Damages are an amount of currency that will compensate an innocent party for a loss. They are commonly awarded in cases regarding tort and contract. They fall into three general categories:
Special damages: Money to compensate for past losses that can be clearly identified by documentation, such as a debt, medical bills, and lost wages.
General damages: Money to compensate for a loss that cannot be determined with precision, but where it is clear that the innocent party has suffered some loss that can be identified, such as future medical bills, future lost wages, loss of reputation and suffering.
Punitive damages: Money that is not designed to compensate the innocent party, but to punish the other party either for their behavior during the legal proceedings or for a general course of conduct. For example, punitive damages are in order if a defendant's legal strategy was to stretch out the innocent party's lawsuit as long as possible even though it was clear it had merit. They can also be used when the innocent party can establish a pattern of abuse against similarly situated innocent parties who are not a party to the lawsuit, for example when a manufacturer does not recall a product to fix a defect and instead pays off suits to persons injured by the product.