Which type of damages is intended to punish the breaching party and deter others from similar conduct?

The correct answer is punitive damages. These damages are specifically designed to go beyond compensating the injured party for their losses. Instead, they serve a dual purpose: punishing the party who has breached a contract or engaged in wrongful conduct, and deterring others from behaving similarly in the future.

In legal terms, punitive damages are awarded in cases where the defendant's actions are found to be particularly egregious, reckless, or malicious. The goal is not just to restore the victim to their previous state but to signal to society that such behavior is unacceptable. This approach can be effective in encouraging higher standards of conduct among individuals and businesses.

Other types of damages, such as compensatory damages, primarily focus on reimbursing the injured party for actual losses incurred. Nominal damages are awarded in cases where a legal wrong has occurred but no significant financial loss is proven, and liquidated damages refer to a predetermined amount set forth in a contract as compensation for a specific breach. None of these options serve the dual function of punishment and deterrence that punitive damages do.