This research paper will explain how special and general damages play a role when there is a breach of contract. A contract is a two-party agreement that generates mutual legal responsibilities. It can be either be written or oral. When one of the parties fails to perform the contract as agreed, there is a breach of contract. Thus, breach of contract happens when parties fail to follow their legal agreements. For example, failing to deliver a product on time, failing to pay on time, or failing to meet contractual obligations. When a contract has been breached, compensation can be claimed. Damages are defined in contract law as an amount of money given to the innocent party as compensation for a violation of contract.