Compensation vs. Restitution - What is the Legal Difference?

In tort law, two main forms of compensation are recognized: damages and redress. Both aim to compensate the injured party economically, but on different grounds and according to various principles of assessment.

What are damages?

Damages are financial compensation for an economic loss suffered by the injured party. The purpose of damages is to put the injured party in the same economic position as if the injury had not occurred.

Damages require that three fundamental conditions are met:

• There must be a basis for liability, such as negligence, strict liability, or absolute liability.

• The injured party must have suffered an economic loss.

• There must be a causal link between the basis for liability and the economic loss.

Typical items of damages include lost earnings, medical treatment expenses, the repair of damaged property, etc. In cases of personal injury, damages are assessed according to standardized rules in Chapter 3 of the Damages Act. For property damage, the usual starting point is the cost of repairs or the replacement value.

What is redress?

Redress is financial compensation for non-economic harm, such as pain and suffering and other non-economic injuries or damages. The objective is not to cover an economic loss but to compensate for the psychological distress or infringement the injured party has experienced. In certain areas, redress can also serve a punitive and preventive function.

The conditions for redress differ from those for damages:

• Intent or gross negligence is generally required (some exceptions apply).

• No demonstrable economic injury is required.

• There must be a legal basis for awarding redress (e.g., Section 3-5 of the Damages Act).

The assessment of redress is more discretionary than that of damages. The law provides guidance on factors such as the nature and severity of the infringement, the relationship between the parties, and other circumstances. Case law has established standardized levels of redress for many types of cases. Redress amounts are usually significantly lower than damages.

Conclusion

Both damages and redress are essential for ensuring the rights of the injured party, but they have different legal bases and serve distinct purposes. Damages are meant to cover an economic loss, while redress aims to compensate for non-economic harm. Different conditions apply, and the assessment is conducted according to varied principles. At the same time, in some cases, one may claim both damages and redress for the same incident of harm.