Themis Contracts Practice Exam

Which statement best describes incidental damages?

Costs arising from special circumstances beyond ordinary breach. Lost profits. Costs incurred in handling the breach, such as inspection or storage. Punitive damages.

Correct Answer:

Costs incurred in handling the breach, such as inspection or storage.

Explanation:

Incidental damages are the expenses you incur to deal with the breach itself—the costs of handling the breach and protecting or preparing the affected goods or situation. This includes things like inspecting the goods, storage, and similar administrative costs incurred after the breach to mitigate harm. The statement that mentions costs in handling the breach, such as inspection or storage, matches this concept precisely. Other damages described—like lost profits—are broader, consequential damages, not incidental costs, and punitive damages are generally not available in contract disputes.

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