A more thorough explanation:

Definition: Punitive damages are additional damages awarded by a court in certain circumstances. They are considered punishment and are given when the defendant's behavior is found to be especially harmful.

Punitive damages are not usually awarded in cases of breach of contract. They are typically only awarded in cases of tort liability, where the plaintiff can prove that the defendant engaged in intentional or willful misconduct.

For example, if someone intentionally harms another person, the court may award punitive damages in addition to compensatory damages (which are meant to compensate the victim for their losses).

However, courts are reluctant to award punitive damages on the principal for the reckless actions of the agent, unless the principal encouraged or caused the agent's recklessness.

It's important to note that some contracts may list certain "liquidated damages" as a consequence of a breach. However, if these damages are actually punitive in nature, a court may choose to ignore the clause.

Overall, courts only apply punitive damages in about 5% of verdicts. When considering whether to award punitive damages, courts will focus on the reprehensibility of the defendant's behavior and the ratio of punitive damages to compensatory damages.