What is a key feature of compensatory damages?

Compensatory damages are specifically designed to restore the injured party to the position they were in before the injury occurred. This principle is rooted in the idea that the party who has suffered a loss due to another party's actions should be made whole again, as much as possible, within the legal framework. These damages cover quantifiable losses such as medical expenses, lost wages, and pain and suffering, reflecting the actual harm inflicted rather than serving as a punishment for wrongdoing.

In contrast, punitive damages are awarded in certain cases to punish the defendant for particularly egregious behavior and deter similar actions in the future, which clarifies why the option involving punishment does not accurately describe compensatory damages. Additionally, compensatory damages are applicable in both civil and tort cases, rather than solely in contractual contexts or criminal cases, further highlighting their broader application in legal scenarios.