What is the term for the amount paid to one party to punish the other?

The term that refers to the amount paid to one party specifically to punish the other is known as punitive damages. This type of damages goes beyond mere compensation for losses or injuries and is intended to deter wrongful conduct by imposing a financial penalty on the party at fault. Punitive damages are awarded when the behavior of the defendant is found to be especially reckless, malicious, or deceitful, warranting a greater consequence than simple restitution.

Compensatory damages, in contrast, are designed to make up for the actual loss or injury suffered by the plaintiff, reflecting the direct financial impact of the harm caused. Nominal damages represent a small amount of money awarded when a legal wrong has occurred, but no substantial harm or loss can be demonstrated. Liquidated damages are pre-estimated amounts specified within a contract that are due if a party breaches that contract, serving as a form of agreed-upon compensation rather than punitive action.