Exemplary damages are damages awarded in a court case which go beyond compensation to the victim. These damages are also known as punitive damages in some legal systems. Not all nations allow courts to award exemplary damages and nations which do not generally will not uphold rulings of this nature. They are explicitly intended as punishment to penalize the individual found in the wrong, not to compensate the victim for any injuries which might have been experienced.
In order for exemplary damages to be awarded, a case generally needs to meet a specific standard. Nations which allow courts to award damages of this type generally require that the case demonstrate that the person paying the damages committed the wrongful act willfully, maliciously, or recklessly. Thus, activities like fraud and malicious defamation would be eligible for exemplary damages, while simple negligence would not.
Civil cases allow people to recover compensation which they experience injuries as a result of the actions of others. The court does, however, distinguish between different types of actions. There is a distinct difference, for example, between negligent driving which leads to a crash and an intentional decision to run into someone. In the first case, the victim of the crash could receive compensatory damages to pay for medical expenses and repair to the car, but not exemplary damages. In the second case, exemplary damages could be awarded because the driver acted with malice.
These damages are awarded in excess of compensatory damages, so the person awarded the damages essentially gets two separate payouts. The idea behind awarding damages as punishment is that they serve as a deterrent so that people will be less likely to commit similar crimes in the future, and they also provide a public object lesson. Members of the public reading about large payouts and noting that a portion of the payout was punitive in nature will take note, and may think twice before engaging in similar activities.
There is some debate about when damages of a punitive nature are appropriate and how large they can be. Generally courts will not award exemplary damages greater than four times the compensatory damages. Extremely large awards do happen in very unique cases, but they may be challenged under the argument that they are unfair. Likewise, courts may debate about whether or not a case is one which merits awarding exemplary damages. Different countries have different standards, which can complicate matters further.