A more thorough explanation:

Definition: Exemplary damages, also known as punitive damages, are additional damages awarded to the plaintiff beyond the actual damages incurred. These damages are considered punishment and are intended to dissuade the defendant from engaging in harmful behavior. Punitive damages are typically awarded at the court's discretion when the defendant's behavior is found to be especially harmful. They are not awarded in the context of a breach of contract claim.

Examples: In a case of tort liability, a court may award punitive damages if the plaintiff can prove that the defendant engaged in intentional tort or wanton and willful misconduct. For example, if a driver intentionally hits a pedestrian, the court may award punitive damages in addition to compensatory damages. However, if the driver accidentally hits the pedestrian, punitive damages may not be awarded.

In a principal-agent relationship, courts are usually reluctant to award punitive damages on the principal for the reckless actions of the agent. However, if the principal encourages or causes the agent's recklessness, punitive damages may be awarded. For example, if a company encourages its employees to cut corners on safety measures, and an employee's recklessness causes harm to someone, the court may award punitive damages against the company.

Explanation: Exemplary damages are awarded to punish the defendant for their harmful behavior and to deter them from engaging in such behavior in the future. These damages are not meant to compensate the plaintiff for their losses but to send a message to the defendant and others that such behavior will not be tolerated. The court has discretion in awarding punitive damages and will consider the severity of the defendant's behavior and the harm caused to the plaintiff.