Lost profits, lost sales, incidental damages and most other damages are consequential damages. Texas … Direct damages, also called “general damages” in some contexts, are damages that naturally result from a breach of contract (i.e., the damages any party would usually incur in this situation). A federal district court judge in Pennsylvania has penned a thoughtful decision on this issue, worth noting. To be awarded consequential damages in a lawsuit, they must be a foreseeable result of [citations omitted], Quoting from a federal appellate decision, the court noted –, "Rather than turning on foreseeability, the difference between direct and consequential damages depends on whether the damages represent (1) a loss in value of the other party's performance, in which case the damages are direct, or (2) collateral losses following the breach, in which case the damages are consequential." var today = new Date(); var yyyy = today.getFullYear();document.write(yyyy + " "); | Attorney Advertising. On the other hand, Startup Company’s other damages—personnel costs and lost profits—depend on other intervening factors that may not be typical or usual for other companies in this situation. This is part of Dana Shultz’s Canonical Qs on the Law series of questions and answers about legal issues, concepts and terminology. Id. "Lexology is an excellent and extremely useful initiative. Below is a list of common examples of consequential damages in a commercial context: Loss of anticipated profits; Loss of business; The project was construction of a new Motel 6, and the contractor stopped work before it was complete, but already late. The most common provision is a waiver of consequential damages. In such contexts, (a) incidental damages are costs and expenses incurred by the non-breaching party to avoid other direct and consequential losses caused by the breach, and (b) consequential damages are damages that (i) are neither incidental nor direct damages and (i) normally and necessarily arise from the specific nature of either the particular breach or the buyer’s circumstances. Consequential damages are those losses foreseeable with special knowledge. The subsequent dispute has focused on damages, and specifically what damages are allowed as “direct” damages and what damages are barred by a contract clause prohibiting “consequential” damages. However, the sec… Cleveland, OH 44114 stand those damages directly related to the design defect. Consequential Damages Waiver: – Neither party will be liable to the other for consequential, indirect, or punitive damages for any cause of action, whether in contract, tort or otherwise. consequential damages that are recoverable and those that are not. Insurance firms deal with other types of consequential damages when the damages are included as a clause to the policy. Keep in mind that the meaning of these terms and the applicable categories can vary from jurisdiction to jurisdiction and based on the type of contract in question (e.g., a services contract versus a contract involving commercial goods, such as software). The first car accident cannot be blamed for directly causing the injuries to those in the second car accident. 401-2, the authors distinguish between “direct damages” and “consequential damages”. Consequential damages include, but are not limited to, lost profits, lost revenues, and lost business opportunity, whether the other party was or should You may understand that this provision purports to eliminate the software vendor’s (licensor’s) liability for these types of damages if there is a problem with the product in question. ‘direct’, and losses that are ‘consequential’. When dealing with a breach of contract action, it is important that the damages be identified as either consequential or direct damages. Dorestin v. For example, an agreement might include a limitation of liability clause that reads something like this: IN NO EVENT WILL LICENSOR BE LIABLE UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ITS SUBJECT MATTER UNDER ANY LEGAL OR EQUITABLE THEORY, INCLUDING BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, AND OTHERWISE, FOR ANY…CONSEQUENTIAL, INCIDENTAL, INDIRECT, EXEMPLARY, SPECIAL, OR PUNITIVE DAMAGES …. Unlike the categories above, which are designed to compensate the aggrieved party, punitive damages are awarded to the aggrieved party in order to punish egregious conduct on the part of the breaching party. consequential damages that are recoverable and those that are not. Consequential damages often entail a deeper knowledge of a contract and its terms. Consequential damages are damages that “do not necessarily, but do directly, naturally, and proximately result from” the injury for which compensation is sought. Judge in Pennsylvania has penned a thoughtful decision on this issue, worth noting boundary between direct and consequential are. Competitors and benchmark against them the contractor stopped work before it was complete, but incremental interest costs monthly. Makes little sense to have them also define the boundary between direct and consequential damages the spring 2015! 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