What’s notable in this definition is that “consequential damages” are damages resulting from the injured party’s circumstances. For example, if a transportation company was purchasing a truck to its fleet for a special transportation contract and the truck is not delivered on time, it was foreseeable that the transportation company would not be able to execute its transportation obligations. Please fill out the form provided and one of our dedicated Miami injury lawyers will assist you in scheduling a free consultation. Punitive Damages vs. Compensatory Damages: Frequently Asked Questions. In addition to the direct damages, a party may also suffer consequential damages resulting from the breach of contract. Damages are not always compensatory in nature. The courts will assess whether damages suffered are “actual” or “consequential” by looking at the circumstances, the consequential damages clause, the sophistication of the parties, the foreseeability of the damage and so on. Though punitive damages can be awarded in any type of personal injury case, they are most often awarded in instances in which the defendant was grossly negligent. Also called special damages, since they result from a breach of contract and yet would not necessarily be incurred by every injured party experiencing that breach. Damages are sums of money that are mentioned in the contract, and are required to be paid to the victim in case of breach of contract by another party. If you believe that you are entitled to punitive damages as well as to compensatory damages, we can build a case that shows how the defendant was grossly negligent and why you deserve to be compensated for more than just your physical injuries. There are many types of consequential damages a party can suffer due to the contractual breach of another such as: Let’s look at some of the common types of consequential damages. A typical example of consequential damage is the loss of profits. Consequential damages often entail a deeper knowledge of a contract and its terms. This is done to minimize the risk of being held liable to pay consequential losses to the other party. For example, you purchase a good that is defective and for security and safety reasons, you must have the good urgently repaired to prevent further damages or the further aggravation of the losses. On the other hand, consequential damages are damages that the parties could foresee, at the time they entered into the contract, would be suffered by another party due to a breach. Compensatory damages and punitive damages are the two types of personal injury damages that a plaintiff will demand in civil litigation. What’s more, indirect damages are damages suffered by a party due to their special circumstances. In Corporate Issues. If the supplier is able to limit the consequential liability, it will limit its exposure to the possible consequential losses a client may invoke against it. The courts considered that “consequential damages” are recoverable when there is a breach of contract and when the breaching party knows or is imputed to know that the non-breaching party may suffer losses beyond ordinary expectancy or restitution damages. Compensatory damages are intended to provide the victim of a personal injury case with enough money to replace what they lost. Consequential damages are damages that are not directly linked to the breach but were obvious and foreseeable when the parties contract or related to the special circumstances of the non-breaching party and known to the other upon entering into the contract. In the matter Applied Data Processing, Inc. v. Burroughs Corp, the court defines direct damages vs consequential damages as follows: The distinction between general and special damages is not that one is and the other is not the direct and proximate consequence of the breach complained of, but that general damages are such as naturally and ordinarily follow the breach, whereas special damages are those that ensue, not necessarily or ordinarily, but because of special circumstances. Such indirect damages are damages that do not necessarily flow from the breach of contract but are secondary in nature or indirect to breach. In construction contracts, a party may claim consequential damages for losses resulting from extra financing costs, additional overhead costs, lost bonding costs and more. Punitive damages are awarded to punish the defendant. As a result, Baxendale could not be accountable to pay for consequential damages that he was unable to assess Hadley’s risk exposure nor was he informed of it. The starting point in calculating compensatory damages is to determine the loss in value of the performance that the plaintiff had the right to expect. What I have found interesting over the last several months is that contractors, surety brokers and even surety underwriters really do not know the difference between liquidated and consequential damages. Under UCC, incidental damages are damages suffered by a party in its attempt to limit further losses or additional damages caused by another party’s breach. In general terms, direct damages immediately stem from the contractual breach, while consequential damages are still related to the breach but without a direct correlation. Overview. However, the sec… For example, if the breach of contract directly results in a loss of $20,000, then an award of $20,000 in compensatory damages will compensate the loss in full. If a contract is subject to UCC, it’s important to nuance direct damages, incidental damages and consequential damages in the contract and not mix them up. Compensatory damages are typically awarded in medical malpractice lawsuits, usually for medical bills, hospital bills, rehabilitation expenses, and compensation for lost earnings. I acknowledge that contacting Spencer Morgan Law through this website does not create an attorney-client relationship, and information I send is not protected by attorney-client privilege. For example, if an airline company purchases an airplane for commercial use, defects in the airplane resulting in the loss of revenues can are foreseeable at the moment the contract is signed and thus can be considered as consequential damages. Consequential damages go beyond the compensation for direct damages suffered by a party due to the breach of another but are other damages that were foreseeably caused as a consequence of the breach of contract. In this article, we will break down the notion of consequential damages so you know all there is to know about it. Consequential damages, on the other hand, may “result naturally, but not necessarily, from the defendant’s wrongful acts.” Another good example of consequential damages can be given using a personal injury scenario. Just like special damages, under the Federal Rules of Civil Procedure, a party must specifically plead consequential damages. We will look at what is a consequential loss, its legal definition, how the legal theory started in case law, we’ll look at different types of consequential damages, compare it with direct damages, incidental damages, indirect damages and go over concrete examples so you can better understand the concept. A defendant is liable to a plaintiff for all the natural and direct consequences of the defendant’s wrongful act, with respect to compensatory damages. If a party breaches the terms of a contract, the non-breaching party may claim lost profits as direct damages for the loss of profits resulting in the project at hand but consequential damages for the loss of profits in other projects directly resulting from the breach. Compensatory Damages vs. Punitive Damages. From a legal standpoint, an enforceable contract is present when it is: expressed by a valid offer and acceptance, has adequate consideration, mutual assent, capacity, and legality. It is usually levied in an amount that is up to three times that of compensatory damages. To be awarded consequential damages in a lawsuit, they must be a foreseeable result of an act. The term "damages" sounds as if it refers to the injuries a person suffers in an accident. For example, if the Uniform Commercial Code (UCC) applies in the context of the sale of goods, incidental damages and consequential damages will have their meaning defined by law. 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