Consequential damages are usually only awarded when the aggrieved party brings the wrongful party to court through a lawsuit. In these cases, consequential damages may equal or equal the consequences or penalties described in the contract. Consequential damages (also called special damages) are a form of relief that the plaintiff can claim against the defendant for the harm caused as a result of the defendant's actions. Consequential damages do not necessarily have to result from the defendant's direct wrongful action, but are the natural result of the act, as defined in the Haynes & Boone v. Personal Injury Attorney in Orangeburg SC. Consequential damages are indirect damages suffered by a claimant as a result of a breach of contract.
Although consequential damages are much less common than compensatory damages, the courts will award them under the right circumstances. For example, in a case of breach of contract, if at the time the contract was executed, the parties contemplated the possibility that the non-defaulting party would suffer a loss of profits from business transactions that the breaching party entered into with third parties, then the violating party could be entitled to recovery of the loss of profits. In this example, the loss of profits would be a consequence of Breach. Consequential damages often include loss of profits, loss of profitable opportunities, or loss of business revenues, by and caused by the breach of a contract.
Consequential or special damages serve to repair any indirect damage that results from a breach of contract. The guiding principle is that, even though the damage is an indirect consequence of the breach of contract, the damage would not yet have occurred if the contract had been executed in its entirety. In other words, indirect damages seek to compensate for changes in circumstances that result indirectly from the breach of a contract, for example, business interruptions, losses resulting from the inability to fulfill obligations contracted with a third party, or loss of customers. To be recoverable, consequential damages must have been reasonably foreseeable at the start of the contract.
According to the UCC, indirect damages are damages resulting from non-compliance by the seller, including (a) any loss arising from the buyer's requirements and needs that the seller had reason to know at the time of the contract and that could not be reasonably prevented with coverage or otherwise; and (b) damage to persons or property that immediately results from any breach of warranty. Therefore, consequential damages require certainty as to the amount of the loss, the predictability of the loss incurred as a result of a default at the time of hiring, and the inability to mitigate the loss through coverage or otherwise. Generally, indirect damages include property damage, personal injury, attorneys' fees, lost profits, loss of use, buyer liability to customers, loss of goodwill, interest on money held by customers, and damages related to third-party complaints. Consequential damages arise indirectly from a breach of contract and are not the direct result of the breach itself.
These damages are usually foreseeable when the contract is formed, but they don't necessarily stem directly from the breach. In Texas, to recover damages resulting from a breach of contract, the party that has not breached it must meet several requirements. Consequential damages must have been reasonably foreseeable or have been contemplated by the parties at the time of the formation of the contract. This means that the parties must have anticipated these damages due to a breach.
Second, the damages must be directly caused by the violation and not be too remote or speculative. The connection between the violation and the consequential damages must be clear and direct. Unlike compensatory and consequential damages, which compensate for specific financial losses, incidental damages focus on reimbursing the party that hasn't breached the costs of the violation. These damages are usually ancillary to other types of damage and cover expenses directly related to the violation. Consequential damages are generally defined as damages, losses, or injuries that result naturally, but not necessarily directly, from the act of the other party involved in the project.
They are the result of special circumstances. Loss of profits, loss of revenue, loss of use, loss of bonding capacity, loss of business reputation, insolvency, and loss of efficiency can be consequential damages. These are often referred to as expected damages. Direct damages, on the other hand, are those damages that are a direct and immediate loss caused by a default and compensate for that loss.
Examples of direct damage include the costs of repairing a faulty work or additional work, as well as expenses derived from general conditions and the costs of delaying the project. Ultimately, exemption from indirect damages can limit uncertainty and assign risk to losses other than direct costs resulting from defective, additional, or delayed work under the contract. Outside the context of contracts for the sale of goods, the meanings of incidental and consequential damages are somewhat different, but they must still be excluded separately. The loss of profits derived from other contracts for the sale of electricity produced by the installation constituted indirect damage.
The buyer filed a lawsuit and sought compensation under the contract for the market value of the gas not received. The risk of loss due to a delay often fuels homeowners' reluctance to exempt themselves from all consequential damages. As a result, it has become common for a contract's exemption provision to include a cutback or exception for liquidated damages that the landlord can recover under certain circumstances. Compensatory damages compensate the party that has not breached the contract for the actual financial losses suffered as a direct result of the breach of contract.
Therefore, exemptions from liability for indirect damages should not be considered a substitute for explicit waivers for incidental and consequential damages, which must always be expressly rejected. Unless one of the provisions provides for a cutback for the other, there is at least the question of what the parties intended in concept of indirect damage. It is often limited to third-party claims and is sometimes limited to property damage and personal injury. Examples of general damages include compensation for pain and suffering, emotional distress, loss of enjoyment of life, and loss of reputation.
Compensatory damages compensate a party for an actual loss suffered as a result of a breach of contract. Compensation is the obligation to reimburse a party for damages suffered as a result of a breach of an obligation underlying. Here are five types of breach-of-contract damages in the Lone Star State and how Massingill business law attorneys can help. Consequential damages make it difficult for parties to budget for the “worst possible scenario” if they are found to have breached an agreement, and can open the door for a party to claim excessive and costly compensation, otherwise a case of breach of contract for relatively small damages.
If you have questions about the types of damages you could recover, seek advice from experienced Austin business attorneys, such as Massingill. Compensatory damages compensate a party that has not defaulted for any loss that directly results from the default.