Consequential damages, such as loss of profits, loss of revenue, and loss of efficiency, can occur as a result of a project. In the event of a Car Accident Attorney in Greenville NC, these damages may also include loss of use, loss of bonding capacity, loss of business reputation, and insolvency. These types of damages are considered intended and can result from special circumstances. 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 faulty, additional, or delayed work under the contract.
Consequential damages are the indirect damages that a claimant suffers as a result of a breach of contract. While 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, lost profits would be a consequence of non-compliance.
Consequential damages, also known as indirect or special damages, are damages that are not directly caused by a breach of contract, but are nonetheless the result of a breach. In essence, these types of damages provide a mechanism to compensate non-infringing parties for losses that are not directly caused by a breach, but are still the result of that breach. These damages can be significant in construction contracts, as they can include costs related to delays, lost profits, and other financial losses. For example, if a contractor fails to complete a project on time, the homeowner may suffer consequential damages, such as lost profits or increased financing costs.
On the other hand, for a contractor, a violation can generate indirect costs, such as loss of profits, due to increased costs derived from the violation. In short, the definition of consequential damages generally adopts a “global view” of damages and includes all damages that may arise from a violation, including damages that are only indirectly caused by the violation. For this reason, the scope of liability that could be described as “consequential damages” is much greater than that of damages caused solely directly by an infringement. Therefore, construction entities must understand the concept of consequential damages in construction agreements.
Unless one of the provisions has a cutback for the other, there is at least some question as to what the parties intended in relation to the consequential damages. The risk of loss due to a delay often fuels homeowners' reluctance to exempt themselves from all consequential damages. 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 supplier alleged that the buyer was claiming consequential compensation (which he waived) for any “lost profits” derived from the contract by reselling the gas to third parties at a higher price.
According to the UCC, consequential damages are damages resulting from non-compliance by the seller, including (a) any loss resulting 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 through coverage or otherwise; and (b) damage to persons or property that immediately results from any breach of warranty. Therefore, since there are numerous ways in which a party that has not defaulted can claim that a loss is an “emergent harm” derived from a violation, as well as unlimited potential liability for such damages, it follows that consequential damages can have a significant impact not only on a construction project but also on the viability of construction entities. 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 damages, otherwise it would be a case of breach of contract for relatively small damages. Generally, consequential damages include property damage, personal injury, attorney fees, loss of profits, loss of use, buyer liability to customers, loss of goodwill, interest on money held by customers, and damages related to third-party claims. Some jurisdictions may not allow exemption from indirect damages under certain circumstances, such as when the damages were foreseeable at the time of the conclusion of the contract.
However, despite potential limitations to the applicability of consequential damage exemption clauses, they can be a useful tool for parties. For example, if one of the parties is aware that they can be held responsible for significant consequential damages in the event of a default (e.g., consequential damages often include loss of profits, loss of profitable opportunities, or loss of business revenues), caused by a breach of contract. Since there is the potential for significant losses to occur as a result of consequential damages, it is not surprising that parties often try to limit their exposure to these damages by using consequential damage exemption clauses or clauses that limit exposure to only certain types of consequential damages. The reason for this is that consequential damages in a breach of contract case must be directly attributed to the actions of the breaching party.