Consequential damages are a type of damages that are typically considered when parties enter into a legal agreement. This type of damages are those that are caused as a result of the wrongdoings of one of the parties, often referred to as “foreseeable damages.” These types of damages occur when a specific action by one of the parties causes a result that was not explicitly mentioned in the contract.
For example, if one party enters into a contract with a second party to deliver supplies and the failure to do so causes the second party to lose money in the form of lost business, the first party may be obligated to pay these consequential damages. These damages are in addition to any originally agreed upon and they are designed to make the injured party whole after the failure of the contract.
Considerations of Consequential Damages
When entering into a legal contract, parties should consider what types of risks and damages are possible and agree upon whether or not they should be eligible for compensation. In most cases, contracts should specifically state that consequential damages will not be allowed in order to protect both parties from potential financial burdens that may not have been originally considered.
In addition, parties should be aware of the type of defenses that could be used to dispute or disprove the claims of consequential damages. Proving the connection between the original breach of contract and the subsequent damages can be a difficult process, and complex legal arguments can play an important role in determining whether a claim of consequential damages is successful.
Conclusion
Consequential damages are a specific type of damage that can be incurred when one party fails to act in accordance with contract terms. It is important for parties entering into a contract to include any associated risks as part of their agreement and to understand the potential for consequential damages if there is a breach of contract. Parties should also consider whether or not consequential damages will be allowed, and be sure to include language addressing this type of damage.