When one party breaches a legal contract, there are almost always consequences. Contracts are legally binding, so anyone who doesn’t fulfill their part of the bargain may be on the hook for financial damages or other penalties.
Consequential damages are those awarded to injured parties with violated contract clauses. For example, if a business partner reneges on an agreement, costing another party money, they could be liable for consequential damages.
Read on for more information about consequential damages, how they work, and whether they apply to your case. Alternatively, you can contact Schwartzapfel Lawyers about your free consultation by calling us at 1-516-342-2200 or visiting us online now!
What Is the Definition of Consequential Damages?
Consequential damages are a type of civil damages that result from one party failing to honor some type of contractual agreement.
For example, if two companies have a contractual agreement to supply each other with products or resources, and one of the companies does not fulfill their end of the bargain, they could be liable for consequential damages if the other company takes them to court.
Consequential damages get their name because they are the consequences that result from breaching contractual agreements. They’re almost always awarded in cases where a company or individual sues another over contract breaches.
All contractual damages are incurred when a party doesn’t uphold its end of a certain agreement. They can result in circumstances like:
- A company willfully omits or adds a segment to an existing contract without telling the other party, which causes indirect damages by affecting their business operations;
- A company does not fulfill its end of a contractual bargain, resulting in incidental damages like loss of profit;
- A company does not fulfill its end of a contractual bargain and does not tell the other party in the agreement for some time.
As you can see, there must be a demonstrable consequence of the breach for a claimant to recover such damages. The attorney providing legal advice may help you determine this.
In many cases, damages for consequential losses may be laid out in the relevant contract. For example, in a real estate deal, the consequences for not upholding one’s end of the bargain could be written right in the contract, including monetary fines and other penalties.
That said, consequential damages can extend beyond initial contract terms, and the amount paid can depend on either party’s expectations at the time of contracting. So, companies and individuals alike must consider liability when signing agreements, including whatever liquidated damages they may have to pay if they are found guilty of breaching contracts.
As a type of special damages, consequential damages are unique in that they don’t arise from direct or wrongful action on the part of the defendant. Instead, they result naturally from their actions. In a sense, they aren’t penalties so much as they are logical consequences of breaking a contractual agreement.
What Do Consequential Damages Include?
Consequential damages can include any pre-established and/or logical damages based on the actions of the defendant. Depending on the specifics of the contract law case, these can include but are not limited to:
- Money to make up for lost profits from interruption of business practices, loss of use of facilities, or loss of goodwill;
- Money to make up for lost customers because of delays, cancellations, or other negative repercussions;
- Liquidated equipment or business assets to pay a wronged business partner.
In all cases, the foreseeability of the breach of warranty or contract may affect these compensatory damages. Some contracts may also include disclaimers or a waiver of consequential damages that affect overall payouts.
The skilled team at Schwartzapfel Lawyers is ready to fight for you when you contact us today at 1-516-342-2200.
Consequential Damages Compared to Other Types of Damages
For many, the best way to understand consequential damages is to compare them to other damage types.
General damages are any non-pecuniary losses where the monetary value can’t be determined. For example, if a breach of contract results in physical damages, like injuries, the affected party might refer to their pain as specific damage. They might be awarded general damages to compensate for pain and suffering, and similar factors.
Punitive damages can be described as damages intended to punish or deter the conduct of bad actors. The point of punitive damages is to punish the wrongful party and prevent others from repeating their actions. A breaching party might incur punitive damages if they deliberately harm contractual partners or counterparts, such as knowingly committing fraud.
Direct damages are any damages arising from the breaching party’s wrongful act. They are immediate, natural, and sometimes expected consequences from those actions, such as lying about behavior, breaching contractual agreements, etc.
Actual damages are any damages awarded to the breaching party to make up for losses of the non-breaching party. They essentially compensate for tangible losses that the non-breaching party suffered, like property damage or injuries. Note: Whereas consequential damages are not tangible, actual damages are.
For more on this and related topics, call Schwartzapfel Lawyers now at no charge by dialing 1-516-342-2200!
Example of Consequential Damages in Action
Imagine a scenario where you work with a business partner that provides your organization with key resources. Under the terms of your contractual agreement, that business partner needs to provide your company with a certain number of resources every month so you can manufacture the right number of products for your customers.
However, your contractual partner does not deliver the agreed-upon resources by the end of the fiscal quarter. Because of this, you have to cancel customer orders, lose the trust of your customers, and suffer other damages because of this.
When investigated, you discover that your contractual partner was never able to fulfill their end of the bargain. Therefore, you sue them for breaching the terms of the contract and for entering into a contract with you without the resources or ability to fulfill their obligations.
If you are found to be right, and your business partners are found to be guilty, you may be awarded consequential damages. Those consequential damages may compensate you for:
- The income you lost because of the contractual breach;
- The customers you lost, which may represent long-term income losses;
- Other awards based on other financial difficulties, special circumstances, or hardships your business encounters.
For more help with fighting for consequential damages, call Schwartzapfel Lawyers now at 1-516-342-2200!
Are Consequential Damages Always Awarded?
Consequential damages are not awarded in all cases and are not always awarded in the courtroom. If one party breaches a contract, some business partners are able to come to an understanding between themselves. Based on the rules outlined in their contract, the offending party might simply pay the other partner a fine or compensate them in some other way.
Consequential damages are typically only awarded when the wronged party takes the wrongful party to court through a lawsuit. In these cases, the consequential damages may meet or match whatever consequences or penalties are outlined in the contract.
In cases where no consequences or penalties are outlined in the given contract, lawyers may come to appropriate consequences themselves to help both sides settle out of court. They may measure the damages the wronged party suffered, such as property damage, lost income, etc. Then they may take the actions of the wrongful party into account, such as whether they were negligent, whether they were malicious, and so on.
The right law firm can help you determine whether you must sue the at-fault party to recover consequential damages. They can also help you through other legal recourse, such as pursuing arbitration.
Consequential Damages and Liability Limitations
All the parties that enter into a contract must be aware that they are liable for damages they cause by breaching the contract and its obligations. Therefore, lots of contracts and companies include limitation of liability clauses.
Limitation of liability clauses limits the extent to which a specific party can be held responsible for unfortunate events. For example, a limited liability company or LLC limits the personal liability of its founding members. If the LLC breaches its contractual duties, the individual members of the LLC cannot be sued for the losses they cause to their business partners.
Similarly, many contracts include Act of God clauses. In essence, these protect companies from being held liable for losses that are caused due to natural disasters and other unforeseen events. If you want your company to avoid consequential damages, including one or more liability clauses in your business contracts may be wise.
Contact Schwartzapfel Lawyers Today
Consequential damages may be awarded in your case if you were monetarily injured by your business partner or other contractual partner who violated an important contract clause. If the other party in a deal breached the contract, you could sue them for monetary awards and more.
The seasoned team at Schwartzapfel Lawyers can help through every step of the process. As knowledgeable New York City attorneys, we’re well-equipped and ready to review your case’s details and provide you with the legal support you need to recover the financial compensation you are entitled to for your hardship.
Day or night, rain or shine, it would be our honor and privilege to fight for you! Call us now for a free case evaluation at 1-516-342-2200.
Or, if the Internet is more your speed, you can schedule your free Schwartzapfel Lawyers consultation by visiting usonline. That said, you shouldn’t wait, as your window to file a claim and recover damages may soon close forever.
To keep that from happening, call Schwartzapfel Lawyers today and have us fight for you!
DISCLAIMER: Nothing on this page should be considered legal advice. You should seek the appropriate counsel your situation requires. For more information, call 1-516-342-2200 now!
Schwartzapfel Lawyers, P.C. | Fighting For You
Consequential Damages | Wex | US Law
Consequential Loss: Definition, Insurance, Vs. Direct Loss | Investopedia
What is limitation of liability clause? | Definition from TechTarget