The Skinny on Consequential Damages.
What are consequential damages and why do they matter? To understand consequential damages, you first have to understand direct damages. Direct damages are those that you’d typically think of as damages for breach of the duties one party owes another. On a breach of contract claim, they’d include the cost to complete a project, to repair faulty work, and added supervision costs incurred because a project takes longer to complete. Or if you were in a car accident, direct damages would include repair costs to your car or medical bills for injuries sustained in the accident.
Difference Between Consequential and Direct Damages
On the other hand, consequential damages (sometimes called special or indirect damages) are additional damages beyond those that arise directly from a defendant’s actions or inactions. Direct damages are paid to reimburse a plaintiff for something the defendant was supposed to, but failed to do; additional loss that the plaintiff incurs as a result of the defendant’s breach that are outside of the defendant’s original duties to the plaintiff are consequential damages. For a breach of contract claim they might include the lost profits of unrelated Project B that you had to pass up because the defendant kept you from finishing Project A on time. Those lost profits – if you could prove them – would be consequential damages. In our car accident scenario, you might have been on your way to an interview for a great new job at a significantly higher salary which you missed out on because of the accident. Again, if you could prove you’d have been offered the job, you could potentially recover your lost wages.
Consequential Damages are Recoverable in Texas.
In Texas, consequential damages are recoverable unless waived by the party who would otherwise have the right to assert them. These waivers can be one way. i.e. only one party to the agreement is waiving their right to consequentials, or they can be two-way waivers so that both parties are waiving their right to consequentials. Whether and how to construct the waiver is a decision that should be made with your attorney, although generally speaking, limiting one’s exposure to costly and a wide-ranging array of potential damages is a good thing.
Karen Ensley is a partner at Ensley Benitez Law, PC. She can be reached at karen@eblawtexas.com or 817-538-6894.