Remedies; Breach of Contract DamagesConsequential damages, or “special damages,” are defined as loss or injury that does not flow directly and immediately from a defendant’s wrongful action but still occur as a result or consequence of that action.  Defined another way, special or consequential damages seek to compensate a plaintiff for additional losses other than the value of the promised performance, which are incurred as a result of the defendant’s breach.  The quintessential example of consequential damages is lost profits because an award of lost profits is not directly attributable to fixing the breach itself, but rather fixing related damages that have manifested due to the breach.

REFERENCE DESK

Smith v. Renz, 840 S.W.2d 702 (Tex. App. 1992):

Special or consequential damages are damages which a party may recover for breach of contract which are incidental to and caused by the breach and may reasonably be supposed to have entered into the contemplation of the parties at the time of the contract.

Gardensensor, Inc. v. Stanley Black & Decker, Inc., 2014 WL 4764628 (N.D. Cal. Sept. 24, 2014):

Under Delaware law, “[direct] damages are defined as those as the law itself implies or presumes to have accrued from the wrong complained of, for the reason that they are its immediate, direct, and proximate result, or such as necessarily result from the injury.” Pharmaceutical Product Development, Inc. v. TVM Life, No. 5688, 2011 WL 549163, at *6 (Del. Ch. Feb. 10, 2011) (internal quotation marks and citations omitted). On the other hand, “[c]onsequential damages … are defined as damages that do not flow directly and immediately from the act of the [breaching] party, but only from some of the consequences or results of such act but were nonetheless reasonably foreseeable or contemplated by the parties at the time the contract was entered into as a probable result of a breach.” Id. (internal quotation marks and citations omitted).

In deciding when lost profits constitute consequential damages, the Delaware Court of Chancery in eCommerce Indus., Inc. v. MWA Intelligence, Inc., No. 7471, 2013 WL 5621678, at *47 (Del. Ch. Sept. 30, 2013) accepted “the Second Circuit’s cogent explanation” in Tractebel Energy Marketing v. AEP Power Marketing, 487 F.3d 89 (2d Cir.2007). In Tractebel, the Court held that lost profits are considered consequential damages when “as a result of the breach, the non-breaching party suffers loss of profits or collateral business arrangements” but not “when profits are precisely what the non-breaching party bargained for, and only an award of damages equal to lost profits will put the non-breaching party in the same position he would have occupied had the contract been performed.” eCommerce, 2013 WL 5621678, at *47 (citing Tractebel, 487 F.3d at 109–10). Black & Decker attempts to distinguish eCommerce by arguing that it only applies “where the lost profits are recoverable by virtue of a violation of a non-compete clause.” Dkt. No. 76 at 13. However, there is no indication in the eCommerce opinion that its holding is so limited.

Lola Roberts Beauty Salon, Inc. v. Leading Insurance Group Insurance Co., Ltd., 76 N.Y.S.3d 79 (2018):

Consequential damages are damages that do not directly flow from a breach of contract  Proximate cause is an essential element of a breach of contract cause of action.  Every contract contains an implied covenant of good faith and fair dealing.  In an insurance contract context, consequential damages resulting from a breach of the implied covenant of good faith and fair dealing may be asserted, “so long as the damages were within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting.  Consequential damages, designed to compensate a party for reasonably foreseeable damages, must be proximately caused by the breach .  Generally, it is for the trier of fact to determine the issue of proximate cause. However, the issue of proximate cause may be decided as a matter of law where only one conclusion may be drawn from the established facts.

In re CR Fields, III, 544 B.R. 156 (2016):

Under Arkansas law, damages recoverable for breach of contract are those damages that would place the injured party in the same position as if the contract had not been breached.  Furthermore, damages must arise from the wrongful acts of the breaching party.  In contrast, consequential damages are damages that do not flow directly and immediately from the breach’ of a contract, but only from some of the consequences or results of the breach.

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