What are consequential damages in California?

Asked by: Napoleon Cartwright  |  Last update: July 27, 2022
Score: 4.9/5 (65 votes)

California recognizes two types of damages, general and special. General damages are also called “consequential damages” and measure the natural and direct losses caused by the breach. For example, a business might agree to pay a consultant $3,000 a month for a year but then breaches the agreement after one month.

What are considered consequential damages?

Commonly, consequential damages include property damage, personal injury, attorneys' fee, lost profits, loss of use, liability of buyer to customers, loss of goodwill, interest on money withheld by customers, and damages related to third party claims.

What is the difference between compensatory and consequential damages?

Compensatory damages compensate for the special loss suffered; consequential damages compensate for the foreseeable consequences of the breach; incidental damages compensate for the costs of keeping any more damages from occurring; nominal damages are awarded if the actual amount cannot be shown or there are no actual ...

How do you prove consequential damages?

Actual Consequential Damages

To recover consequential damages, the claimant must prove they were (1) proximately caused by the breach and (2) were reasonably foreseeable at the time the parties entered into the contract. Determining foreseeability is one challenge, yet the more difficult hurdle is proving the amount.

What is the difference between consequential and special damages?

Also called special damages, since they result from a breach of contract and yet would not necessarily be incurred by every injured party experiencing that breach. Consequential damages are generally not recoverable in contract disputes, but are recoverable in tort. See General damages (contrast).

California Law Consequential Damages

28 related questions found

What is a consequential loss example?

A consequential loss is an indirect loss that accompanies an insured loss, for example the loss of earnings arising from a property fire, experienced by a business insured against fire.

Why are consequential damages excluded?

Exclusions of consequential damages are among the most common and important provisions in a wide variety of contracts. They can significantly reduce the breaching party's liability, sometimes by staggering amounts of money.

Can you claim for consequential loss?

It is recoverable only if the paying party knew or should have known of that circumstance when it made the contract, under the second limb of the rule in Hadley v Baxendale [1854] EWHC Exch J70. By definition, therefore, consequential losses are exceptional and often not recoverable.

Are repair costs consequential damages?

Where an owner must undertake repair work to existing conditions in order to access and remediate the defective work, the damages resulting therefrom may be covered. Thus, costs and expenses relating to this activity are considered part of consequential damages for which there should be coverage.

What does no consequential damages mean?

The definition of consequential damages, also known as "special damages," refers to damages from an indirect result of an event or incident.

What are the 3 types of compensatory damages?

The three types of damages are economic damages, non-economic damages, and punitive damages.

Is pain and suffering a consequential damage?

Compensatory damages may be imposed for a person's pain and suffering. These are called nonpecuniary damages because they are difficult to quantify, but they are nevertheless viewed as legitimate compensation for a legally recognized harm.

What are the 3 types of damages?

Types of Damages
  • COMPENSATORY. Compensatory damages are generally the most identifiable and concrete type of damages. ...
  • GENERAL. General damages are sought in conjunction with compensatory damages. ...
  • PUNITIVE. Punitive damages are meant to punish a Defendant for particularly egregious conduct.

Which is an example of a consequential or indirect loss?

Till the owner purchases a new set of machinery, the operations will remain halted. This loss due to the halting of daily business operations is an example of consequential loss as it is an indirect loss. It is not covered under the insurance for direct losses.

What are consequential damages for breach of contract?

Special damages (also called “consequential damages”) cover any loss incurred by the breach of contract because of special circumstances or conditions that are not ordinarily predictable. These are actual losses caused by the breach, but not in a direct and immediate way.

When can consequential damages be recovered?

This may be recovered if it is determined such damages were reasonably foreseeable or "within the contemplation of the parties" at the time of contract formation. This is a factual determination that could lead to the contractor's liability for an enormous loss.

What are consequential damages in construction?

Generally speaking, consequential damages in construction contracts relate to indirect losses or damages incurred by either the owner or contractor arising from a breach by the other, such as lost income or increased financing costs on the part of the owner or loss of business opportunities by the contractor.

Why are consequential damages important?

Because the waiver of consequential damages can significantly control the amount of damages for which a contractor is assuming risk and greatly limit the owner's ability to recoup many damages, it is arguably the most important provision in a construction contract.

What is covered under consequential loss?

It was the loss that a party suffered on account of breach of contract that was reasonably contemplated by the parties when they made their agreement. It typically included losses such as loss of revenue, profit or opportunity on account of the breach.

What is the difference between consequential and indirect damages?

Consequential damages are also referred to as special damages or indirect damages. Such indirect damages are damages that do not necessarily flow from the breach of contract but are secondary in nature or indirect to breach.

What is covered under consequential loss policy?

Consequential loss coverage reimburses the insured for business costs due to damaged facilities or equipment. For example, business interruption insurance can cover situations that result when the loss of revenue occurs due to events such as an extended power outage, a flood, or a mudslide.

Are consequential damages enforceable?

Whether consequential damages clauses may be enforceable largely depends on the language of the contract. However, regardless of what the contract or the clause itself says, these clauses are generally considered to be unenforceable because parties do not write them with an acceptable amount of care.

Can consequential damages be capped?

As a compromise, parties will often agree to cap consequential damages either at a specific dollar amount or a specific percentage based upon the contract value. That cap can be anything the parties negotiate but in my experience it ranges anywhere from 5% to 15% of the contract value.

What is full disclaimer of consequential damages?

Notwithstanding any provision to the contrary, in no event shall any Party be liable to another Party for any incidental, consequential, special, exemplary or indirect damages, lost business profits or lost data arising out of or in any way related to the Contract Documents.

What is a consequential claim?

By definition consequential damages mean, when one unforeseen event leads to a series of other events, causing damage that was not a result or outcome of the first unforeseen event.