consequential damages
Definition
Consequential damages are the indirect losses that flow from a breach of contract or wrongful act, going beyond the immediate direct harm to include ripple effects like lost profits or lost business opportunities. A court will only award these damages if the person who caused the harm could have reasonably predicted that these kinds of losses would result from their actions.
Example
If a supplier fails to deliver ingredients for your bakery and you lose $5,000 in wedding cake orders as a result, those lost profits are consequential damages because they stem from the supplier's failure rather than being the direct cost of the missing ingredients themselves.
Watch Out
Many contracts contain a clause that specifically eliminates the right to collect consequential damages, so always read that fine print before you sign because waiving this right can leave you severely undercompensated if something goes wrong.
See which terms appear in your contract?
This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.