indirect damages
Definition
Indirect damages are financial losses that don't flow directly from a problem itself but instead result from the ripple effects of that problem. For example, if a supplier sends you defective ingredients, your direct damage is the cost of the bad ingredients, but your indirect damages would be the profits you lost because you couldn't make your product and sell it. Courts and contracts treat these differently because indirect damages can sometimes be much larger and less predictable than the original harm.
Example
Your website hosting company goes down for three days, and you lose $50,000 in online sales as a result. Those lost sales are indirect damages because they resulted from the outage rather than being the outage itself.
Watch Out
Many business contracts include a clause that specifically says neither party can sue the other for indirect damages, so you could be left holding the bag for enormous losses even when the other party is clearly at fault.
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.