Rather than turning on foreseeability, the difference between direct and consequential damages depends on whether the damages represent (1) a loss in value of the other party’s per­form­­ance, in which case the damages are direct, or (2) collateral losses following the breach, in which case the damages are consequential. Direct damages are such as follow immediately upon the act done; while consequential damages are the necessary and connected effect of the wrongful act flowing from some of its consequences or results though to some extent depending on other circumstances. Consequential damages are damages that “do not necessarily, but do directly, naturally, and proximately result from” the injury for which compensation is sought. U.S. perspective Direct damages are those that flow directly from breach of a contract. Consequential loss confuses business people and some recent cases have added to the confusion. Reynolds Metals Co. v. Westinghouse Elec. There are really two types of damages for a breach of a construction contract. This is part of Dana Shultz’s Canonical Qs on the Law series of questions and answers about legal issues, concepts and terminology. And when you throw in the term direct damages, the conversation gets even more complicated. Atl. As a result, instead of forseeability, the difference between direct and consequential damages depends on whether the damages represent (1) a loss in value of the other party’s performance, in which case the damages are direct, or (2) collateral losses following the breach, in which case the damages are consequential. Toll Free: 800.975.9468 (Continued on page 2) Fax: 216.241.4520 Direct Damages, Consequential Damages & Liquidated Damages: A Brief Review by Robert Gavin We often are asked “What is the difference between direct … direct and consequential damages TheLaw.com Law Dictionary & Black's Law Dictionary 2nd Ed. The question of whether lost profits resulting from a contract breach constitutes direct or consequential damages has vexed practitioners for decades. Consequences of Consequential Damages. The courts have adopted different approaches to clauses which seek to exclude or include consequential loss from the scope of damages that a party to an agreement can claim. 1985). The consequential damages are the costs the department store had to pay to hire a new manufacturer to finish what the toy store failed to do. What was once considered to be a consequential loss may now be a direct loss. The benefit of the bargain that is directly and strictly tied to the contract is a measure of direct damages. While we can hardly claim that the answer is now clear, the primary factor appears to be foreseeability of … Cleveland, OH 44114 stand those damages directly related to the design defect. Examples of direct damages include unpaid contract amounts, cost to repair defective work, and reduced project value due to nonconforming work. Dorestin v. "Rather than turning on foreseeability, the difference between direct and consequential damages depends on whether the damages represent (1) a loss in value of the other party's performance, in which case the damages are direct, or (2) collateral losses following the breach, in which case the damages are consequential." This is true whether there is a dispute between an owner and a general contractor or a dispute between a general contractor and a subcontractor. Corp., 758 F.2d 1073, 1079 (5th Cir. The department store can sue for both consequential and direct damages. The distinction between direct and consequential damages is important when the parties’ contract contains a clause barring consequential damages. Contract breach constitutes direct or consequential damages the conversation gets even more complicated gets... 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