, otherwise known as special damages
, is one of the damages, the other being direct damages, that may be awarded to plaintiff
A plaintiff , also known as a claimant or complainant, is the term used in some jurisdictions for the party who initiates a lawsuit before a court...
in a civil action who claims that terms of an agreement were not honored.
When a contract is breached
Breach of contract is a legal cause of action in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other party's performance....
, the recognized remedy for an owner is recovery of damages that result directly from the breach, such as the cost to repair or complete the work in accordance with the contract documents, the loss of value of lost or damaged work. Consequential damages (also sometimes referred to as indirect or “special” damages), include loss of product and loss of profit or revenue and 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. For example, the cost to complete unfinished work on time may pale in comparison to the loss of operating revenue an owner might claim as a result of late completion.
The Supreme Court
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
United States v. 50 Acres, 469 U.S. 24 was a case appealed to the Supreme Court of the United States as to whether a public condemnee is entitled to consequential damages measured by the cost of acquiring a substitute facility if it has a duty to replace the condemned facility...
that consequential damages are not available in Federal takings.
An example of a situation where consequential damages is rewarded:
Two parties enter into a contract for the sale of an antique doll for $5,000.
The seller finds out that buyer intends to re-sell doll to a collector for a 10% profit.
Seller breaches the contract and sells it him/herself to the collector; doll’s value at time of breach is $6,000.
Total measure of damages: compensatory damages and consequential damages (lost profit).
The provenance of the legal theory underlying "consequential damages" is widely attributed to the 19th century English case of Hadley v. Baxendale in which a miller contract for the purchase of crankshaft for a steam engine at the mill. The party agreeing to produce the part which was critical to the mill's operation and/or output, agreed to deliver the part for inspection as to fit, by a certain date in order to avoid contractual and other business loss/liability and when the part wasn't delivered for inspection on time sued to recover not only what direct costs were incident to the breach alleged but also to recover what costs/losses were entailed with the production shutdown resultant from failure of timely delivery. Thus, Baxendale comes to stand for the proposition that "consequential damages" are recoverable where a contract is breached by a party that knows - or is imputed to know - that ordinary expectancy, reliance or restitution damages will not suffice to meet damages caused by the breach.
The Compensatory Damages
In law, damages is an award, typically of money, to be paid to a person as compensation for loss or injury; grammatically, it is a singular noun, not plural.- Compensatory damages :...
equals $1000 ($6000-$5000).
The Consequential damages equals $500 ($5000x.10).