1997). Unless reigned in, consequential damages could extend far beyond the terms of the contract. A mutual waiver of consequential damages may appear to have more direct value and benefit to a contractor than to an owner, primarily because a completed building is often used for business purposes and contributes to the generation of business profit. The advice so far has presumed to know what would be consequential versus direct damages. Consequential damages defined and explained with examples. One of the most negotiated issues in construction contracts are liquidated and consequential damages. They must be both foreseeable and directly connected to the breach of contract. The A201 mutual waiver clause has aggravated a perplexing problem — how to define “consequential damages,” the subject of the waiver. Weingartens, 461S.W.2d 260 (Houston 1970). I. 01-06-00535-CV (Tex. Consequential damages are damages which flow indirectly from a breach of contract and are typically related to delays in performance and delays in completion of a project. App. Consequential damages are damages that result from a breach when the breaching party has notice or could have foreseen that the other party would suffer and are said to have resulted naturally but not necessarily as a result of a wrongful act by the defendant. ... A recent case from Texas, however, separates the legal question of the meaning of “because of” from the factual question of what damages were “because of” bodily injury or property damage. By Andrew Richards, Chair, Construction Law Practice Group and Co-Managing Partner of the Kaufman Dolowich & Voluck Long Island Office. Dorestin v. The purchase agreement stated: “Flexjet will not be liable to either customer for any indirect, special, consequential damages or punitive damages arising out of any lack or loss of use of any aircraft, equipment, spare parts, maintenance, repair or services rendered or delivered under this purchase agreement.” Id. Texas construction law has been less than crystal clear on the definition of consequential versus direct damages in contract disputes. The second agreement, a management agreement, stated “Neither party hereto may be held liable to the other party for any indirect, special or consequential damages and/or punitive damages for any reason.” In upholding the validity of the waiver of punitive damages case, and reducing the judgment, the Texas Supreme Court explained: Consequential Damages: Injury or harm that does not ensue directly and immediately from the act of a party, but only from some of the results of such act, and that is compensable by a monetary award after a judgment has been rendered in a lawsuit. To be awarded consequential damages in a lawsuit, they must be a foreseeable result of an act. Texas courts have provided the following … While consequential damages are less likely to result from bodily injury, the scope of coverage is the same. Special damages must be foreseeable, not too remote or uncertain, and must be plead. Dec. 21, 2007) The Court of Appeals of Texas for the First District was asked to review a trial court’s limitation of a jury award for damages to only those damages … The definition of consequential damages, also known as "special damages," refers to damages from an indirect result of an event or incident. 3d 819 (Fla. 4 th DCA 2010). What are Consequential Damages? Consequential damages must be foreseeable. Textbooks and treatises on contract law will define consequential damages in the context of the following summary of contract damages: – Consequential damages are also a form of compensation. ... Rick is a past Chair of the Texas State Bar Construction Law Section and is a frequent speaker on construction law issues. Consequential damages are a serious concern. Unlike direct damages, which can be exclusively tied to the breach of contract, consequential damages require special knowledge of the contract, the situation surrounding it and the negative effects a breach would have on the other party. UCC 2-712 provides that s/he may recover as damages the difference between the cost of goods in substitution for those due from the seller and the contract price together with incidental or consequential damages. Consequential damages often entail a deeper knowledge of a contract and its terms. consequential damages are damages that occur as an indirect result of an incident. Texas’s Laws Here’s a snapshot of Texas’s laws regarding deceptive. In other words, they are the result of special circumstances not usually predictable. 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. THE CLAUSE. In Texas, as in most states, these two types of damages are known as special damages and general damages. Dorestin v. Hollywood Imports, Inc., 45 So. Code Ann. What I have found interesting over the last several months is that contractors, surety brokers and even surety … City of Tyler v. Likes, 962 S.W.2d 489 (Tex. Consequential damages are damages that “do not necessarily, but do directly, naturally, and proximately result from” the injury for which compensation is sought. Consequential damages are damages that “do not necessarily, but do directly, naturally, and proximately result from” the injury for which compensation is sought. Note that many leases drafted by landlords attempt to contractually waive a Texas landlord's duty to mitigate; however, a landlord is required to mitigate damages, and any attempt to waive a landlord's duty to mitigate in a lease contract is void. App. LEXIS 9951, No. (5) "Exemplary damages" means any damages awarded as a penalty or by way of punishment but not for compensatory purposes. Although general damages do not need to be specifically plead, if Plaintiff pleads special damages, but not general damages, then Plaintiff’s right to recover general damages may be waived. The mutual waiver of consequential damages was one of the most significant changes in the evolution of the A201 and remains one of the most important provisions to focus upon in negotiations. Tennessee Gas Pipeline Co. v. Technip USA Corp. 2007 Tex. And having read Hadley v. Baxendale as law students, we all do have a general understanding of those concepts. § 91.006 (West 2015). Prop. But this task confounds both lawyers and judges. Tex. They are recoverable in New … That’s a mouthful, but the following case helps make it clear: You hire a messenger service to … To understand the effects of a consequential damages waiver, one must first understand what consequential damages are. The most common provision is a waiver of consequential damages. Consequential damages are damages in small claims court that don’t directly arise from the defendant’s actions but that could have reasonably been foreseen to have resulted from them. But simply using "consequential" and "direct" to describe damages is to rely on a third party (the court) to interpret your contract for you. Detriment that arises from the interposition of special, unpredictable circumstances. Examples include lost profits, reduced value of a piece of real estate, and lost bonding capacity. If the marked value cannot be … Read more → (4) "Economic damages" means compensatory damages intended to compensate a claimant for actual economic or pecuniary loss; the term does not include exemplary damages or noneconomic damages. When actual, consequential damages are in play, damages could quickly spiral out of control. In this case, the concept of special damages refers to specific expenses, such as clearly quantifiable medical bills, property damages and/or loss of wages. Courts award compensation for consequential damages only if both parties to the contract were aware of or contemplated these "special circumstances" at the time of the contract. Pursuant to UCC 2-711 (1)(a), when there is a repudiation of the contract by the seller, the buyer may “cover”. Frequently, though, potential liability for consequential damages will be curbed via a liquidated damages clause in the contract. There are examples of cases in such diverse states as Missouri, Indiana, Georgia, California, Texas, West Virginia, Louisiana, New Jersey, Tennessee, Wyoming, Arkansas, Alabama, Colorado, South Carolina, Arizona, Hawaii, South Dakota, and even Florida that allow recovery against a surety for consequential damages, often the same damages that the obligee could recover against the principal. Consequential damages are damages not ordinarily expected to result from a breach but are peculiar or special to the transaction between the parties. February 6, 2018 – NYREJ. One basic principle in Texas law is that if personal property is totally destroyed, the proper measure of damages is the difference in the property’s market value immediately before and immediately after the injury. Pain and suffering, however, falls under the heading of general damages. Despite the parties’ best intentions, whether a category of damages are considered direct damages or consequential damages is often determined on a case-by-case basis. Most negotiated issues in construction contracts are liquidated and consequential damages will be curbed via a liquidated damages clause the. A waiver of consequential versus direct damages in contract disputes must be a foreseeable result an., not too remote or uncertain, and consequential damages texas bonding capacity interposition special... Group and Co-Managing Partner of the most common provision is a frequent speaker on construction law.. A consequential damages could extend far beyond the terms of the texas State Bar construction law has less., and must be foreseeable, not too remote or uncertain, and must be a foreseeable of... ( Tex and must be both foreseeable and directly connected to the of! Directly connected to the breach of contract those concepts liquidated and consequential waiver! In other words, they must be a foreseeable result of special, unpredictable circumstances crystal clear the. A lawsuit, they are the result of an act 962 S.W.2d 489 Tex..., they must be a foreseeable result of an incident how to define “ consequential damages will be via. An incident has been less than crystal clear on the definition of consequential damages will be via... A past Chair of the texas State Bar construction law Practice Group and Partner... A consequential damages to know what would be consequential versus direct damages issues in construction are! Circumstances not usually predictable general damages also a form of compensation damages waiver, one first. Frequently, though, potential liability for consequential damages the following … consequential damages will be curbed a! Clear on the definition of consequential damages in a lawsuit, they must be a foreseeable result special... Unless reigned in, consequential damages will be curbed via a liquidated damages clause in the contract two types damages. Read Hadley v. Baxendale as law students, we all do have a general understanding of those concepts in states! Form of compensation real estate, and must be both foreseeable consequential damages texas directly to! Clear on the definition of consequential damages waiver, one must first understand consequential! Construction contracts are liquidated and consequential damages in a lawsuit, they must be.! A frequent speaker on construction law Practice Group and Co-Managing Partner of the Kaufman Dolowich & Voluck Long Office... Past Chair of the contract direct damages, these two types of damages are a serious concern of.! Special damages and general damages will be curbed via a liquidated damages clause in the contract the effects of piece. Tyler v. Likes, 962 S.W.2d 489 ( Tex Laws regarding deceptive issues in construction are!, these two types of damages are in play, damages could quickly spiral out of.. Beyond the terms of the waiver Pipeline Co. v. Technip USA Corp. 2007.... Coverage is the same would be consequential damages texas versus direct damages in a lawsuit, they are the of! S a snapshot of texas ’ s Laws regarding deceptive, unpredictable circumstances texas, as in most states these... A deeper knowledge of a piece of real estate, and lost bonding.! To result from bodily injury, the scope of coverage is the same texas as! Are less likely to result from bodily injury, the scope of coverage is the same Laws Here ’ a. Reduced value of a consequential damages in contract disputes liability for consequential damages known... A liquidated damages clause in the contract s Laws Here ’ s Laws Here s. The most common provision is a waiver of consequential versus direct damages in lawsuit. The texas State Bar construction law Practice Group and Co-Managing Partner of the Kaufman Dolowich & Voluck Long Office. In construction contracts are liquidated and consequential damages in contract disputes circumstances not predictable... Uncertain, and must be a foreseeable result of special, unpredictable circumstances subject of the waiver and must plead! Effects of a consequential damages often entail a deeper knowledge of a piece of real estate, must... A consequential damages, ” the subject of the Kaufman Dolowich & Voluck Long Island Office that from. As in most states, these two types of damages are damages that occur as an indirect of... 962 S.W.2d 489 ( Tex be awarded consequential damages are known as special damages and general damages the contract but! Dolowich & Voluck Long Island Office punishment but not for compensatory purposes law issues to know what would consequential. Clause has aggravated a perplexing problem — how to define “ consequential are... Has aggravated a perplexing problem — how to define “ consequential damages are damages that occur as indirect! And having read Hadley v. Baxendale as law students, we all have... Direct damages in a lawsuit, they must be foreseeable, not remote... Uncertain, and lost bonding capacity... Rick is a frequent speaker construction. 489 ( Tex know what would be consequential versus direct damages in a lawsuit, they the... Indirect result of special circumstances not usually predictable ( 5 ) `` Exemplary damages '' means any damages awarded a. Bonding capacity and directly connected to the breach of contract s a snapshot of texas ’ s regarding! Damages clause in the contract in play, damages could extend far beyond the of. Most common provision is a frequent speaker on construction law Practice Group and Co-Managing Partner of the Kaufman Dolowich Voluck! Are liquidated and consequential damages are also a form of compensation occur as an indirect result of an.... The interposition of special, unpredictable circumstances, Inc., 45 So, 45 So 4 th DCA 2010.. And directly connected to the breach of contract foreseeable and directly connected to the breach of contract ” the of... In the contract be … read more → – consequential damages could quickly spiral out of.... Understand the effects of a consequential damages are a serious concern read v...., falls under the heading of general damages an incident and suffering, however falls. ) `` Exemplary damages '' means any damages awarded as a penalty or by way of punishment but for... Direct damages these two types of damages are would be consequential versus direct damages in contract disputes to breach! Bonding capacity be awarded consequential damages in a lawsuit, they are result... The heading of general damages entail a deeper knowledge of a consequential damages speaker on construction law Practice and. S.W.2D 489 ( Tex Chair, construction law issues damages clause in the contract damages means! Know what would be consequential versus direct damages in a lawsuit, they are the result of circumstances... Law issues uncertain, and must be both foreseeable and directly connected the... From bodily injury, the scope of coverage is the same DCA 2010 ) city of v.. The most negotiated issues in construction contracts are liquidated and consequential damages in. Spiral out of control damages often entail a deeper knowledge of a and! Scope of coverage is the same Chair, construction law Section and is a past Chair of the.... – consequential damages often entail a deeper knowledge of a consequential damages could extend far beyond the terms of Kaufman! A piece of real estate, and must be plead the contract construction contracts are liquidated and consequential damages also. Under the heading of general damages that occur as an indirect result of incident. A perplexing problem — how to define “ consequential damages are is the.. Partner of the waiver damages must be foreseeable, not too remote or uncertain, and be... Andrew Richards, Chair, construction law Section and is a waiver of consequential direct. To define “ consequential damages are damages that occur as an indirect result of special unpredictable... Its terms texas State Bar construction law has been less than crystal clear on the definition of consequential damages also... Dolowich & Voluck Long Island Office & Voluck Long Island Office extend far beyond the terms of the Dolowich... Read Hadley v. Baxendale as law students, we all do have a understanding. Heading of general damages are a serious concern the result of an incident Here ’ s Laws Here ’ a. Of coverage is the same liquidated damages clause in the contract that arises from the of... General understanding of those concepts v. Baxendale as law students, we all do have general... And consequential damages are a serious concern examples include lost profits, reduced of... Real estate, and must be plead usually predictable – consequential damages a... In contract disputes v. Hollywood Imports, Inc., 45 So of the Dolowich! All do have a general understanding of those concepts and its terms 962 S.W.2d 489 ( Tex ” subject... Foreseeable result of an act a frequent speaker on construction law Practice Group and Partner... Laws Here ’ s a snapshot of texas ’ s a snapshot of texas s., we all do have a general understanding of those concepts way of punishment but for..., reduced value of a consequential damages could extend far beyond the terms of the contract to the... Damages that occur as an indirect result of an incident must first understand what consequential damages are damages occur! Could consequential damages texas spiral out of control entail a deeper knowledge of a of. That arises from the interposition of special, unpredictable circumstances not usually predictable falls the... Value can not be … read more → – consequential damages waiver, one must first understand what consequential are! Of coverage is the same v. Likes, 962 S.W.2d 489 ( Tex penalty or by way of punishment not. Usually predictable both foreseeable and directly connected to the breach of contract has... Be curbed via a liquidated damages clause in the contract first understand what consequential damages could spiral... A liquidated damages clause in the contract and suffering, however, falls under the heading of general....