Consequential Damages
Indirect losses that flow from a breach — like lost profits.
What it means
Consequential damages are losses that flow indirectly from a breach rather than from the breach itself — lost profits, lost business opportunities, downtime, damage to reputation. They contrast with direct damages, like the cost of repairing defective work. Because consequential losses can dwarf the contract price, many contracts contain a mutual waiver of consequential damages, often inside or beside the limitation-of-liability clause.
Why it matters before you sign
A consequential-damages waiver decides whether the biggest category of real-world loss is recoverable at all — think about what an actual failure would cost your business before agreeing to waive it.
In a contract, it looks like this
The parties mutually waived consequential damages, so the owner could not recover lost rental income caused by the delayed opening.
This definition is a general, educational explanation — not legal advice. XOsign provides AI-assisted document tools and does not provide legal advice; consider consulting a qualified attorney for guidance on your specific situation. Requirements vary by state.
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