Contract Glossary
Consequential Damages
Definition
Consequential damages are indirect losses that flow from a breach of contract — not the immediate harm, but the downstream effects. Think lost profits, lost customers, or a missed business opportunity that only happened because the other side didn't hold up their end of the deal.
In Practice
You hire a web developer to build your e-commerce site by November 1 for the holiday season. They deliver on December 15. Your direct damages are whatever you overpaid or spent fixing their work. Your consequential damages are the $80,000 in holiday sales you lost because the site wasn't live during Black Friday and Cyber Monday.
Example Clause
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES, INCLUDING BUT NOT LIMITED TO LOSS OF PROFITS, LOSS OF REVENUE, LOSS OF DATA, OR BUSINESS INTERRUPTION.
Common in these contract types
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Frequently asked questions about consequential damages
Direct damages are the immediate cost of a breach. Consequential damages are the ripple effects — lost profits, damaged reputation, or missed opportunities. Most commercial contracts exclude consequential damages entirely.
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Create your contractThis content is for informational purposes only and does not constitute legal advice. For contracts with significant financial or legal implications, review by a qualified attorney is recommended.