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The difference between consequential vs. direct damages

When it comes to breaches of contract, Houston businesses can pursue a range of damages. However, there tends to be some confusion surrounding consequential and direct damages, both of which can be a very real concern for a commercial enterprise. Here at The Jackson Law Firm, we strive to provide clients essential information in a clear and concise manner. That includes the ins and outs of consequential vs. direct damages as they pertain contractual breaches.

According to the American Bar Association, a simplified classification of legal terms is often needed to create a greater understanding. While the actual definition of consequential and direct damages seems relatively straightforward, in practice they can become a bit more muddled. In general terms, direct damages immediately stem from the contractual breach, while consequential damages are still related to the breach but without a direct correlation.

Consequential damages often entail a deeper knowledge of a contract and its terms. 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. This entails proving that the party accused of breaching the contract was well aware of these consequences and went ahead with their actions regardless.

This is an important distinction, as consequential damages are often much greater than direct damages. It’s also a lot more difficult to show that those involved in the contract breach intended to do so as early as the signing. Conversely, direct damages are typically easier to establish because of their immediate impact. If you’d like more information on what you can do in the event of a contract breach, please feel free to visit us online.

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