After tracing the historical derivation of the term, and its current use, we provide a number of basic guidelines for addressing consequential damage waivers in acquisition agreements, which include the following: Posted by Jim Naughton, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on, Harvard Law School Forum on Corporate Governance, on Reassessing the “Consequences” of Consequential Damage Waivers in Acquisition Agreements, Reassessing the “Consequences” of Consequential Damage Waivers in Acquisition Agreements. 2. Buyers, on the other hand, should not assume that contract’s “rule of reasonableness” fails to apply to broadly worded indemnification provisions. In this case, the insured sought direct and consequential damages from its insurer, stemming from Hudson’s denial of Panasia’s claim for water damage to its commercial building. That’s what I did, with an article that I mentioned in this July 2008 blog post as my trusty guide: “Reassessing the ‘Consequences’ of Consequential Damage Waivers in Acquisition Agreements,” 63 Business Lawyer 777 (2008). [5] Glenn D. West and Sara G. Duran, Reassessing the “Consequences” of Consequential Damage Waivers in Acquisition Agreements, 63 The Business Lawyer 777, 780 (May 2008). Generally, consequential loss (also called indirect loss) is the non-dominant loss from a breach of contract. In other words, consequential damages are a distant, yet foreseeable, cost of a broken contract. The fact that they can be assigned to a wide array of consequences means that the amount of consequential damages that can be awarded to a plaintiff can skyrocket rather quickly. Suggested Citation, 767 Fifth AvenueNew York, NY 10153United States214-746-7780 (Phone)214-746-7777 (Fax), 1802 HartfordLubbock, TX 79409United States, One First National PlazaChicago, IL 60603United States, Corporate Law: Corporate & Takeover Law eJournal, Subscribe to this fee journal for more curated articles on this topic, Corporate Governance: Arrangements & Laws eJournal, We use cookies to help provide and enhance our service and tailor content.By continuing, you agree to the use of cookies. … Many times a party will want to exclude consequential and special damages from recovery. Consequential damages are also known as “special damages,” and are damages that are not a direct result of an incident itself, but are instead consequences of that incident.An example of consequential damages would be a driver getting into a car accident because, instead of paying attention to the road, he was focused on another car accident that had just happened across the street. 777 (2008), Available at SSRN: If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday. (Click here for a copy.) But this task confounds both lawyers and judges. There are many types of damages in the law that a party may claim in the case of breach of contract including: i) direct damages ii) consequential damages and iii) special damages. Therefore, when attempting to prove consequential damages, if a party does not specifically plead those damages, then the evidence of those damages would be inadmissible. Consequential damages are damages that “do not necessarily, but do directly, naturally, and proximately result from” the injury for which compensation is sought. [5] Glenn D. West and Sara G. Duran, Reassessing the “Consequences” of Consequential Damage Waivers in Acquisition Agreements, 63 The Business Lawyer 777, 780 (May 2008). After tracing the historical derivation of the term and its current use by the courts, this Article considers the impact of such waivers in a hypothetical business acquisition and proposes some specific guidelines for the negotiation of these waivers. One of the most common arguments against pure economic loss is the floodgates principle, which argues that the business world would have to be overly cautious, which isn't a good thing for the economy. The present economic climate may have consequences for both pleading and proof of consequential damages. They are probable consequences or losses contemplated by the parties at contract formation. at 792. If possible, buyers should try to define “consequential damages” for the purpose of any waiver provision in such a manner that the term covers only those consequential damages for which the law already denies recovery for breaches of contract. I use the words “not unlikely” as In theory, the definition of consequential damages is not that complicated, but in application, the results become muddled. Negotiating Delay Risks: Consequential Damages, Liquidated Damages and Limitations of Liability in Construction Contracts Stein Ray LLP 222 West Adams Street • Suite 1800 Chicago, IL 60606 312.641.3700 sstein@steinraylaw.com Presenter:JeffAppelbaum www.steinraylaw.com ThompsonHine 10/27/2015 1. Loss of profits due to an interruption of normal business practices. 2. Cleveland, OH 44114 stand those damages directly related to the design defect. at 791–92 (internal quotation marks and citations omitted). Judge Posner, for example, purported to distinguish between direct and consequential damages, “the difference lying in the degree to which Posted: 17 Sep 2015, Weil, Gotshal & Manges LLP; Texas Tech University School of Law; SMU Dedman School of Law. (Click here for a copy.) [11] Id. The May 2008 issue of The Business Lawyer contains a great article by Glenn D. West and Sara G. Duran of Weil Gotshal entitled “Reassessing the ‘Consequences’ of Consequential Damage … This is because what constitutes consequential loss depends on the context of the contract. The recent cases of Hotel Services Limited v Hilton International Hotels (UK) Limited and Deepak Fertilisers v Davy McKee are clear examples of this position. By Allyson Kreps. That’s what I did, with an article that I mentioned in this July 2008 blog post as my trusty guide: “Reassessing the ‘Consequences’ of Consequential Damage Waivers in Acquisition Agreements,” 63 Business Lawyer 777 (2008). Reassessing the “Consequences” of Consequential Damage Waiv-ers in Acquisition Agreements,63BUS.LAW. This post comes from Glenn D. West and Sara G. Duran of Weil, Gotshal & Manges. Requirements for Recovery of Consequential Damages The degree of proof as to the amount of damages is high-er for consequential damages than for direct damages, and consequential damages must be pled with greater specificity. In our article, Reassessing the “Consequences” of Consequential Damage Waivers in Acquisition Agreements, which was recently published in The Business Lawyer, we provide clarity on the issue of Consequential Damages. 63 Bus. They go beyond the express terms and conditions of the contract itself and into the actions that flow from the breach. 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