Consequential Damages Lawyers

A contract is an agreement between two or more parties that creates obligations to each other. Contracts are enforceable in a court of law. A contract can be either oral or written; however, oral contracts are more challenging to enforce because the contract’s exact terms may vary depending on who is telling the story.

If you are entering into a contract involving considerable substantial sums of money, it may be in your best interest to retain the services of a business attorney to protect your rights, make sure that the language of the contract matches what you intend to agree to and prevent any disputes associated with the contract.

When a dispute arises between parties over a contract, the court must establish that a contract exists. Four essential elements make up a valid contract, which the complaining party must prove:

1. Offer: One or both of the parties must have made a promise to do, or to refrain from doing, some specified action in the future
2. Consideration: Consideration means that something of value was exchanged in exchange for something else of value (e.g., services for cash). Consideration can also be thought of as whatever it was that induced the parties to enter into the contract
3. Acceptance: Unambiguous acceptance of the contract terms can be shown through words, deeds, or performance. If the contract specifies the exact manner of acceptance, acceptance must mirror the terms of the contract
4. Intent: The most crucial element of a contract is that the parties intend to make a contract. The parties must intend to create legal relations and must also understand at the time of contracting that the agreement will be enforceable in a court of law

There are two different sets of governing laws that determine how a court will interpret a contract and how it will enforce the terms of the contract. The first is a codified set of laws – the Uniform Commercial Code, or “UCC.” It controls contracts that are primarily for the sale of goods. The UCC is a standardized collection of guidelines governing the law of commercial transactions. Most states have adopted the UCC in whole or in part. If the contract is for the sale of goods and occurs between one or two merchants, the UCC will govern the transaction.

The other type of law is “common law.” Common law is what governs the majority of contracts. Every state has its own common law. It is an evolving set of laws, mostly created by judges’ court decisions.

Are There Different Types Of Contracts?

There are a variety of different types of contracts, which may include:

• Express Contracts: An express contract is a contract that is formed by explicit language. An express contract will recite the agreement as well as its terms in entirety and specificity
• Implied Contracts: An implied contract is a contract formed by the parties’ behavior. An example of an implied contract would be when a dentist examines and treats a patient in their office. It is implied that the dentist will do their best and that the client will pay the fee that is charged for the treatment
• Bilateral Contracts: A bilateral contract is between two persons or companies in which each party promises to the other. This is commonly regarded as the most common of contracts. An example of a bilateral contract would be, “I will wash your car and you will pay me $10.00”
• Unilateral Contracts: A unilateral contract is one in which the offer requests performance, instead of exchanging promises. A unilateral contract is generally only complete and formed when performance has been concluded. An example of a unilateral contract would be a reward poster; the contract is only formed when the item requested on the reward poster is returned. Once the item is returned, the money will then be provided for performance

What Are Consequential Damages?

Consequential damages, commonly referred to as “special damages” or “expectation damages,” are specific types of damage that arise from a breach of contract by one party. Consequential damages are damages above and beyond money lost because of the breach of contract. They are damages that a breaching party should have expected when they breached the contract, and it would not surprise them that if they breached the contract, the other party would suffer this form of harm.

While direct damages generally focus on the costs associated directly with the contract, consequential damages focus on the costs outside the contract. Examples generally include:

• Lost profits
• Lost products
• Lost time
• Damage to reputation
• Reduction in the value of a product

Are Consequential Damages Clauses Enforceable?

Clauses forbidding consequential damages are commonplace, so much so that they may be considered “boilerplate.” These clauses generally state that none of the parties will be liable for consequential damages resulting from a breach of contract.

Whether consequential damages clauses may be enforceable depends on the contract’s language. If these clauses are unenforceable, it is likely because the parties did not write them with an acceptable amount of care. An example of this would be how parties fail to define consequential damages. Simply stating that a party is not liable for ‘consequential damages’ or ‘losses’ does not necessarily indicate that either party agreed to forfeit future potential losses.

Additionally, lost profits or revenues may be general damages. Courts have recently held that waivers of lost profits or revenues, and potentially other “consequential” damages, are considered general damages. The waiver is unenforceable because the parties did not agree to waive those general, direct damages.

Some examples of the considerations that courts examine when determining the validity of these clauses include:

• The sophistication of the parties: The more sophisticated the parties, the less likely a court may permit them to agree broadly to limit their damages. They would be expected to be specific regarding what consequential damages may arise and should have addressed them within the contract. If one of the parties is considerably more sophisticated than the other, the court may determine this type of clause is unenforceable because of the lack of mutuality in the parties’ positions
• Foreseeability: This refers to how foreseeable it is that a breach will result in non-monetary damages, which will help a judge determine whether the damages are consequential or direct, probable losses.
• The context of the agreement: The less specific a damages-limiting clause is, the more likely it is considered to be a boilerplate. As such, a court will likely consider it to be unenforceable because it was not likely a bargained-for term of the contract, but simply an afterthought

Do I Need A Lawyer To Obtain Consequential Damages?

Consult a local contract attorney in your area if you are involved in a contract dispute. An experienced local attorney can help you understand your legal rights and options according to your state’s specific laws, and they will also be able to represent you in court as needed. Your attorney can work towards a suitable damages award to remedy your contract dispute under the full extent of the law.

Also, if there are any changes or updates to contract laws that might affect your legal rights, your attorney can keep you informed of your options under the law.