In Powell Electric Systems, Inc. v. Hewlett Packard Co.,[3] Powell and Hewlett Packard contracted for the installation, testing, and repair of a new transformer. The courts have adopted different approaches to clauses which seek to exclude or include consequential loss from the scope of damages that a party to an agreement can claim. Direct Damages – Where did it Flow From? The parties disagreed on whether Continental was entitled to the unrealized charter hire Western initially contracted. A Westlaw search for [“consequential damages” and synonymous and “special damages”] yielded 35 cases, 7. Brown. CONSEQUENTIAL DAMAGES It [s Still A Hadley v. Baxendale World • The two branches of Hadley: DIRECT DAMAGES and CONSEQUENTIAL DAMAGES • DIRE T DAMAGES are ^those which may fairly and reasonably be considered as arising naturally from the breach of any similar contract (as said in Hadley, in the great multitude Trevor J. The question of whether lost profits resulting from a contract breach constitutes direct or consequential damages has vexed practitioners for decades. The difference between incidental and consequential damages is the cause of the expense or loss. 2009, no pet. To be awarded consequential damages in a lawsuit, they must be a foreseeable result of an act. Consequential Damages. h.). Direct damages are those that flow naturally and necessarily from the breach and compensate for loss that is presumed to have been foreseen or contemplated by the parties because of the breach. Think of it as a ripple effect. 131, 133 (1916). While a seemingly simple test, Texas courts have had varying outcomes depending the specific facts and circumstances. There is a second reason for concern about the distinction between consequential and direct damages. During installation, Powell negligently connected a new transformer resulting in damages to Hewlett’s facilities. The degree of proof required for the consequential damages is also higher than for the direct damages. But simply using "consequential" and "direct" to describe damages is to rely on a third party (the court) to interpret your contract for you. Direct damages are sufficiently predictable that they require no special pleading. Both direct and consequential damages are necessary to fully compensate it because the innocent party entered the contract with the intention of receiving the full benefit of its bargain, This sounds simple enough, but the costs associated with the full benefit of the bargain are frequently difficult to foresee when the contract is first formed The department store can sue for both consequential and direct damages. Mainly, labor and materials costs. The question of whether lost profits resulting from a contract breach constitutes direct or consequential damages has vexed practitioners for decades. damages are direct and special damages are consequential. Consider whether lost profits are reasonably foreseeable and quantifiable. Consequential damages crop up in contract disputes, insurance claims, and personal injury cases. CONSEQUENTIAL DAMAGES It [s Still A Hadley v. Baxendale World • The two branches of Hadley: DIRECT DAMAGES and CONSEQUENTIAL DAMAGES • DIRE T DAMAGES are ^those which may fairly and reasonably be considered as arising naturally from the breach of any similar contract (as said in Hadley, in the great multitude [3] 356 S.W.3d 113, 117 (Tex. Thus, as we have seen through this sample of cases, while the Texas courts generally respect the parties’ contractual language classifying certain damages as direct or consequential, the courts will closely examine the circumstances giving rise to the claim. This is an important distinction, as consequential damages are often much greater than direct damages. 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