What are consequential damages?

Consequential damages refer specifically to losses that do not arise directly from a breach of contract but are a consequence of that breach. These damages often stem from the unique circumstances of the injured party and may include things like lost profits or additional costs incurred due to the breach. They require proof that the breaching party was aware or should have been aware of these potential outcomes resulting from their actions.

Although the chosen answer refers to special damages that exceed standard expectation damages, it is important to clarify that consequential damages typically fall under a category of special damages. These damages go beyond ordinary losses, reflecting the specific repercussions that the breach has caused for the aggrieved party. Essentially, they are tied to the particular context in which the breach occurred, making them different from general or expectation damages, which can be calculated based solely on the contract terms.

The other options do not accurately capture the essence of consequential damages. For instance, damages that naturally occur from a breach are usually covered under expectation damages rather than consequential damages. Nominal damages apply to trivial breaches where the party hasn't incurred significant loss, and punitive damages are meant to punish wrongful conduct rather than compensate for economic loss. Understanding these distinctions is crucial for assessing damages in contract law effectively.