When can consequential damages be recovered by the plaintiff?

Consequential damages, also known as special damages, can be recovered when the breaching party had prior knowledge of the circumstances that would lead to those damages. This requirement stems from the principle that the breaching party can only be held liable for damages that they were aware could result from their actions. In order for consequential damages to be recoverable, the plaintiff must demonstrate that the breaching party knew or should have known that their breach would cause harm beyond ordinary economic loss, thereby creating a foreseeable risk of particular damages.

For example, if the breaching party is informed about specific circumstances surrounding a transaction, such as a deadline or a critical reliance of the plaintiff on the contract, they should recognize that any breach could lead to significant losses. This creates an obligation to compensate for those losses.

In contrast, while having clear terms in a contract can help enforce the expectation of damages, it doesn't inherently mean consequential damages will be recoverable unless the knowledge aspect is satisfied. Similarly, while a reasonable person’s foresight might indicate that damages could occur, it is the knowledge of the specific circumstances by the breaching party that is pivotal. Finally, negligence generally relates to tort claims rather than contract breaches and does not directly impact the recoverability of consequential damages in this