Whether you’re an owner preparing to enter a contract or already in a dispute, understanding consequential damages could help you. Before signing a contract, this knowledge enables you to protect yourself. If you’re dealing with a project gone wrong, awareness of these damages can help you when reviewing your contract and considering legal action.
Consequential Damages Definition
According to the Massachusetts Uniform Commercial Code, consequential damages (also known as indirect or special damages) include losses arising from a breach of contract or a contractor’s failure to perform contractual obligations. For a party to recover consequential damages, those damages generally must have been reasonably foreseeable when the parties entered into the contract, and the contract must be valid.
One example might be a building owner deprived of the use of their property because a contractor didn’t finish the work by the agreed-upon date. In this case, consequential damages are things like the rental income they would have received during the time for a residential property.
Direct vs. Consequential Damages
Direct or general damages are another type of damage that an owner could recover. These damages are losses that flow naturally from the breach of contract itself. They are immediate and obvious financial harms you suffer as a result of the breach.
For example, a contractor may breach a contract by installing a faulty plumbing system at a hotel. As a result, you would need to tear out walls, replace pipes, and repair finishes. The costs to fix this problem would fall under direct damages. This faulty plumbing would also mean halting operations in the hotel and losing any booking revenue you would have made. The booking revenue would be consequential damages.
About the Waiver of Consequential Damages
The waiver of consequential damages is also an important consideration when entering into contracts.
What It Is
In a contract, your contractor may include waivers that can restrict certain rights or claims without constituting a breach of contract. One such waiver is the waiver of consequential damages. This waiver means that you release the contractor from liability for any consequential damages.
What’s Required for the Waiver
Case law consists of the legal principles established by previous court decisions. Under these legal principles, Massachusetts contracts can include waivers, provided the waivers are written in clear, unmistakable language and do not violate public policy.
Other principles for contracts include that they not be unconscionable. Contracts and any terms within them shouldn’t have issues with the bargaining process. Contracts also have a duty of good faith, meaning that parties must deal with each other honestly.
Dealing With the Waiver
Before you sign a contract, you should review all terms and understand the rights you may be signing away. If the contract waives consequential damages, you can decide whether that’s acceptable.
If you’ve already signed the contract and notice the consequential damage waiver after the fact, you may still have options. You might be able to negotiate with the other party to amend or clarify the contract. If necessary, you may be able to challenge the waiver’s enforceability in court to seek recovery for consequential damages.
Before You Sign: Negotiating the Waiver Clause
If you notice a waiver clause before you sign your contract, you may be able to get it removed or changed. Some of your options include:
- Asking for the deletion of the clause
- Limiting the scope of the clause to only waive some consequential damages
- Creating a mutual waiver to make the contract fairer for both sides
- Introducing exceptions to the waiver so you can still get damages in certain cases
The negotiation process can be complex, and it may be helpful to seek assistance from a professional with legal expertise. Attorneys can help ensure the waiver is fair and explain the meaning of key contract terms.
After a Breach: Recovering Damages Despite a Waiver
If you had a contract with a waiver for consequential damages and the contractor you were working with breached the contract, you still have options for recovering damages. The first option may be to challenge the contract and waiver, as it could be poorly written. Another option may be to recover damages, depending on the facts and circumstances of the case.
The second option is to recover all damages that were not consequential. If the contract included a waiver for consequential damages, you still have the option to recover direct damages so that the contractor has to pay the direct costs associated with repairing their work.
Why Trust Us for Consequential Damages Knowledge?
Navigating the nuances of consequential damages in Massachusetts contract law demands precise legal expertise and a client-focused approach. At Calabrese Law Associates, attorneys like Manuel Guanipa specialize in business law and general civil litigation, bringing extensive experience in contract review, negotiation, and litigation strategy, including successfully representing institutional clients in breach-of-contract cases.
Our team, with practitioners like Hannah Santos focusing on various contract-related disputes, expertly distinguishes between direct and consequential damages. We critically evaluate the enforceability of waiver clauses and guide you through strategic negotiations or litigation, adhering to our guiding principles of efficiency and client service to limit legal spend while achieving world-class results. Our commitment to vigorously protecting your interests and securing the compensation you deserve ensures your contracts truly safeguard your financial future.
Get Help Recovering Damages
If you would like to seek consequential damages but had a waiver in your contract, you may still have options for making things right. At Calabrese Law Associates, we provide general contractor litigation to help recover damages. Reach out to discuss your case with us.
This publication and its contents are not to be construed as legal advice nor a recommendation to you as to how to proceed. Please consult with a local licensed attorney directly before taking any action that could have legal consequences. This publication and its content do not create an attorney-client relationship and are being provided for general informational purposes only.
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