What Does “Damages” Mean in a Contract?
Monetary compensation for losses or injuries caused by breach of contract or other wrongful conduct.
Detailed Explanation
Damages are the money you can recover when the other party breaches the contract or causes harm. There are several types: direct/actual damages (actual losses suffered), consequential damages (secondary effects like lost profits), and punitive damages (punishment for egregious conduct).
Contracts often exclude or cap certain types of damages. "No consequential damages" clauses are common, limiting recovery to direct losses only.
Example in a Contract
“In no event shall either party be liable for any indirect, incidental, consequential, special, or punitive damages, including lost profits, loss of data, or business interruption, regardless of the cause.”
Why It Matters
Damage exclusions can dramatically limit what you can recover. If a vendor's failure costs you a million-dollar client, but "consequential damages" are excluded, you might only recover what you paid them, not your lost profits.
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