Common use of Consequential and Special Damages Clause in Contracts

Consequential and Special Damages. If the agreement does not contain any limitation on damages, when one party breaches the agreement the non-breaching party may be able to recover consequential or special damages from the party that breached the agreement. Some examples of consequential or special damages are lost profits, punitive damages or damages incurred by the non-breaching party from a third party claim, all of which might not be foreseen or expected by the party that breached the agreement. Consideration should therefore be given to adding a provision to the agreement that would have each party waive any claim against the other for consequential or special damages.