Jerry was happily walking down the road, when suddenly he tripped over and fell into a ditch dug by Tom. This ditch was dug by Tom to collect rainwater flowing down his drain. He had forgotten to cover the ditch with a lid. Jerry sued Tom for consequential damages and asked him to pay for his medical bills.
The above stated story is one example, wherein Jerry seeks compensation from Tom under the consequential damage clause. Jerry was injured as a result or consequence of an act carried out by Tom. If one is to seek justice using this clause, then the result should be a foreseeable act.
As it is very apparent from the above example, an open ditch on the road will lead to accidents, as an unsuspecting passerby may slip and fall into it. Tom suffered from a broken leg and plenty of bruises by falling into the ditch. Let us take a look at the clause in detail, and understand this legal term better.
Legally speaking, consequential damages is a 'loss or injury sustained by someone due to an indirect act of another party'. When a case is filed under civil ligation, the damages or loss incurred are paid in the form of monetary compensation. This helps the person affected by the indirect action cover up for a tangible loss. The losses include medical expenses, lost wages as well as property damage.
This damage not only includes injury or harm, but also any loss under a contractual situation. This means loss to general or particular requirements that were known by the seller at the time of contract, and could have been covered by using a substitute or otherwise.
They are also known as special damages, it being one of the two types of damages. In case of insurance dispute, an example includes loss of revenue to a business when the insurance company did not evaluate and compensate on time. This causes loss of earnings or profits as the business could not carry out repair or replacement of the property on time.
Another type arises from contracts' dispute. Suppose a restaurant owner signs a contract with a contractor to paint his restaurant. The contractor is aware that the restaurant is scheduled to reopen on a decided future date. However, due to his laziness or lax attitude, the restaurant is not painted on time, and the restaurant reopening needs to be postponed by 15 days. This causes financial loss to the restaurant owner.
In such a case, the restaurant owner can sue the contractor under the clause since the painter's mistake caused him great loss. The example mentioned in the beginning covers a case that leads to injury or bodily harm. As Jerry dug the ditch, it was his moral responsibility to cover it up to avoid injury or harm. He was careless and forgot the most important part of covering the lid or placing a visible warning sign to unsuspecting passersby.
From the definition, you can understand that it is related to any harm, injury, loss, etc., that occurs as a consequence of an action. For in depth information about this special damage, it is best to speak to a lawyer, who can also give you legal advice regarding consequential damages, should you need it.