What are "consequential damages"?

Consequential damages refer to losses that occur as a direct result of a wrongful act by another party. These damages go beyond the immediate or direct losses typically associated with a breach of contract or tort. Instead, they encompass additional losses that may arise as a consequence of the initial wrongful act, such as lost profits, additional expenses incurred, or other financial impacts that result from the actions or negligence of the other party involved.

Understanding this concept is critical to recognizing how liability and compensation can extend beyond the immediate harms. For example, if a business is unable to operate due to a breach of contract, the consequential damages would include lost business opportunities and revenue that arise from that breach. This highlights the importance of being able to prove that the damages were indeed a direct result of the wrongdoing.

In contrast, the other choices such as compensation for emotional distress, punitive damages, and statutory damages do not accurately capture the essence of consequential damages. Emotional distress focuses on psychological impact, punitive damages aim to punish wrongful conduct, and statutory damages are predetermined amounts defined by law, none of which align with the broader implications of consequential damages stemming from a party's wrongful act.