Incidental damages

Definition

Incidental damages are the additional costs that a party incurs as a result of a breach of contract. These damages typically arise when one party fails to fulfill their contractual obligations, leading the other party to experience unforeseen expenses while trying to remedy the situation. Understanding incidental damages is crucial in the context of warranties and sales contracts, as it helps to clarify the extent of liability and potential recovery for non-performance.

5 Must Know Facts For Your Next Test

1. Incidental damages can include costs such as shipping fees, storage charges, or expenses related to finding alternative suppliers after a breach.
2. To recover incidental damages, the non-breaching party must demonstrate that these costs were reasonable and directly related to the breach.
3. Unlike consequential damages, which may require proof of foreseeability, incidental damages are generally more straightforward to claim since they are directly tied to the breach.
4. Sales contracts often contain terms that address liability for incidental damages, making it essential for parties to clearly outline their responsibilities.
5. Failure to mitigate damages can impact a party's ability to recover incidental damages, meaning they must take reasonable steps to minimize their losses.

Review Questions

• How do incidental damages differ from consequential damages in a sales contract scenario?
  • Incidental damages differ from consequential damages in that they arise directly from the costs incurred due to a breach of contract, such as shipping or storage fees. In contrast, consequential damages refer to secondary losses that occur as a result of the breach but are not directly caused by it, like lost profits. Understanding this distinction helps parties in sales contracts gauge their potential recovery based on the nature of their incurred losses.
• What criteria must be met for a party to successfully claim incidental damages following a breach?
  • For a party to successfully claim incidental damages after a breach, they must demonstrate that the expenses were reasonable and directly linked to the breach. This includes providing evidence of how these costs arose in response to the non-performance and ensuring that they did not exacerbate their losses. Proper documentation is vital in establishing these claims.
• Evaluate the role of warranties in influencing the assessment of incidental damages in sales contracts.
  • Warranties play a significant role in determining incidental damages by outlining the obligations and expectations regarding product performance or service delivery. If a warranty is breached, it can lead to an increase in incidental damages claimed because the non-breaching party may incur additional costs trying to resolve issues related to the warranty failure. Furthermore, clear warranty language can also limit liability for incidental damages, which is why understanding these terms is essential for both buyers and sellers.

Related terms

Consequential damages: Consequential damages are losses that occur as a secondary result of a breach of contract, which may not be directly linked to the breach itself but are still a foreseeable outcome.

Liquidated damages: Liquidated damages are predetermined amounts specified within a contract that must be paid if a party fails to perform their contractual duties.

Breach of contract:

A breach of contract occurs when one party fails to fulfill their obligations as set out in an agreement, which can lead to various types of damages being assessed.