LawMeaning

Consequential Damages Waiver

In one sentence

A clause in which parties agree not to claim indirect losses (like lost profits) resulting from a breach.

Plain English

A consequential damages waiver is an agreement that neither party will sue for indirect or secondary losses caused by a breach. Consequential damages are losses that flow indirectly from the breach—like lost profits, lost business opportunities, or reputational harm—as opposed to direct damages like repair costs. By waiving these, parties limit their exposure to only direct, foreseeable losses. This clause is especially common in commercial contracts where indirect losses could be enormous.

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Example

A manufacturing contract includes a waiver of consequential damages. If the supplier fails to deliver raw materials, the manufacturer can claim the cost of the missed shipment but not the millions in lost sales to their customers.

Used in a sentence

“The service agreement's consequential damages waiver prevented the client from recovering lost profits when the vendor's system went down.”

Related terms

Damages Cap
A contract limit on the maximum amount one party can recover in damages if the other party breaches.
Penalty Clause
A contract provision imposing a fixed monetary punishment for breach, regardless of actual damages.
Indemnity Clause
A contract provision requiring one party to compensate the other for losses, damages, or legal costs arising from specified events.
Breach of Contract
Failure to do what a contract requires, without a valid legal excuse.
Material Breach
A significant failure to perform a contract obligation that defeats its core purpose.
Good Faith and Fair Dealing
A legal duty to act honestly and fairly when making and performing contracts.
Offer
A proposal to enter into a binding agreement on specific terms.
Acceptance
Agreeing to the exact terms of an offer, creating a binding contract.

This page is a plain-English reference and is not legal advice. Laws vary by jurisdiction and change over time. For specific situations consult a licensed attorney.