ABSTRACT
Consequential damages have been a cornerstone of contract doctrine since the broken crankshaft in Hadley v Baxendale. And the Hadley rule is one of the most prominent defaults across the common law world. Despite this, provisions barring consequential damages abound in high-impact deals and contract theorists cannot agree on why. One camp argues that these provisions bargain around an imprecise default; the other maintain that these provisions do nothing but undermine the deal. Looking at over 1,300 contracts and speaking to roughly 100 practitioners, we find that real-life consequential damages provisions are often hopelessly ambiguous and that their inclusion in contracts is sometimes more habit than intention.
Chowdhury, Tara and Chudkowski, Faith and Dixon, Amanda and Sharma, Rishabh and Sherrill, Madison and Tanne, Hadar and Choi, Stephen J and Gulati, Mitu, Consequential Damages: Alien Vomit or Intelligent Design? (January 29, 2024). Virginia Public Law and Legal Theory Research Paper No 2024-14; Virginia Law and Economics Research Paper No 2024-8.
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