ABSTRACT
The paper considers the line between direct damages and consequential damages. Noting that language excluding recovery for consequential damages is common, it then asks why rational parties might choose to exclude such damages. Since the legal rule is only a default rule, it then considers a puzzle. Why, when the default rule is unclear or wrong, do parties not contract around the default. In particular, it notes that in England, for generations courts held exclusion clauses inapplicable, yet transactional lawyers kept including them without modifying them to adapt to the court’s rulings. It also considers the response to cases involving the decline in the market price of a commodity following a carrier’s wrongful delay of the goods.
Goldberg, Victor Paul, On Consequential Damages (April 3, 2025), Columbia Law and Economics Working Paper.
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