Damages Provisions in Services Contracts

Summary

This practice note discusses how to draft consequential damages and liquidated damages provisions in service contracts. Consequential damages repay losses that follow naturally but not necessarily from the breach and, thus, are recoverable only if the breaching party had notice or could have foreseen at the time the contract was made that the other party would suffer that loss if the contract was not performed according to its terms. Liquidated damages constitute the measure of damages agreed to in advance by the parties as just compensation for the breach of a contract where the harm caused by the breach is incapable or very difficult of accurate estimation.