A frequently litigated issue in contractual disputes is whether a non-breaching party can recover its alleged consequential damages arising under a contract. Consequential damages, or special damages, may include monetary losses stemming from lost profits. If a party can establish a breach under the contract, then a party may be able to recover its consequential damages if these damages were a foreseeable outcome of the breach. In breach of contract actions in Florida, “[o]ne of the “most commonly litigated and thus the most often sought after item of consequential damages is lost profits.” Halliburton Co. v. E. Cement Corp., 672 So. 2d 844 (Fla. 4th DCA 1996). Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.
In breach of contract claims, there is a distinction between general damages and consequential damages. General damages are “those damages which naturally and necessarily flow or result from the injuries alleged.” Hutchison v. Tompkins, 259 So. 2d 129 (Fla.1972). Stated differently, general damages may be described as those damages “as may fairly and reasonably be considered as arising in the usual course of events from the breach of contract itself.” Fla. E. Coast Ry. v. Beaver St. Fisheries, Inc., 537 So. 2d 1065 (Fla. 1st DCA 1989). By contrast, special damages are not likely to occur in the usual course of events, but “may reasonably be supposed to have been in contemplation of the parties at the time they made the contract.” Fla. E. Coast Ry. v. Beaver St. Fisheries, Inc., 537 So. 2d 1065 (Fla. 1st DCA 1989). Special damages consist of items of loss which are peculiar to the party against whom the breach was committed and would not be expected to occur regularly to others in similar circumstances.
Likewise, consequential damages “do not arise within the scope of the immediate buyer-seller transaction, but rather stem from losses incurred by the non-breaching party in its dealings, often with third parties, which were a proximate result of the breach, and which were reasonably foreseeable by the breaching party at the time of contracting.” Hardwick Properties, Inc. v. Newbern, 711 So. 2d 35, 40 (Fla. 1st DCA 1998) (citations omitted). As one example Florida law, Section 672.715 of Florida’s Uniform Commercial Code defines “consequential damages” resulting from a seller’s breach, as:
- Any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and
- Injury to person or property proximately resulting from any breach of warranty.
“The consequential nature of loss . . . is not based on the damages being unforeseeable by the parties. What makes a loss consequential is that it stems from relationships with third parties, while still reasonably foreseeable at the time of contracting.” Keystone Airpark Auth. v. Pipeline Contractors, Inc., 266 So. 3d 1219 (Fla. 1st DCA 2019). The most common form of consequential damages is lost profits.
However, lost profits do not always constitute consequential damages as a matter of Florida law. “Lost profits are recoverable as general damages where they flow directly and immediately from the breach of a contract.” Bird Lakes Dev. Corp. v. Meruelo, 626 So. 2d 234 (Fla. 3d DCA 1993). Indeed, “when the non-breaching party seeks only to recover money that the breaching party agreed to pay under the contract, the damages sought are general damages.” HCA Health Services of Florida, Inc. v. CyberKnife Ctr. of Treasure Coast, LLC, 204 So. 3d 469 (Fla. 4th DCA 2016). Lost profits can constitute general damages when the non-breaching party seeks to recover the total value of the breaching party’s promised payments less the cost of performance.
Peter Mavrick is a Fort Lauderdale business litigation lawyer, and represents clients in Miami, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.