Consequential damages can be far larger than the contract. Here is why the waiver matters.
In this article
Why it matters
If a delay keeps a restaurant from opening, the owner may claim lost profits that dwarf your contract. Consequential damages are indirect losses like lost revenue, rent or financing costs. A waiver limits that exposure.
Direct vs consequential
Direct damages fix the problem. Consequential damages are losses caused by it.
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Examples
Lost profits, lost rental income and business interruption.
Mutual waiver
Both parties give up claims for consequential damages against each other.
Standard forms
Many standard contract forms include a mutual waiver. Check it wasn't removed.
Exceptions
Read carve-outs carefully. They can bring back risk.
Liquidated damages
Agreed daily damages often sit alongside the waiver. Understand both.
Insurance
Some risks may be insurable, others not.
Negotiation
Ask for the waiver if it's missing.
Flow-down
Align your subcontracts with the prime contract.
An example
A GC noticed the owner deleted the mutual waiver from a hotel contract. After negotiation, it was restored with a cap on liquidated damages.
Where to start
Add a check for the consequential damages waiver to your contract review checklist and consult an attorney.
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Frequently asked questions
What are consequential damages in construction?
Indirect losses that result from a breach, such as an owner's lost profits, lost rent or business interruption, as opposed to the direct cost to fix the work.