In this installment of PARCEL Counsel, we will take a look at the term “damages” and how it is used in legal matters. Generally speaking, the term is applied to the injuries or loss sustained by one person as the result of the negligence or contractual breach of another person. However, there are many subcategories of the general term.
It is my sense that many readers of this column have encountered these terms from time to time, but may be unsure as to their exact meaning in a legal context. Here we will focus on those most often encountered by business persons and, in particular, by transportation professionals.
The Starting Point
The terms actual damages, compensatory damages, direct damages, and general damages all refer to the same type of damage — those which directly relate to the loss. An example of this in transportation matters would be when a carrier loses a shipment with a value of $1,000.00. The shipper would be entitled to its general (or actual, compensatory, or direct) damages in the amount of $1,000.00.
And Pay the Consequences?
In contrast to this are consequential damages, also referred to as indirect or special damages. These are damages that do not flow directly or immediately from the loss. An example of this in transportation matters would be where a manufacturing facility had to be closed for several weeks because a replacement part for a critical piece of machinery was delivered late.
Whether the loss sustained by a person is in the nature of general damages or in the nature of consequential damages is a critical distinction. This is because once a party, such as a shipper, can prove that the other party, such as a carrier, is responsible for the loss, the first party will be entitled to recover its general damages… but may or may not be able to recover its consequential damages.
As a general principle, consequential damages are only recoverable if they were reasonably foreseeable and/or were contemplated by the parties. If not reasonably foreseeable, they may not be recovered. Although there is general agreement as to the definitions of general and consequential damages, when applied to a particular set of facts it is often not at all clear as to whether or not the damages were sufficiently foreseeable as to make them recoverable.
This is a very subtle distinction. In transportation matters there are almost always collateral problems arising when a shipment is lost or damaged. If the parties are unable to settle their dispute, it will require a court or jury to make a factual determination as to whether or not it was, to coin a phrase, “foreseeable enough to be foreseeable.” After having thought about this quite a bit, I believe the most critical aspect of making this determination is whether both parties were aware of the potential for certain specific consequential damages to arise.
Stop!!
The third category we will consider is that of irreparable or non-pecuniary damages. These are damages that cannot be remedied by the payment of a sum of money. This term comes into play when a party is seeking an injunction, that is, an order from the court enjoining (compelling) another party to do or stop doing something. One of the elements that must be proven in order to obtain an injunction is that there will be irreparable damage to the party seeking the injunction if the conduct sought to be enjoined is not immediately stopped.
An example of this would be a company seeking an injunction to enforce a non-compete provision in an employment contract. To obtain the injunction the company would have to prove that if the alleged violation is not stopped now, the diversion of customers and sales would cause it to suffer irreparable damage while waiting for the matter to be tried in court years later.
Swimming with the Sharks
In the next installment of Parcel Counsel we will look at liquidated damages. Interestingly, a loss which might be considered liquidated damages as between a seller-consignor and a buyer-consignee could at the same time be in the nature of consequential damages as between a carrier and its shipper customer.
To conclude, I would like to take this opportunity to acknowledge the invaluable assistance in the preparation of this column, as well as previous columns, of the Research Librarians at the Hennepin County Law Library located in Minneapolis, MN (https://hclaw.co.hennepin.mn.us/).
All for now!
Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A. and the Senior Editor of transportlawtexts, inc. Previous columns, including those of William J. Augello, may be found in the “Content Library” on the PARCEL website (www.PARCELindustry.com). Your questions are welcome at brent@primuslawoffice.com.
It is my sense that many readers of this column have encountered these terms from time to time, but may be unsure as to their exact meaning in a legal context. Here we will focus on those most often encountered by business persons and, in particular, by transportation professionals.
The Starting Point
The terms actual damages, compensatory damages, direct damages, and general damages all refer to the same type of damage — those which directly relate to the loss. An example of this in transportation matters would be when a carrier loses a shipment with a value of $1,000.00. The shipper would be entitled to its general (or actual, compensatory, or direct) damages in the amount of $1,000.00.
And Pay the Consequences?
In contrast to this are consequential damages, also referred to as indirect or special damages. These are damages that do not flow directly or immediately from the loss. An example of this in transportation matters would be where a manufacturing facility had to be closed for several weeks because a replacement part for a critical piece of machinery was delivered late.
Whether the loss sustained by a person is in the nature of general damages or in the nature of consequential damages is a critical distinction. This is because once a party, such as a shipper, can prove that the other party, such as a carrier, is responsible for the loss, the first party will be entitled to recover its general damages… but may or may not be able to recover its consequential damages.
As a general principle, consequential damages are only recoverable if they were reasonably foreseeable and/or were contemplated by the parties. If not reasonably foreseeable, they may not be recovered. Although there is general agreement as to the definitions of general and consequential damages, when applied to a particular set of facts it is often not at all clear as to whether or not the damages were sufficiently foreseeable as to make them recoverable.
This is a very subtle distinction. In transportation matters there are almost always collateral problems arising when a shipment is lost or damaged. If the parties are unable to settle their dispute, it will require a court or jury to make a factual determination as to whether or not it was, to coin a phrase, “foreseeable enough to be foreseeable.” After having thought about this quite a bit, I believe the most critical aspect of making this determination is whether both parties were aware of the potential for certain specific consequential damages to arise.
Stop!!
The third category we will consider is that of irreparable or non-pecuniary damages. These are damages that cannot be remedied by the payment of a sum of money. This term comes into play when a party is seeking an injunction, that is, an order from the court enjoining (compelling) another party to do or stop doing something. One of the elements that must be proven in order to obtain an injunction is that there will be irreparable damage to the party seeking the injunction if the conduct sought to be enjoined is not immediately stopped.
An example of this would be a company seeking an injunction to enforce a non-compete provision in an employment contract. To obtain the injunction the company would have to prove that if the alleged violation is not stopped now, the diversion of customers and sales would cause it to suffer irreparable damage while waiting for the matter to be tried in court years later.
Swimming with the Sharks
In the next installment of Parcel Counsel we will look at liquidated damages. Interestingly, a loss which might be considered liquidated damages as between a seller-consignor and a buyer-consignee could at the same time be in the nature of consequential damages as between a carrier and its shipper customer.
To conclude, I would like to take this opportunity to acknowledge the invaluable assistance in the preparation of this column, as well as previous columns, of the Research Librarians at the Hennepin County Law Library located in Minneapolis, MN (https://hclaw.co.hennepin.mn.us/).
All for now!
Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A. and the Senior Editor of transportlawtexts, inc. Previous columns, including those of William J. Augello, may be found in the “Content Library” on the PARCEL website (www.PARCELindustry.com). Your questions are welcome at brent@primuslawoffice.com.
