Consequential Damages: Alien Vomit or Intelligent Design?
Consequential damages have been a cornerstone of contract doctrine since the broken crankshaft in Hadley v. Baxendale. And the Hadley rule is one of the most prominent defaults across the common law world. Despite this, provisions barring consequential damages abound in high-impact deals and contract theorists cannot agree on why. One camp argues that these provisions represent bargains that improve on an imprecise default; the other maintains that these provisions, while perhaps intending to improve on the default, often undermine the deal. Looking at over 1,300 contracts and speaking to roughly seventy-five practitioners, we find that real-life consequential damages provisions are often hopelessly ambiguous and that their inclusion in contracts is sometimes more habit than intention.