What is the Consequence of Consequential Damages?

Many contracts have a provision like this: Neither party will be responsible or held liable for any consequential, special, or incidental losses or damages.

What exactly does it mean?

In contract law, if the other party breaches the contract (i.e., doesn’t do what he or she is obligated to do), you will have some costs, losses or damages. In contract law, you are entitled to recover the damages that are a reasonably foreseeable consequence of the breach. You are not entitled to receive compensation for damages that are not reasonable or remote. Sometimes, contracts attempt to limit more remote situations in the contract text. These provisions are known as limitations of liability.

Unless there is fraud or egregious contract (and not just a breach of contract) you are also not entitled to punitive damages or pain and suffering. Punitive may sound like “punish” which is what it means. In North Carolina, punitive damages are awarded "to punish a defendant for egregiously wrongful acts and to deter the defendant and others from committing similar wrongful acts."

Contract damages may include:

Direct damages: The damages that you reasonably expect to arise from the breach in question, without taking into account your special circumstances.