Which type of damages must be reasonably foreseeable to be recoverable?

• A. Direct damages
• B. Incidental damages
• C. Consequential damages
• D. Liquidated damages

Answer: (C)

The idea being tested is how foreseeability affects recoverable damages in a contract breach. Consequential damages are the category that must be reasonably foreseeable to be recoverable, because they arise from the unique circumstances of the injured party and not from the breach itself in a general sense. The rule, rooted in Hadley v. Baxendale, is that damages beyond the ordinary losses must have been foreseeable by the parties at the time of contracting as a probable result of the breach. For example, if a supplier’s late delivery disrupts a buyer’s production line and causes lost profits tied to a specific contract, those profits are recoverable only if the supplier knew or could have foreseen that consequence. Direct damages, by contrast, flow naturally from the breach and don’t require this special foreseeability, incidental damages are extra costs incurred in dealing with the breach, and liquidated damages are pre-agreed amounts governed by separate rules.