How to Collect on Consequential Damages in Small Claims Cases
Consequential damages are damages in small claims court that don’t directly arise from the defendant’s actions but that could have reasonably been foreseen to have resulted from them. That’s a mouthful, but the following case helps make it clear:
You hire a messenger service to pay your credit card bill at the bank on or before May 1. You tell them that it is a credit card bill and if it’s not paid on time, you’ll have to pay additional charges and interest. The messenger agrees to make the payment, understanding the importance of the timely payment. But the messenger forgets and pays the bill late.
Obviously, you could have the fee you paid to the messenger refunded because he did not perform as agreed. However, you also want to recover consequential damages to compensate you for the money you had to pay to the credit card company for late charges and penalties, as these were reasonably foreseeable as arising from the failure to make the delivery.
Another for-instance is the case of your car suffering damage as a result of the defendant’s negligence. The defendant is 100 percent responsible and the defendant’s insurance company is going to pay for all of the repairs without question.
Your car will be in the repair shop for three weeks. Your compensatory damages are the cost of the repairs. Your consequential damage is the money you have to lay out for car rental expenses or for taxi services while your car is being repaired.
Under the common law, lost profits were not considered consequential damages because a business could not prove that it would have any profits. Profits are considered speculative.
Modern case law permits the recovery of lost profits when you can establish an ongoing business, as well as past dealings with the defendant or industry standards applicable to such a transaction.
Imagine you own a truck and have a contract to deliver lumber to a construction site next Monday. You take the truck to the mechanic to service and tell him that you need the truck by Saturday so that you can deliver the lumber on Monday.
The mechanic, now aware of why you need the truck, says, “No problem, you’ll have it by Saturday,” but doesn’t deliver the truck on time because he forgets to work on it. You would have a viable claim for the profits you lost by not showing up to haul the lumber.