Which type of damages arises indirectly from a breach and must have been foreseeable to the breaching party?

Consequential damages arise indirectly from a breach of contract and must have been foreseeable to the breaching party when the contract was formed. This type of damage typically includes losses that occur as a result of the breach but are not direct losses. For instance, if a supplier fails to deliver materials on time, the consequential damages may include lost profits that a manufacturer incurs due to the downtime caused by not having those materials.

For these damages to be recoverable, the breaching party must have had reason to foresee that such losses could result from their failure to uphold the contract. This foreseeability standard is crucial because it limits liability; a party should only be held accountable for consequences that they could have reasonably anticipated.

In contrast, other types of damages do not operate under the same requirements or principles—nominal damages are awarded when a breach occurs but no actual harm results, compensatory damages are aimed at covering direct losses and actual harm, and punitive damages are intended to punish a breaching party and deter future misconduct, rather than compensating for loss. Understanding the distinctions between these types emphasizes the unique nature of consequential damages and their reliance on the concept of foreseeability in contract law.