M&A agreements and other commercial contracts frequently
contain a provision that bars the recovery of "consequential
damages"—often referred to by courts and practitioners
as a consequential damages bar. The term "consequential
damages", however, lacks a precise definition, and thus, the
question whether certain types of damages are recoverable in light
of a consequential damages bar is a recurring subject of
high-stakes litigation. In particular, there is an established body
of New York law addressing whether lost profits constitute
consequential damages or direct damages. The answer to this
question often can mean the difference between a case that involves
nominal damages, such as costs and expenses to cure a breach, and a
bet-the-company litigation involving the potential recovery of
millions of dollars of lost profits. Yet many sophisticated
commercial parties continue to include a boilerplate consequential
damages bar in their contracts, often on the assumption
