[2] Consequential damages go beyond the contract itself and into the actions that arise from the failure to fulfill.
This may be recovered if it is determined such damages were reasonably foreseeable or "within the contemplation of the parties" at the time of contract formation.
The provenance of the legal theory underlying "consequential damages" is widely attributed to the 19th century English case of Hadley v. Baxendale,[7] in which a miller contracted for the purchase of a crankshaft for a steam engine at the mill.
The party agreeing to produce the part (which was critical to the mill's operation and/or output) agreed to deliver the part for inspection as to fit by a certain date in order to avoid contractual and other business loss/liability.
When the part was not delivered for inspection on time, the miller sued to recover not only the direct costs that were incident to the alleged breach, but also to recover the costs/losses that were entailed with the production shutdown resulting from the failure to timely deliver the crankshaft.