What is the difference between "actual damages" and "consequential damages" in legal terms?

The distinction between "actual damages" and "consequential damages" is essential in legal contexts, particularly in contract law. Actual damages refer to the direct and tangible losses incurred as a direct result of a breach of contract or wrongdoing. These damages are straightforward, including costs like unpaid bills or damaged goods that can be easily quantified.

On the other hand, consequential damages, sometimes referred to as special damages, are the losses that occur as a result of the breach but are not directly linked to it. These arise from secondary effects that stem from the initial breach, such as lost profits, loss of business opportunities, or additional costs incurred due to the breach's ripple effects. For instance, if a supplier fails to deliver materials on time, a manufacturer may not only suffer actual damages from needing to quickly source new materials but also experience consequential damages through lost sales during the delay.

By recognizing this distinction, one can better understand how damages are assessed in legal disputes, particularly when determining compensation for losses incurred due to another party's actions.