Direct damages

Definition

Direct damages are losses that arise as an immediate consequence of a breach of contract or wrongful act, as distinct from indirect or consequential loss. Dutch law has no rigid statutory split between direct and consequential damages; recoverability turns on the causation and attribution rules of articles 6:95 to 6:98 BW. Contracts often define "direct damage" to set the boundary of what remains recoverable under a liability cap.

Example

When a delivered machine is defective, the cost of repairing it counts as direct damage, while the buyer's lost production is treated as consequential loss.

Why this is a business risk

When a contract excludes consequential loss, only direct damages remain recoverable, so what the contract treats as "direct" becomes the entire ceiling on your compensation. If the definition is vague or narrower than expected, significant losses such as rework costs or replacement procurement may fall outside it. Businesses that accept a counterparty's standard definition without checking it against their own risk profile may find they are compensated for far less than the actual damage they suffered.

How to manage it

• Read the contractual definition of "direct damage" carefully and map it to the actual losses your business would suffer in a realistic failure scenario.
• If the contract excludes consequential loss, negotiate that the most material indirect losses are either carved back in or covered separately.
• Ensure the liability cap is calibrated to the realistic quantum of direct damage, not just the contract fees.
• Keep contemporaneous records when damage occurs, to show the immediate causal link between the breach and each claimed loss.

Legal references

• BW 6:95 Dutch Civil Code: extent of damages Dutch law
• BW 6:98 Dutch Civil Code: causation and attribution Dutch law

Unless marked otherwise, references are to Dutch law (Burgerlijk Wetboek, the Dutch Civil Code); EU instruments such as the GDPR apply across the EU. This is general information, not legal advice. Other jurisdictions treat these concepts differently. Verify the current text and your situation with a qualified lawyer.