# Direct damages Source: https://contracko.com/glossary/direct-damages # Direct damages Loss that flows immediately and foreseeably from a breach, such as repair or replacement costs. ## 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. ### How Contracko helps Contracko's AI review extracts and summarises damage and liability clauses so you can see how each contract defines "direct" versus "consequential" loss without reading every page. Version history and obligation tracking mean that when a definition is amended in negotiation, the change is recorded and comparable across related contracts. ## Legal references - [BW 6:95 Dutch Civil Code: extent of damages Dutch law](https://wetten.overheid.nl/BWBR0005289) - [BW 6:98 Dutch Civil Code: causation and attribution Dutch law](https://wetten.overheid.nl/BWBR0005289) 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. ## Relevant for [Manufacturing](https://contracko.com/industries/manufacturing)[Logistics & Distribution](https://contracko.com/industries/logistics)[IT Services](https://contracko.com/industries/it-services) ## Related clauses - [Limitation of Liability Clause](https://contracko.com/clause-library/limitation-of-liability) - [Indemnification Clause](https://contracko.com/clause-library/indemnification) ## Related terms - [Consequential damages](https://contracko.com/glossary/consequential-damages) - [Liability limitation](https://contracko.com/glossary/liability-limitation) - [Breach of contract](https://contracko.com/glossary/breach-of-contract) ### Never miss a contract deadline again - AI finds renewal and notice dates - Risks and obligations are surfaced automatically - Reminders help you act before dates slip Drop a contract to start PDF, DOCX, PNG, or JPG [Start 7-day trial](https://app.contracko.com/register?appLanguage=en&utm_source=glossary_sidebar&utm_medium=lead_magnet&utm_campaign=glossary_sidebar_contract_upload&content_slug=direct-damages&content_title=Direct+damages&cta_placement=glossary_sidebar_cta&source_tool=glossary_sidebar_direct-damages) GDPR compliant. Encrypted. Never used for AI training. ## Frequently asked questions Common questions about this term. - **Q:** How does Dutch law determine which losses are "direct"? **A:** Dutch law applies the attribution test of article 6:98 BW: a loss is attributable if it is a foreseeable consequence of the breach given its nature. There is no hard statutory definition of "direct" versus "consequential"; the contract's own definition governs if one is provided. - **Q:** Can repair costs exceed the contract value and still be recoverable as direct damage? **A:** In principle yes, if they are a foreseeable and immediate consequence of the breach and there is no cap or the cap is set above that amount. A disproportionate cap or an exclusion of remediation costs could limit recovery. - **Q:** What happens when a contract does not define "direct damage" at all? **A:** The court applies the general causation and attribution rules of articles 6:95 to 6:98 BW to determine what is recoverable. The absence of a definition gives the court more discretion and creates uncertainty for both parties. - **Q:** Is lost profit always classified as consequential rather than direct damage? **A:** Not necessarily. Lost profit is a common example of consequential loss, but if lost revenue is the direct and immediate result of the breach (for example a buyer cannot on-sell goods that were never delivered), it may qualify as direct damage under the specific contract definition or the attribution rules. - **Q:** Does a liability cap that covers "direct damages only" also exclude the cost of obtaining substitute performance? **A:** Generally no: the reasonable cost of obtaining equivalent performance from an alternative source is typically treated as a direct loss flowing immediately from the breach. However, contract wording varies, so always check whether replacement or cover costs are expressly addressed. ## See these terms in your own contracts Upload a contract and Contracko pulls out the key terms, dates and obligations, then reminds you before each one matters. [Start 7-day free trial](https://app.contracko.com/register?appLanguage=en) Book demo