But consequential damages—which are collateral to the breach—are also recoverable even though they were not reasonably foreseeable at the time of contract formation so long as they were actually foreseeable to the breaching party due to special circumstances peculiar to that transaction.

Do consequential damages need to be foreseeable?

Not only must the damages be directly traceable to the breach of contract and result from it, but the damages must also be “foreseeable.” Whether a given damage is direct or consequential turns on pertinent contract language, but may also be influenced by such factors as the parties' business sophistication.

What damages are foreseeable?

Foreseeable damages are damages that both party to the contract knew or should have been aware of at the time when the contract was made. Apart from this an insured can recover foreseeable damages, beyond the limits of its policy, for breach of a duty to investigate, bargain for, and settle claims in good faith.