Incidental damages are compensatory damages awarded to an injured party based on costs associated with the loss in the value of the other party’s failed or deficient performance. Incidental damages are primarily a civil law concept and are particularly relevant in the field of Contract Law.
The landmark 1929 case of Hawkins v. McGee held that if one party breaches a contract, the non-breaching party may recover damages based on the difference between the value of the contract as fully performed and the actual value of the non-breaching party’s present condition, plus any incidental damages reasonably foreseeable to all parties at the time of contract formation. Thus, incidental damages do not have to be expressly included in the original contract in order to be recoverable as long as they are foreseeable.
Under UCC § 2-710, incidental damages to an aggrieved (injured) seller include any commercially reasonable charges, expenses or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the buyer's breach, in connection with return or resale of the goods or otherwise resulting from the breach.
UCC § 2-715 covers incidental damages from the viewpoint of an aggrieved (injured) buyer. This section stipulates that incidental damages resulting from the seller's breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach.
[Last updated in June of 2023 by the Wex Definitions Team]
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