Consequential Economic Loss Law and Legal Definition

Consequential economic loss is the economic loss that proximately results from failure of the goods to function as warranted, loss of goodwill, loss of business reputation, and other loss proximately resulting from a defective product beyond direct economic loss. Hence examples of consequential economic loss include lost profits and loss of goodwill or business reputation.

In Pee Jay's Packing Co. v. Makfill Sys., 10 Phila. 588 (Pa. C.P. 1983), the court observed that “"Economic loss" is defined as the diminution in the value of the product because it is inferior in quality and does not work for the general purposes for which it was manufactured and sold. Direct economic loss may be said to encompass damage based on insufficient product value; thus, direct economic loss may be "out of pocket" - the difference in value between what is given and received - or "loss of bargain" - the difference between the value of what is received and its value as represented. Direct economic loss also may be measured by costs of replacement and repair. Consequential economic loss includes all indirect loss, such as loss of profits resulting from inability to make use of the defective product.”