When a service goes down, direct damages are the tangible, out-of-pocket costs to fix or replace what broke. Consequential damages are the knock-on effects: lost revenue, lost customers, production delays, or reputation harm. Many contracts exclude consequential damages to prevent runaway exposure for scenarios the vendor cannot price or control.
The dividing line is blurry. Some jurisdictions treat certain lost profits as direct when they naturally flow from the breach, especially if the vendor knew about the risk. Clear examples in the contract help: list what is excluded (e.g., lost profits, loss of data, business interruption) and, if needed, what remains recoverable (e.g., direct replacement costs).
Both sides benefit from practical examples during negotiation. Aligning on what counts as direct helps avoid surprises when a claim arises.
THIS IS NOT LEGAL ADVICE.