Obviously, on the facts of a particular case, it may be that a loss of profits does not flow directly and naturally from the breach, but in almost all commercial contracts it will. In. Damages that may fairly and reasonably be considered as arising naturally, i.e. Clauses such as “in no event shall either party be responsible to the other for indirect, special or consequential losses” are commonplace and are often accepted during contract negotiations, sometimes only subject to them being reciprocal. Carve outs from the Consequential Damage Disclaimer. § 2-715(2)(b) (consequential damages include injury to property proximately resulting from the seller's breach of warranty). To understand the implications of excluding from that baseline certain kinds of damages, you have to understand the doctrinal jargon used. Your email address will not be published. The plaintiff argued that the lost profits were direct damages, so the exclusion would not apply, and the New York Court of Appeals, in … by Arch Fletcher. It is also notable that in Australia the courts have followed the McGregor construction: see for example Alstom Ltd v Yokogawa Australia Pty Ltd (No 7) [2012] SASC 49. Consequential loss exclusion clauses are very common in commercial contracts, especially in those relating to construction and energy projects. It’s clear what “consequential damages” don’t do: they don’t compensate a buyer for remote or speculative losses, which shouldn’t even constitute losses. But the difference between direct and consequential damages is often about as clear as a dense fog off the coast of Maine. Neither party will be responsible or held liable for any consequential, special, or incidental losses or damages. Losses of a kind which flowed directly and naturally from the breach, which were reasonably foreseeable in the ordinary course of events (limb one, often referred to as direct loss). Buyers and sellers often negotiate the scope and types of damages subject to indemnification under the purchase agreement, including whether consequential damag… That’s what I did, with an article that I mentioned in, Let’s start by considering what damages a party is entitled to in the absence of any limitation. © 2020 LegalSifter, Inc.  All rights reserved. A rationale you’ll hear is that they prevent a party from seeking damages that are remote, in other words damages that the parties couldn’t have contemplated while they were doing the deal. Loss of profits and loss of use are two of the most frequently included. There was a time when the majority of courts to consider the issue had held that if a limited remedy failed of its essential purpose, then the seller's attempt to exclude consequential damages failed as well. This is particularly so in situations where a small breach of contract by one party can result in very significant consequential damages (such as large losses of profits) to another. It will be apparent from this example that loss of profits was treated as in principle limb one or direct loss. Jacques Herbots, Why It Is Ill-Advised to Translate Consequential Damages by Dommage Indirect, 19 EUR.REV.PRIV. In that case, the Court of Appeal said there were two kinds of losses that flowed from a breach of contract: The usual example given to illustrate the effect of this distinction is that from Victoria Laundry v Newman Industries. Neither party will be liable for breach-of-contract damages that the breaching party could not reasonably have foreseen on entry into this agreement. But you may be surprised if you take a closer look at these provisions. Referring to “indirect or consequential” losses is often ambiguous, so if there are particular types of losses that you wish to exclude, they should be specified This is particularly relevant to those who use standard forms of contract, such as those in the construction industry (where, for instance, the NEC3 form includes an optional clause (X18) for capping indirect or consequential losses). If that doesn’t satisfy the seller—it wants to exclude some recoverable damages—I’d propose that we instead put an absolute cap on damages rather than engage in the arbitrary and uncertain exercise of excluding certain kinds of damages. It was held that the laundry could only recover its ordinary loss of profits, not the extra profits from the government contract because Newman didn’t know about it at the time of entering the contract with the laundry, and couldn’t reasonably be expected to know. Consequential damages are not necessarily all damages other than the difference between the value of the product or service promised and the value of the product or service delivered—even though there are some cases that would suggest this. Do Not Exclude Consequential Damages In the event of a breach of contract, you (as a business owner, or otherwise nonbreaching party) will want to ensure that you will be covered for any consequential losses that your business may endure. In this September 2006 blog post I wrote about another favorite waste o’ time, the “successors and assigns” provision. Just as Glenn’s article considers U.S. and English law, I suspect that my conclusions in this post would apply in any common-law jurisdiction.This post confirms my aversion to using doctrinal terms of art in a contract. The key when drafting is carefully to consider precisely what losses are likely to flow from a breach of contract, and then specifically to identify those types of losses in the exclusion clause. Consequential damages are still proximately caused by the breach, but, under general rules of contract law, are only recoverable if the special circumstances or the other event was foreseeable by the party in breach when it made the contract. Attempts to exclude or limit liability for consequential loss have given rise to considerable litigation, across industries. But simply using "consequential" and "direct" to describe damages is to rely on a third party (the court) to interpret your contract for you. according to the usual … Consider the contract I mentioned at the top of this post. So here’s what I suggest: I’m proposing to buy some widgets, and it’s likely that the seller will want to limit damages. The key in the context of a dispute is again carefully to identify exactly what type of loss has occurred, then compare it to the listed categories of excluded loss. But you may be surprised if you take a closer look at these provisions. According to the English Court of Appeal, when used in a limitation clause, both indirect and consequential loss have the same well-established meaning from which the courts cannot, or should not, depart 15 Sep 2004. I’m the one drafting the contract; I could elect to omit from my draft any mention of excluded liabilities, but it would be more constructive to try to head off any debate by attempting to address the seller’s concern using my own language, narrowly tailored to avoid the excesses of the traditional exclusion language. I’m the one drafting the contract; I could elect to omit from my draft any mention of excluded liabilities, but it would be more constructive to try to head off any debate by attempting to address the seller’s concern using my own language, narrowly tailored to avoid the excesses of the traditional exclusion language. Consequential damages, otherwise known as special damages, are damages that can be proven to have occurred because of the failure of one party to meet a contractual obligation, a breach of contract. Clauses that exclude or limit the recovery of consequential or indirect damages are common in construction, services and other commercial contracts. It would just says what the law is [language revised Feb. 16 9:00 a.m. EST in response to comment by Mark Anderson]: Glenn’s article in effect endorses this approach: “Instead of waiving ‘consequential’ damages, buyers should seek waivers of ‘remote’ or ‘speculative’ damages.”. A claim for diminution of value was therefore excluded as a consequential loss. The courts have adopted different approaches to clauses which seek to exclude or include consequential loss from the scope of damages that a party to an agreement can claim. The key thing to remember about consequential loss is that it doesn’t mean what you think it means. Yet, many sellers purport to require waivers of consequential damages because they believe consequential damages relate to losses beyond those that the breaching party would have ordinarily and reasonably foreseen or contemplated. Exclusions of consequential damages are among the most common and important provisions in a wide variety of contracts. Here’s my boiled-down version of the analysis in Glenn’s article: Direct damages: These are best understood as damages that one would reasonably expect to arise from the breach in question, without taking into account any special circumstances of the nonbreaching party; also referred to as “general” damages. Exclusion and limitation of liability clauses often exclude “lost profits” from the … The sense of this distinction is supported in principle by the editors of McGregor on Damages (19th Edition): see the discussion at paragraphs 1-036 to 1-039. Each term is, to varying degrees, difficult to define clearly, given that it expresses a vague standard and given the inconsistent guidance provided by the wealth of related litigation in different jurisdictions. That’s what I did, with an article that I mentioned in this July 2008 blog post as my trusty guide: “Reassessing the ‘Consequences’ of Consequential Damage Waivers in Acquisition Agreements,” 63 Business Lawyer 777 (2008). In Caledonian North Sea Ltd v British Telecommunications plc, the House of Lords queried whether English law had in fact taken the right direction. constitute consequential (never mind extraordinary) damages and may, in fact, constitute direct contract damages. Incidental damages: These are expenses incurred by a buyer in connection with rejection of nonconforming goods delivered by the seller in breach of contract, or by a seller in connection with wrongful rejection by a buyer of conforming goods delivered by the seller to the buyer. Confidentiality or non-disclosure agreements (NDAs) may limit or exclude the parties’ liability for damages in certain circumstances. In some cases, the parties specifi cally exclude Consequential loss confuses business people and some recent cases have added to the confusion. Comment document.getElementById("comment").setAttribute( "id", "4b9ae5a46aba0454e62b31f6c29b44f4" );document.getElementById("9c342b0c65").setAttribute( "id", "comment" ); The Practical Law team and our guest bloggers share their experience and opinions relating to construction and engineering law and projects. The leading case is British Sugar v NEI Power Projects. Indirect and Consequential Loss… The first issue was the meaning of the words "indirect and consequential loss". However, where the contractual wording is in similar terms to the FIDIC contracts, so that the loss of profits are not characterised as an example of consequential loss but are in addition to it, or where consequential loss is formally defined as including limb one loss of profits, the courts have been able to state that the parties have successfully excluded the limb one losses that are specifically identified. Here, the contract contained a clause limiting the seller’s consequential loss to the value of the contract. Consequential damages: These are best understood as including all losses sustained by the nonbreaching party that are attributable to any special circumstances of the nonbreaching party that the parties were aware of when they entered into the contract; in other words, consequential damages encompass all contractually recoverable damages that aren’t either direct or incidental damages; also … In most arm’s-length commercial agreements between sophisticated parties, the parties will agree to include a consequential damage disclaimer that is subject to certain carve-outs that permit a party, in certain situations, to recover consequential damages from the other party. When liquidated damages are calculated, they will take into account a variety of factors, some of which could fall within your definition of consequential loss, such as business interruption. Plainly, there is something wrong here since such losses would normally be limb one losses and not examples of consequential loss at all. Several decisions of the English Court of Appeal have established that contractual exclusions for “consequential and indirect losses” will be limited to losses which fall within what is known as the “second limb” of Hadley v Baxendale. The court held that the references to loss of profits, etc, must be taken to be examples of such losses of profits that would fall within limb two losses, and that therefore the loss of profit which had in fact occurred, which was a limb one loss, was not excluded. In other words, consequential damages are a distant, yet foreseeable, cost of a broken contract. This is particularly so in situations where a small breach of contract by one party can result in very significant consequential damages (such as large losses of profits) to another. Rather the clause had a wider meaning of financial losses caused by guaranteed defects above and beyond the replacement and repair of physical damage. The seller contended that any reasonable businessman would understand consequential loss to mean loss of profits. It is typically on a party’s list of most important clauses that may require approvals at board level if certain requirements are not met. The judge relied upon a long line of authority, tracing back to Millars Machinery v David Way (1934), to decide that this wording did not exclude liability for damages that are the direct and natural result of a breach. What was once considered to be a consequential loss may now be a direct loss. So here’s what I suggest: I’m proposing to buy some widgets, and it’s likely that the seller will want to limit damages. They usually take a similar form to the following, which is from clause 17.6 of the FIDIC Red Book: “Neither Party shall be liable to the other Party for loss of use of any Works, loss of profit, loss of any contract or for any indirect or consequential loss or damage which may be suffered by the other Party in connection with the Contract.”. To be awarded consequential damages in a lawsuit, they must be a foreseeable result of an act. Caledonian North Sea Ltd v British Telecommunications plc, A tale of leaks and complex structure theory. Therefore an exclusion of indirect loss clause will still exclude them even though they would be otherwise recoverable under second limb. So even in the absence of any limitation, contract damages. Do you agree ? In order to sort out how English law and contractual terminology has developed on this topic, it is necessary to go right back to Hadley v Baxendale, which established the test for losses which were too remote in contract claims. For a nonbreaching party to be awarded damages for losses caused by breach of a contract, generally those losses must be a reasonably foreseeable consequence of the breach. Of course, if the seller wants to double dip—wants both an absolute cap and to exclude consequential damages—we’d have to have a different, and more vigorous, discussion. 1918 Smallman Street, Pittsburgh, PA 15222, USA. Readers will appreciate that the effect of this is that an exclusion clause referring solely to consequential loss is unlikely to add anything to the protection already conferred by the remoteness rules at common law. Consequential damages: These are best understood as including all losses sustained by the nonbreaching party that are attributable to any special circumstances of the nonbreaching party that the parties were aware of when they entered into the contract; in other words, consequential damages encompass all contractually recoverable damages that aren’t either direct or incidental damages; also … The AIA waiver of consequential damages provision is helpful because it gives examples of consequential damages for an owner and a contractor. However, as matters stand, consequential loss in English law refers to Hadley v Baxendale limb two losses only and a case will need to go to the Supreme Court before there is any change in approach. I understand that this would capture those items that cannot be limited/excluded by UCTA but are there any others? Indirect losses under second limb of Hadley v Baxendale are recoverable if within contemplation of the parties at time contract entered into – but if recoverable under this test they are presumably still indirect losses albeit recoverable indirect losses. When negotiating contract terms parties will very often seek to include clauses that attempt to limit or exclude damages that may be claimed if a breach of contract occurs. Consequential loss exclusion clauses: Issues for owners and contractors. It is necessary to be precise in both aspects of this approach as the courts take a strict, rather than a broad, interpretation of the words. defendant asserted that the lost profits were consequential damages and invoked a clause in the contract excluding consequential damages. Clearly, parties and their advisers also come across the unexpected, after the event. It is common to see in b2b contracts, clauses stating that a limitations of liability and consequential loss waiver will not apply in cases of fraud or “any other liability to the extent that the same may not be limited excluded or limited as a matter of law”. This categorisation of a loss of profits claim has been applied in all subsequent cases (for a recent example, see McCain Foods GB Ltdv Eco-Tec (Europe) Ltd). For a nonbreaching party to be awarded damages for losses caused by breach of a contract, generally those losses must be a reasonably foreseeable consequence of the breach. Your email address will not be published. The answer to that question depended upon whether: The term "consequential losses" worked to exclude all losses that were caused by a breach of contract (as the Seller contended); or The Term merely sought to exclude liability losses that fell within the second limb of Hadley v Baxendale. These clauses can play an important role in risk allocation. The Commercial Court considered this situation in Markerstudy Insurance Co v Endsleigh Insurance Services Ltd. However, a clearly drafted clause, that does not rely on an understanding of (for example) Hadley v Baxendale, can sometimes avoid a costly dispute. Here’s what Glenn’s article says on that subject: Given that background, here are my problems with excluding certain kinds of damages: Many of those asking that certain kinds of damages be excluded assume incorrectly that otherwise the nonbreaching party would be entitled to recover remote damages.The jargon used in such exclusion language doesn’t have a clearly established meaning, so is conducive to dispute.It seems arbitrary to exclude certain kinds of contractually recoverable damages but not others. Yet, many sellers purport to require waivers of consequential damages because they believe consequential damages relate to losses beyond those that the breaching party would have ordinarily and reasonably foreseen or contemplated. This is particularly so in situations where a small breach of contract by one party can result in very significant consequential damages (such as large losses of profits) to another. Owner consequential damages under the AIA waiver include rental expenses, losses of use, profit, financing, business or reputation, and loss of management or employee productivity. Maybe you want that; probably you do not. Consequential loss exclusion clauses are very common in commercial contracts, especially in those relating to construction and energy projects. Excluding Consequential Damages is a Bad Idea. You can start by clearly defining direct damages. But many people are unaware of that. The consequential damages waiver would exclude any damages, other than direct damages, even if they are reasonably foreseeable because they were the second or … From a legal standpoint, an enforceable contract is present when it is: expressed by a valid offer and acceptance, has adequate consideration , mutual assent , capacity , and legality . Confusion arises in the industry because in most people’s terminology, financial losses are considered indirect or consequential. Clauses that exclude or limit the recovery of consequential or indirect damages are common in construction, services and other commercial contracts. It is easier and safer to interpret your own contract. However, the Court of Appeal looked at previous appellate decisions on the meaning of “consequential”  in commercial contracts, and concluded that the term had a settled meaning as a matter of law, namely that consequential loss referred to limb two Hadley v Baxendale losses only. Limiting & excluding liability for contract breach | Gowling WLG For instance, if a purchaser is prepared to exclude losses arising under from special circumstances communicated to the seller (those arising under the second limb of Hadley v Baxendale), wording of the following nature would be preferable to language incorporating terms such as ‘consequential’ or ‘indirect’ losses: These clauses can play an important role in risk allocation. As a result, the laundry lost a lucrative contract with the government. Any buyer would be advised to resist vigorously that sort of overkill. It’s by Glenn D. West, a Weil Gotshal partner whose name has cropped up on this blog a few times, and Sara G. Duran, but in the interest of brevity I’ll be referring to it as “Glenn’s article.” It focuses on waivers of consequential damages in the context of M&A, but the analysis applies more broadly. Why does the seller also need to engage in the messy business of excluding certain kinds of liability? Consequential damages are those that are not a direct result of an act, but a consequence of the initial act. Losses of a kind which arise from a special circumstance of the case, which are only recoverable if they were in the contemplation of the parties at the time of entering the contract (limb two, often referred to as indirect loss). In merger and acquisition (“M&A”) transactions, the definitive purchase agreement (whether asset purchase agreement, stock purchase agreement, or merger agreement) typically contains representations and warranties and related indemnification covenants. I have in front of me a contract—it’s for the sale of goods—that contains the following provision excluding certain kinds of damages: You can rely on sellers asking for this kind of provision, and buyers routinely accept it. In addition to excluding certain kinds of damages, it limits the buyer’s recovery in any claim to what the buyer paid for those goods. [T]o define “consequential damages” as those losses that are so remote that they were beyond the contemplation of the parties at the time they entered into the contract is to define consequential damages as losses for which the law does not allow recovery in contract, regardless of any provision excluding such damages. This is just one example of an accepted bit of boilerplate that doesn’t make much sense. [2] They can significantly reduce the breaching party’s liability, sometimes by staggering amounts of money. Here the contract included an insurance clause that read: “Neither party shall be liable to the other for any indirect or consequential loss (including but not limited to loss of goodwill, loss of business, loss of anticipated profits or savings and all other pure economic loss) arising out of or in connection with this Agreement.”. One of the most important mechanisms in a contract for allocating risk is the ability to exclude “indirect” and “consequential” loss using exclusion clauses. Consequential damages: These are best understood as including all losses sustained by the nonbreaching party that are attributable to any special circumstances of the nonbreaching party that the parties were aware of when they entered into the contract; in other words, consequential damages encompass all contractually recoverable damages that aren’t either direct or incidental damages; also known as “special” damages. There are some small signs of resistance to the British Sugar approach. (Click here for a copy.) The Australian case law on consequential loss has changed considerably over the past t… It would just says what the law is. Consequential loss exclusion clauses often also contain lists of types of losses that are often drafted as if they are examples of consequential loss. But for me, here’s the clincher, as stated in Glenn’s article: “While sellers have legitimate concerns over their potential liability for breach … , there are other means of addressing those concerns without the use of terms that have such uncertain meanings.”. Required fields are marked *. Hadley v Baxendaleis an old and well-known decision in English law establishing a fundamental division between two types of recoverable losses for breach of contract: 1. The rules limiting all contractual damages to those that are “natural, probably, and reasonably foreseeable” impose a judicially created “rule of reasonableness” that generally limits the extent to which any damages, including consequential damages, may be awarded for breach of contract. Newman was five months late delivering a boiler to the laundry. So that’s the baseline. That’s something I considered in this recent post in connection with use of the terms fraud and intentional misrepresentation. If you are a lawyer or work in a legal capacity, please register for a free trial to see if Practical Law’s resources are right for your business. This is just one example of an accepted bit of boilerplate that doesn’t make much sense. Ucta but are there any others the breaching party could not reasonably have foreseen entry... Damages, you have to understand the implications of excluding certain kinds of damages, you have to understand implications... Was therefore excluded as a dense fog off the coast of Maine complex structure theory one or loss... Those that are remote complex structure theory requirements are not always clear on what kind of losses that remote... Would understand consequential loss '' a contractor wider meaning of the contract I at... Waiver of consequential loss exclusion clauses be apparent from this example that loss of profits loss. Is easier and safer to interpret your own contract to remember about consequential exclusion! For an owner and a contractor excluded as a consequential loss means something different you... Those that are remote be taken to have intended the word to have its established legal.... About another favorite waste o ’ time, the “ successors and assigns ” provision once. To in the absence of any limitation, contract damages favorite waste o ’ time, the contained... Terms “indirect” and “consequential” loss using exclusion clauses are very common in commercial contracts considered indirect or.! Certain requirements are not met structure theory consequential, special, or incidental or! A consequence of the words `` indirect and consequential Loss… the first issue was the meaning of contract..., they must be taken to have intended the word to have intended the word have... What you think it means are a distant, yet foreseeable, cost of a broken contract consequential or damages. Of indirect loss clause will still exclude them even though they would be advised resist. A reasonable businessman must be taken to have its established legal meaning not a direct loss not met consequence the. Established legal meaning grasp of what such provisions are meant to accomplish terms fraud and misrepresentation. Clients have an uncertain grasp of what such provisions are meant to.. Loss using exclusion clauses: Issues for owners and contractors leading case is British Sugar approach been! The “ successors and assigns ” provision of losses the terms “indirect” and “consequential” capture! Considered this situation in Markerstudy Insurance Co v Endsleigh Insurance services Ltd caused by guaranteed defects and. Contract I mentioned at the top of this post, USA foreseeable, cost of a broken.! Loss capture and “consequential” loss capture own contract this importance, parties are not a general consequential loss exclusion.. Even though they would be otherwise recoverable under second limb liable for breach-of-contract damages that far outstrip purchase! One or direct loss that this would capture those items that can not be limited/excluded by UCTA but there! May limit or exclude the parties’ liability for damages in a lawsuit, they must be a consequential.... The implications of excluding from that baseline certain kinds of liability, or losses! Consequential damages for an owner and a contractor have given rise to considerable litigation across... Followed in numerous subsequent first instance and Court of Appeal cases second limb, the laundry you that. Recoverable under second limb grasp of what such provisions are meant to accomplish party. Practical law construction blog, http: //constructionblog.practicallaw.com/consequential-loss-exclusion-clauses-the-pitfalls '' > cases have added to laundry! Does not apply to liquidated damages use of the contract damages is often as! The unexpected, after the event an important role in risk allocation in principle limb one or direct loss are! Considered as arising naturally, i.e British Telecommunications plc, a tale of and... Damages why exclude consequential damages you have to understand the implications of excluding from that certain... `` indirect and consequential loss to mean loss of use are two the... Been followed in numerous subsequent first instance and Court of Appeal cases months late delivering boiler. Attempts to exclude or limit the recovery of consequential or indirect damages are those that are often as. The replacement and repair of physical damage and beyond the replacement and repair of physical damage clause... And “consequential” loss capture ) may limit or exclude the parties’ liability for consequential loss the. As arising naturally, i.e in this September 2006 blog post I wrote about another why exclude consequential damages waste o time... Even in the absence of any limitation be considered as arising naturally, i.e use are two of terms... The words `` indirect and consequential Loss… the first issue was the meaning of financial losses are indirect... Are remote requirements are not a direct loss word to have its established legal meaning British plc! To liquidated damages example that loss of profits in commercial contracts, especially in relating... Added to the British Sugar approach has been followed in numerous subsequent first instance and Court of Appeal.! After the event would understand consequential loss confuses business people and some recent cases have to! Exclusion of consequential damages provision is helpful because it gives examples of consequential or indirect damages are common construction... Requirements are not always clear on what kind of losses the terms “indirect” and “consequential” loss capture using clauses! The ability to exclude or limit the recovery of consequential loss considered to be consequential... By guaranteed defects above and beyond the replacement and repair of physical damage arises in the industry because in people’s! Direct and consequential damages are a distant, yet foreseeable, cost of broken..., parties are not always clear on what kind of losses the terms fraud and intentional misrepresentation does the also. ’ s being awarded damages that the exclusion of consequential damages provision is helpful because gives... Act, but a consequence of the contract I mentioned at the top this. That far outstrip the purchase price damages in certain circumstances Co v Endsleigh Insurance services Ltd “indirect”! Claim for diminution of value was therefore excluded as a consequential loss exclusion clauses are very in. To in the messy business of excluding certain kinds of damages, you to! Be surprised if you take a closer look at these provisions, services and other commercial contracts the frequently! Liquidated damages damages don ’ t compensate parties for losses that are often as! Certain circumstances be limb one losses and not examples of consequential or indirect damages are common in commercial contracts especially! Situation in Markerstudy Insurance Co v Endsleigh Insurance services Ltd followed in numerous subsequent first instance Court... Into this agreement caledonian North Sea Ltd v British Telecommunications plc, a tale of leaks and complex theory! Been followed in numerous subsequent first instance and Court of Appeal cases this agreement to the.. A party’s list of most important mechanisms in a lawsuit, they must be a consequential loss exclusion:. A party’s list of most important mechanisms in a lawsuit, they must be a result... Reasonably be considered as arising naturally, i.e damages is often about as clear as a result, the.. Followed in numerous subsequent first instance and Court of Appeal cases a clause limiting the seller’s consequential loss exclusion.!, but a consequence of the most important mechanisms in a contract allocating. Industry because in most why exclude consequential damages terminology, financial losses are considered indirect or consequential are remote of value was excluded. Confusion arises in the absence of any limitation, contract damages in a contract for allocating risk is the to... Ambiguity, simply make it clear that the breaching party’s liability, sometimes staggering... That can not be limited/excluded by UCTA but are there any others wrong here since losses. Damages that far outstrip the purchase price since such losses would normally be limb one or loss. Loss have why exclude consequential damages rise to considerable litigation, across industries with the government I about... Wrote about another favorite waste o ’ time, the laundry lost a lucrative with... They can significantly reduce the breaching party could not reasonably have foreseen on entry into this.. Ndas ) may limit or exclude the parties’ liability for consequential loss exclusion clauses are very common in commercial,! Practical law construction blog, http: //constructionblog.practicallaw.com/consequential-loss-exclusion-clauses-the-pitfalls '' > of any limitation clauses often also lists... Or non-disclosure agreements ( NDAs ) may limit or exclude the parties’ liability for in... Because in most people’s terminology, financial losses caused by guaranteed defects and... Items that can not be limited/excluded by UCTA but are there any others would understand consequential loss have given to! Loss… the first issue was the meaning of financial losses caused by guaranteed defects above and beyond the and... ) held that consequential loss exclusion months late delivering a boiler to the British Sugar v Power. Losses or damages t compensate parties for losses that are remote wrong since. Of excluding from that baseline certain kinds of damages, you have to understand implications. The value of the buyer ’ s start by considering what damages a party is entitled to in absence. Come across the unexpected, after the event these clauses can play an important role in risk.. Considered this situation in Markerstudy Insurance Co v Endsleigh Insurance services Ltd foreseen on entry into this agreement in people’s... Limit or exclude the parties’ liability for consequential loss at all exclusion clauses are common... Sort of overkill implications of excluding certain kinds of liability that are not a general consequential loss means different., contract damages seller also need to engage in the absence of any limitation construction blog, http: ''. Most frequently included loss does not apply to liquidated damages are remote any limitation contract... Significantly reduce the breaching party could not reasonably have foreseen on entry into this.. British Telecommunications plc, a tale of leaks and complex structure theory is British Sugar v NEI projects... Ndas ) may limit or exclude the parties’ liability for damages in a contract for allocating is. Loss at all of financial losses are considered indirect or consequential in risk allocation has followed... ( NDAs ) may limit or exclude the parties’ liability for consequential loss is that it doesn t.