It is common practice in international standard form EPC contracts (such as ENAA and FIDIC) to refer to both “indirect” and “consequential” loss or damage in exclusion of liability clauses. This website uses cookies so that we can provide you with the best user experience possible. 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. The judge confirmed that although exclusion clauses are no longer read narrowly, the words must be given their ordinary meaning. While a plaintiff wants an award, a defendant does not because the indirect results of having breached a contract can have a far-reaching impact on the defendant. The judge appears to have disagreed with this argument on the basis that the lost profits were nevertheless caused as a direct and natural result of the fire. 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. Towage fees, agency fees, survey fees, off hire and off hire bunkers caused by the engine failure. These are “indirect losses”or “consequential losses” (the terms “indirect” and “consequential” loss are used interchangeably). Transforming Public Procurement – the Final Frontier? Therefore, the claims in this case do not appear to fall within the scope of the exclusion.”. This case has increased the uncertainty around which losses will be consequential. 2. British Sugar PLC v NEI Power Products Ltd [1997] CLC 622, Caledonia North Sea Limited v British Telecommunications plc [2002] BLR 139, Scottish Power UK Plc v BP Exploration Operating Company Ltd [2015] EWHC 2658 (Comm), Transocean Drilling UK Ltd v Providence Resources Plc [2016] EWCA Civ 372, Star Polaris LLC v HHIC-Phil Inc [2016] EWHC 2941 (Comm), Exclusions for indirect and consequential loss: English law on the brink of change? Press and hold the LawNow icon and then click "Add to home screen". As such, the Court concluded that this clause did not exclude lost profits in the form of direct damages. Keeping these cookies enabled helps us improve our website and provide you with the most relevant content. Consequential loss exclusion clauses: Issues for owners and contractors. Choy Chee Yean is a Partner with the Projects & Infrastructure Practice Group. 1. These cookies “remember” that you have visited a website and this information may be shared with the providers of analytics services (see details in our privacy policy). According to the court, this clause was “unhappily drafted” because the supposed examples of damages intended to be excluded by the phrase “indirect or consequential loss or damage” were qualified by the parenthetical to only be excluded if they in fact constituted indirect or consequential loss or damage to begin with. They also allow you to log in to personalised areas and to access third party tools that may be embedded in our website. The Government has today announced that the deadline for building owners to complete their applications to the Building Safety Fund has been extended to 30 June 2021 (from 31 December). Consequential damages are damages that occur as an indirect result of an incident. Our combination of practice excellence and deep industry expertise provides a distinct competitive advantage to our clients, bringing together legal expertise, commercial insight and close professional support. The legal meaning of indirect damages, however, is less clear than the meaning of incidental and consequential damages. exclusion of indirect damages. 2 Entertain Video Ltd (“2E”) sued Sony for, among other things, loss of profit arising from a fire at Sony’s warehouse in Enfield. Consequential Damages — consequential damages are an indirect result of a direct loss. The court held that although the liability of the ship owner represented a liability “to any other party”, it was nevertheless a direct liability which was not caught by the exclusion clause. Persistent cookies, however, remain and continue functioning on repeat visits. In no event shall any Party or any affiliate thereof or any of their respective directors, officers, agents, or employees be liable to any other Party or any affiliate thereof or any of their respective directors, officers, agents, or employees for any indirect, consequential, punitive, special, incidental or exemplary losses or damages (including without limitation lost profits or … Exclusion and limitation clauses should be drafted to comply with the legislation regarding fairness where the legislation applies  (Please. Transforming Public Procurement – the Final Frontier? In more recent years judicial criticism of the traditional approach has appeared. "Neither party will be liable for any indirect or consequential loss under or in connection with this contract". To take full advantage of our website, we recommend that you click on “Accept All”. Joe Colgan, EC Harris. In order to qualify for funding, the remedial works must start on... China’s Belt and Road initiative has the potential to help nations across Central and Eastern Europe meet their diverse and growing infrastructure needs. Loss of customers due to cancellations or delays. The Buyer sought damages which included: i. Indirect and consequential loss exclusions: English law holds the line for now. Our combination of practice excellence and deep industry expertise provides a distinct competitive advantage to our clients, bringing together legal expertise, commercial insight and close professional support. Click on the 'start' button and save as a bookmark. It is unfortunate that the court’s reasoning in this regard is not spelt out in more detail. Such an interpretation has been criticised as one which the average businessman would not expect. In the case of the factory, therefore, such an exclusion would not affect any claim for ordinary loss of production suffered during the period the factory was unavailable. Any other damages which may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract. This website uses cookies so that we can provide you with the best user experience possible. For example, Clause 17.6 of the FIDIC Silver Book provides: “Neither Party shall be liable to the other Party for loss of use of any Works, Damages that may fairly and reasonably be considered as arising naturally, i.e. The Claimant ("the Buyer") purchased a ship from the Defendant ("the Seller"). Where appropriate, standard forms should be amended to identify the particular types of loss that a party is conscious of that it wishes to exclude. Session cookies only last for the duration of your visit and are deleted from your device when you close your internet browser. This category depends upon additional facts being known to both parties. 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