Several initiatives, including accelerator programmes, incubators and a multitude of free zones geared towards promoting... “For too long, modern and innovative approaches to public procurement have been bogged down in bureaucratic, process-driven procedures. In the example of the factory just given, it may be that loss of production during the period of rebuilding caused the loss of a particularly lucrative long-term contract. Session cookies only last for the duration of your visit and are deleted from your device when you close your internet browser. So, disclaimers of indirect damages should not be viewed as a substitute for explicit disclaimers of incidental and consequential damages, which always should be expressly disclaimed. Buyers and sellers often negotiate the scope and types of damages subject to indemnification under the purchase agreement, including whether consequential damag… As such, the Court concluded that this clause did not exclude lost profits in the form of direct damages. M&A transaction documents often contain an exclusion or limitation of the seller’s liability for ‘consequential’, ‘indirect’ or ‘special’ losses suffered by the purchaser. 2 Entertain Video Ltd (“2E”) sued Sony for, among other things, loss of profit arising from a fire at Sony’s warehouse in Enfield. The claim was made under a stevedoring contract between the ship owner and the port authority. 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. 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 … Exclusion and limitation clauses in commercial contracts are used to control, or put a cap on, a party’s liability. 2. The court ruled that the clause excluded liability for indirect/consequential loss of profits, and not direct loss of profits: The most likely (and often the only) damage that Polypearl would suffer from E.on’s failure to meet the minimum spend commitment would be a loss of profits. The judge held that "indirect" damages were irrecoverable in any event, and that, as a matter of interpretation, "consequential" must mean something similar, and so the costs Davy McKee thought they were excluding (loss of profit and overhead … Click on the 'menu' button again and select "Bookmarks". Some functionality will not work if you don’t accept these cookies. Some companies have adopted a policy that no contract can be signed unless the company is specifically excused, in writing (and sometimes in ALL CAPS), from this scary-sounding exposure. If you agree to this, please click "Accept all" below. Such an interpretation has been criticised as one which the average businessman would not expect. They also allow you to log in to personalised areas and to access third party tools that may be embedded in our website. Click on the 'start' button and save as a bookmark. Click on the "..." icon in the bottom-right of the screen. Similarly, consequential damages are not necessarily indirect damages—some courts suggest this is true, but others do not. Click on the "..." icon in the bottom-right of the screen. 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. Click on the 'start' button and save as a bookmark. For example, if the breach involved the destruction of a factory, both the cost of rebuilding and the loss of production suffered during rebuilding would fall within this first category. Session cookies only last for the duration of your visit and are deleted from your device when you close your internet browser. The claimant (the Buyer) bought the vessel (Star Polaris) from the defendant (the Yard). The Global Life Sciences & Healthcare Sector Group is delighted to release the latest episode in its video/podcast series, On the Pulse. In summary: Case: Ferryways NV v Associated British Ports [2008] EWHC 225 (Comm). Loss of profits due to an interruption of normal business practices. However, the rule is very well established and in British Sugar plc v NEI Power Projects, the Court of Appeal commented that reasonable businessmen using such language must be taken to be aware of the distinction. Details concerning the tools in use are in our privacy policy. The direct and natural result of the fire was the destruction of the goods and the warehouse, causing lost profits and business interruption losses to the claimants. Consequential loss exclusion clauses: Issues for owners and contractors. 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. The Brexit transition period – during which, broadly, the status quo continues – will end on 31 December 2020. The Buyer subsequently indicated that it intended to amend its claim to include a claim for diminution in the value of the vessel by reason of the defects. 15 Sep 2004. A number of Courts have held that general damages are direct and special damages are consequential. In this most recent case, a more direct assault has been made on the traditional approach by reference to the above criticism. The arguments made by Sony in this case would have dramatically expanded the reach of the clause in comparison to the traditional approach which is thought not to have resulted in a single reported case where losses have been effectively excluded. Some States do not allow the exclusion or limitation of incidental or consequential damages, so the above limitation or exclusion may not apply to you. Consequential loss exclusion clauses are very common in commercial contracts, especially in those relating to construction and energy projects. Care should be taken when drafting to ensure that a clause excludes what it is supposed to. Law-Now Zones provide expert analysis on specialist topics. No Consequential Damages. Keeping these cookies enabled helps us improve our website and provide you with the most relevant content. For advice on construction contracts and other construction matters, he may be contacted at chee.yean.choy@sg.rajahtann.com. For example, consequential damages are often awarded to reimburse an accident victims loss of wages, when he could not work for weeks after being injured in an automobile accident. This website uses cookies so that we can provide you with the best user experience possible. Keeping these cookies enabled helps us improve our website and provide you with the most relevant content. This category depends upon additional facts being known to both parties. 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? The series brings together CMS lawyers and experts to discuss key industry topics impacting, innovating and disrupting... Today, CMS launched its new publication which is designed to provide guidance on the law governing electronic execution of deeds and documents and the practicalities associated with using e-signing platforms, in all UK jurisdictions. In the forms files of many business attorneys, a ubiquitous boilerplate clause addresses the dreaded “special, indirect, or consequential” damages. 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