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. Introduction 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 … Persistent cookies, however, remain and continue functioning on repeat visits. Care should be taken when drafting to ensure that a clause excludes what it is supposed to. A number of Courts have held that general damages are direct and special damages are consequential. The shipping contract excluded losses for “consequential … losses, damages or expenses” and this included a claim for diminution in value. 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. However, in order for someone to win consequential damages in a lawsuit, the damages must have been a foreseeable result of that incident. Buyers and sellers often negotiate the scope and types of damages subject to indemnification under the purchase agreement, including whether consequential damag… This website uses cookies so that we can provide you with the best user experience possible. Transforming Public Procurement – the Final Frontier? Transforming Public Procurement – the Final Frontier? It is of note, therefore, that the court applied the traditional approach whilst accepting the need to give the words “indirect” and “consequential” their natural and ordinary meaning, in the context of the agreement as a whole and the relevant factual matrix. 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. This case appears to be the first occasion on which a direct attempt to overcome the traditional approach has been made by reference to the recent judicial criticism of it (Star Polaris being a case where the rule was distinguished by reference to specific drafting). ICLR, 2017, 34(3), pages 210-225, 2 Entertain Video Ltd & Ors v Sony DADC Europe Ltd [2020] EWHC 972. Approximately £40 million worth of stock owned by 2E was being held at Sony’s warehouse at the time of the fire, which was caused by civil disorder arising from the shooting of Mark Duggan in 2011. The cost of repairs to the vessel; ii. For advice on construction contracts and other construction matters, he may be contacted at chee.yean.choy@sg.rajahtann.com. 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 … Following delivery, the ship suffered a serious engine failure and was towed to Korea for repairs. These are “direct losses”. Consequential loss exclusion clauses are very common in commercial contracts, especially in those relating to construction and energy projects. The ship owner appealed the arbitral award to the High Court. The first issue was the meaning of the words "indirect and consequential loss". The court said that a party seeking to limit liability for such losses must do so by using clear and unambiguous language. Exclusion of liability for “indirect or consequential” losses. Extension to Building Safety Fund and new Waking Watch Relief Fund announced, Download the latest 'On the Pulse' video/podcast episode #6, CMS launches ‘Electronic Signatures & E-Signing Platforms - The definitive UK legal guide’, Tap the Share button at the bottom of the Safari screen for the website you're on, Tap the icon labelled 'Add to Home Screen', Tap the 'Add' button in the upper right corner. Excluding “consequential losses” has always been, and remains, dangerous. 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. 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. The arbitra… 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. Consequential loss exclusion clauses: Issues for owners and contractors. Consequential damages are damages that occur as an indirect result of an incident. In 2002, one member of the House of Lords stated that he wished to reserve the question as to whether the traditional approach was correct (Caledonia North Sea Limited v BT plc). For instance, a purchase agreement will often provide that the liability of the seller under … 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 Court held that the express wording of the limitation clause in Dow excluded only “loss of profits and damages arising in the context of indirect or consequential damages” (emphasis added). In R (on the application of Thornton) v OGA [2020] EWHC 2615 (Admin)  the English courts considered, for the first time, whether a ‘letter of comfort’ given by the Oil and Gas Authority (“OGA”) concerning a change of control should be overturned. For a more detailed analysis of the traditional approach and the arguments for change please see the article by two of the present authors published in the International Construction Law Review noted below. This case has increased the uncertainty around which losses will be consequential. The result of consequential damages can include: 1. Law-Now Zones provide expert analysis on specialist topics. by Arch Fletcher. Analytics cookies collect anonymised information such as the number of site visitors or most popular pages. edgenuity is not liable for any indirect, special, incidental or consequential damages arising out of or related to this agreement (including, without limitation, costs of delay; loss of data, records or information; and lost profits), even if it … Click on the 'menu' button again and select "Bookmarks". Joe Colgan, EC Harris. 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. No Consequential Damages. 2. But the difference between direct and consequential damages is often about as clear as a dense fog off the coast of Maine. 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). The EU would like to extend the transition period, to negotiate a fuller trade deal, but the UK has said no. 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 Global Life Sciences & Healthcare Sector Group is delighted to release the latest episode in its video/podcast series, On the Pulse. Choy Chee Yean is a Partner with the Projects & Infrastructure Practice Group. A Westlaw search for [“consequential damages” and synonymous and “special damages”] yielded 35 cases, 7. according to the usual course of things, from a breach of contract. 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