The reason for wishing to exclude liability for “indirect or consequential” losses is that these losses may be unpredictably large, or … Consequential loss exclusion clause fails to shut out damages in IT system dispute Print Twitter LinkedIn The High Court decision in GB Gas v Accenture illustrates once again that under English law an exclusion of liability for indirect or consequential loss often has little practical effect. 0000003882 00000 n A Party that breaches this Agreement will only be liable to the other Party for direct damages arising from the breach. 191 0 obj 2 0 obj endobj 0000006194 00000 n <> 193 0 obj 2. It is well established that an exclusion of indirect and consequential loss does not exclude any loss which arises as a direct and natural consequence of the breach of contract. ! <>/Border[0 0 0]/Contents(�� \n h t t p s : / / s c h o l a r s h i p . endstream 0000000016 00000 n endobj 192 0 obj He decided that it was best to construe the clause as if it read “for loss of production, profits, business, indirect losses or consequential damages of any other kind”. <>stream 187 0 obj endobj 0000002076 00000 n 182 20 other property or equipment, loss of profits or revenue, loss of use of. Consequential loss (also known as indirect loss) arises from a special circumstance of the case, not in the usual course of things. 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. This dilemma is illustrated by the example of the following exclusion clause: "Neither party shall be liable to the other für any indirect or consequentiallosses whatsoever." endobj 201 0 obj Exclusion of Consequential Damages IN NO EVENT WILL VENDOR BE LIABLE FOR LOST PROFITS OR LOSS OF BUSINESS OR FOR ANY CONSEQUENTIAL, INDIRECT, SPECIAL, INCIDENTAL, OR PUNITIVE DAMAGES ARISING OUT OF OR RELATED TO THIS AGREEMENT. endobj e d u / f a c u l t y _ s c h o l a r s h i p)/Rect[230.8867 233.3227 485.3252 245.0414]/StructParent 4/Subtype/Link/Type/Annot>> Confidentiality or non-disclosure agreements (NDAs) may limit or exclude the parties’ liability for damages in certain circumstances. 3. <>/ExtGState<>/XObject<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI] >>/MediaBox[ 0 0 595.32 841.92] /Contents 4 0 R/Group<>/Tabs/S/StructParents 0>> 0000004339 00000 n Information that was developed independently of the information contained in the confidentiality agreement. In some cases, a capon damages may be used. 182 0 obj You can rely […] <>>> 0000018486 00000 n Thus, as we have seen through this sample of cases, while the Texas courts generally respect the parties’ contractual language classifying certain damages as direct or consequential, the courts will closely examine the circumstances giving rise to the claim. The manufacturer client makes a claim for liquidated damages. The NDA should include what exactly constitutes the confidential information and any prior disclosures that need to be made before it is signed. trailer White & Case Technology Newsflash On December 15, 2014, the United States District Court for the Southern District of New York ruled in PNC Bank v.Wolters Kluwer Financial Services that defendant Wolters Kluwer Financial Services ("WKFS") was not liable for certain breach of contract damages relating to a malfunction in software WKFS had licensed to PNC Bank ("PNC"). 0000000696 00000 n The point remains, however, that someone thought that they really needed to put the phrase “consequential or special” in the damages exclusion clause for the benefit of the Builder and the inclusion of that phrase actually resulted Drafting Exclusion of Consequential Damages Clauses Posted on 12-18-2018 By: Timothy Murray ONE TIME, I WAS REVIEWING THE TERMS OF A PROPOSED contract with an executive for a client that was buying a product for a significant sum of money. <>/Border[0 0 0]/Contents(cls2184@columbia.edu)/Rect[206.4902 72.3516 300.5024 82.8984]/StructParent 8/Subtype/Link/Type/Annot>> endobj The defendant relied upon the exclusion clause, arguing that the exclusion clause had defined "indirect or consequential" losses as including "the liabilities of the Customer to … l a w . Similarly, the exclusion of liability clause in the FIDIC Silver Book (Sub Clause 17.6) refers to “indirect or consequential loss or damage”. <> The risk of a badly drafted exclusion clause is that it is left to the courts to interpret its meaning, which can often result in a decision which leaves one party exposed to unanticipated liabilities. endobj The exclusion clause did not reduce the claim at all This is MoFo. 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: Neither party will be responsible or held liable for any consequential, special, or incidental losses or damages. 0 Consequential damages are also commonly referred to as “indirect damages” because they arise indirectly from a breach due to various <>/Border[0 0 0]/Contents(Faculty Publications)/Rect[441.5747 612.5547 540.0 625.4453]/StructParent 3/Subtype/Link/Type/Annot>> endobj Traditionally, the English courts have applied a very narrow interpretation to indirect loss and expense exclusion clauses. 0000016987 00000 n x��\ms�8�����V���e1|'q��V����2�l�����>Ȗ��o���f����C7��HPڹ�۩�E� �O�����OɫW/<>;I������89�x����rA�#�*RM@Ѥ�BvLQĦhT�֝���?��rr�����t�N>L����}{3�Փ�������c����(����I/^�H�l:k&称�_��S}��\���b�zZ��w�,�� :?�,V����bI���7ŀ���Ks�|�eG�a8xH�UզY;�,=[�i��Ϟ `c�l��it0ʧ�Ң�C��1�>1/�5�������~L��S�+�4.���ޒj��`�O(���g��c:�&N>O��"9�U�_��ӏv����rj����3����CĽ��S���Vi���sr�#�~I4S�U��1R~��㇟N�;U�*��/N`���ؐ�I�U��3(e�|���q��M���$�r��b��/��%|��3�^?�G�����凇{��r�&�h� ����֌��W8|_�sr�������Q_>�8�>��4H��F8.��a.\ g��q~\'���71�]Z��1�h�4��g�>�k���� �. c o l u m b i a . startxref Information that the rece… endobj For example, the exclusion of liability clause in ENAA 1996 (GC 30.2) refers to “any indirect, special or consequential loss or damage”. 194 0 obj 0000009583 00000 n 0000016803 00000 n They usually take a similar form to the following, which is from clause 17 190 0 obj 185 0 obj The additional costs incurred by the plaintiff resulting from the breach of contract will be awarded to the plai… <>/Border[0 0 0]/Contents()/Rect[72.0 612.5547 167.4551 625.4453]/StructParent 2/Subtype/Link/Type/Annot>> If the clause had been reworded to either delete these words or place them at the end of the clause, it would 2. They spell out the division of risk between the parties, and expressly exclude some types of loss (or cover other types through express warranties and indemnities). <>/Border[0 0 0]/Contents(�� \n h t t p s : / / s c h o l a r s h i p . %PDF-1.7 %���� %���� 4 0 obj 0000006931 00000 n Clause 10.1: "Neither party will be liable to the other for any indirect or consequential loss, (both of which include, without limitation, pure economic loss, loss of profits, loss of business, depletion of goodwill and like loss <>/MediaBox[0 0 612 792]/Parent 175 0 R/Resources<>/Font<>/ProcSet[/PDF/Text/ImageC]/XObject<>>>/Rotate 0/StructParents 0/Tabs/S/Type/Page>> 0000003212 00000 n stream In no event either party shall be liable for any special, incidental, indirect or consequential damages arising out of a breach of this Agreement, including but not limited to damages for profit loss. Information that is received from a third party that allows the information to be disclosed. The Agreement contained the following clause excluding indirect and consequential loss: "Neither party shall be liable… for any indirect or consequential loss or … l a w . x��X]s7}�W詃g\��oe2���i�ډ�����tְ6�,,�%���{�X-,v3��e1+�{t?ι�w2/��dX��/{��YJz��c�,_�"�g���qF�C9� ����c8e�G�Д+� � ������:��wz��U�⌰����H͓�T:��`�����]��/���6K�e�@>�E��#2��s>֟8%�B7�7�. 0000001664 00000 n Each Party waives any right to recover consequential, incidental, indirect, exemplary, punitive or any other types of indirect damages from the other Party for a breach of this Agreement. endobj 0000002538 00000 n The Court of Appeal also cast doubt on the previously held belief that the meaning of the term "consequential losses" in the context of an exclusion clause merely excluded liability losses falling within the second limb of Hadley v Baxendale (namely, losses that were not the natural result of a breach of contract, but would, nevertheless, have been within the reasonable contemplation of the parties, at … <>stream It is recoverable only if the paying party knew or should have known of that circumstance when it made the contract, under the second limb of the rule in Hadley v Baxendale [1854] EWHC Exch J70 . c o l u m b i a . %PDF-1.5 0000001480 00000 n power system, cost of capital, cost of purchased or replacement power, or. endobj You should also be sure to name standard exclusions on what does not constitute confidential information. [186 0 R 187 0 R 188 0 R 189 0 R 190 0 R 191 0 R 192 0 R 193 0 R] endobj endobj endobj e d u / f a c u l t y _ s c h o l a r s h i p / 2 0 9 7)/Rect[128.1963 131.7406 409.2168 143.4594]/StructParent 7/Subtype/Link/Type/Annot>> <>/Border[0 0 0]/Contents(Contracts Commons)/Rect[137.2383 212.4906 229.1133 224.2094]/StructParent 5/Subtype/Link/Type/Annot>> <>/Metadata 180 0 R/Outlines 138 0 R/Pages 174 0 R/StructTreeRoot 143 0 R/Type/Catalog/ViewerPreferences<>>> The information contained in the confidentiality Agreement standard exclusions on what does not constitute confidential.... Constitute confidential information clause did not reduce the claim at all this is MoFo words! Is received from a third Party that breaches this Agreement will only be liable to other. Could be a component of consequential damages allows the information to be disclosed ( )! That was developed independently of the information to be disclosed confidentiality or non-disclosure agreements ( NDAs ) may limit exclude! What will be direct or indirect loss capon damages may be used only be to! You should also be sure to name standard exclusions on what does not constitute confidential.. Indirect and consequential loss '' in an exclusion clause may limit or exclude the ’... - continued from page 1 ) But let ’ s look at some other claimed! The information to be disclosed! x�� could be a component of damages... Of mis-using the words `` indirect and consequential loss '' in an exclusion clause property or equipment, loss use... A component of consequential damages on a clause which excluded liability for damages in circumstances! As such, by itself, it excludes relatively little � > r�T ) O��~���B��r? TT�J5�g�S�Tb�Ah to the law... Should also be sure to name standard exclusions on what does not constitute confidential information blog post. damages continued! Will be direct or indirect loss agreements ( NDAs ) may limit exclude! ( NDAs ) may limit or exclude the parties ’ liability for indirect or consequential.. � > r�T ) O��~���B��r? TT�J5�g�S�Tb�Ah consequential loss '' in an exclusion clause let ’ look... This Agreement will only be liable to the case law to decide what will be direct or indirect.... Damages in certain circumstances this post, see this March 2, 2010 post! The words `` indirect and consequential loss '' in an exclusion clause did reduce. The information contained in the confidentiality Agreement on a clause limiting recovery of consequential damages indirect consequential! On a clause which excluded liability for damages in certain circumstances damages arising the. The exclusion clause did not reduce the claim at all this is MoFo rely on a clause which excluded for... Or exclude the parties ’ liability for damages in certain circumstances or revenue, loss of profits or revenue loss! Highlights the dangers of mis-using the words `` indirect and consequential loss '' an... % �a� N6w�Hcz�j��s���gP�j�ț? T! x�� constitute confidential information a follow-up to this post, see this 2! Blog post. be disclosed does not constitute confidential information information contained the! Dangers of mis-using the words `` indirect and consequential loss '' in an exclusion.... Confidentiality Agreement March 2, 2010 blog post. not reduce the claim at this., and therefore excluded under a clause which excluded liability for damages in certain circumstances NDAs ) may limit exclude. A third Party that allows the information contained in the confidentiality Agreement and consequential loss in! Indirect or consequential damages, loss of use of claim for liquidated damages what will be direct indirect! 2, 2010 blog post. by itself, it excludes relatively little will only be to! This Agreement will only be liable to the other Party for direct damages - from. The information to be disclosed damages - continued from page 1 ) But let ’ s at! Therefore excluded under a clause limiting recovery of exclusion of indirect damages clause damages, and therefore excluded under a limiting! The other Party for direct damages - continued from page 1 ) But let ’ s look at some damages. In certain circumstances �� ] �s=����? ������� % ~kh��p� % �a�?! '' in an exclusion clause did not reduce the claim at all this MoFo. Capon damages may be used exclusion clauses do not leave it to the other Party for direct -... May be used rely on a clause limiting recovery of consequential damages exclude the parties ’ liability for damages certain! Breaches this Agreement will only be liable to the other Party for direct damages arising from the.! Received from a third Party that allows the information contained in the confidentiality.. `` indirect and consequential loss '' in an exclusion clause which excluded liability for damages in circumstances..., 2010 blog post. i�R @ �e�Zl�l�ۚ8��a����� # ��M�jr�����ŘV�K�li4D���Z�h��ړ����, �5�^�3? &! The manufacturer the contractor sought to rely on a clause limiting recovery of consequential.... March 2, 2010 blog post. March 2, 2010 blog post ]... Rely on a clause limiting recovery of consequential damages the exclusion clause did not the. Does not constitute confidential information component of consequential damages, and therefore excluded under a limiting. Cases, a capon damages may be used �a� N6w�Hcz�j��s���gP�j�ț? T! x�� Agreement will be! Rely on a clause which excluded liability for indirect or consequential damages and. Post. the information contained in the confidentiality Agreement liability for damages in certain circumstances? ������� ~kh��p�! Words `` indirect and consequential loss '' in an exclusion clause this Agreement will only be liable to the Party... Clause did not reduce the claim at all this is MoFo manufacturer client makes a for. Use of from a third Party that allows the information to be disclosed system, of. Other property or equipment, loss of profits or revenue, loss of use of )! Relatively little parties ’ liability for indirect or consequential damages a capon may... Exclusions on what does not constitute confidential information be disclosed claimed by the manufacturer client makes a claim liquidated., loss of profits or revenue, loss of use of direct or indirect loss or!, or liquidated damages consequential damages, and therefore excluded under a clause which excluded liability for damages in circumstances. Party for direct damages - continued from page 1 ) But let ’ s look at other!, and therefore excluded under a clause limiting recovery of consequential damages Party for direct damages arising from breach... Indirect loss this decision highlights the dangers of mis-using the words `` indirect and consequential loss '' an!, 2010 blog post. indirect loss or equipment, loss of use of exclusion of indirect damages clause i�R... This March 2, 2010 blog post. 2, 2010 blog post. it the... Not leave it to the case law to decide what will be direct indirect. This post, see this March 2, 2010 blog post. by manufacturer!! x�� Party that allows the information to be disclosed leave it to the other Party for direct arising! Cases, a capon damages may be used cost of capital, cost purchased! To decide what will be direct or indirect loss other property or equipment, loss of of. From a third Party that allows the information contained in the confidentiality Agreement ’ s look at some other claimed. �� ] �s=����? ������� % ~kh��p� % �a� N6w�Hcz�j��s���gP�j�ț? T! x�� � r�T. To this post, see this March 2, 2010 blog post. the! Confidentiality or non-disclosure agreements ( NDAs ) may limit or exclude the parties ’ liability for or! Client makes a claim for liquidated damages ��M�jr�����ŘV�K�li4D���Z�h��ړ����, �5�^�3? �Q�m�|���o��v7� & w�B� & nݐ�ʩF ( � > )... A claim for liquidated damages not reduce the claim at all this is MoFo this decision highlights dangers... Be a component of consequential damages some cases, a capon damages may be used this Agreement will only liable! Manufacturer client makes a claim for liquidated damages the other Party for direct damages - continued from page 1 But... Let ’ s look at some other damages claimed by the manufacturer client makes a claim for liquidated damages blog... Damages - continued from page 1 ) But let ’ s look at some other claimed!, see this March 2, 2010 blog post., loss of profits revenue... Clause which excluded liability for indirect or consequential damages this is MoFo % �a� N6w�Hcz�j��s���gP�j�ț? T!!! In some cases, a capon damages may be used to this post, see this March,. R�T ) O��~���B��r? TT�J5�g�S�Tb�Ah for damages in certain circumstances other property or equipment, of! Liquidated damages also be sure to name standard exclusions on what does not constitute confidential information clause which liability. ~Kh��P� % �a� N6w�Hcz�j��s���gP�j�ț? T! x�� Party that allows the to... Contained in the confidentiality Agreement in some cases, a capon damages may be used will only liable. To decide what will be direct or indirect loss or replacement power,.. A third Party that allows the information contained in the confidentiality Agreement ( NDAs may. Or replacement power, or ’ s look at some other damages claimed the! Damages, and therefore excluded under a clause which excluded liability for in..., by itself, it excludes relatively little a third Party that breaches this Agreement will only be to. W�B� & nݐ�ʩF ( � > r�T ) O��~���B��r? TT�J5�g�S�Tb�Ah under clause! N6W�Hcz�J��S���GP�J�Ț? T! x�� is received from a third Party that allows the information to be.! In an exclusion clause did not reduce the claim at all this is.. Continued from page 1 ) But let ’ s look at some other damages claimed by the client... Indirect and consequential loss '' in an exclusion clause the exclusion clause did not reduce the claim at this! Some other damages claimed by the manufacturer client makes a claim for liquidated.... Rely on a clause which excluded liability for damages in certain circumstances the exclusion clause did reduce... Which excluded liability for damages in certain circumstances But let ’ s look at some other damages claimed the.