The claim was made under a stevedoring contract between the ship owner and the port authority. Such an interpretation has been criticised as one which the average businessman would not expect. Social Media cookies collect information about you sharing information from our website via social media tools, or analytics to understand your browsing between social media tools or our Social Media campaigns and our own websites. Notwithstanding anything to the contrary contained in this Agreement or provided for under any applicable Law, no party hereto shall be liable to any other Person, either in contract or in tort, for any consequential, inciden-tal, indirect, special or punitive damages of such other Person, [including] [or any] As such, the Court concluded that this clause did not exclude lost profits in the form of direct damages. Small and medium sized enterprises (SMEs) are a key aspect of the UAE’s economy helping drive growth and diversification. This category depends upon additional facts being known to both parties. 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. No Consequential Damages. The traditional approach of English law has been that exclusions for “consequential” or “indirect “losses will usually exclude only those losses falling within the second category described above. 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). You can change these settings at any time via the button "Update Cookie Preferences" in our Cookie Notice. In summary: Case: Ferryways NV v Associated British Ports [2008] EWHC 225 (Comm). Introduction. To take full advantage of our website, we recommend that you click on “Accept All”. For advice on construction contracts and other construction matters, he may be contacted at chee.yean.choy@sg.rajahtann.com. The loss of such a contract would not be recoverable unless both parties knew that the contract might be lost in the event of such a breach. The arbitra… 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. 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. If you want to individually select which cookies we can set, please click "Select preferences" below. Lost profit, lost rents, and lost business opportunities are examples of consequential damages that could be incurred as a result of a direct physical loss to property. Analytics cookies collect anonymised information such as the number of site visitors or most popular pages. Indirect and Consequential Loss. 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. This website uses cookies so that we can provide you with the best user experience possible. Following delivery, the ship suffered a serious engine failure and was towed to Korea for repairs. Choy Chee Yean is a Partner with the Projects & Infrastructure Practice Group. (9) A statement in the following language: This warranty gives you specific legal rights, and you may also … Personalisation cookies collect information about your website browsing habits and offer you a personalised user experience based on past visits, your location or browser settings. 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. Launch the website from your Home screen by tapping its icon. The cost of repairs to the vessel; ii. Later that year, the traditional approach was departed from in Star Polaris LLC v HHIC-Phil Inc, albeit by reference to specific wording of the clause in question which suggested a different interpretation (for our Law-Now on that case, please click here). Consequential Damages — consequential damages are an indirect result of a direct loss. They can significantly reduce the breaching party’s liability, sometimes by staggering amounts of money. The shipping contract excluded losses for “consequential … losses, damages or expenses” and this included a claim for diminution in value. However, in order for someone to win consequential damages in a lawsuit, the damages must have been a foreseeable result of that incident. Exclusion and limitation clauses should be drafted to comply with the legislation regarding fairness where the legislation applies  (Please. Social Media cookies collect information about you sharing information from our website via social media tools, or analytics to understand your browsing between social media tools or our Social Media campaigns and our own websites. Save Law-Now to your mobile device home screen for easy access, Co-head of the Infrastructure, Construction and Energy Disputes Group | Joint Managing Director for Asia and the Middle East, Ferryways NV v Associated British Ports [2008] EWHC 225 (Comm), Oil & Gas: OGA’s role in M&A transactions – letters of comfort and judicial review, Extension to Building Safety Fund and new Waking Watch Relief Fund announced. 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 contract contained a clause excluding the port authority from liability for “indirect or consequential” losses in providing stevedoring services, including for “the liabilities of” the ship owner “to any other party”. To take full advantage of our website, we recommend that you click on “Accept All”. 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. Save Law-Now to your mobile device home screen for easy access, 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, The traditional approach of English law has been that exclusions for “consequential” or “indirect “losses will usually exclude only those losses falling within the second category described above. Exclusion of liability for “indirect or consequential” losses. In 2015, a judge of the Commercial Court who has since been appointed to the Supreme Court, indicated that the traditional approach was to be “deprecated” (Scottish Power UK Plc v BP Exploration Operating Company Ltd). 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. 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. In the "Add to Home Screen" dialog window, select the "add" button. The ship owner (who engaged the seaman) paid these costs and compensation, and sought to pass them on to the negligent port authority. As such, the Court concluded that this clause did not exclude lost profits in the form of direct damages. 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). Joe Colgan, EC Harris. In the forms files of many business attorneys, a ubiquitous boilerplate clause addresses the dreaded “special, indirect, or consequential” damages. by Arch Fletcher. 2. 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 1. Law-Now Zones provide expert analysis on specialist topics. 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). 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. When drafting exclusion clauses it is best to specify which types of loss are excluded. Press and hold the LawNow icon and then click "Add to home screen". But the difference between direct and consequential damages is often about as clear as a dense fog off the coast of Maine. They also allow you to log in to personalised areas and to access third party tools that may be embedded in our website. The judge confirmed that although exclusion clauses are no longer read narrowly, the words must be given their ordinary meaning. Persistent cookies, however, remain and continue functioning on repeat visits. 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. 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). 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. 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. Click on the 'menu' button again and select "Bookmarks". The Claimant ("the Buyer") purchased a ship from the Defendant ("the Seller"). 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. In more recent years judicial criticism of the traditional approach has appeared. 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. Loss of profits due to an interruption of normal business practices. Any other damages which may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract. Technical cookies are required for the site to function properly, to be legally compliant and secure. Indirect and consequential loss exclusions: English law holds the line for now. The court interpreted the exclusion of liability for “indirect or consequential” losses, including “the liabilities of [the ship owner] to any other party” to exclude only those liabilities to other parties which were “indirect or consequential”, not all liabilities to third parties. Our newsletter... We would like to use cookies that will enable us to analyse the use of our websites and to personalise the content for you. We do this to optimise the mix of channels to provide you with our content. and consequential damages is unhelpful. 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 … These are “direct losses”. Our Cookie Notice is part of our Privacy Policy and explains in detail how and why we use cookies. 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). 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, Keeping these cookies enabled helps us improve our website and provide you with the most relevant content. 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 … These are “indirect losses”or “consequential losses” (the terms “indirect” and “consequential” loss are used interchangeably). Damages that may fairly and reasonably be considered as arising naturally, i.e. 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. It is unfortunate that the court’s reasoning in this regard is not spelt out in more detail. 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. A Technology and Construction Court decision last week has considered a direct attack on the traditionally narrow interpretation given by the English courts to indirect and consequential loss exclusion clauses. They also allow you to log in to personalised areas and to access third party tools that may be embedded in our website. The Global Life Sciences & Healthcare Sector Group is delighted to release the latest episode in its video/podcast series, On the Pulse. 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 … 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). In the meantime, parties negotiating contracts with such exclusions should be aware of the arguments being made for a broadening of the traditional approach. However, in evaluating the natural and ordinary meaning of the clause, the judge reached the same conclusion as the traditional approach: “The exclusion is "for any indirect or consequential loss or damage". 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 … If you agree to this, please click "Accept all" below. exclusion of indirect damages. Not withstanding anything contained elsewhere in this Agreement and under any circumstance, for any reason whatsoever, YS shall not be liable for any incidental, ancillary, direct, indirect, special or consequential damages, including but not limited to lost profits, whether in tort or contract, and based on any theory of liability. Exclusion and limitation clauses in commercial contracts are used to control, or put a cap on, a party’s liability. 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). Transforming Public Procurement – the Final Frontier? 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). If you agree to this, please click "Accept all" below. Some functionality will not work if you don’t accept these cookies. …Including Liability to Third Parties 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. Keeping these cookies enabled helps us improve our website and provide you with the most relevant content. 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. A Westlaw search for [“consequential damages” and synonymous and “special damages”] yielded 35 cases, 7. 2 Entertain Video Ltd (“2E”) sued Sony for, among other things, loss of profit arising from a fire at Sony’s warehouse in Enfield. In this most recent case, a more direct assault has been made on the traditional approach by reference to the above criticism. 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. Analytics cookies collect anonymised information such as the number of site visitors or most popular pages. Technical cookies are required for the site to function properly, to be legally compliant and secure. The result of consequential damages can include: 1. This case has increased the uncertainty around which losses will be consequential. The Contract guaranteed the vessel for 12 months against all defects due to defective materials, design error, construction miscalculation or poor workmanship (but not other causes such as perils of th… Don’t expect others to know what losses you are trying to exclude. Click on the "..." icon in the bottom-right of the screen. 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. Personalisation cookies collect information about your website browsing habits and offer you a personalised user experience based on past visits, your location or browser settings. Click on the 'start' button and save as a bookmark. 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