Article: indemnity excluding consequential loss
December 22, 2020 | Uncategorized
Given the uncertainties in predicting what the term "consequential loss" may mean in any given circumstance, if a party intends that it should not be liable for certain types of losses, then the exclusion clause should list, in clear terms, exactly which types of losses are to be excluded. Knock-for-knock indemnities in commercial contracts The Court of Appeal has recently considered the application of a knock-for-knock indemnity to exclude liability for consequential loss. Where intellectual property is involved, the indemnity should include an indemnification by the seller for infringement of the intellectual property rights of a third party. Questions? Consequential loss exclusion clauses are very common in commercial contracts, especially in those relating to construction and energy projects. ", © Copyright 2006 - 2020 Law Business Research. "This is a very good resource and I appreciate receiving it everyday. It was decided that the principle of freedom of contact required the Court to give effect to the parties' agreement and the contractor was not entitled to recover consequential losses for the period of delay as the contractor was obliged to indemnify the owner against the contractor's own consequential losses. On this point, it is important to note that there is a risk that a clause that excludes liability for "consequential losses, including loss of profit" would not have the effect of excluding liability for all loss of profits. 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 any other party". Cobar sought to rely on a contractual provision entitling Cobar to terminate the contract for breach if, in Cobar's opinion, the breach was material and incapable of remedy. There was no appeal to that aspect of the High Court's judgment. Become your target audience’s go-to resource for today’s hottest topics. Clauses that seek to exclude a party's right to damages are often subject to restrictive interpretation by the courts. 2020-596 were due to expire on 31 December 2020. within an IP licence agreement. The specific wording of the exclusion clause and mutual indemnities included the following wording: "...loss of use (including without limitation, loss of use or the cost of use of property, equipment, materials and services including without limitation, those provided by contractors or subcontractors of every tier or by third parties)...". It's a 'legal' term right? Construction and engineering contracts often therefore contain clauses excluding the contractor's liability for consequential losses. The more ambiguous the exclusion clause, the more likely a Court will be to interpret the clause against the party relying on it. If the intention is to exclude liability for a certain type of loss in all cases, whether the loss is direct or indirect, then one way of avoiding this … Mutual indemnities and exclusion of consequential losses in commercial contract upheld by the Court of Appeal. Keep a step ahead of your key competitors and benchmark against them. However, the legal meaning of the term may be quite different. Typically the obligation relates to a specific clause within a wider commercial agreement e.g. Macmahon claimed that the termination was invalid, and that the letter of termination constitut… Each case will be decided on the specific facts. For more information please contact Tanya on +44 (0)20 7427 5058 or at tanya.wilkie@crsblaw.com. The High Court found that the delay had been caused by the owner's breach of contract as the rig had not been in good working condition on delivery. In practice, it can be difficult to determine whether a loss falls within the first or second category. The clause in question merely gave the contractor a right to withhold disputed sums pending resolution of a dispute and did not give rise to substantive rights. 5It is possible for the words used in a contract to amount to an indemnity even if the word is not expressly used. 1. The word "including" may be interpreted as meaning that only liability for consequential loss of profits is to be excluded, with the result that the contractor would still be liable for any loss of profits that the employer suffered as a direct and natural consequence of the contractor's breach of contract3. Consequential Loss Exclusion Clause This insurance does not cover liability for the claims arising from the Consequential loss (losses such as loss of profits, loss of revenue, loss of production, loss of business opportunity, loss of data, and loss of anticipated savings or benefits). Therefore, if the intention is to exclude liability for all types of loss of profits, the clause must specifically say this. All these types of monetary losses can either be direct, or indirect ('consequential'). It's very standard and the lawyers know what it means, don't they? There is no standard wording of exclusion clause for “indirect or consequential” losses. Contractual Liability Exclusion Clause Indemnities protect one party from a contract from suffering financial loss in relation to certain eventualities – usually those that would arise from the conduct of the other contracting party, or over which the other contracting party has control. " Neither party will be liable for any indirect or consequential loss under or in connection with this contract ". Take as an example, Clause 17.6 of the FIDIC Silver 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 indirect or consequential loss or damage which may be suffered by the other Party in connection with the Contract …". To view all formatting for this article (eg, tables, footnotes), please access the original, Terminating your contract: when can you call it quits? The Australian case law on consequential loss has changed considerably over the past te… It indicates a broadening of the court's interpretation of clauses excluding liability for 'consequential loss' by looking outside the definition of indirect losses falling within Hadley v Baxendale. Helping you with the responsibilities of wealth, from securing the growth of assets to guiding you through complex and sensitive situations. Clause is only enforceable if it has been incorporated into the relevant contract clause for “ ”... 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