Contact: Mark Kenney; Carter Newell (Queensland, Australia)
In an article in the first of the March 2014 editions of Constructive Notes, consideration was given to the operation of exclusory or limiting provisions directed to economic, indirect or consequential loss. We have all seen simple clauses in contracts to the effect of 'neither party is liable to the other for any consequential or indirect loss'.
The presumption of most is that this will exclude damages that are too distant or unknown, but what if anything, does it really exclude?
As a basic premise, when one party breaches a contract, the other party is entitled to damages that flow from that breach. Over time this principle has narrowed to what is commonly referred to as the 'two limb approach'.(1) The two limbs outline what types of damages can be claimed, all others being considered too remote. The first limb is those damages that arise naturally from a breach of contract (obvious and direct). The second limb is those damages that are non-direct but that would be within the reasonable contemplation of the parties at the time of contracting. Understandably, this second limb, which is where consequential type losses would potentially sit, has been the subject of considerable dispute over the last 150 years.
To read the full article, click here.
