{"id":193146,"date":"2025-03-27T15:37:29","date_gmt":"2025-03-27T15:37:29","guid":{"rendered":"https:\/\/legalvision.co.uk\/?p=193146"},"modified":"2025-04-11T15:18:42","modified_gmt":"2025-04-11T14:18:42","slug":"consequential-indirect-loss-contracts","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/commercial-contracts\/consequential-indirect-loss-contracts\/","title":{"rendered":"Consequential and Indirect Loss in Business Contracts: Legal Considerations for Suppliers\u00a0"},"content":{"rendered":"\n

When your business supplies goods or services to business customers, you take on the risk of breaching your contract and facing claims for financial losses suffered by your clients. Some of these losses may be ‘direct and foreseeable’. Others may be more remote, falling into the ‘indirect or consequential loss\u2019 category. If your contract does not limit your liability<\/a>, a customer could claim compensation for losses far exceeding the deal’s value. To protect your business, you should include a clear limitation of liability clause that defines and excludes the types of loss for which you are not prepared to accept responsibility. This includes carefully considering how liability for consequential and indirect losses should be managed. This article explains how liability clauses work, how indirect and consequential loss may apply in such provisions, and how to draft exclusions that offer your business meaningful protection from risk.<\/p>\n\n\n\n

Why Should Suppliers Limit Their Liability?<\/h2>\n\n\n\n

A limitation of liability<\/a> provision is a critical safeguard in your contracts. Without a limitation of liability clause, your business could become liable for losses far exceeding your contract value. For example, a customer might seek damages for much broader commercial harm they suffered due to your business breaching the contract, not just the cost of fixing the issue, but also additional losses, such as substantial loss, which could be significant.<\/p>\n\n\n\n

An explicit liability clause can help you manage this risk. It can do this by clearly setting out the types of losses your business will not be liable for and putting a financial cap on the total amount your business would be liable to pay for a breach of contract.<\/p>\n\n\n\n

The clause must be drafted carefully and tailored to sufficiently protect your business from the risks you face under your contracts.<\/p>\n\n\n\n

What Considerations Apply When Limiting Indirect or Consequential Loss?<\/h2>\n\n\n\n

Under English law, losses are divided into two types, which are: <\/p>\n\n\n\n