What Do I Need to Know About Consequential Loss for My Dispute?

As a business owner, you will likely become involved in a dispute that goes to court at some point. In this case, you should ensure you are familiar with the different types of damages available to you. ‘Damages’ is the legal term for the monetary award that a court can impose for the unsuccessful party to pay the successful party. In many ways, it is similar to compensation. This article will explain what consequential loss is, how it fits alongside the other types of damages that you may get in a court decision, and when you are likely to get consequential loss damages. 

What are Remedies?

Put simply, remedies are what the English courts will give you at the end of your court case. Knowing the remedies available in a commercial contract setting is very important from the outset. The most common remedy you may receive is the court imposing damages. 

What are Damages?

Damages are a monetary sum reflecting the loss you have suffered as part of your dispute. The amount of money you receive as part of your damages will reflect different types of loss. 

In a commercial contract setting, damages will put you in the same position you would have been in but for the breach of contract. This can include particular losses, such as loss of profit. It can also include ‘consequential loss.’

What is Consequential Loss?

First, a ‘loss’ is where you suffer some type of harm. It is usually an obvious financial loss, but a loss of time can also result in a financial loss. 

Consequential loss is a type of loss that arises from special circumstances. This means that the loss does not happen in the usual course of normal life or business. As a result, you can recover for this type of loss only if the party you entered into the contract with knew or should have known about the circumstances of the loss when you made the contract. 

Consequential loss is sometimes also known as indirect loss. This is distinct from direct loss. This is a tricky area of the law, and a good way of understanding what consequential loss means for your business is to see how it differs from direct loss. 

Direct Loss

Direct loss is a loss that happens as a direct result of a breach of a contract. In other words, direct loss is a foreseeable type of loss. 

Indirect Loss

Indirect loss is a loss that comes from unusual circumstances and is not immediately obvious or a natural result of the breach. You can claim indirect loss if the parties knew or should have known about the circumstances when the contract was entered into. 

Consequential Loss Exclusion Clause

A consequential loss exclusion clause is a way of limiting the risk of paying for consequential loss damages. These are alternatively known as ‘exemption clauses’. Such a clause may clearly state that the other party does not accept liability for consequential loss caused. In this case, you will likely be unable to take them to court to recover this type of loss.

You must carefully survey the exact wording of your contract with the other party. If you have not yet entered a contract, you can try to negotiate the exemption clause out of the contract. In the alternative, you can ask for a lower price for your goods due to the clause.

Key Takeaways

Consequential loss is a type of loss that will be part of your damages claim. It can increase the sum a court awards you drastically. Therefore, you should ensure that you are familiar with how consequential loss works if you plan to take a dispute to court. 

Consequential loss is any loss that does not happen in the ordinary course of things. It must be unforeseeable, but it must also be known to one of the parties when the contract is entered into. This is a tricky area of law, so it is advised that you seek professional legal advice if you are basing a claim around potential consequential loss. 

If you have any questions about consequential loss, our experienced dispute lawyers can as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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