Consequential loss - Revision history

Designing Buildings at 06:15, 2 September 2021

2021-09-02T06:15:10Z

← Older revision		Revision as of 06:15, 2 September 2021
Line 23:		Line 23:
	NB [http://www.legislation.gov.uk/ukpga/1977/50 The Unfair Contract Terms Act] can apply under certain circumstances and so any contractual provisions should be ‘reasonable’.		NB [http://www.legislation.gov.uk/ukpga/1977/50 The Unfair Contract Terms Act] can apply under certain circumstances and so any contractual provisions should be ‘reasonable’.

−	~~= Find out more =~~	+	= Related articles =
−		+
−	=== Related articles ~~on Designing Buildings Wiki ==~~=	+

	* Breach of contract.		* Breach of contract.

Designing Buildings at 09:53, 21 September 2020

2020-09-21T09:53:00Z

← Older revision		Revision as of 09:53, 21 September 2020
Line 1:		Line 1:
−
	In the event that there are problems with a development, it is possible that losses will be incurred by the injured party. For example, the cost of repairs, loss of rent, loss of profit and so on. The party that suffers the loss may then try to recover it from the party that caused it. Under the common law of negligence, losses that are purely economic (such as loss of profit) are generally not recoverable, but under contract law they may be, depending on the wording of the contract.		In the event that there are problems with a development, it is possible that losses will be incurred by the injured party. For example, the cost of repairs, loss of rent, loss of profit and so on. The party that suffers the loss may then try to recover it from the party that caused it. Under the common law of negligence, losses that are purely economic (such as loss of profit) are generally not recoverable, but under contract law they may be, depending on the wording of the contract.

Line 27:		Line 26:

	=== Related articles on Designing Buildings Wiki ===		=== Related articles on Designing Buildings Wiki ===
−	*Breach of contract.	+
−	*Collateral warranties.	+	* Breach of contract.
−	*Contract.	+	* Collateral warranties.
−	*Contract terms.	+	* Contract.
−	*Defects.	+	* Contract terms.
−	*Direct losses.	+	* Defects.
−	*Fluctuations.	+	* Direct losses.
−	*Hadley v Baxendale.	+	* Fluctuations.
−	*Liquidated damages.	+	* Hadley v Baxendale.
−	*Loss and expense.	+	* Liquidated damages.
−	*Measure of damages.	+	* Loss and expense.
−	*Preliminaries.	+	* Measure of damages.
		+	* Preliminaries.

	=== External references ===		=== External references ===
−	*[http://www.bailii.org/ew/cases/EWCA/Civ/1997/2438.html British Sugar plc v NEI Power Projects Ltd and Another (1997)].
−	*[http://www.bailii.org/ew/cases/EWHC/Exch/1854/J70.html Hadley v Baxendale] (1854).
−	*[http://www.legislation.gov.uk/ukpga/1977/50 Unfair Contract Terms Act].

−	[[~~Category~~:~~Contracts_~~/~~_payment~~]]	+	* [http://www.bailii.org/ew/cases/EWCA/Civ/1997/2438.html British Sugar plc v NEI Power Projects Ltd and Another (1997)].
−	[[Category:Contracts_/_payment]]	+	* [http://www.bailii.org/ew/cases/EWHC/Exch/1854/J70.html Hadley v Baxendale] (1854).
−	[[Category:Procurement]]	+	* [http://www.legislation.gov.uk/ukpga/1977/50 Unfair Contract Terms Act].
		+
		+	[[Category:DCN_Case_Law]] [[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:Contracts_/_payment]] [[Category:Procurement]]

Designing Buildings at 07:01, 11 June 2014

2014-06-11T07:01:04Z

← Older revision		Revision as of 07:01, 11 June 2014
Line 2:		Line 2:
	In the event that there are problems with a development, it is possible that losses will be incurred by the injured party. For example, the cost of repairs, loss of rent, loss of profit and so on. The party that suffers the loss may then try to recover it from the party that caused it. Under the common law of negligence, losses that are purely economic (such as loss of profit) are generally not recoverable, but under contract law they may be, depending on the wording of the contract.		In the event that there are problems with a development, it is possible that losses will be incurred by the injured party. For example, the cost of repairs, loss of rent, loss of profit and so on. The party that suffers the loss may then try to recover it from the party that caused it. Under the common law of negligence, losses that are purely economic (such as loss of profit) are generally not recoverable, but under contract law they may be, depending on the wording of the contract.

−	The general position regarding losses resulting from a breach of contract was established by the case of ~~[http://www.bailii.org/ew/cases/EWHC/Exch/1854/J70.html~~ Hadley v Baxendale] (1854) where the court held that the injured party could recover losses that could be reasonably considered to arise naturally from the breach of contract in the usual course of things (direct losses), or losses that whilst they may not arise naturally from the breach, could have been reasonably contemplated by the parties to the contract at the time that they entered into that contract (indirect or consequential losses).	+	The general position regarding losses resulting from a breach of contract was established by the case of Hadley v Baxendale (1854) where the court held that the injured party could recover losses that could be reasonably considered to arise naturally from the breach of contract in the usual course of things (direct losses), or losses that whilst they may not arise naturally from the breach, could have been reasonably contemplated by the parties to the contract at the time that they entered into that contract (indirect or consequential losses).

	Losses that are unusual, special or unlikely are generally considered too ‘remote’ to be recoverable unless the special circumstances were known at the time that the contract was entered into, whether or not they were caused by the breach. If this were not the case, an almost unlimited liability could arise for losses that were entirely unforeseeable.		Losses that are unusual, special or unlikely are generally considered too ‘remote’ to be recoverable unless the special circumstances were known at the time that the contract was entered into, whether or not they were caused by the breach. If this were not the case, an almost unlimited liability could arise for losses that were entirely unforeseeable.
Line 34:		Line 34:
	*Direct losses.		*Direct losses.
	*Fluctuations.		*Fluctuations.
		+	*Hadley v Baxendale.
	*Liquidated damages.		*Liquidated damages.
	*Loss and expense.		*Loss and expense.
		+	*Measure of damages.
	*Preliminaries.		*Preliminaries.

Designing Buildings at 08:21, 27 February 2013

2013-02-27T08:21:46Z

← Older revision		Revision as of 08:21, 27 February 2013
Line 1:		Line 1:
		+
	In the event that there are problems with a development, it is possible that losses will be incurred by the injured party. For example, the cost of repairs, loss of rent, loss of profit and so on. The party that suffers the loss may then try to recover it from the party that caused it. Under the common law of negligence, losses that are purely economic (such as loss of profit) are generally not recoverable, but under contract law they may be, depending on the wording of the contract.		In the event that there are problems with a development, it is possible that losses will be incurred by the injured party. For example, the cost of repairs, loss of rent, loss of profit and so on. The party that suffers the loss may then try to recover it from the party that caused it. Under the common law of negligence, losses that are purely economic (such as loss of profit) are generally not recoverable, but under contract law they may be, depending on the wording of the contract.

	The general position regarding losses resulting from a breach of contract was established by the case of [http://www.bailii.org/ew/cases/EWHC/Exch/1854/J70.html Hadley v Baxendale] (1854) where the court held that the injured party could recover losses that could be reasonably considered to arise naturally from the breach of contract in the usual course of things (direct losses), or losses that whilst they may not arise naturally from the breach, could have been reasonably contemplated by the parties to the contract at the time that they entered into that contract (indirect or consequential losses).		The general position regarding losses resulting from a breach of contract was established by the case of [http://www.bailii.org/ew/cases/EWHC/Exch/1854/J70.html Hadley v Baxendale] (1854) where the court held that the injured party could recover losses that could be reasonably considered to arise naturally from the breach of contract in the usual course of things (direct losses), or losses that whilst they may not arise naturally from the breach, could have been reasonably contemplated by the parties to the contract at the time that they entered into that contract (indirect or consequential losses).

−	Losses that are unusual, special or unlikely are generally considered too ‘remote’ to be recoverable unless the special circumstances were known at the time that the contract was entered into, whether or not they were caused by the breach. If this were not the case, an almost unlimited liability could arise for losses that were entirely ~~unforseable~~.	+	Losses that are unusual, special or unlikely are generally considered too ‘remote’ to be recoverable unless the special circumstances were known at the time that the contract was entered into, whether or not they were caused by the breach. If this were not the case, an almost unlimited liability could arise for losses that were entirely unforeseeable.

	This position however remains fairly open-ended and leaves a great deal of uncertainty as to whether a loss could have been ‘reasonably contemplated’ at the time that a contract was entered into. As a result, in order that both parties can understand specifically those losses that will be recoverable, it is very important that they are set out explicitly and very clearly in the contract.		This position however remains fairly open-ended and leaves a great deal of uncertainty as to whether a loss could have been ‘reasonably contemplated’ at the time that a contract was entered into. As a result, in order that both parties can understand specifically those losses that will be recoverable, it is very important that they are set out explicitly and very clearly in the contract.
Line 9:		Line 10:
	Very broadly, contracts often allow direct losses to be recovered (such as the cost of repairs), but may exclude indirect or consequential losses (such as loss of profit).		Very broadly, contracts often allow direct losses to be recovered (such as the cost of repairs), but may exclude indirect or consequential losses (such as loss of profit).

−	However, it is not always this straight forward. For example, profit can be held by the courts to be a direct loss (British Sugar plc v NEI Power Projects Ltd and Another (1997)) or it may be considered that some component of profit is a direct loss. It cannot be assumed therefore that profit is excluded just because consequential losses are excluded.	+	However, it is not always this straight forward. For example, profit can be held by the courts to be a direct loss ([http://www.bailii.org/ew/cases/EWCA/Civ/1997/2438.html British Sugar plc v NEI Power Projects Ltd and Another (1997)]) or it may be considered that some component of profit is a direct loss. It cannot be assumed therefore that profit is excluded just because consequential losses are excluded.

	The exact wording of the contract must be studied and requires very careful drafting. The FIDIC form of contract for example allows overheads, preliminaries, loss of productivity, interest and finance charges and claims preparation, but excludes profit, inflation or exchange rate fluctuations and lost commercial operation.		The exact wording of the contract must be studied and requires very careful drafting. The FIDIC form of contract for example allows overheads, preliminaries, loss of productivity, interest and finance charges and claims preparation, but excludes profit, inflation or exchange rate fluctuations and lost commercial operation.
Line 21:		Line 22:
	It can be worth assessing what losses might occur before drafting a contract, and also defining clearly within the contract what constitutes a breach.		It can be worth assessing what losses might occur before drafting a contract, and also defining clearly within the contract what constitutes a breach.

−	NB The Unfair Contract Terms Act can apply under certain circumstances and so any contractual provisions should be ‘reasonable’.	+	NB [http://www.legislation.gov.uk/ukpga/1977/50 The Unfair Contract Terms Act] can apply under certain circumstances and so any contractual provisions should be ‘reasonable’.

−	= ~~See also~~ =	+	= Find out more =

−	*~~Loss and expense~~.	+	=== Related articles on Designing Buildings Wiki ===
−	*~~Liquidated damages~~.	+	*Breach of contract.
		+	*Collateral warranties.
		+	*Contract.
		+	*Contract terms.
	*Defects.		*Defects.
		+	*Direct losses.
		+	*Fluctuations.
		+	*Liquidated damages.
		+	*Loss and expense.
		+	*Preliminaries.
		+
		+	=== External references ===
		+	*[http://www.bailii.org/ew/cases/EWCA/Civ/1997/2438.html British Sugar plc v NEI Power Projects Ltd and Another (1997)].
		+	*[http://www.bailii.org/ew/cases/EWHC/Exch/1854/J70.html Hadley v Baxendale] (1854).
		+	*[http://www.legislation.gov.uk/ukpga/1977/50 Unfair Contract Terms Act].

	[[Category:Contracts_/_payment]]		[[Category:Contracts_/_payment]]
	[[Category:Contracts_/_payment]]		[[Category:Contracts_/_payment]]
	[[Category:Procurement]]		[[Category:Procurement]]

Designing Buildings at 08:46, 23 October 2012

2012-10-23T08:46:58Z

← Older revision		Revision as of 08:46, 23 October 2012
Line 1:		Line 1:
−	In the event that there are problems with a ~~completed~~ development, it is possible that losses will be incurred by the injured party. For example, the cost of repairs, loss of rent, loss of profit and so on. The party that suffers the loss may try to recover ~~that loss~~ from the party that caused it.	+	In the event that there are problems with a development, it is possible that losses will be incurred by the injured party. For example, the cost of repairs, loss of rent, loss of profit and so on. The party that suffers the loss may then try to recover it from the party that caused it. Under the common law of negligence, losses that are purely economic (such as loss of profit) are generally not recoverable, but under contract law they may be, depending on the wording of the contract.
−		+
−	Under the common law of negligence, losses that are purely economic (such as loss of profit) are generally not recoverable, but under contract law they may be, depending on the wording of the contract.	+

	The general position regarding losses resulting from a breach of contract was established by the case of [http://www.bailii.org/ew/cases/EWHC/Exch/1854/J70.html Hadley v Baxendale] (1854) where the court held that the injured party could recover losses that could be reasonably considered to arise naturally from the breach of contract in the usual course of things (direct losses), or losses that whilst they may not arise naturally from the breach, could have been reasonably contemplated by the parties to the contract at the time that they entered into that contract (indirect or consequential losses).		The general position regarding losses resulting from a breach of contract was established by the case of [http://www.bailii.org/ew/cases/EWHC/Exch/1854/J70.html Hadley v Baxendale] (1854) where the court held that the injured party could recover losses that could be reasonably considered to arise naturally from the breach of contract in the usual course of things (direct losses), or losses that whilst they may not arise naturally from the breach, could have been reasonably contemplated by the parties to the contract at the time that they entered into that contract (indirect or consequential losses).

−	Losses that are unusual, special or unlikely are generally considered too ‘remote’ to be recoverable unless the special circumstances were known at the time that the contract was entered into, whether or not they were caused by the breach.	+	Losses that are unusual, special or unlikely are generally considered too ‘remote’ to be recoverable unless the special circumstances were known at the time that the contract was entered into, whether or not they were caused by the breach. If this were not the case, an almost unlimited liability could arise for losses that were entirely unforseable.

−	This is fairly open-ended and leaves a great deal of uncertainty as to whether a loss could have been ‘reasonably contemplated’. As a result, ~~for~~ both ~~the~~ parties to understand specifically those losses that will be recoverable, it is very important that they are set out explicitly and very clearly in the contract.	+	This position however remains fairly open-ended and leaves a great deal of uncertainty as to whether a loss could have been ‘reasonably contemplated’ at the time that a contract was entered into. As a result, in order that both parties can understand specifically those losses that will be recoverable, it is very important that they are set out explicitly and very clearly in the contract.

−	Very broadly, contracts often allow direct losses such as the cost of ~~repairing the breach~~, but may exclude indirect or consequential losses such as loss of profit.	+	Very broadly, contracts often allow direct losses to be recovered (such as the cost of repairs), but may exclude indirect or consequential losses (such as loss of profit).

−	However, it is not always this straight forward. For example, profit can be held by the courts to be a direct loss (British Sugar plc v NEI Power Projects Ltd and Another (~~1998~~)) or it may be considered that some component of profit is a direct loss. It cannot be assumed therefore that profit is excluded just because consequential losses are excluded.	+	However, it is not always this straight forward. For example, profit can be held by the courts to be a direct loss (British Sugar plc v NEI Power Projects Ltd and Another (1997)) or it may be considered that some component of profit is a direct loss. It cannot be assumed therefore that profit is excluded just because consequential losses are excluded.

−	The exact wording of the contract must be studied and requires very careful drafting. The FIDIC form of contract for example ~~may allow~~ overheads, preliminaries, loss of productivity, interest and finance charges and claims preparation, but ~~exclude~~ profit, inflation or exchange rate fluctuations and lost commercial operation.	+	The exact wording of the contract must be studied and requires very careful drafting. The FIDIC form of contract for example allows overheads, preliminaries, loss of productivity, interest and finance charges and claims preparation, but excludes profit, inflation or exchange rate fluctuations and lost commercial operation.

	It is generally in the interest of the client that recoverable losses are unlimited, but for the contractor (or consultant) to try to restrict recoverable losses by excluding indirect or consequential losses.		It is generally in the interest of the client that recoverable losses are unlimited, but for the contractor (or consultant) to try to restrict recoverable losses by excluding indirect or consequential losses.

−	This is also the case with regards liability to third parties, and so a similar situation is found ~~with~~ collateral warranties.	+	This is also the case with regards liability to third parties, and so a similar situation is found within collateral warranties.

−	Contractors and consultants are likely to wish to restrict recoverable losses in collateral warranties to the cost of ~~repair~~. Clients on the other hand (or purchasers or tenants) may argue that contractors and consultants should be able to anticipate the consequences of a breach of contract and so should allow consequential losses. A compromise position is likely, for example the BPF form of collateral warranty allows consequential losses, but includes a requirement for the injured party to mitigate those losses and sets a cap for liability in respect of each breach.	+	Contractors and consultants are likely to wish to restrict recoverable losses in collateral warranties to the cost of repairs. Clients on the other hand (or purchasers or tenants) may argue that contractors and consultants should be able to anticipate the consequences of a breach of contract and so should allow recovery of consequential losses. A compromise position is likely, for example the BPF form of collateral warranty allows consequential losses, but includes a requirement for the injured party to mitigate those losses and sets a cap for liability in respect of each breach.

	It can be worth assessing what losses might occur before drafting a contract, and also defining clearly within the contract what constitutes a breach.		It can be worth assessing what losses might occur before drafting a contract, and also defining clearly within the contract what constitutes a breach.
Line 30:		Line 28:
	*Liquidated damages.		*Liquidated damages.
	*Defects.		*Defects.
		+
		+	[[Category:Contracts_/_payment]]
		+	[[Category:Contracts_/_payment]]
		+	[[Category:Procurement]]

Designing Buildings at 08:33, 23 October 2012

2012-10-23T08:33:48Z

← Older revision		Revision as of 08:33, 23 October 2012
Line 3:		Line 3:
	Under the common law of negligence, losses that are purely economic (such as loss of profit) are generally not recoverable, but under contract law they may be, depending on the wording of the contract.		Under the common law of negligence, losses that are purely economic (such as loss of profit) are generally not recoverable, but under contract law they may be, depending on the wording of the contract.

−	The general position regarding losses resulting from a breach of contract was established by the case of ~~Hadley v Baxendale (1854)~~ http://www.bailii.org/ew/cases/EWHC/Exch/1854/J70.html where the court held that the injured party could recover losses that could be reasonably considered to arise naturally from the breach of contract in the usual course of things (direct losses), or losses that whilst they may not arise naturally from the breach, could have been reasonably contemplated by the parties to the contract at the time that they entered into that contract (indirect or consequential losses).	+	The general position regarding losses resulting from a breach of contract was established by the case of [http://www.bailii.org/ew/cases/EWHC/Exch/1854/J70.html Hadley v Baxendale] (1854) where the court held that the injured party could recover losses that could be reasonably considered to arise naturally from the breach of contract in the usual course of things (direct losses), or losses that whilst they may not arise naturally from the breach, could have been reasonably contemplated by the parties to the contract at the time that they entered into that contract (indirect or consequential losses).

	Losses that are unusual, special or unlikely are generally considered too ‘remote’ to be recoverable unless the special circumstances were known at the time that the contract was entered into, whether or not they were caused by the breach.		Losses that are unusual, special or unlikely are generally considered too ‘remote’ to be recoverable unless the special circumstances were known at the time that the contract was entered into, whether or not they were caused by the breach.

−	This is fairly open-ended and leaves a great deal of uncertainty as to whether a loss could have been ‘reasonably contemplated’. As a result, for both the parties to understand specifically those losses that will be recoverable, it is very important that they are set out explicitly and very clearly in the contract.	+	This is fairly open-ended and leaves a great deal of uncertainty as to whether a loss could have been ‘reasonably contemplated’. As a result, for both the parties to understand specifically those losses that will be recoverable, it is very important that they are set out explicitly and very clearly in the contract.

	Very broadly, contracts often allow direct losses such as the cost of repairing the breach, but may exclude indirect or consequential losses such as loss of profit.		Very broadly, contracts often allow direct losses such as the cost of repairing the breach, but may exclude indirect or consequential losses such as loss of profit.
Line 15:		Line 15:
	The exact wording of the contract must be studied and requires very careful drafting. The FIDIC form of contract for example may allow overheads, preliminaries, loss of productivity, interest and finance charges and claims preparation, but exclude profit, inflation or exchange rate fluctuations and lost commercial operation.		The exact wording of the contract must be studied and requires very careful drafting. The FIDIC form of contract for example may allow overheads, preliminaries, loss of productivity, interest and finance charges and claims preparation, but exclude profit, inflation or exchange rate fluctuations and lost commercial operation.

−	It is generally in the interest of the client that recoverable losses are unlimited, but for the contractor (or consultant) to try to restrict recoverable losses by excluding indirect or consequential losses.	+	It is generally in the interest of the client that recoverable losses are unlimited, but for the contractor (or consultant) to try to restrict recoverable losses by excluding indirect or consequential losses.

	This is also the case with regards liability to third parties, and so a similar situation is found with collateral warranties.		This is also the case with regards liability to third parties, and so a similar situation is found with collateral warranties.
Line 25:		Line 25:
	NB The Unfair Contract Terms Act can apply under certain circumstances and so any contractual provisions should be ‘reasonable’.		NB The Unfair Contract Terms Act can apply under certain circumstances and so any contractual provisions should be ‘reasonable’.

−	See also	+	= See also =

−	~~loss~~ and expense	+	*Loss and expense.
−		+	*Liquidated damages.
−	~~liquidated~~ damages	+	*Defects.

Designing Buildings: Created page with "In the event that there are problems with a completed development, it is possible that losses will be incurred by the injured party. For example, the cost of repairs, loss of ren..."

2012-10-23T08:32:29Z

Created page with "In the event that there are problems with a completed development, it is possible that losses will be incurred by the injured party. For example, the cost of repairs, loss of ren..."

New page

In the event that there are problems with a completed development, it is possible that losses will be incurred by the injured party. For example, the cost of repairs, loss of rent, loss of profit and so on. The party that suffers the loss may try to recover that loss from the party that caused it.

Under the common law of negligence, losses that are purely economic (such as loss of profit) are generally not recoverable, but under contract law they may be, depending on the wording of the contract.

The general position regarding losses resulting from a breach of contract was established by the case of Hadley v Baxendale (1854) http://www.bailii.org/ew/cases/EWHC/Exch/1854/J70.html where the court held that the injured party could recover losses that could be reasonably considered to arise naturally from the breach of contract in the usual course of things (direct losses), or losses that whilst they may not arise naturally from the breach, could have been reasonably contemplated by the parties to the contract at the time that they entered into that contract (indirect or consequential losses).

Losses that are unusual, special or unlikely are generally considered too ‘remote’ to be recoverable unless the special circumstances were known at the time that the contract was entered into, whether or not they were caused by the breach.

This is fairly open-ended and leaves a great deal of uncertainty as to whether a loss could have been ‘reasonably contemplated’. As a result, for both the parties to understand specifically those losses that will be recoverable, it is very important that they are set out explicitly and very clearly in the contract.

Very broadly, contracts often allow direct losses such as the cost of repairing the breach, but may exclude indirect or consequential losses such as loss of profit.

However, it is not always this straight forward. For example, profit can be held by the courts to be a direct loss (British Sugar plc v NEI Power Projects Ltd and Another (1998)) or it may be considered that some component of profit is a direct loss. It cannot be assumed therefore that profit is excluded just because consequential losses are excluded.

The exact wording of the contract must be studied and requires very careful drafting. The FIDIC form of contract for example may allow overheads, preliminaries, loss of productivity, interest and finance charges and claims preparation, but exclude profit, inflation or exchange rate fluctuations and lost commercial operation.

It is generally in the interest of the client that recoverable losses are unlimited, but for the contractor (or consultant) to try to restrict recoverable losses by excluding indirect or consequential losses.

This is also the case with regards liability to third parties, and so a similar situation is found with collateral warranties.

Contractors and consultants are likely to wish to restrict recoverable losses in collateral warranties to the cost of repair. Clients on the other hand (or purchasers or tenants) may argue that contractors and consultants should be able to anticipate the consequences of a breach of contract and so should allow consequential losses. A compromise position is likely, for example the BPF form of collateral warranty allows consequential losses, but includes a requirement for the injured party to mitigate those losses and sets a cap for liability in respect of each breach.

It can be worth assessing what losses might occur before drafting a contract, and also defining clearly within the contract what constitutes a breach.

NB The Unfair Contract Terms Act can apply under certain circumstances and so any contractual provisions should be ‘reasonable’.

See also

loss and expense

liquidated damages