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07 August 2018 / Daphne Perry
Categories: Features , Commercial
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Consequential loss: what the reasonable businessperson really thinks

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Daphne Perry discusses evidence of what commercial contract users understand by an exclusion of indirect & consequential loss

According to the Court of Appeal, both indirect and consequential loss (in a limitation clause) have the same well established meaning from which the courts cannot, or should not, depart. Both mean an unusual kind of loss, caused by a special circumstance and recoverable only if both parties were in a position to know about that circumstance, under the second limb of the rule in Hadley v Baxendale [1854] 9 Exch 341 All ER Rep 461.

What the courts say

The Court of Appeal has consistently interpreted both indirect and consequential loss in this way, rejecting arguments based on context or on what a reasonable person might think, in:

  • 1935: Millar's Machinery v David Way and Son [1935] 40 Com Cas 204
  • 1978: Croudace Construction Ltd v Cawoods Concrete Products Ltd [1978] 2 Lloyd's Rep 55
  • 1997: British Sugar Plc v NEI Power Projects Ltd [1997] EWCA Civ 2438
  • 2000: Hotel Services
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