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Consequential loss: Difference between revisions
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Consequential loss, sometimes called [[relational economic loss]] arising as a result of breach of contract that was not a direct consequence of a result of failure by one party to perform the contract. Subject to usual rules regarding foreseeability, causation and remoteness of damage, consequential loss is generally seen as unlikely to be recoverable in an ordinary action for breach of contract, at least in the absence of an [[indemnity]]. | Consequential loss, sometimes called [[relational economic loss]] arising as a result of breach of contract that was not a direct consequence of a result of failure by one party to perform the contract. Subject to usual rules regarding foreseeability, [[causation]] and [[remoteness of damage]], consequential loss is generally seen as unlikely to be recoverable in an ordinary action for [[breach of contract]], at least in the absence of an [[indemnity]]. | ||
===Example - buying a car=== | ===Example - buying a car=== | ||
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On the other hand sometimes consequential losses ''are'' within the parties' reasonable contemplation, they are easy enough to calculate, and it is fair enough to include them. Such as upon a failure to settle a [[stock loan]]. The failure to make the onward delivery might incur a {{gmslaprov|buy-in}} cost from the onward recipient. | On the other hand sometimes consequential losses ''are'' within the parties' reasonable contemplation, they are easy enough to calculate, and it is fair enough to include them. Such as upon a failure to settle a [[stock loan]]. The failure to make the onward delivery might incur a {{gmslaprov|buy-in}} cost from the onward recipient. | ||
===Remoteness of | ===[[Remoteness of damage]]=== | ||
It is sometimes, erroneously, said that [[consequential loss]] is not recoverable under ordinary [[contractual damages]] principles. The test of "[[remoteness of damage]]" is "foreseeability" - or what was "in the reasonable contemplation of the parties". Now it is true that in many cases consequential loss is ''not'' in the reasonable contemplation of the parties. But this is not necessarily so: sometimes it is, as the example above points up quite nicely: | It is sometimes, erroneously, said that [[consequential loss]] is not recoverable under ordinary [[contractual damages]] principles. The test of "[[remoteness of damage]]" is "foreseeability" - or what was "in the reasonable contemplation of the parties". Now it is true that in many cases consequential loss is ''not'' in the reasonable contemplation of the parties. But this is not necessarily so: sometimes it is, as the example above points up quite nicely: | ||
In this case it would be clearly contemplated that the failure to deliver the taxi would lead to a loss of income, and provided that loss could be sensibly quantified (a different question) it would quite conceivably be covered. | In this case it would be clearly contemplated that the failure to deliver the taxi would lead to a loss of income, and provided that loss could be sensibly quantified (a different question) it would quite conceivably be covered. | ||
Explicitly seeking indemnification for | Explicitly seeking indemnification for [[damages]] that ''may'' not be covered by ordinary remoteness principles risks creating an argument, where before there was none, and winding up in a worse position that you otherwise would be. “Consequential” losses ''may'' be recoverable in contract as long as they are reasonably foreseeable and in contemplation of the parties, which may well be true in the case of hedging losses and the like. But if you specifically seek to include consequential losses, the Skinnerian reponse of most lawyers is to reject it out of hand. If you sought an indemnity just for ordinary contractual losses, you might be able to include sufficiently foreseeable consequential losses. | ||
===See Also=== | ===See Also=== | ||
*[[Indemnity]] | *[[Indemnity]] | ||
*[[Breach of contract]] | |||
*[[Remoteness of damage]] | *[[Remoteness of damage]] | ||
{{c2|Contract|Damages}} | {{c2|Contract|Damages}} | ||