What does consequential loss mean?

What does consequential loss mean? A consequential loss is an indirect adverse impact caused by damage to business property or equipment. A consequential loss policy or clause will compensate the owner for this lost business income. This type of insurance is also called business interruption or business income insurance.

What is a consequential loss example? Consequential Loss — a loss that arises as a result of direct damage to property—for example, loss of rent. Some types of consequential loss are insurable under standard direct damage or time element coverage forms; others are not.

What is consequential loss in a contract? Generally, consequential loss (also called indirect loss) is the non-dominant loss from a breach of contract. They are probable consequences or losses contemplated by the parties at contract formation. In contrast, normal loss (or direct loss) naturally arises from a breach.

Can you claim for consequential loss? It is recoverable only if the paying party knew or should have known of that circumstance when it made the contract, under the second limb of the rule in Hadley v Baxendale [1854] EWHC Exch J70. By definition, therefore, consequential losses are exceptional and often not recoverable.

What does consequential loss mean? – Related Questions

What does no consequential loss mean?

Generally, the natural and ordinary meanings of these terms distinguishes between “normal loss” which is loss that every plaintiff in a like situation would suffer, and “consequential loss” which is anything beyond the normal measure.

Can you exclude consequential loss?

“The exclusion is “for any indirect or consequential loss or damage”. The direct and natural result of the fire was the destruction of the goods and the warehouse, causing lost profits and business interruption losses to the claimants.

What is the difference between direct and consequential damages?

Direct damages are damages resulting directly from a breach of the contract whereas consequential damages are damages that are not directly caused by the breach but normally and naturally arise from the circumstances of the non-breaching party.

What are consequential damages in a breach of contract?

Special damages (also called “consequential damages”) cover any loss incurred by the breach of contract because of special circumstances or conditions that are not ordinarily predictable. These are actual losses caused by the breach, but not in a direct and immediate way.

What is consequential in law?

Consequential damages, otherwise known as special damages, are damages that can be proven to have occurred because of the failure of one party to meet a contractual obligation, a breach of contract. For example, consequential damages are a potential type of expectation damages which arise in contract law.

What is an example of indirect loss?

Indirect Loss Insurance Example

If a tornado destroys the roof of a store, not only are there rebuilding costs, but the business cannot operate until the damage is fixed. Income lost during the rebuilding — and after it, if customers stick with the alternatives they find in the meantime — represents an indirect loss.

What is consequential loss in English law?

Consequential or indirect loss in contract law means an unusual sort of loss that arises from a special circumstance of the case, and not in the usual course of things.

How do you prove consequential damages?

To recover consequential damages, the claimant must prove they were (1) proximately caused by the breach and (2) were reasonably foreseeable at the time the parties entered into the contract. Determining foreseeability is one challenge, yet the more difficult hurdle is proving the amount.

Why should you exclude consequential loss?

Exclusion and limitation clauses in commercial contracts are used to control, or put a cap on, a party’s liability. The reason for wishing to exclude liability for “indirect or consequential” losses is that these losses may be unpredictably large, or open-ended, representing an “unquantifiable risk”.

Does insurance cover consequential damages?

Policyholders should consider it a best practice to scrutinize any argument by an insurance company that consequential damages are not covered because they are not bodily injury or property damage. Where those damages arise “because of” covered bodily injury or property damage, they may well be covered.

Can you sue for consequential damages?


If you can prove that the other party knew or could have foreseen when the agreement was made, you can recover consequential damages. One common issue in a breach of contract case regarding consequential damages is whether you can recover for lost profits.

Are consequential damages recoverable?

Also called special damages, since they result from a breach of contract and yet would not necessarily be incurred by every injured party experiencing that breach. Consequential damages are generally not recoverable in contract disputes, but are recoverable in tort. See General damages (contrast).

What is consequential loss construction?

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.

What do consequential damages include?

Commonly, consequential damages include property damage, personal injury, attorneys’ fee, lost profits, loss of use, liability of buyer to customers, loss of goodwill, interest on money withheld by customers, and damages related to third party claims.

Are lost profits direct or consequential damages?

The court held that “lost profits damages may take the form of ‘direct’ damages or the form of ‘consequential’ damages.”[6] Those profits lost on the breached contract itself, such as the amount the non-breaching party would have received, less expenses saved, are considered direct damages.

What is the difference between direct and indirect damages?

Direct damages or “general damages” flow directly and without interruption from the type of wrong alleged in a complaint. By contrast, indirect or consequential damages are losses that are removed from the breach and usually involve an intervening event that causes the damage.

Can a seller recover consequential damages?

To obtain consequential damages, the seller is required to be aware of or have reasonably foreseen the specific needs or requirements of the buyer at the time of contracting, which led to such damages. Any expenses saved because of the seller’s breach must be deducted from the damages.

What are the 3 types of damages?

There are 3 types of damages are: economic, non-economic, and exemplary.

How are legal damages calculated?

In Birsdsall, the Supreme Court wrote that “the amount awarded shall be precisely commensurate with the injury suffered, neither more nor less.” When calculating damages, courts will often look at lost wages/income, related medical bills, the cost of repairs to damaged property, the costs of materials needed to deal

What is indirect damage on a car?

Indirect damage is a type of damage which is not visible at the place of collision. Or which is not visible to an average man. Like in a rear end collision, the frame and body of car appears perfect on the place of crash but the indirect damage to the body and frame of the car appears away from the area of collision.

What is direct loss and expense?

Construction contracts will generally provide for the contractor to claim direct loss and/or expense as a result of the progress of the works being materially affected by relevant matters for which the client is responsible, such as: Failure to give the contractor access to and from the site.

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