To minimise liability for losses from a contract breach, it is standard practice to include a clause excluding liability for all “consequential losses”. However, recently the courts have interpreted “consequential losses” to mean only the indirect losses that result from the breach of contract, therefore excluding liability for any direct losses including loss of profits and business opportunities.

To ensure you don’t pay the price, make sure your commercial contracts:

Do: Use clear wording to list the specific types of losses which are excluded e.g. loss of profits, loss of goodwill, loss of opportunity.

Don’t: Use terms such as “including”, “for example” and “in particular” when referring to indirect or consequential losses as this may inadvertently change the meaning of the losses listed.

Do: Use “indirect” rather than “consequential” loss as it is clearer and less confusing, particularly for consumers.

Do: Try to cap the liability referencing time to bring a claim and the amount.