I’ve long suspected that contract users don’t understand “indirect and consequential loss” as the courts say they should. In January, I had the chance to survey members of the International Association for Contract and Commercial Management, asking what these terms meant. About half of the respondents did not understand either term as the Court of Appeal says they must.
That’s a legal problem, because the law says a contract term means what the reasonable user would understand by it. And it’s a practical problem, because contract negotiators commonly exclude this loss in the false belief that doing so protects them against many financial claims.
In March 2018 the IACCM published my article in its Contracting Excellence Journal online: What is indirect and consequential loss?. The article describes:
- The survey questions and results.
- What the English courts say these expressions mean, in clauses limiting or excluding liability.
- What contract users understand by these words, according to the survey.
- Post a comment on this blog, to share your experience of excluding indirect or consequential loss.
- Read Can good contract drafting prevent disputes?
- Get the book, Clarity for Lawyers, for more ways to avoid unexpected meanings in contracts.
- Follow the blog.
(PS: the New Law Journal has published a version of this article on 9 August 2018, available here to those with a subscription.)