The Law of Unintentional Consequences

The Law of Unintentional Consequences

Sadly, every commercial dispute involves losses – some losses are obvious and some losses are indirect – including money; faulty or damaged or destroyed equipment; or even damage to the reputation of a business.

However, in any commercial dispute, there are often losses that are more difficult to identify or that don’t immediately appear, not unlike an infection occurring after an operation. These unintended consequences of a commercial dispute are called “consequential losses.”

The good news is that these consequential losses can be dealt with before entering into a contract. As They can also become a source of complex disputes, you would be well served to invite Streeterlaw’s expert Commercial Dispute Solicitors to advise you to ensure you are protected.

Before you enter a contract

Typically, contracts try to exclude one party from having to pay another more than they are prepared to if the commercial relationship sours or ends. Often, that will include a ‘consequential loss’ clause where one party says that ‘even if as a consequence of our failing to perform part of this contract, we only owe you damages for what is directly related to the contract.’ Anything that happens ‘as a result’ or is a ‘flow-on effect’ of our failing to perform is your responsibility and risk.

Some contracts go even further and specify a monetary limit on the damages. These clauses are usually broadly written, sometimes breathtakingly so, without any regard to the kind of contract they relate to making an expert review well worth the cost as it could save you a serious, and expensive, headache later. Some contracts go even further and specify a monetary limit on the damages – based on the value of the contract, or the value of an insurance policy.

It is equally important and highly beneficial at the negotiation stage to get good professional advice about whether the limitations that are put into a contract are appropriate – we have seen how things go wrong and can assess them and head off problems, ideally before they crop up.

After a dispute or loss has occurred Although disputes are not guaranteed, they do occur frequently. So then, what if you are in a dispute already, and you are seeing other costs stack up alongside your direct, easy to identify, losses as a result of the breach of contract?

There is a complex web of law around whether you can claim consequential losses, and if so: how much and for how long. Recently, Courts have started defining certain losses as direct losses to achieve a measure of justice for a wronged party, even though they might look like consequential losses. In addition, the situation might change depending on whether there are policies of insurance that are responding to the claim – in some cases changing what, how much, and how long you can claim. This is particularly important when you have multiple people blaming each other for the dispute – for example, a builder, a waterproofer, and a plumber all blame each other for the water damage to your new home.

Our commercial dispute experts at Streeterlaw are very familiar with considering not just the obvious but the more extended parts of claims including how the terms of the contract, and insurance policies, are going to affect your claim. We are experienced in assessing how the terms of the contract might expand or limit your chances in your case or negotiation.

We can assist you in forming an appropriate strategy to try and achieve an outcome without a court case or to pursue or defend a claim if it does require litigation, getting the right expert opinion to support your claim, and conducting that claim to a commercial conclusion.

Call the experienced team at Streeterlaw on (02) 8197 0105 to ensure that you avoid unnecessary consequential losses for your business.

Written by Dean Jessep

Dean is very approachable and he genuinely cares. He takes the time to understand his client’s situation. Dean enjoys charting a course to achieve great outcomes for his clients by applying his professional skills and experience to navigate any challenges that come up. Qualifications – BLA, Dip Law, GLDP

Call us on 02 8197 0105 to book an appointment with Dean Jessep!