Consequential Loss in Commercial Contracts:

Exclusion clauses for 'consequential loss'

The recent NSW Court of Appeal decision in Allianz v Waterbrook [2009] NSWCA 224 ('Allianz') considered the meaning of 'consequential loss' when that legal phrase is not further defined in an exclusion clause. Although this case has given some jurisdictional consistency to this area of law in Australia, it has not changed the need for a precise definition of 'consequential losses' when drafting such an exclusion clause.

No definitive meaning

An exclusion clause for consequential loss is commonly found in commercial contracts. Yet many parties to a contract treat 'consequential loss' as shorthand for a broad category of losses, including loss of profit, loss of revenue, loss of a business opportunity, loss of production or a loss of goodwill. Indeed many of these types of losses may fall into the category of consequential loss.