Exclusion of liability for consequential loss in infrastructure contracts

Introduction

When entering into infrastructure contracts, parties will attempt to negotiate a careful bargain ensuring their risk is minimised. The incorporation of a mutual exclusion of liability for consequential losses is common in many complex and high value projects, as a means of reducing each party's risk exposure to the other. The types of loss covered by a consequential loss exclusion has been considered on several occasions by State Supreme Courts, both in situations where the term has been defined and undefined in the contract. As seen in the Victorian Court of Appeal decision Environmental Systems v Peerless Holdings¹, a broad view can be adopted, and in the State of Victoria, for the types of losses covered by an undefined consequential loss exclusion clause.