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ARTICLE · 15 FEBRUARY 2014

Two little words - one big impact: an undefined "consequential loss" exclusion can be an unknown risk in construction contracts

Norton Rose Fulbright Australia
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The best way to minimise this risk is to include a detailed definition of consequential loss when drafting contracts.

AustraliaReal Estate and Construction
Danielle Strain
Danielle Strain
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When negotiating a contract, parties will attempt to negotiate the terms to match their risk profiles; concluding those risks they are willing to accept and resisting those they are not. In this context certainty is very much the aim of the game. One key area where there is the potential for risk allocation to be made uncertain relates to the use of the term "consequential loss".

The all too common undefined exclusion for consequential loss has been the subject of academic and judicial debate since 2008, and has been reconsidered recently in the case of Regional Power Corporation v Pacific Hydro Group Two Pty Ltd (No 2) [2013] WASC 356 (Regional Power). The Regional Power decision has placed a very different interpretation to the cases that preceded it as to what is covered by "consequential loss".

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