Consequential Damages: Are Exclusions Of Consequential Damages Inconsequential

Republished with permission from Carswell, a division of Thomson Reuters Canada Limited.

This article carries on the general theme of exclusions picked up by Kerry Short and Donald Lucky in their earlier papers, however in this case in the context of the standard exclusion of "consequential damages" in most standard form contracts. As the author notes in her opening paragraphs, it is common to assume that "consequential damages" are economic damages incurred beyond mere physical loss, but as her analysis shows this is not the prevailing legal interpretation of the phrase.

After surveying the development of the common law in this area in helpful chart format, the author identifies eight areas of direct damage that are not excluded by consequential damages exclusions: loss of profits; delay damages such as stand-by charges and inflationary factors; increased replacement cost; increased production costs; increased energy costs; overheads; cost to remediate defective