International Construction Law Review
EXCLUSION OF CONSEQUENTIAL DAMAGES: WRITE WHAT YOU MEAN
GREGORY ODRY
Senior Legal Counsel, IPR–GDF SUEZ, Latin America
In predicting that “Hadley v. Baxendale [was] still, and presumably always [would] be, a fixed star in the jurisprudential firmament”1 Professor Gilmore was undeniably right. Indeed, although it has been shown that Hadley v. Baxendale
2 was irrevocably marked by the context of the 19th century Industrial Revolution3 and while valuable alternatives to the reasoning of the decision in Hadley v. Baxendale have been found,4 its ratio decidendi remains the key reference in common law systems for the measure of damages in contracts and in particular for the distinction between direct or general damages and consequential or indirect or special damages.
Still, when trying to understand the exact meaning of consequential damages one may feel that the radiance of such a celestial decision had some dazzling rather than guiding effects on its oracles or believers.
The intent of this article is (i) to provide an update on the English and United States case law regarding the concept of consequential damages and the clauses dealing with their exclusion and, thereafter, (ii) to identify some consequential issues that may be faced by negotiators or litigators when dealing with these types of exclusion clauses.
I. THE ENGLISH AND AMERICAN PERSPECTIVES: “TWO NATIONS SEPARATED BY A COMMON LANGUAGE?”5
A. A SHARED PRECEDENT
Hadley v. Baxendale, decided by the English Court of Exchequer Chamber in 1854, has since been followed by English courts as an established precedent. This decision is also recurrently cited in most of the jurisdictions of the
1 Grant Gilmore in The Death of Contract 83 (1974).
2 (1854) 9 Ex 341, 156 ER 145.
3 See Richard Danzing, “Hadley v. Baxendale: A Study in the Industrialisation of the Law”, 4 J Legal Stud 249 (1975).
4 Thomas A Diamond and Howard Foss, “Consequential Damages for Commercial Loss: An Alternative to Hadley v. Baxendale”, 63 Fordham L Rev 665 (1994).
5 Famous quote attributed to George Bernard Shaw but probably inspired by Oscar Wilde in The Canterville Ghost (1887): “We have really everything in common with America nowadays except, of course, language.”
Pt 2] Exclusion of Consequential Damages
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