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Indirect and consequential loss - excluding liability

A recent case has shown the importance of having your limitations on liability checked to ensure that they reflect the current law on the subject.

In the case of Ferryways NV v Associated British Ports (2008), the Court had to consider a clause in a stevedoring contract which excluded liability for "indirect or consequential [loss] including without limitation ... loss of profit and ... the liabilities of the Customer to any third party."

A member of the crew of the claimant's vessel had been killed by the stevedore defendant's subcontractor, resulting in the claimant having to make a payment to the crew-member's family. The claimant sought to recover the amount from the stevedores, who said that this was excluded by the above clause because it was a liability to a third party.

The High Court rejected the defendant's argument because the amount paid was a direct consequence of the stevedore's breach. The clause would only have excluded liability for liabilities to third parties (or loss of profit for that matter) where that liability was not a direct or natural result of the breach.

This case once again demonstrates that if a party wants to exclude liability for loss of profits, third party claims or other such losses, the exclusion must be drafted very carefully in order to be enforceable in most circumstances.

For more information or assistance, please contact a member of our team.