This is a double edged sword. One of the quintessential risk management provisions often included in construction contracts is a waiver of the right to recover consequential damages in claims between the contracting parties. If possible, buyers should try to define “consequential damages” for the purpose of any waiver provision in such a manner that the term covers only those consequential damages for which the law already denies recovery for breaches of contract. Phillips Petroleum v. Lost profit, lost rents, and lost business opportunities are examples of consequential damages that could be incurred as a result of a direct physical loss to property. But what are consequential damages? Owners, … There is a second reason for concern about the distinction between consequential and direct damages. I believe in specificity in that the types of consequential damages that are waived should be detailed in the waiver of consequential damages provision. M&A INDEMNIFICATION SURVEY Comments –Incidental damages include expenses 1980). Similarly, practitioners and commentators offer differing interpretations of “consequential damages” and the evils that a waiver of consequential damages is intended to avoid. The exact damages that are included in the term “consequential damages” are not well defined within existing case law. (2) was proper when a damage clause provided damages that were, under the circumstances, unconscionably low. Trinkle v. Schumacher Co., 100 Wis. 2d 13, 301 N.W.2d 255 (Ct. App. However, the cases above illustrate the wide variety of costs that can be considered “consequential damages.” … Many contractors and architects attempt to allocate risk and responsibilities for consequential damages with owners using contract waivers. Starting in 1997, major design and construction trade organizations included forms of waivers in their standard design and contractor trade association contracts. • “Anything our CGL [commercial gen- eral liability] insurance policy won’t cover.” (No, the term’s definition has nothing to do with applicable insur- ance coverage. 1. As a recent case decided in Florida demonstrates, although the formal definition of such damages is clear and easily understood, applying the definition to particular damages is not intuitive and can lead to surprising results. Contracts often contain clauses under which parties prospectively waive rights to consequential damages. 8570 (S.D.N.Y. consequential damages” and were thus barred by the contract’s waiver of consequential damages, where “a plain reading of the [contract] reveal[ed] that it applied to all ‘con-sequential damages arising out of or relating to this contract.’”26 In the contractor context, a waiver may leave the owner bereft of … These will typically be waived in favor of liquidated damages for the benefit of the owner, and exclude any lost profits in favor of the contractor. Section 20.4 of the EPC Agreement is entitled "Consequential Damages." B. Waivers of Consequential Damages Today, most owner-issued construction contracts require the contractor to waive its consequential damages. They go beyond the express terms and conditions of the contract itself and into the actions that flow from the breach. CONTRACTUAL WAIVER OF CONSEQUENTIAL DAMAGES Contractual waivers of consequential damages are important, whether they are mutual or one-sided. Similarly, practitioners and commentators offer differing interpretations of “consequential damages” and the evils that a waiver of consequential damages is intended to avoid. A mutual waiver of consequential damages may appear to have more direct value and benefit to a contractor than to an owner, primarily because a completed building is often used for business purposes and contributes to the generation of business profit. Consequential Damages Injury or harm that does not ensue directly and immediately from the act of a party, but only from some of the results of such act, and that is compensable by a monetary award after a judgment has been rendered in a lawsuit. Effective waivers will expressly define the type of consequential damages the provision is intended to bar. If the waiver is mutual (something on which you should insist), then the provision may save you money in the event your design or services delay the project. Consequential Damage Waiver Provisions Waivers can take various forms ranging from a broad mutual waiver of consequential damages to a waiver of specifically listed damages for each party.

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