Consequential Losses: Beware

The recent case of Johnston -v- WH Brown decided in the Scottish Court of Sessions sheds further light on the use of the term 'consequential loss' in facilities management contracts. According to Rebecca Harvey of Masons Solicitors the term is now almost meaningless and contracting parties should be very careful in using it. Writing in the latest issue of Facilities Management Legal Update, Rebecca compares this latest case with the landmark case of British Sugar -v- NEI Power Projects from 1997:

>From British Sugar, we have learnt that loss of profits, traditionally viewed as the archetypal 'consequential loss', can, in some cases, be viewed as losses flowing directly and naturally from a breach of contract. As recently as this month, the Scottish court in Johnston -v- Brown has decided that the costs involved in preparing a schedule of defects, or in preparing any claim, are not recoverable as consequential losses.

Full details of the case are available in Vol.3, Iss. 11 of Facilities Management Legal Update.