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Offshore Construction Contracting Principles

Consequential Damages

Principles

It is recommended that the following principles be applied in relation to consequential damages under offshore construction contracts:

In no event shall any of the Parties be liable to the other Party whether in contract, warranty, tort (including negligence or strict liability) or otherwise, for any special, indirect, incidental or consequential losses or damages of any kind or nature whatsoever.

Each Party shall indemnify the other Party Group from and against any special, incidental, indirect or consequential loss or damages.


Clarifications / Considerations

Indirect damages or consequential loss - that could be incurred by either Party - can exceed the value of the Contract by a factor 10, 100 or 1000.

It would therefore be out of proportion for either Party to assume liability for the other Party's indirect damages.


Example Clause

The following is an example of a clause which excludes consequential damages in accordance with the above principles.

X. Consequential Damages

Under the Contract, the terms "Consequential Loss" or "Consequential Damages" shall mean:

  1. consequential or indirect loss under English law; or
  2. loss and/or deferral of production, loss of product, loss of use, loss of revenue, profit or anticipated profit (if any), in each case whether direct or indirect to the extent that these are not included in (i), and whether or not foreseeable at the Effective Date.

In no event, and notwithstanding any provision to the contrary elsewhere in the Contract, and except to the extent of any agreed Liquidated Damages or rates for delays (including without limitation any predetermined termination fees) provided for in the Contract, shall either Party be liable to the other Party, whether in contract, warranty, tort (including negligence or strict liability) or otherwise, for any special, indirect, incidental or Consequential Loss or Consequential Damages of any kind or nature whatsoever.

Company shall save, indemnify, defend and hold harmless Contractor Group from the Company's Group's own Consequential Loss and the Contractor shall save, indemnify, defend and hold harmless Company Group from the Contractor's Group's own Consequential Loss, arising from, relating to or in connection with the performance or non-performance of the Contract.