This clause says that neither party will claim compensation for indirect losses caused by the other party's failure—things like lost profits, lost business opportunities, or damage to your reputation. For example, if a software vendor's system crashes and you lose £100,000 in sales, this clause would prevent you from suing for those lost sales (though you could still sue for the direct cost of fixing the system). It matters because consequential damages can be enormous and unpredictable, so both parties use this clause to cap their risk. Courts in both the UK and US enforce these waivers, though they won't protect someone who acts with gross negligence or fraud.
Accept this clause if the other party is large and creditworthy—it protects you too if something goes wrong on your side. However, carve out exceptions for death, personal injury, fraud, or gross negligence; these should never be waived. If you're the smaller party, try to make the waiver one-way only (they can't claim consequential damages from you, but you can claim from them) as compensation for the power imbalance. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause says that neither party will claim compensation for indirect losses caused by the other party's failure—things like lost profits, lost business opportunities, or damage to your reputation.
Why should I care about this clause?
For example, if a software vendor's system crashes and you lose £100,000 in sales, this clause would prevent you from suing for those lost sales (though you could still sue for the direct cost of fixing the system).
What are my options?
It matters because consequential damages can be enormous and unpredictable, so both parties use this clause to cap their risk.
How does this affect small businesses?
Courts in both the UK and US enforce these waivers, though they won't protect someone who acts with gross negligence or fraud.