This clause says you cannot claim money for indirect or "knock-on" damages—only direct losses. For example, if a supplier delivers faulty parts and your factory shuts down for a week, you can claim the cost of the parts, but not the lost profits from the shutdown. This is common in commercial contracts because indirect losses can be unpredictable and enormous. Both UK and US law allow parties to exclude these damages by contract, though courts interpret these clauses strictly and won't let them hide unfair surprises.
Understand what you're giving up. If your business depends on continuous operation, excluding consequential loss could leave you uncompensated for your biggest actual harm. Try to negotiate an exception for losses caused by gross negligence or willful breach. At minimum, make sure the direct loss cap is high enough to cover your core business costs, and consider whether you need separate insurance for business interruption. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause says you cannot claim money for indirect or "knock-on" damages—only direct losses.
Why should I care about this clause?
For example, if a supplier delivers faulty parts and your factory shuts down for a week, you can claim the cost of the parts, but not the lost profits from the shutdown.
What are my options?
This is common in commercial contracts because indirect losses can be unpredictable and enormous.
How does this affect small businesses?
Both UK and US law allow parties to exclude these damages by contract, though courts interpret these clauses strictly and won't let them hide unfair surprises.