Consequential damages

Definition

Consequential or indirect damages are losses that do not arise immediately from the breach itself but as a knock-on effect, such as lost profit, business interruption or third-party claims. These are the most common target of exclusion in liability clauses. Dutch law has no fixed statutory definition; what qualifies as "consequential" depends on the contractual definition and on the attribution test of articles 6:95 to 6:98 BW.

Example

A supplier excludes consequential damages, so a buyer cannot recover the profit it lost while a defective component halted its factory line.

Why this is a business risk

Consequential damages are often the biggest financial exposure in a failure scenario, yet they are routinely excluded in supplier terms. If your business depends on a single supplier and that supplier fails, the resulting lost revenue and customer penalties may be entirely unrecoverable under the contract. Accepting a blanket exclusion of indirect loss without understanding what it covers means the largest risks are uninsured and unenforceable.

How to manage it

• Identify your highest-value indirect exposures before signing and negotiate targeted carve-outs from the consequential-damage exclusion for those specific categories.
• Ensure your own business interruption insurance covers losses that the contract does not allow you to recover from the supplier.
• Use contractual milestones and service levels so that a failure is detected and escalated before downstream losses accumulate.
• When you are the party granting the exclusion, define "consequential" precisely so you are not arguing about scope in a dispute.

Legal references

• BW 6:96 Dutch Civil Code: extent of damages Dutch law
• BW 6:98 Dutch Civil Code: causation and attribution Dutch law

Unless marked otherwise, references are to Dutch law (Burgerlijk Wetboek, the Dutch Civil Code); EU instruments such as the GDPR apply across the EU. This is general information, not legal advice. Other jurisdictions treat these concepts differently. Verify the current text and your situation with a qualified lawyer.