# Consequential damages

Source: https://contracko.com/glossary/consequential-damages

# Consequential damages

Indirect loss flowing on from a breach, such as lost profit, lost production or reputational harm.

## 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.

### How Contracko helps

Contracko's AI review flags exclusion of consequential loss as a key risk finding and summarises which categories of indirect damage each contract covers or excludes, so your legal and commercial teams can spot dangerous gaps across the portfolio. Obligation tracking surfaces milestone and SLA commitments that serve as an early-warning system before downstream losses arise.

## Legal references

- [BW 6:96 Dutch Civil Code: extent of damages Dutch law](https://wetten.overheid.nl/BWBR0005289)
- [BW 6:98 Dutch Civil Code: causation and attribution Dutch law](https://wetten.overheid.nl/BWBR0005289)

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.

## Relevant for

[Manufacturing](https://contracko.com/industries/manufacturing)[Logistics & Distribution](https://contracko.com/industries/logistics)[IT Services](https://contracko.com/industries/it-services)

## Related clauses

- [Limitation of Liability Clause](https://contracko.com/clause-library/limitation-of-liability)
- [Indemnification Clause](https://contracko.com/clause-library/indemnification)

## Related terms

- [Direct damages](https://contracko.com/glossary/direct-damages)
- [Liability limitation](https://contracko.com/glossary/liability-limitation)
- [Exoneration clause](https://contracko.com/glossary/exoneration-clause)

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## Frequently asked questions

Common questions about this term.

- **Q:** Is a complete exclusion of consequential damages enforceable in the Netherlands?
  **A:** Between businesses it is generally valid, but a court can set it aside under article 6:248 BW if relying on it would be unacceptable by standards of reasonableness and fairness, especially where the damage stems from intent or gross negligence.

- **Q:** What is typically listed as a consequential loss in standard contracts?
  **A:** Common examples are lost profit, loss of revenue, loss of business, loss of goodwill, data loss, business interruption and third-party claims. The exact list varies by contract and industry.

- **Q:** Can I carve out specific categories of indirect loss from a consequential-damage exclusion?
  **A:** Yes. Negotiating a carve-out that keeps, for example, data-recovery costs or regulatory fines within the recoverable categories is a common approach when a blanket exclusion is otherwise acceptable.

- **Q:** Does an exclusion of consequential damages also exclude claims under an indemnity?
  **A:** Not unless the indemnity is expressly subject to the exclusion. Indemnities are often drafted to survive consequential-damage exclusions; the key is to read both provisions together.

- **Q:** How does a force majeure event interact with consequential-damage exclusions?
  **A:** Force majeure excuses performance but does not by itself limit damages if performance is not actually impossible. An exclusion of consequential loss and a force majeure clause serve different purposes and both may apply simultaneously in an extended outage situation.

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