Normally, contracts have a Liability/Indemnification provision where the Parties agree what kind of liability applies in case of contractual breaches. Also, it is very common to see disclaimers of liability for e.g. Indirect, Consequential, Incidental damages (and the list could go on).

I wonder how contracts that have no reference to Liability provisions should be interpreted? Does that mean that all types of liability are applicable? Let's say under US and Central Europe jurisdictions.

1 Answer 1


Normally, the overwhelming majority of contracts do not have liability waivers. When you last bought your petrol, groceries, went to a restaurant or bought a cup of coffee did you sign a liability waiver? I didn't think so.

In the absence of a liability waiver, parties to a contract and liable for the damage that a breach of that contract causes the other party. In addition they are liable for the damage any tort the commit has on the other party. This is the standard common law position.

In addition, statute law often puts additional obligations on a party to a contract: merchantability and fitness for purpose being classic examples. These may either be implicit terms of the contract so breaching them is a breach of contract or they may be statutory obligations so that breaching them allows damages for a statutory (rather than contractual) breach. Usually, these terms are not excludable.

There is a limit to what a liability waiver can waive. At common law, if the waiver is so onerous that it amounts to unconscionable conduct then it is unenforceable. Similarly, there are statutes that limit what can be waived: negligence, for example, is usually not something that can be excluded.

The scope of damage recoverable includes direct and consequential damage (including pure economic loss and, in some jurisdictions, punitive damages). The normal legal concepts of causation - the damage must flow from the breach and proximity - the damage must be close enough that it is reasonably foreseeable, apply. The consequences of any valid limitation of liability are then applied to knock out some forms of damage.

Let's consider your contract with the restaurant. If you eat the meal and contract salmonella poisoning then the restaurant has broken the contract by providing food that was neither merchantable or fit for purpose and has may have been negligent to boot.

The damages recoverable for either cause of action include:

  • your medical bills
  • your lost income while recovering
  • another meal or a refund
  • punitive damages (maybe)
  • if you die from salmonella, your funeral expenses and compensation to your family
  • your legal costs

They would not include:

  • Your family's and friends' travelling expenses to visit you in hospital
  • compensation if you die as a result of mistreatment of the salmonella

These are too remote.


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