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Consequential loss clauses in contracts and how to utilise them Consequential loss, which is also known as indirect loss, is any loss which may arise from the specific context of the case (e.g., if a part within a machine is not delivered on time and the company which owns the machine claims it cannot operate its whole factory, and therefore cannot pay its workers, as a result of the delay). Such losses are usually only recoverable if it can be said the defaulting party (e.g., the supplier of the part to the machine) was aware of the link and, therefore the likelihood of the resulting loss, due to their breach. The concept of consequential loss, to some extent at least, is attributable to the case of ‘Hadley v Baxendale’ (1854). This case involved the claimant mill owner engaging the defendant to repair a crankshaft in the mill and return it. The defendant took longer than agreed, and the claimant could not operate the mill during the delay as a result. The claimant claimed for loss of profits. The Court held that the defendant was not liable for loss of profits as it was not informed the mill would be closed. The damages were not foreseeable/could not be said to be reasonably contemplatable by the defendant when it entered into the Contract.