Consequential Loss

This Topic Includes:
Trader's liability - for goods
Trader's liability - for services
Difficulty of putting a value on consequential loss
Contracting out of a liability for consequential loss

Consequential loss is a loss (normally one that costs you money) that you suffer as a result (consequence) of something going wrong with the goods you bought or a service received.

The Consumer Guarantees Act allows you to claim compensation for consequential loss from a trader.

Examples of consequential loss

eg, as a result of a faulty bathroom pipes repair, a plumber floods your home damaging hallway carpet. A service provider will be responsible for the cost of cleaning the carpet or meeting the replacement cost, if the damage is more severe.

eg, your fridge/freezer breaks down due to a fault while you are away from home for the weekend. As a result of the breakdown all the food spoils. A trader will be responsible for the cost of replacing the food lost as a result of the fault.

However, you do have a duty to take reasonable steps to prevent further loss. So, if food could have been saved in time by moving it to another fridge, you will not be able to claim for loss of the food.

Trader's liability for consequential loss - goods

A trader might minimise their liability for consequential loss by offering a replacement if your goods are being repaired and this repair will take some time.

eg, your family’s washing has to be done at a laundromat some distance away while the repairer fixes a fault in your washing machine. It may be easier for the trader to supply a replacement washing machine while yours is being repaired. Rather than having to pursue the trader to reimburse you for the laundromat costs.

The trader’s responsibility is not endless. It is limited to loss or damage that could have been expected to result from the product's failure. A trader is not liable for losses that are not foreseeable.

eg, you bought a sewing machine from a trader, intending to use it to run up outfits for friends who were going to pay you (the trader didn’t know this). If the sewing machine develops a serious fault and you want to reject it, you may be entitled to a refund but not the loss of earnings, as this would not have been foreseeable.

Trader's liability for consequential loss - services

The service provider’s responsibility is limited to loss or damage that could have been expected to result from the failure of the service. 

A service provider is not liable for losses that are not foreseeable.

eg, a repairer causes a flood in the laundry while working on your washing machine. The repairer may be liable for damage to the vinyl in the laundry. If water from the flood runs outside, ruining a valuable Persian rug put out to air, this would be an unforeseeable loss.

A service provider might minimise their responsibility for consequential loss by offering a replacement while they fix the goods again.

eg, a car that was towed had to be repaired again. This leaves you without transport. It may be worthwhile for the garage to supply a "loaner" vehicle to you while the car is being repaired. This will save you spending time and money hiring a car then trying to recover those costs from the garage.

Putting a value on consequential loss

Sometimes it is hard to put a "dollar figure" on the loss you have suffered because the damage has affected more than the goods themselves.

Example - goods

You have used a liquid cleaner in accordance with the instructions to remove a stain on new curtains. The cleaner has badly damaged one of the four curtains in your living room.

What is the trader liable for - a "patch up" job or the cost of replacing all the curtains in that room?

This will depend on whether a "patched" curtain will compensate you properly. Will a new curtain match the others? Compensation should put you into the position you would have been in if the cleaner had worked - four clean matching curtains.

If the curtain were new the trader may have to meet the cost of replacing all the curtains. If the curtains were well worn, the compensation would be less to reflect the wear and tear.

Example - services

You have arranged for a carpet cleaning firm to clean your living room carpet. The process leaves small stains on one patch of the carpet. The stains cannot be removed.

Is the carpet cleaner liable for a "patch up" job or the cost of the carpet in that room ?

This will depend on whether a "patched" carpet will compensate you properly. Compensation should put you into the position you would have been in if the job had been done properly. If the "patch" job does not do this, then the cleaner would be responsible for the cost of replacing the carpet.

If the matter went to a Disputes Tribunal, the Tribunal would take into account the expectations that you had of the carpet cleaner’s services and the age and wear of the carpet in deciding an appropriate level of compensation.

Contracting out of the responsibility for consequential loss

A trader cannot contract out of the Consumer Guarantees Act, except where they are selling goods or services to someone for use in their business. 

A service provider cannot write a term into a service agreement that says that they will not be responsible for extra loss suffered.

If traders attempt to contract out of the Act when selling consumer goods or services, they may be breaching the Fair Trading Act by misleading you about your legal rights.