Loss of profit

McCain Foods GB Ltd v Eco-Tec (Europe) Ltd [2011]

Loss of revenue or profit may be a direct loss and should not be thought of as always as indirect or consequential.

The claim related to McCain's purchase of a BGPur system from Eco-Tec (Europe) Ltd. The system was to remove hydrogen sulphide from biogas produced in McCain's waste water treatment processes. The clean biogas was to be used to generate electricity for the plant and sell it. McCain argued that the system proved impossible to commission. The court found Eco-Tec in breach of contract. On quantum, the parties agreed that McCain was entitled to the cost of replacement equipment.

McCain sought damages for other losses including lost revenue from elecricity sales. Eco-Tec, however, contended that all items except for the replacement equipment were excluded due to a limitation clause in the asset purchase agreement purporting to exclude "indirect, special, incidental and consequential damages".

McCain, on the other hand, argued that the sums claimed were not consequential damages because the Court of Appeal had determined that consequential loss was to be confined to loss or damage within the second limb of Hadley v Baxendale [1854] 9 EX 341 (i.e., losses arising from "special cases" known to the breaching party), whereas these items fell within the first limb (i.e., losses "arising naturally ? according to the usual course of things").

The court agreed with Mccain.

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