Every country’s law is deeply influenced by its people’s culture and way of looking at the world. At The Law Office of S. Grynwajc, PLLC, we see this every day. We also see how cultural differences can result in problems for companies when they expand across international borders. In today’s blog post, we’re taking a look at how European and American law and culture vary when it comes to the concept of indirect and consequential damages.
The United States and the EU have different ways of looking at the issue of liability. We see it in warranties, in personal injury cases, and (for us most of all) in business contracts. In the United States, if you make a mistake (in anything from driving negligently to not fulfilling a contract) you can be held liable for what we call “indirect damage.” Americans consider loss of profit, loss of reputation, and loss of business opportunities all to be “indirect damages” for which you can obtain compensation for your loss.
Indirect damages exist in European countries’ laws too. However, in Europe, as a matter of principle, one is never held liable for indirect damages. You cannot be held financially responsible for anything not directly caused by what you did.
Where this gets tricky is that in Europe, matters like loss of profit aren’t necessarily considered indirect. If it can be proven that it is directly caused by you, it is considered a direct damage, and you can be held liable.
So what does this mean for contracts governed by EU law?
In the United States, it is standard practice to contractually exclude indirect damages from both parties’ liability. In Europe, you would not necessarily feel the need to do this because you would not normally be held liable for indirect damages. However, you would need to add specific language in your contract if you intend to exclude your liability for certain types of losses, such as loss of profit, because in the EU, to have the same purpose, the wording of the exclusion clause in the contract would need to be different.
Whenever you draft a contract, you want it to give you the full protection of the law in the way that it is drafted. That means different things in different places. At the Law Office of S. Grynwajc, PLLC, we hold dual qualifications as EU and U.S. lawyers, uniquely positioning us to help in these matters. Contact us today to learn more about our international business law services!