Law and regulation of consequential damages clauses in the energy sector in North Macedonia

The term “consequential loss” is not defined and does not exist under the Law on Contract and Torts of North Macedonia (“MLCT”). 

The MLCT provides for three types of damage that are recoverable in contractual and non-contractual relations: 

1. ordinary damage; 
2. loss of profit; and 
3. non-pecuniary damage. 

Ordinary damages and loss of profit are sometimes jointly referred to as “pecuniary damage”. In relation to ordinary damages and loss of profit, the MLCT stipulates that the injured party has the right to compensation for the ordinary damage, and is also entitled to compensatory damages. The amount of damages is determined by value at the time of the court decision. When assessing the amount of the lost benefit, the profit that could reasonably be expected, which the injured party had been prevented from earning, by the harmful action or omission of the damaging party, is taken into account. If the damage arises from an intentional crime, the court may award compensatory damages for an amount corresponding to the damage suffered by the innocent party. 
The MLCT provides that the party has a right to non-pecuniary damages in cases of violation of personal rights. 

Although in some agreements the term “consequential loss” is being used, it could lead to legal uncertainty since this term is not defined under Macedonian law. However, the term “loss of profit” is usually used in contractual exclusion of liability clauses. 

For example, the draft Electricity Supply Contract (ESA) proposed by the one of the largest electricity suppliers in N. Macedonia, stipulates the following provision for the limitation of liability:

Unless otherwise agreed in writing by the Parties and to the extent permitted by law, neither Party shall be liable to the other for any exemplary, punitive, indirect, including (inter alia) loss of profit or income and costs of purchased or exchanged power other than as set out in Article 9, for any claims arising out of this Agreement.

The meaning attributed to the words “consequential loss” depends on the interpretation of those words in a contractual exclusion clause. There is no clear practice regarding the interpretation of the words “consequential loss” as this term is not commonly used in Macedonian law. The usual rules of interpretation stipulated in the MLCT apply. Namely, in interpreting the disputed provisions, the literal meaning of the expressions used should not be accepted, but the common intention of the parties should be explored, and the provision should be understood in accordance with the principles of the MLCT. Unclear provisions in the contract should be interpreted in order to achieve a fair contractual relationship.

On a separate note, according to the MLCT, parties cannot exclude or limit liability when acting with intent or gross negligence.

As a principle, the MLCT determines that parties are free to regulate their relationship within the limits of what is allowed by the law. In this context parties are free to regulate exclusion of liability clauses, provided that general rules on obligations are complied with. This includes the basic principle of conscientiousness and fairness. 

However, according to the MLCT, contractual provisions shall be null and void if they are contrary to the principles of conscientiousness and fairness, impose obvious misunderstandings in the mutual agreement between the parties, and create an opportunity that may cause damage to the co-contractor or endanger the achievement of the contract. Additionally, if there is uncertainty over the provision, the standard rules on interpreting limitation of liability clauses stipulated in the MLCT would apply (see above).

There are no special rules on the interpretation of limitation or exclusion of liability clauses.  

As consequential loss is not recognised or commonly used in contracts governed by Macedonian law, its practical usage has limited scope. It is possible that if a court considers that the consequential loss exclusion clause excludes a claim for damages, then the clause may impact non-monetary claims for performance of contractual obligations.