CMS Guide to Consequential Loss in Sweden

Swedish law does not explicitly define the term “consequential loss”. Additionally, there is no clear case law regarding its meaning.

The general principle under Swedish law is that in case of a breach of agreement, the aggrieved party shall be put in the same position as if the contract would have been fulfilled – which includes compensation for any loss.

The damages include compensation for expenses, costs, and losses caused by the breach of contract, as well as compensation for future damage and loss that will occur as a result of the breach of contract. However, the right to compensation requires that the damage was i) foreseeable at the time the contract was entered into and ii) a likely consequence of the breach.

The closest to the concept of “consequential loss” is to be found in the Swedish Sale of Goods Act [Sw. köplag (1990:931). Here, a distinction is made between “direct loss” and “indirect loss”. The difference between direct and indirect losses is only made within the framework of the Sale of Goods Act which requires negligence (or intentional breach of contract) for indirect losses to be compensated. Even if not directly applicable to other situations, the principles and terms of the Sale of Goods Act is applied by analogy  

The general perception is that “consequential loss” falls within the “indirect loss” indirect loss category this context. “Indirect loss” is defined as

1. loss resulting from reduction or loss of production or turnover;
2. other loss resulting from the goods being unfit for use in the intended manner;
3. loss of profit resulting from a contract with a third party lapsing or not being properly performed; and
4. other similar loss, if such loss was difficult to foresee.

The term ‘consequential loss’ can appear in general damage law contexts, but without being specifically defined.

In sum, the term does not have a specific definition in Swedish law. By analogy, and if not defined in the contract, the definition of “indirect loss” in the Sale of Goods Act can be used.

Yes. Generally applicable standard terms and conditions often contain exclusion clauses for indirect loss or consequential loss, but without clarifying the meaning of the term used. As a precautionary measure, parties to commercial contracts often clarify that the seller is not liable for certain types of losses resulting from the defect, such as “loss of production, loss of profit and other consequential or indirect losses”.

The Swedish Supreme Court has through case law (NJA 1977 p. 483), recognised the use of a liability limitation clause for indirect loss in a commercial agreement. However, Swedish doctrine indicates that the court takes a stricter view of exclusion of liability clauses, as these exclude the right to compensation entirely. These clauses, which exempt the party from liability in the event of intent, negligence or gross negligence, may be adjusted under Swedish law on the grounds that they constitute an unreasonable contractual term. This is however very rare.

To summarise, the concept of consequential loss is used in Swedish law and has been accepted in liability limitation clauses. However, when it comes to disclaimers, an assessment must be made on a case-by-case basis to determine whether the clause is reasonable or not. Typical, liability exclusions for gross negligence or intent would be considered as unreasonable. 

As stated above, there is no definition “consequential loss”. However, by way of analogy, an exclusion would be similar to the exclusion of “indirect loss” unless other meaning follows from the agreement.

In such cases, it is very important to clarify what the intentions of the parties were in providing for different types of “loss” in the contract. Was this meant to be an exclusive enumeration or an exemplifying enumeration? Can the concept of “indirect loss” still be used or was this excluded? As the parties have freedom to agree on the compensation and liabilities exclusions (except in cases of gross negligence or intent), the principles of contract interpretation will be applied. 

No, Swedish law generally allows an action for specific performance irrespective of the extent to which damages would or would not be recoverable.