Common law meaning
The concept of indirect loss developed in common law jurisdictions such as England. The common law approach generally permits recovery of two broad categories of loss caused by a breach of contract: first, losses that are the natural consequence of the breach (for example, the direct cost of repairing or replacing damaged property); and, secondly, losses which are not a natural consequence of the breach but which were foreseeable by the parties (for example, lost profits, if both parties knew that damaged property would leave the innocent party unable to perform its obligations under other contracts).Indirect losses are generally viewed in common law jurisdictions as the types of loss that fall into the second of these categories. In those jurisdictions, clauses excluding indirect losses will not exclude losses arising directly and naturally from a breach of contract.
Treatment under Omani law
Whilst the Civil Transactions Law (Royal Decree 29/13) (the “Civil Code”) does allow for the recovery of indirect losses in certain circumstances, such provisions of the law are yet to be tested before the Omani courts. In a civil jurisdiction such as Oman, the distinction between losses occurring as a natural, direct consequence of a breach and those that are foreseeable but not arising in the natural course of events does not sit comfortably with the courts, partly because the concept of foreseeability is not a relevant consideration.Indirect or consequential damages are not, then, excluded as a matter of law but the terms have limited applicability in Oman. First, there must be a nexus between loss suffered and damages claimed. Secondly, there must be a degree of foreseeability, i.e., damage must not be too remote.
Common practice
In spite of the attitude of the Omani courts to the concept of indirect loss, clauses excluding indirect losses are commonly seen in Omani law-governed contracts. Given the lack of a clear concept of indirect loss in Oman, these clauses can be ineffective unless they clearly identify the heads of loss that are meant to be excluded.For example, there is a risk that the Omani courts would consider loss of profit to be a direct loss that is not excluded by a generally worded indirect loss exclusion clause. If the parties do not want to be liable for loss of profit, this should be specifically mentioned.
In summary, terms such as direct, indirect and consequential, which are not legally recognised terms in Omani law, are likely to be a source of contention in the event of a dispute. It is preferable to draft contractual provisions that state explicitly the exact heads of claim that are intended to be excluded.
