Claiming compensation for consequential loss

On this page:

• What is consequential loss?
• What can I get compensated for?
• How much can I claim?
• How can I claim?
• What if my contract says I cannot claim?

What is consequential loss?

Consequential loss is the cost to you caused by a problem with goods or services. Compensation is usually for financial costs but can include other costs, such as lost time or productivity.

What can I get compensated for?

A supplier will have to pay for losses that:

• 'could have been expected to result' from a failure to meet a consumer guarantee, and
• were 'reasonably foreseeable'.

They would not have to pay for:

• problems unrelated to their conduct or the goods they supplied
• losses caused by something completely independent of their business, after the goods left their control.

A consumer recently bought a car, which leaked oil on her driveway due to a fault. A neighbour's dog ran through the oil and into her house, dirtying the carpet. The car dealer may be required repair the oil leak in car and to have the driveway cleaned, however would not have to pay for carpet cleaning, as the dealer could not predict that a dog would run through the oil and into the house – the cost was not 'reasonably foreseeable'.

A consumer's washing machine breaks down due to a fault. As a result, there is water damage to carpet in part of the house. The supplier will be responsible for the cost of replacing the carpet damaged by flooding from the faulty washing machine.

How much can I claim?

It can be hard to put a dollar figure on consequential loss.

Compensation should put you in the position you would have been in if the goods or services had met the consumer guarantees.

A consumer used a liquid cleaner according to instructions on the pack to remove a stain on his new curtains. The product badly damaged a curtain in the living room. As the curtain was new, the supplier would probably have to meet the cost of replacement.

A consumer took their curtains to a dry cleaner to be dry cleaned. When the consumer returned to pick up their curtains they were badly damaged. The consumer would not only be entitled to a remedy for the defective service (e.g. a refund for the dry cleaning fee) but also have the dry cleaner pay for the loss incurred. This could include the dry cleaner paying to replace the curtains.

What if the contract says I cannot claim?

A supplier cannot write a term into their contract that says they will not be responsible for extra loss suffered.

If they attempt to do so, they may be misleading you about your legal right to compensation. Misleading conduct is unlawful under the Australian Consumer Law. Penalties apply to such conduct.

How do I claim?

You can apply directly to the supplier for compensation. If the supplier declines or an agreement cannot be negotiated, you can take the matter to formal dispute resolution services or pursue legal action.

For more information about dispute resolution, contact the ACCC or the consumer protection agency in your state or territory.