Seller's Liability for Damages

A breach of contract may result in the seller being liable to compensate the buyer for any resulting losses. According to the Sale of Goods Act, the buyer is entitled to damages for losses incurred due to the seller's delay or defects in the goods. The seller can only be relieved of the obligation to pay damages if they can demonstrate that the delay or defect was caused by an unforeseeable impediment beyond their control, which they could not reasonably have anticipated at the time of entering the contract. Moreover, the release from liability requires that the seller could not reasonably have avoided or mitigated the consequences of the impediment. In practice, there is a significant likelihood that the seller will be held liable for damages.

According to the Sale of Goods Act, the seller may have the liability to pay damages for costs due to a breach of agreement e.g. travel costs, loss of profit and the price difference between the original and replacement product. Other direct and indirect losses due to the breach of contract may be recoverable. According to the Act, indirect loss consists of loss due to interruption of production or reduction of turnover, loss of profit and loss due to damage to property other than the goods sold. Usually, the buyer is entitled to damages for indirect losses if the seller has been careless.

The contract may limit the amount of loss that can be recovered. Contracts usually exclude indirect damages and a maximum amount may be set on the recoverable loss. For further information, see [Limitations of Liability].

Damages may arise as an independent consequence of a breach of contract or as an additional measure, such as a reduction in price, repair, or cancellation of the contract.