Special, Indirect, Incidental, Exemplary, Punitive, and Consequential Damage Waiver Clause
(Interconnect Agreement) (Midstream Energy)

Summary

This clause is a special, indirect, incidental, exemplary, punitive, and consequential damage waiver clause found in an interconnect agreement within the midstream energy context. It allows parties to a contract to waive indemnity for outsized damage claims that may only be loosely related to a contract dispute. This clause includes practical guidance and drafting notes. Commercial contracts are often complicated, lengthy, and sometimes subject to misinterpretation. This can lead to contractual disputes or breaches which end in litigation or arbitration. However, parties to a contractual dispute often want some level of certainty surrounding possible damages. Open-ended potential liabilities may be just as damaging to a company's future as an actual damage award. Potential future liabilities that are only loosely tied to a contract's terms are not favored. Thus, it is somewhat standard within the bounds of a commercially negotiated contract for the parties to waive certain potential liabilities that are only loosely related to the contract and the parties' obligations thereunder. These often include what are termed "special" damage claims, including indirect, incidental, exemplary, punitive, and consequential damages. These damages—which a party may claim run several times more than the direct damages incurred under the terms of the contract—are waived to provide peace of mind and business certainty. A failure to waive these damages may allow a contract counterparty to use litigation offensively to force a settlement on contractual claims that may otherwise lack merit. For more information on these types of provisions, see Damages Waivers: Consequential, Incidental, Lost Profits, and Other Damages and Damages for Breach of Commercial Contract. For more about pipeline operations and midstream energy in general, see Acquisition, Construction, and Project Development, Energy M&A Resource Kit, and Operational Balancing Agreement (Pipeline and Storage Operators).