In our practice, we often encounter the question whether clients should accept liability for indirect and contingent damages. Here’s a brief explanation as to why indirect damage cannot be enforced under Romanian law.
Concept
“Damages” (in Romanian, “daune interese” or “despăgubiri”) refer to the compensation that one expects to receive or may receive following a situation where they suffered a loss due to another person’s intentional or unintentional unlawful conduct. Understanding the concept of damages under Romanian law is crucial because it impacts and applies to all interactions within the business environment. From a simple non-disclosure agreement that covers damages for breach of confidentiality obligations to indemnification under an M&A deal, the concept remains consistent. Also, it is noteworthy that the concept of “damages” has applicability both in contract law and in tort law, with contract law allowing certain flexibility of the parties in what concerns damages quantification, the conditions needing to be met for indemnification etc.
Types of Damages in Romania
The Romanian Civil Code allows for the claiming of compensatory damages (in Romanian, “daune materiale”) and moral damages (“daune morale”). Both kinds need to meet the conditions for being awarded, as further detailed below.
Compensatory damages are the reparation in cash that the person causing the damage needs to pay back to the damaged party. For example, a party breaching an agreement may be held liable to pay compensatory damages to cover the actual loss suffered by the other party or the loss of opportunity suffered by the other party. Moral damages are the reparation in cash or otherwise for damages brought against the other party’s reputation, image etc. Moral damages are usually harder to quantify and their grounds harder to prove.
Prerequisites for Damages under Romanian Law
The rule under Romanian law is that, for a claim for damages to be admissible (i) the damage should be existing (not contingent); (ii) the damage should be the consequence of an unlawful action or inaction; and (iii) the person inflicting the damage should be at fault (intention or negligence).
The loss – which covers both the loss actually suffered (damnum emergens) by the party claiming damages and the benefit deprived of (lucrum cessans) needs to be (i) a direct result of the unlawful action or inaction – Romanian law does not allow indemnification for indirect losses; and (ii) certain – this means that the loss has already occurred or is certain to occur in the future.
Indirect and uncertain losses are not indemnifiable under Romanian law, as these losses do not meet the legal prerequisites for indemnification.
Conclusion
Understanding the concept of damages under Romanian law is essential for anyone engaged in business or legal matters in Romania. Whether dealing with compensatory or moral damages, it’s crucial to meet the legal prerequisites for a claim to be admissible, ensuring that the loss is direct, certain, and caused by unlawful conduct. While the flexibility in contractual indemnification allows some room for negotiation, Romanian law remains stringent in its exclusion of indirect and uncertain losses. By grasping these principles, parties can better navigate liability and protect their interests in both contractual and tortious matters.
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