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Liability in Commercial ContractsOverview of English law and practice

Richard Brown, Travers Smith LLPIndustrijurist gruppen Kvitfjell, 8 March 2013

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What we will cover• Context• Limiting liability – the basics under English law• Caps on liability• Excluded losses• Indemnities• Common problem areas with liability clauses

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Context• What contracts are we talking about?• Categories

– Limits on liability– Exclusions of liability– Indemnities

• Court’s approach• Importance of getting drafting right

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Limiting liability – the basics under English law• What liability cannot be excluded or limited?

– Death/personal injury caused by negligence

– Fraud

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Limiting liability – the basics under English law• Unfair Contract Terms Act• Consumers• Deliberate/wilful breach

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Caps on liability• “What level should we accept?”• Structure

– Aggregate– Annual– Per claim

• Relevance of term • Value of contract• Insurance Common drafting issue

“The maximum aggregate liability of each Party under this Agreement shall be limited to the charges payable by the Customer in the 12 months immediately preceding the matter or circumstance giving rise to the claim.”

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Caps on liability• What is an unreasonably low cap?

• Bargaining power / sophistication of parties

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Caps on liability• What should fall outside cap?

– Fees– Confidentiality– IP infringement– Data protection– TUPE– Service credits/liquidated damages

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Excluded losses• Loss of profit – really?

• Consequential, special and indirect loss – what is it?

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Excluded losses• Loss of data Common drafting issue

“Neither party shall be liable to the other Party under this Agreement for any indirect or consequential loss or damage (including loss of profits, revenue or business).”

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Indemnities• Rationale and benefit• Unreasonable indemnity clauses• Absence of other restrictions on indemnities

• Recovery of third party loss?

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• Price refund is the only remedy: reasonable?

• Shortening limitation periods – reasonable?• How short can you go?

• Non reliance provisions

Common problem areas with liability clauses

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Conclusion• Reluctance of court intervention • Importance of clear drafting• Courts will look to enforce provisions as drafted,

unless clearly contrary to business common sense• But need to adopt reasonable approach to liability

provisions in context of contract as a whole

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ProfileRichard BrownCommercial, IP & Technology, Travers Smith Richard trained at Travers Smith and became a partner in the firm’s Commercial, IP and Technology Department in 2006. Richard specialises in

advising large UK and international businesses on key contractual, joint venture and outsourcing arrangements and his clients include household names in the media, sport, leisure, utilities and support service sectors.

Richard’s recent work has included advising:• Channel 4, on the launch of Channel 4 HD on Freeview and its other DTT carriage arrangements• Sahara Force India Formula One racing team, on its technical partnerships with McLaren and Mercedes-Benz• YouView, on its contractual arrangements in advance of the launch of its new linear and on demand TV platform• Exponent on its acquisition of the BBC Magazines business from BBC Worldwide• Firstsource on Barclays Bank´s outsourcing to it of the Barclaycard credit card and payment businesses and Eircom´s customer services

function• talkSPORT on its global radio licensing partnerships• Macquarie Bank on a series of investments in, and outsourcings relating to, its utility metering business• International Energy Group on its gas and electricity infrastructure partnerships• Trainline.com on its ticket retail arrangements with train operating companies and other transport operatorsRichard is named as a key individual in the Chambers legal directory and his practice is highlighted in the Legal 500 where clients comment

that he is "a good person to have in your corner" and ''when something is very important and we need a good result, we pick up the phone and talk to Richard.''

Richard is also a founding member of the firm´s Anti-Bribery Group, advising businesses across the world on the impact of the UK Bribery Act.