Exclusion clauses: top drafting tips and recent developments

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The parties to a commercial agreement often try to manage their risk by inserting clauses into the contract stating that one or both of the parties’ liability — for example, where there is a breach of contract — is limited or restricted in certain ways. For example, a supplier of services will often limit its liability to the value of those services. Similarly, a party selling goods to another party may include a clause excluding the seller’s liability for loss of profit, or for indirect/consequential loss.

Despite the obvious benefits of including clauses restricting the extent of a party’s liability under a contract, a recent Court of Appeal case has highlighted the pitfalls when trying to rely on such clauses. On 7 February, the Court of Appeal found in Kudos Catering (UK) Limited v Manchester Central Convention Complex Limited [2013] EWCA Civ 38, that on the facts and the particular wording of the contract, a clause which excluded a party’s liability for loss of profits did not apply where that party had failed to perform the contract…

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