1. Contract Law - Back to Basics LIABILITY! David Lowe Partner

2. Warranties Indemnities RepresentationsIndirect Loss

3. BACK TO BASICS What if the contract is silent? How to control liability?

4. WHAT IF THE CONTRACT IS SILENT? Scope of liability Direct and indirect loss Economic loss What is a warranty? Misrepresentation

7. CONTRACT IS SILENT Remoteness and causation eg. Wiseman v Virgin Direct and indirect loss eg Hadley v Baxendale Economic loss eg. Victoria Laundries

8. DIRECT AND INDIRECT LOSS Hadley v Baxendale Basically: “Direct Loss”- reasonable contemplation of parties - objective test “Indirect Loss” – parties have special knowledge - subjective test

9. DIRECT

10. INDIRECT DIRECT

11. ECONOMIC LOSS Victoria Laundries Economic Losses Can be direct losses

13. WHAT IS A WARRANTY? Academically has a special meaning: Warranty Condition Intermediate terms

14. BUT IN THE REAL WORLD I warrant I undertake I promise I commit I will all has the same effect

15. Representations Misrepresentations Act 1967

16. IN SUMMARY Liability has limited scope Role of direct and indirect loss Economic loss can be direct Warranty no special meaning Watch out for representations Duty to mitigate

17. HOW TO CONTROL LIABILITY Entire Agreement Force Majeure Disaster Recovery/Business Continuity Capping and Excluding Liability Indemnities

18. ENTIRE AGREEMENT Contract is king Excludes the sale chat Reduces risk of misrepresentation

19. FORCE MAJEURE If silent then “frustration” Frustration is very limited Always consider including a force majeure clause

20. FORCE MAJEURE IS NOT EVERYTHING Disaster Recovery and Business Continuity

21. CAPPING AND EXCLUDING LIABILITY Lesson 1 Consequential loss is indirect loss British Sugar

22. CAPPING AND EXCLUDING LIABILITY Lesson 2 Excluding indirect loss does not exclude financial loss British Sugar

23. CAPPING AND EXCLUDING LIABILITY Lesson 3 Exclusion clause will be read against the party excluding liability Keep it simple! Contra proferentum

24. CAPPING AND EXCLUDING LIABILITY Lesson 4 Need to be clear and explicit to cap/exclude liability for negligence Canada Steamship

25. CAPPING AND EXCLUDING LIABILITY Lesson 5 Cannot exclude liability for death/personal injury arising from negligence Unfair Contract Terms Act 1976

26. CAPPING AND EXCLUDING LIABILITY Lesson 6 In most contracts caps and exclusions must be “reasonable” Unfair Contract Terms Act 1976 St Albans v ICL

27. CAPPING AND EXCLUDING LIABILITY Lesson 7 What is “reasonable” is unclear If cap is too low then risks being unenforceable

28. IN SUMMARY 1. Consequential loss is indirect loss 2. Financial losses can be direct losses 3. Cap/exclusion will be read narrowly 4. Need to be clear to exclude negligence 5. Cannot exclude death/personal injury from negligence 6. Caps and exclusions must be reasonable 7. What is reasonable is unclear

29. INDEMNITIES Surprisingly unclear  No duty to mitigate?  Extend liability?  Relax remoteness?  Relax causation?  “hold harmless”? ?

30. EURUS “Indemnities” has no special meaning Will not get indirect loss unless explicit Read against beneficiary

31. INDEMNITIES Are they worth it? “Insurance” v contract Market practice – IP, TUPE, deal with due diligence issues

32. The Future of Law. Since 1818.LexisNexis Confidential. Supplementary Content from Lexis PSL NB: The following links are accessible via a subscription only (see below) Practice notes: Exclusion and limitation of liability Excluding and limiting liability for misrepresentations Causation and remoteness in contractual breach claims Precedents: Limitation of liability clause Indemnity clause Entire agreement clause Force majeure clause Checklists: Drafting and negotiating an exclusion and limitation of liability clause - checklistDrafting and negotiating an exclusion and limitation of liability clause - checklist As an Aspire member you are entitled to complimentary access to Lexis PSL In-house – a guidance tool with bespoke in-house content that gives practical answers fast with punchy practice notes focused on commercial challenges. In addition, you can also explore 20+ practice areas with access to 1000’s of precedents policy templates, clauses and drafting notes. If you would like to enquire about your free 3 month access please contact us.contact us