Neglectful conduct leading to a form of damage or misfortune being redefined or misrepresented
In the realm of business and law, the importance of clear and precise contractual language cannot be overstated. Two recent English High Court cases, EE Limited v Virgin Mobile Telecoms Ltd and Soteria Insurance Limited v IBM United Kingdom Ltd, serve as valuable reminders of this fact.
In the EE Limited v Virgin Mobile Telecoms Ltd case, the High Court found itself grappling with a damages claim of £24,635,684 due to a breach of exclusivity clause. However, the court granted reverse summary judgment and struck out the claim, as the damages fell within the excluded head of loss, "anticipated profits". The court held that the claim was in substance for loss of profit, as EE was required to give credit for any costs it would have incurred in earning that revenue.
The Soteria Insurance Limited v IBM United Kingdom Ltd [2022] case, on the other hand, demonstrated that the court will not conflate "loss of profit, revenue, savings" with wasted expenditure. In this case, the court found that the losses in question were not excluded because there was no explicit reference to wasted expenditure in the exclusionary language used.
These cases underscore the need for parties to accurately characterise a claim to ensure it falls within or outside an excluded head of loss. It is crucial to ensure that all the heads of loss a party wishes to exclude are covered by the clause.
When it comes to the concept of gross negligence in an English law contract, parties must be mindful of its definition and usage. Gross negligence should be defined as a serious breach involving a reckless or blatant disregard for foreseeable risk, rather than mere carelessness or ordinary negligence. This helps to avoid ambiguity and disputes about what behaviour triggers the exception.
Key considerations include drafting the contract to clearly distinguish gross negligence from ordinary negligence, using gross negligence as a carve-out to liability caps, consistency with case law, drafting clarity in related provisions, and negotiating leverage.
In summary, explicitly defining gross negligence in the contract, limiting the carve-out scope clearly, and using established legal standards to guide drafting can ensure enforceability and minimize litigation risk under English law.
Moreover, it is worth noting that loss of data under outsourcing, technology, and transitional services agreements may be framed in various ways. It may be preferable to have a separate cap that deals with all data-related claims, whatever provision is breached, to avoid potential disputes.
These cases, along with key considerations for drafting contracts, provide valuable insights for businesses and lawyers navigating the complex world of contract law. By adhering to these principles, parties can strive to create contracts that are clear, enforceable, and less likely to lead to costly and time-consuming disputes.
- Given the findings in the EE Limited v Virgin Mobile Telecoms Ltd and Soteria Insurance Limited v IBM United Kingdom Ltd cases, it's crucial for parties to accurately characterize their claims to ensure they fall within or outside an excluded head of loss in a contract, especially since technology agreements may involve data losses.
- In the realm of contract law, particularly in technology-related agreements, it's beneficial to establish a separate cap dealing with all data-related claims, regardless of the provision breached, to prevent potential disputes and ensure clear, enforceable contracts less likely to lead to costly and time-consuming disputes.
