Commercial Contracts: When A Clause Means What It Says

Commercial Contracts: When A Clause Means What It Says

Limitation and exclusion clauses in commercial contracts regularly lead to disputes between the parties.  Any guidance from the court on how these are to be interpreted is always welcome by commercial lawyers, who can then better advise their clients.

 

 

The expert commercial litigation lawyers at Bahamas law firm ParrisWhittaker are highly experienced in advising and representing businesses on the terms and conditions of their commercial contracts.

In a recent case, the UK’s High Court gave an important ruling1 on the meaning and construction of limitation and exclusion clauses, and when they covered liabilities advanced by claimants.  An engineering firm was appointed by a consortium of developers to provide professional services.

The contract contained a clause stating that liability for any claim in relation to asbestos was excluded, and included a limitation of aggregate liability for pollution and contamination to £5m. The consortium took action against the engineering firm for damages for alleged breach of contract and negligence for failing to warn the consortium of its discovery of asbestos. The firm relied on the above limitation clause in the contract.

The court ruled that the limitations and exclusions were clear in their meaning and protected the consultant from liability.

The judge noted the increasing recognition that parties to commercial contracts should be free to apportion and allocate risks and obligations as they see fit. Exclusion and limitation clauses are subject to the same rules of construction as any other provision.  The court’s task is to identify the intentions of the parties, by looking at what a reasonable person with all the background knowledge which would have been reasonably available to them would have understood the parties to have meant.

What does this mean?

Exclusion and limitation clauses must be negotiated carefully.  Once the contract is executed, such clauses will be taken at face value (absent other factors that suggest they shouldn’t be). They will be interpreted on a straightforward, plain reading of its wording.

How can we help?

The commercial litigation lawyers at Bahamas law firm Parris Whittaker have years of experience advising commercial organisations on their commercial contracts. We can assist you in ensuring draft contracts terms fully and effectively protect your interests, including in light of potential future disputes concerning exclusion and limitation clauses. Contact us straightaway for urgent, strategic advice.

1 Persimmon Homes Ltd & Ors v Ove Arup & Partners  Ltd & Anor [2015]  EWHC  3573