Need to revisit exclusion clauses


Liability clauses and the exclusions they contain are usually the most contentious terms in any commercial contract yet the parties are often still uncertain as to where liability will actually fall if there is a breach. Or worse, the exclusions provide less cover than was understood or anticipated. Although this decision will be surprising to many lawyers, it emphasises once again the need to be careful how exclusions are set out and to be crystal clear about which direct and indirect losses are excluded. But you thought your contract did that...


M alleged widespread breaches by E of various claim handling agreements. E tried to argue its liability for direct and indirect loss was exempted by its exclusion clauses which were (our emphasis underlined):

"Neither party shall be liable to the other for any indirect or consequential loss (including but not limited to loss of goodwill, loss of business, loss of anticipated profits or savings and all other pure economic loss) arising out of or in connection with this Agreement." (Art. 13.1)

"Endsleigh will not be liable to Markerstudy ... for any indirect or consequential loss or loss of profit or loss of business arising out of data input errors by Endsleigh ..." (Art. 8.1)

The key issues before the court were whether the exclusions in brackets in the first clause and for loss of profit or business in the second clause were freestanding or caught by the preceding reference to “indirect and consequential loss”.


Points to note:

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