English Contract Law: Validity Of Wide Exclusion

Following a number of high profile decisions of the English courts on commonly used contractual provisions, this update reviews a recent judgement and provides advice for those drafting and reviewing contracts containing exclusion clauses.

Reliance on exclusion clauses by one party often gives rise to disputes. In one case in 2013, the Court of Appeal considered the scope of a wide exclusion clause.

Kudos Catering v Manchester Central Convention Complex [2013] EWCA Civ 38

Kudos and Manchester Central Convention Complex entered into a five year agreement under which Kudos was to provide catering services in the Manchester Convention Centre. The relationship broke down and Manchester terminated the agreement. Kudos claimed the termination was a repudiatory breach of contract, accepted the repudiation and claimed damages for the loss of profit it would have earned over the remainder of the term of the contract.

Manchester relied on a wide exclusion clause to argue that it was not liable:

"[Kudos] hereby acknowledges and agrees that [Manchester] shall have no liability whatsoever in contract, tort (including negligence) or otherwise for any loss of goodwill, business, revenue or profits ... in relation to this Agreement." The court held that the exclusion clause did not apply to liabilities for a repudiatory breach of contract, despite the fact that it was drafted very widely. The court started from the position that it was 'inherently unlikely' that the parties intended to enter into a clause so wide that it resulted in one party abandoning its remedies for breach. In this case, the words 'in relation to this Agreement' meant the...