Failure To Perform Not Covered By Exclusion Clause

Kudos provided catering services to the Manchester Central Convention Complex. The agreement ran from five years from 1 April 2007 but ended unhappily in July 2010 with claims and counterclaims as to who was entitled to terminate etc. An initial point for consideration by the courts was whether the exclusion clause protected Manchester Central from a claim by Kudos for loss of profit. The exclusion clause 18.6 provided: "The Contractor hereby acknowledges and agrees that the Company shall have no liability whatsoever in contract, tort (including negligence) or otherwise for any loss of goodwill, business, revenue or profits, anticipated savings or wasted expenditure (whether reasonably foreseeable or not) or indirect or consequential loss suffered by the Contractor or any third party in relation to the Agreement ... ...".

The High Court thought that the words were "perfectly clear .. their effect is that in any case in which there might otherwise be a liability in contract to pay damages in respect of loss of profit there is not one. It is as simple as that". The judge went on to say that it was not necessary or appropriate for the Court to consider what the parties could possibly have intended if what they have actually stated is clear and unambiguous. The Judge took the view - as per the Rainy Sky Supreme Court case - that, where a clause is unambiguous, the issue of construction does not arise. There were potentially other remedies available to Kudos. Kudos appealed.

The Court of Appeal allowed the appeal. Whilst the decision depended on the exact wording of the clause and its context, the Court made a number of useful observations.

The Judge failed to look at the words in the exclusion clause in the context of the particular clause or the contract as a whole. The Judge fell into error by thinking that the ascertainment of the meaning of apparently clear words was not itself a process of contractual construction. The Court disagreed with the Judge's view that there were other remedies available (which it took to mean an injunction restraining Manchester Central from excluding Kudos from the venues). It looked at the agreement as a whole and came to the conclusion that it was wholly unsustainable that Kudos could perform the contract without the full hearted cooperation of Manchester Central. That meant that if the High Court's interpretation of the exclusion clause were adopted, the contract was effectively devoid of contractual content...