Limitation Clause In Business Contract Not Unreasonable

Elvanite Full Circle Limited v AMEC Earth & Environmental (UK) Ltd [2013] EWHC 1191

Elvanite claimed against AMEC, its professional consultant, for breach of contract. AMEC had been engaged to submit planning permission on a site for Elvanite by a stated date for a fee of about £14,000. That did not happen. Elvanite agreed, subject to contract, to sell the site to a third party conditional on planning permission and an environmental permit. When planning permission did not come through by the expected date, the property market had turned and the buyer pulled out. Elvanite sought to recover its loss of profit on the deal from AMEC, alleging breach of contract. The agreement between them stated that:

AMEC was not to be responsible for any consequential, incidental or indirect damages. The total liability of AMEC was to be limited to the total compensation actually paid or £50,000, whichever was less. All claims by Elvanite were deemed to be relinquished unless filed within one year after completion of the services. The Technology and Construction Court found against Elvanite on the facts, but it made obiter comments on the enforceability of the exclusion clauses under UCTA and certain other points:

The three clauses did not fall foul of UCTA. The starting point was the judgment of Chadwick LJ in Watford Electronics v Sanderson where it was said that experienced businessmen representing companies of equal bargaining power should be taken to be the best judge of commercial fairness of the agreement which they have made. Here, the parties' bargaining positions were broadly equal, Elvanite received no inducement to agree to any of the terms, Elvanite knew what AMEC's terms said and terms limiting liability were not uncommon in contracts for the supply of goods/services Exclusion of consequential/indirect damages. Elvanite's claim was for loss of profit, which could be direct or indirect loss, depending on the nature of the contract obligations. The judge took the view that the claim for loss of profit in this case did not fall under either head of Hadley v Baxendale and was not recoverable in any event. AMEC only became aware of the circumstances that might cause a loss of profit after the contract was made. But if he were wrong about that, the loss of profit would only be recoverable under the second limb of Hadley v Baxendale, not the first, i.e. the loss was not the direct and natural consequence of the breach. Here, the services related to...