The recent English High Court decision in Pinewood Technologies Asia Pacific Ltd v Pinewood Technologies PLC [2023] EWHC 2506 (TLC) emphasises once again the importance of carefully drafted exclusion clauses within commercial contracts, with a high value claim for USD $312.7m being dismissed as a result of the court upholding the terms of a contractual exclusion clause. The decision in the Technology and Construction Court continues the trend of courts upholding contractual exclusion clauses in commercial contracts entered into between business entities. The case relates to the supply of bundled management information systems for motor dealers, and the principles applied by the courts in this case would apply equally to construction contracts where parties often seek to include clauses excluding or limiting liability.
WHAT IS THE BACKGROUND?
Pinewood Technologies PLC (PT) s a developer that supplies bundled management information systems for motor dealers. PT entered into agreements with Pinewood Technologies Asia Pacific Ltd (PTAP), in terms of which PTAP would act as the exclusive reseller in several countries.
In July 2022, PTAP brought a claim against PT, claiming that they had breached several obligations in their agreement and claiming for loss of profits and wasted expenditure. PT countered that PTAP's claims were excluded by virtue of an exclusion of liability clause in the contract and counterclaimed against PTAP for unpaid fees.
The exclusion of liability clause relied upon by PT included the following:
"Pinewood excludes, in relation to any liability it may have for breach of this Agreement, negligence under, in the course of or in connection with this Agreement, misrepresentation in connection with this Agreement, or otherwise howsoever arising in connection with this Agreement, any such liability for: (1) special, indirect or consequential loss; (2) loss of profit, bargain, use, expectation, anticipated savings, data, production, business, revenue, contract or goodwill; (3) any costs or expenses, liability, commitment, contract or expenditure incurred in reliance on this Agreement or representations made in connection with this Agreement; or (4) losses suffered by third parties or the Reseller's liability to any third party."
WHAT WAS THE DECISION?
PTAP argued that the exclusion of liability clause should be struck down as an unfair contract term.
The Court disagreed and found that the parties had negotiated substantive amendments to PT's standard terms when agreeing the Reseller Agreements. The parties were also able to access legal advice, revise multiple drafts of the agreements, with negotiations between both parties and with certain amendments accepted and others rejected. In that context the court rejected arguments on behalf of PTAF that the Unfair Contract Terms Act 1977 would apply to the exclusion clause.
In deciding that the exclusion of liability clause should be upheld the Court noted among other things that (1) the language in the exclusion of liability clause was clear and unambiguous, and (2) there was nothing in the agreement to suggest that the parties had not intended to exclude claims for loss of profits and wasted expenditure.
WHY IS THIS RELEVANT?
This decision reaffirms that the courts will uphold exclusion clauses that are clear and unambiguous and reflects the overriding principle of freedom of contract.
The high value of the claim in this case, USD $312.7m, emphasises the commercial importance of contractual exclusion clauses and (for those relying on them) the importance of making sure they are drafted in a way that is clear and unambiguous.
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