Resource
Securing TUPE regulation protection in commercial agreements
Common contracting issues that should be included as part of any contractual negotiations relating to the transfer of a business or change in service provision.
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Case Study
In Soteria, the claimant sought to recover the significant expenditure that it had incurred in anticipation of receiving a highly upgraded IT system from the defendant. However, the defendant failed to supply the IT system, in contravention of the terms of the contract, causing the claimant to suffer losses of £128m.
In the contract between the companies, a clause stated that IBM’s liabilities in the event of termination excluded “loss of profit, revenue, savings (including anticipated savings)”.
The High Court held that, although the exclusion clause did not specifically exclude wasted expenditure, the claimant’s loss consisted of savings, revenue and profit it would have recovered had the defendant supplied the IT system.
The High Court, therefore, concluded that framing the loss as wasted expenditure did not detract from the characteristics of the loss, meaning that the £128m lost by the claimant was excluded and thus irrecoverable.
Case Study
The claimant appealed the decision to the Court of Appeal, which overturned the High Court’s ruling on the following grounds:
This case highlights the importance of accurate and comprehensive drafting to convey your intentions when contracting, a lack of appreciation of which can lead to significant liabilities if things go wrong.
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