Exclusion Clauses Fail to Protect IT Consultants

Clauses limiting liability under contracts have always been contentious, so a recent decision is to be welcomed because it sets out clearly the limitations which apply to exclusion clauses.

The case involved GB Gas Holdings (Centrica) and Accenture, which had a contract to implement an IT-based billing system for the gas supplier.

In the event, there were many problems with the system and GB sought restitution for its consequential losses. Accenture resisted paying compensation, on the basis of a limitation clause in the contract.

This sought to exclude:

•    loss of profits or of contracts arising directly or indirectly;
•    loss of business or of revenues arising directly or indirectly; and
•    any losses, damages, costs or expenses whatsoever to the extent that these are indirect or consequential or punitive.

Losses for which restitution was sought (amounts claimed in brackets) included:

•    loss of gas distribution charges resulting from the unreliable transmission of usage data (more than £18 million);
•    compensation paid to customers, which included ex-gratia payments to preserve goodwill (£8 million);
•    additional borrowing charges (£2 million);
•    costs of chasing debts not correctly due (just under £400,000); and
•    other costs (more than £100,000).

The court ruled that none of the above losses (including the ex-gratia payments) was excluded by the limitation clause.

If you are entering into any substantial contract, we can advise you on how best to minimise your commercial risk. Contact  Steen Rosenfalck .

© , February 2011

Please contact:

Steen Rosenfalck - Managing Partner, Solicitor

DD +44 (0)20 7553 9931

View profile »