Suppliers often use standard wording in contracts to minimise the scope of loss that they will be liable for in the event of a breach of contract. A common example of such a clause is one which excludes liability for ‘indirect loss’. The recent case of McCain Foods (GB) Ltd v Eco-Tec (Europe) Ltd dealt with the scope of such an exclusion clause. McCain purchased a system which was designed to produce heat and electricity. The system did not work as envisaged. Litigation followed and McCain sought substantial damages which included (1) the costs of buying electricity which it had expected to be able to generate and (2) the loss of revenue it had expected to receive from being able to sell energy back to the grid. It was accepted by the Supplier that that the cost of replacing the defective system was a direct loss but they relied upon the exclusion clause and argued that all the other losses claimed were indirect losses and irrecoverable. In finding for McCain, the Judge held that the costs of buying the electricity and the loss of revenue from selling the energy to the grid were the sort of losses that flowed directly from the breach and were therefore recoverable. This case is a further reminder that exclusion clauses do not always limit the liability to the extent hoped. For further details please contact Andrew Crocombe.
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