Exclusion Clauses - operating again

Published: 21st July 2008

The Court of Appeal has overturned a High Court decision that an exclusion clause (which excluded liability for, among other things, loss of business, loss of profits and consequential loss) was not reasonable and, therefore, not enforceable.

The Court held:

• The obvious and primary measure of loss for the breach was the diminution in value of the promised services and this was not excluded by the exclusion.
  
• The exclusion did not exclude liability for fraud or wilful, reckless or malicious damage and, therefore, was not unreasonable on the grounds of excluding such acts.
  
• In principle, it was entirely reasonable to restrict damage for loss of profits and consequential losses from the categories of loss for which it would become liable when in breach.
  
• There was no inequality in bargaining power.