Contact | Search |

Tag: Commercial-litigation

Court of Appeal decision in digital transformation case

Posted on by Julia Krol

The Court of Appeal recently held that a customer who instructed a supplier to provide digital transformation services was not entitled to delay payments (liquidated damages) of c. £1.6m.

This is because the prompt issuing of a “non-conformance report” by the customer was said to be a condition precedent to the customer receiving delay payments, and no such report was promptly issued. The Court reached this result notwithstanding the term “condition precedent” not being used in the contract.

The relevant provision provided that:

“6.1. If a Deliverable does not satisfy the Acceptance Test Success Criteria and/or a Milestone is not Achieved due to the CONTRACTOR’s Default, the AUTHORITY shall promptly issue a Non-conformance Report to the CONTRACTOR … The AUTHORITY will then have the options set out in clause 6.2.”

“6.2 the AUTHORITY may at its discretion … choose to … require the payment of Delay Payments…”

The Court of Appeal reached this decision because:

  1. It is not necessary for the term “condition precedent” to be used if the contract clearly provides that the relief is conditional on a requirement.
  2. The “if .., then ..” structure in the clauses was clearly conditional and without the non-conformance report, the clauses would not operate properly.
  3. It is not necessary for the deadline for the condition precedent to be expressed as a precise time period – “promptly” is sufficient.

The case shows that both contract drafters and litigators must pay close attention to remedies provisions to ensure that conditions precedent are not inadvertently included and are fully complied with.

The case can be found here: Disclosure and Barring Service v Tata Consultancy Services Ltd [2025] EWCA Civ 380.

COURT OF APPEAL VERDICT IN EXCLUSION CLAUSE DISPUTE

Posted on by Deborah King

In February 2025 the Court of Appeal (by a 2:1 majority) dismissed an appeal brought by EE against Virgin Mobile in relation to a significant claim arising out of a telecommunications supply agreement.

The Court of Appeal agreed with the first instance decision that the exclusion clause excluded EE’s entire £24.6m loss of profit claim against Virgin Mobile.

EE claimed that it had suffered loss and damage in the amount of £24.6m as a result of Virgin Mobile breaching an exclusivity obligation in the telecommunications supply agreement, because EE had lost the revenue that it would have received from Virgin Mobile under the terms of the agreement had the exclusivity obligation not been breached.

Virgin Mobile denied breaching the agreement as alleged but argued that, in any event, EE’s claim was precluded because it was, in substance, a claim for anticipated profits. It therefore fell within the scope of the exclusion clause in the agreement which provided that “Neither Party shall be liable to the other in respect of … anticipated profits”.

EE argued that this interpretation could not be correct because (amongst other things), on the facts which occurred, EE did not have a wasted expenditure claim or a good argument for an injunction, so excluding the loss of profits claim would leave EE without an effective remedy, creating commercial absurdity and defeating the main purpose of the agreement.

The majority of the Court of Appeal rejected this argument because the specific facts which occurred, where no alternative remedy was viable, were not known to the parties when they entered into the agreement and therefore should not affect its interpretation. It was held that, applying the proper legal principles, the exclusion clause did preclude EE’s entire claim.

However, the Court of Appeal did not reach this conclusion easily, and indeed Phillips LJ dissented, noting that “it would be surprising if the parties intended that [Virgin Media] could breach the key exclusivity provision, unlawfully diverting its customers to a third party supplier, without incurring liability to pay EE damages reflecting the loss of revenue resulting from that breach”.

This case provides a further example of the unpredictability of the interpretation of exclusion clauses and the importance of clear, future-proof, contract drafting.

Important amendments to procurement legislation

Posted on by Deborah King

On 24 February 2025 the Procurement Act 2023 (PA 2023) came into force.

This is significant for both public sector entities and their suppliers because the PA 2023 replaces the well-established EU-founded regime under the Public Contracts Regulations 2015 which previously governed public sector procurement processes.

The most striking change to the law is that the PA 2023 introduces a new supplier exclusion and debarment regime which means that suppliers who fail to meet particular standards or pose particular risks (for example, risks to national security) can be debarred from tendering for public contracts. This goes further than the previous regime which only allowed for suppliers to be excluded from particular projects.

In addition to the obvious financial implications of being precluded from participating in new tenders or being awarded call-off contracts, there are likely to be reputational consequences for the affected suppliers as debarred suppliers will be added to a public register, with the ground for their debarment also given.

There are routes to challenge disbarment but, just like any other public procurement challenge, it is advisable to take action quickly and obtain specialist advice to avoid falling foul of the procedural hurdles and limitation issues which claims of this nature often face.