Exclusion clauses

AstraZeneca UK Ltd v. Albemarle International Corporation 2010

A repudiatory breach of contract is a breach which is sufficiently serious to entitle the innocent party to bring the contract to an end.

A party's ability effectively to exclude liability for a deliberate repudiatory breach of contract has been in some doubt in the past couple of years. In 2009, the High Court held in Internet Broadcasting Corporation Ltd v. MAR LLC1 that there is a strong presumption against interpreting an exclusion clause as having that effect. There was considerable criticism of that decision, but until now no reported judicial comment on it. That has changed.

Although the judge's comments in Astrazeneca, the current case, are obiter, they strongly suggest that an otherwise valid exclusion clause covering liability for breach of contract will apply nevertheless, even where the breach was deliberate.

It woud be prudent all the same when drafting an exclusion clause to expressly state whether or not the protection of the clause will operate even when the protected party is in serious breach. If it is to apply remember, however, that the rules of interpretation, and especially the contra proferentem rule, may still give the court latitude to strike down such a provision, so draft clearly. If the Unfair Contract Terms Act (UCTA) applies, your attempted exclusion may fail in any case.

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