PRINCIPLES OF BUSINESS LAW

Principles of Business Law



Principles of Business Law

Introduction

Contracts underpin nearly all financial (and occasionally non-financial) undertaking and become the entrance through which contracting parties consider, align and assign the dangers and reward components of their contractual arrangements. With an understandably increased keenness to “do agreements” in some quarters and a booking about the periods upon which deals are finished in other ones, it pays to realise (or remind oneself of) the values of contract regulation which provide the backdrop context. In the case of BSkyB Ltd and another v HP Enterprise Services UK Ltd (formerly Electronic Data Systems Ltd) and another [2010] EWHC 86 (TCC), the High Court found that the IT supplier EDS (now part of Hewlett-Packard) made fraudulent and negligent misrepresentations about its ability to deliver a project within the stipulated timescale when it pitched for a £48 million contract to build, design and implement a customer relationship management system for BskyB.

By framing the assertion in deception, atmosphere was adept to circumvent the contractual hat on liability of £30 million. Unfortunately for EDS, the whole affirmation clause in the contract was held not to omit liability for negligent misrepresentations made by EDS. Exclusion clauses and limitation of liability clauses (aka damages caps) are significant characteristics of many IT contracts. Drafted rightly, they permit parties at the outset of a venture to balance risk against promise advantages, to procure appropriate protection cover, to control and predict economic exposure and, ultimately, to organise their enterprises in a commercially shrewd way. Drafted incorrectly, they will not accomplish these ends - indeed they may accomplish not anything at all. In the context of agreements between financial parties in the IT area (the subject of this article), drafting an exclusion clause or liability cap rightly' vitally amounts to three things, namely double-checking that the clause: is incorporated into the agreement;is enforceable; will effectively limit or omit losses (or any other remedies which might otherwise be claimed) as intended. Whilst solely commercial aspects of liability caps (most especially the grade of the hat) are often the subject of intense discussion between parties to IT contracts, the operative wording of numerous exclusion clauses and liability caps tends to consist of 'tried and checked' boilerplate that is known (or at least hoped) to rendezvous the three obligations of incorporation, enforceability and thriving limitation or exclusion. Standardised clauses comprise sayings and mannerisms that have developed over time, having been moulded and re-shaped in the light of judicial inspection, and brandish a number of recognisable characteristics (some shrewd, some not). The purpose of this item is to reconsider the basics of these clauses and to recall us of why some of the widespread drawing up oddities are there. It does so by quotation to the exclusion clauses, liability hat and, for the sake of variety, the whole agreement clause in the benchmark in writing periods of business of the (fictitious) purveyor of cloud computing infrastructure and services, Clouds ...