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Terms and Conditions

"We can be too clever by far."

So found at the High Court in the case of Internet Broadcasting Corporation Limited (t/a NET TV) and NET TV Hedge Funds Limited.

It is usual in terms and conditions to exclude liability for certain actions of the parties seeking to rely upon the terms and conditions, such exclusion clauses are controlled at common law and by the Unfair Contract Terms Act 1977 (UCTA) which largely replace the common law. 

The Courts do not have jurisdiction to strike out an exclusion clause simply because it is unreasonable; if the parties have agreed the term, and it covers the situation in which one party seeks to rely on it, the Courts should respect the parties’ decision.  However, the Courts can control the use of exclusion clauses through their interpretation of the contract. 

If an exclusion clause is ambiguous or uncertain, it would generally be construed against the party trying to rely on it.  Therefore, particularly clear words must be used for the exclusion of liability for negligence to be effective, since the Courts regard it as “inherently improbable that one party to the contract shall intend to absolve the other party from the consequences of the latter’s own negligence”. 

In the recent case of Internet Broadcasting Limited, NET TV was in the business of building and providing interactive television platforms.  The Defendant MR Hedge provided information and services to the Hedge Fund industry and arranged conferences for the Hedge Fund industry. MR Hedge was exclusively controlled by its President, Gary Leach and in May 2005, NET TV entered into an agreement with MR Hedge under which NET TV agreed to set up a dedicated internet television channel to broadcast material provided by MR Hedge. 

Under clause 13, the agreement could not be terminated for 3 years except in response to a material breach.  Clause 17 of the agreement stated that neither party be liable to the other for damages to software, damage to or loss of data, loss of profit, anticipated profit, revenues, anticipated savings, goodwill or business opportunity or for any indirect or consequential loss of damage.  In May 2006, MR Hedge gave notice to NET TV purported to terminate the agreement with immediate effect.  NET TV subsequently sued for loss of profits claiming that MR Hedge had wrongfully and deliberately committed a repudiatory breach of agreement.  MR Hedge admitted that it was wrong but sought to rely upon clause 17 under which it would not be liable for NET TV’s loss of profit.  The Judge found in NET TV’s favour holding that clause 17 did not cover the deliberate personal repudiatory breach of contract committed by MR Hedge.

This case is significant because it represents a noteable development in a law on exclusion clauses, ie. they will not protect a deliberate personal repudiatory breach of contract.  The Court considers that where the party is a corporate body, a repudiation will be personal if it is taken by the “controlling mind” of the organisation.  The case if further important because the majority of terms and conditions contain a clause similar to clause 17 in the case referred to and they should now be reviewed in the light of the recent case with this case in mind.

Pearson Hinchliffe Commercial Law can advise you on terms and conditions, contracts and commercial agremments. Click here to speak to a specialist commercial lawyer.

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