Now is the time to review your Business Terms

Remember the 2011 riots? Well a case concerning Force Majeure finally reached the Appeal courts some 9 years later!

Imagine what chaos the Covid19 is going to be…so where are we with Force Majeure.

 

 

Speedread

The High Court (O’Farrell J) has upheld claims for loss of profits, business interruption and increased working costs, arising from the destruction of a warehouse and its contents by fire in the 2011 riots in London.

 

The claimants were owners of CDs and DVDs stored in the warehouse. The defendant provided logistics services to the claimants, including warehouse storage services. The judge found as a fact that the warehouse operator had failed to take reasonable care to secure the warehouse against break-in and fire. The warehouse operator was therefore liable for damages for negligence (and for breach of similar duties in contract, tort and bailment), unless a force majeure clause or various limitation clauses in the logistics contract relieved it of liability.

 

The judge considered various provisions in the logistics contract dealing with liability, and held as follows:

 

•          Force majeure clause. Since the warehouse operator, acting reasonably, could and should have prevented the fire, the fire was not a circumstance beyond that party’s reasonable control. It followed that the force majeure clause offered no protection.

•          Clause excluding indirect and consequential loss. The losses claimed were all direct, being exactly the type of loss one would expect from the breach. None of the losses were excluded as indirect or consequential.

•          Cap on liability for damage to goods. A cap on liability for damage to goods did not assist the warehouse operator’s defence in the present claim because the claim was for business disruption caused by the destruction of the warehouse. (The claim for damage to goods had been disposed of separately.)

•          Aggregate cap on liability. A £5 million cap on aggregate liability was agreed by the parties to be effective, so that the damages awarded to the claimants were limited to that amount, plus interest.

With force majeure a topical subject at the moment, the case is a timely reminder that the parties’ position always depends on the terms of the contract, applied to the facts of the situation. It also shows, yet again, that all limitations face strict interpretation and that an exclusion of indirect and consequential loss may not exclude much. (2 Entertain Video Ltd v Sony DADC Europe Ltd [2020] EWHC 972 (TCC) (24 April 2020).)

 

 

 

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