LDs and the liability cap
The contract must state whether LDs sit inside or outside the overall liability cap. Inside, accrued LDs consume cap headroom, potentially leaving nothing for other claims; outside, the cap applies only to non-LD claims and the LD exposure is theoretically unlimited unless separately sub-capped. There is no default - and the cases conflict. In Eco World v Dobler [2021] EWHC 2207 (TCC), an LD cap was held to cap general damages for delay too; in Buckingham Group v Peel [2022] EWHC 1842 (TCC), a cap expressed as maximum LDs within an LD-specific schedule did not cap general damages.
So spell it out. And note a Triple Point trap: where the liability cap carves out negligence, that carve-out can cover negligent breach of contract - potentially taking many breach claims outside the cap. If your cap excludes negligence, check it does not inadvertently gut itself.
LDs and the consequential-loss exclusion
An LD clause fixes the sum payable regardless of how the loss is classified, so remoteness and the consequential-loss exclusion become irrelevant for LD-covered breaches. But for losses outside the LD clause, the exclusion still operates.
To avoid argument, state expressly that the consequential-loss exclusion does not limit claims under the LD clause, and carve LDs out of the exclusion. That keeps the two provisions from colliding.
Sole remedy - and the rescue clause
By default, a valid LD clause is the exclusive remedy for the breach it covers (Biffa Waste v Maschinenfabrik Ernst Hese [2008] EWHC 6 (TCC)). Two traps follow. First, inserting nil or zero as the LD rate can mean the parties agreed to no damages at all - so general damages are barred too (Temloc v Errill Properties [1987] 39 BLR 30). Second, if a sole-remedy LD clause is struck down as a penalty, the innocent party can be left with no remedy at all unless the contract provides a fallback.
So always include a rescue clause: if the LD provision is unenforceable, liability for the breach is determined under the general law of damages, subject to the contract's other limitations, with the overall cap continuing to apply. Do not assume the court will imply one.
Force majeure and the prevention principle
An LD clause for delay needs an extension-of-time mechanism. Without one, employer-caused delay can engage the prevention principle, which can render the LD clause inoperable and put time at large - so no LDs are payable at all. A force majeure clause should likewise state whether LD obligations are suspended during a force majeure event and grant a corresponding extension of time.
This is a large risk for a small amount of drafting: a missing extension-of-time provision can forfeit the entire delay-LD regime.
Termination and survival
Triple Point Technology v PTT [2021] UKSC 29 settled that accrued LDs survive termination without express words - they accrue up to termination, and general damages apply thereafter. If you want LDs to keep accruing after termination (for example until a replacement is found), you must say so expressly.
Include the LD clause among the provisions that expressly survive termination, and make clear how the LD regime hands over to general damages at the termination date. One more practical point: standard professional-indemnity and liability policies often exclude contractual LD obligations, so the exposure may be uninsured - factor that into the commercial negotiation.
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Practical checklist
- State whether LDs sit inside or outside the liability cap - there is no default (Eco World [2021] EWHC 2207 (TCC); Buckingham [2022] EWHC 1842 (TCC)).
- Check whether a 'negligence' cap carve-out inadvertently takes breach claims outside the cap (Triple Point [2021] UKSC 29).
- Carve LDs out of the consequential-loss exclusion expressly.
- Add a rescue clause so general damages apply if the LD clause is struck down - and never insert 'nil' (Temloc [1987] 39 BLR 30; Biffa [2008] EWHC 6 (TCC)).
- Include an extension-of-time mechanism to avoid the prevention principle putting time at large.
- Make the LD clause survive termination expressly, and check whether the LD exposure is insured.
This guide is informational only and is not legal advice. It does not replace advice from licensed counsel on the facts of a specific transaction.
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