Primary vs secondary obligations
The governing analysis is Lord Diplock's in Photo Production Ltd v Securicor Transport Ltd [1980] AC 827. Termination discharges the parties' primary obligations - their promises of future performance. But it gives rise to, and leaves intact, secondary obligations - principally the obligation to pay damages for the breach. The contract remains the source of that damages claim.
So termination operates prospectively on performance, not retrospectively on the contract. Unperformed primary obligations fall away; everything the contract says about the consequences of breach remains in force.
Exclusion and limitation clauses usually survive
It follows that exclusion and limitation clauses generally continue to apply after termination - including in favour of the party whose breach caused the termination. English law does not treat a sufficiently serious (fundamental) breach as automatically depriving the contract-breaker of protective clauses. Photo Production rejected that idea: the question is simply whether, on the proper construction of the contract, the clause covers the breach and the loss claimed.
The practical mistake to avoid is thinking that because the contract is terminated, the cap and exclusions no longer bite. The correct position is: no more future performance, but the contract still controls liability for the breach that ended it.
Accrued rights survive; future rights fall away
Termination preserves accrued rights and extinguishes future ones. Money that fell due before termination remains payable; breaches committed before termination remain actionable; an indemnity triggered by a pre-termination event survives. What is lost is the right to future performance going forward.
So the timing of rights matters: a right that had already accrued at termination is kept, while one that depended on continued performance is not.
Drafting survival clauses
Do not rely only on a generic statement that a clause survives termination where there is real post-termination risk. List the clauses that must continue and state, for each, the period and scope - typically confidentiality, limitation of liability, indemnities, non-solicitation, audit and records, payment and true-up, intellectual property, and dispute resolution.
For example: confidentiality to survive for a fixed number of years; limitation of liability and dispute resolution indefinitely; indemnities indefinitely for claims arising from pre-termination events. Specificity avoids arguments about what was meant to continue.
What to check
On termination, identify what survives by construction and by any express survival clause: the damages claim, the liability cap and exclusions, accrued payment rights, confidentiality, intellectual property, and dispute resolution. Do not assume the cap or exclusions have fallen away - they usually have not.
And when drafting, make survival deliberate: the time to decide what outlives the contract is before signing, not in the dispute that follows termination.
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Practical checklist
- Treat termination as ending future performance only - the contract still governs damages and liability (Photo Production v Securicor [1980] AC 827).
- Do not assume exclusion or limitation clauses fall away on termination - they usually survive, even for the party in breach.
- Preserve accrued rights: sums due, pre-termination breaches, and triggered indemnities remain enforceable.
- Draft a specific survival clause listing each surviving provision with its period and scope.
- Cover confidentiality, limitation of liability, indemnities, IP, audit and records, and dispute resolution expressly.
- Decide survival before signing - not in the post-termination dispute.
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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