Wang admitted it had committed a number of breaches of its contract to supply engineers’ brassware manufacturer Pegler with a bespoke computer system.
Who: Wang (UK) Ltd and Pegler Ltd
When: February 2000
Where: Technology and Construction Court, London
Wang admitted it had committed a number of breaches of its contract to supply engineers’ brassware manufacturer Pegler with a bespoke computer system. Pegler claimed damages of over £22.8million, of which £12.5m was in respect of lost sales.
Wang sought to rely on a standard form clause in the supply contract which excluded liability “for any indirect, special or consequential loss..in connection with or arising out of the supply, functioning or use of the goods or services supplied.” The clause failed to save Wang for three reasons. First, the losses Pegler claimed arose out of Wang’s failure to supply the contracted goods and services, not out of their supply of them. Second the losses claimed were not consequential at all, since lost sales directly and foreseeably flowed from the failure to supply. Thirdly, since the exclusion was a standard term it was caught by the Unfair Contract Terms Act 1977 and in all the circumstances failed the test of reasonableness that Act imposes.
Why this matters:
This case underlines the need for extreme care in drafting exclusion clauses in supply contracts of all kinds, including contracts for the supply of marketing services. Even if the clause in this case had been more widely drawn so as to catch direct losses arising from supply or failure to supply the contracted services, it might still have failed the “reasonableness” test. The lesson must be to take advice in all cases and not slavishly follow the hand-me-down wording lurking in that dog-eared precedent file.