In Internet Broadcasting Corporation Ltd (NETTV) and NETTV Hedge Funds Ltd v MAR LLC (MARHedge)1, the High Court held that an exclusion clause in a contract should not extend to cover a deliberate personal repudiatory breach. The court’s decision acts as a useful reminder that exclusion clauses should be drafted clearly and carefully, particularly if they are intended to exclude liability for deliberate and personal repudiatory breaches of contract.
In May 2005, NETTV, a provider of interactive television platforms, and MARHedge, a provider of information and services to hedge funds, entered into a three-year joint venture agreement whereby NETTV agreed to set up and provide an internet channel on which it would broadcast content provided by MARHedge. The agreement contained an exclusion clause which held that neither party would be liable to the other for ‘loss of profi t, anticipated profi t, revenues, anticipated savings, goodwill or business opportunity, or for any indirect or consequential loss or damage’.
One year into the contract, MARHedge committed a repudiatory breach of contract. NETTV sued for loss of profi ts, claiming a wrongful repudiatory termination of the contract. MARHedge accepted that it had wrongfully terminated the contract but argued that the exclusion clause protected it from a loss of profi ts claim. Both parties agreed that the Unfair Contract Terms Act 1977 did not apply, as the contract was individually negotiated.
The court held that the repudiation of the contract was both ‘deliberate’ and ‘personal’, as it was committed by the ‘controlling mind’ of MARHedge, its President. The judge went on to state that there was a rebuttable presumption that an exclusion clause should not extend to cover deliberate personal repudiatory breaches of contract. To rebut this presumption, the exclusion clause would need to contain ‘clear’ and ‘strong’ language to the effect that it was intended to cover such repudiation. In this case, the clause did not expressly state that the parties would be protected from a claim for loss of profi ts in the case of deliberate personal wrongdoing. Further, such a reading would, in all likelihood, render the clause ineffective, as it would enable either party to deliberately and personally repudiate the contract at any time without any liability for loss of profi t. This was in spite of the fact that loss of profi t would be the main head of damage arising from a repudiation.