A subcontract clause dealing with subcontractor failure to complete on time capped the subcontractor’s liability for ‘direct loss and/or expense and/or damages’ at 10% of the subcontract order. The main contractor argued, however, that some of its delay and disruption claims, which it said arose under another subcontract clause, that applied where the subcontractor materially affected progress of the main contract works, were not caught by the cap. So what claims did the cap catch?
The court said that a liability cap in a commercial contract should generally be treated as an element of the parties’ wider allocation of benefit, risk and responsibility. No special rules apply to its interpretation but, to be effective, it must be clear and unambiguous. In the court’s view, the natural meaning of the clause was plain; it capped the subcontractor’s liability for the main contractor’s financial claims (whether described as loss, expense or damages) as a result of delay and disruption caused by the subcontractor, howsoever they arose, at 10% of the sub-contract sum. That was part of the commercial allocation of risk and responsibility and the cap was not limited to claims under particular clauses or inapplicable to claims for breach of implied terms.