Be Clear If You Want to Claim Liquidated Damages for Work Never Delivered

The Facts of the Case

Triple Point agreed to supply a new software system to PTT. PTT paid Triple Point for some of the work, despite a delay. However, it refused to pay Triple Point any further for work that was due. Triple Point refused to continue to work on the delivery, so PTT terminated the contract. Triple Point sued PTT for non-payment of the invoices. PTT counterclaimed for damages including liquidated damages arising out of the delay. Liquidated damages are a pre-agreed basis for damages in the event of a delay in delivery, ie a calculation agreed by the parties in advance, in case delivery is delayed.

In a court ruling on one point, the High Court decided that Triple Point had been at fault and was in "repudiatory breach", ie they had acted contrary to the way it should have done, thus denying PTT the benefits of the contract.

Now, the High Court and subsequently the Court of Appeal had to decide whether PTT could claim for liquidated damages.

The Court of Appeal Decision

The Court of Appeal ruled that because of the way the liquidated damages clause was drafted, it only applied to the delays in where the work was subsequently completed and accepted. PTT's claim could not succeed in respect of work that was so late that it was not delivered at all.

Comment

The result would depend on the exact wording used by the parties in the agreement. Therefore, if the customer wants to be able to claim liquidated damages not just for work delivered late but also for work never delivered at all, it should ensure there is clear wording in the contract for that.

If you would like help with drafting clear liquidated damages clauses in a contract to cover situations when you are obtaining time-critical deliverables, please contact Paul Gershlick in our Commercial Law team on 01923 919 320, or complete the form below.