Intentional misbehavior and purposeful violation
In the realm of English contract law, the concepts of wilful misconduct and deliberate default have significant implications, particularly in the context of outsourcing, technology, and other commercial contracts.
Wilful misconduct, generally understood as a deliberate or conscious disregard of a known duty or standard of care, involves intentional wrongdoing, not just reckless or negligent acts. It requires more than mere negligence or accident; there must be an "active role" of the will, a deliberate intention to cause harm or disregard a duty, not excusable by honest mistake or forgetfulness.
Deliberate default, closely related to wilful misconduct, implies a party's intentional failure to perform a contractual obligation with knowledge that such failure is wrongful.
These concepts critically affect how exclusion or limitation of liability clauses operate in such contracts. Typically, exclusion or limitation of liability clauses do not protect a party against losses caused by their wilful misconduct or deliberate default, as English courts generally hold that parties cannot contract out of liability for such serious breaches.
Contractual caps on liability usually do not apply to wilful misconduct or deliberate default, meaning the culpable party may face unlimited liability for damages arising from such conduct despite contractual limits. In outsourcing and technology contracts, it is common to find clauses expressly excluding wilful misconduct and deliberate default from the scope of any liability caps or otherwise protective clauses.
However, the case of Pinewood suggests that, where the drafting is clear and unambiguous, a limitation or exclusion clause will apply to a deliberate default (whether repudiatory or otherwise). This is in line with the approach taken in cases such as AstraZeneca and Marhedge, where the English High Court rejected the existence of any general rule or special presumption that required explicit language for the exclusion of deliberate breaches from the scope of protection offered by a limitation or exclusion clause.
It is important to note that the concept of wilful misconduct (or "wilful default") has no fixed meaning in English Law, and its interpretation can vary from case to case. Parties negotiating a limitation or exclusion of liability clause should therefore be aware of this and consider including express wording to ensure that the other party is not exonerated from liability for its own deliberate breach.
Customers often demand that wilful misconduct is not behaviour for which a supplier is entitled to cap its liability, emphasising the importance of clear and unambiguous contractual language. If parties expect wilful misconduct (or similar expressions) to be carved out of a liability cap, they must say that expressly.
In summary, wilful misconduct under English law requires intentional or conscious disregard of a known duty, which is markedly different from negligence. This high threshold means that limitation or exclusion of liability clauses will usually not shield a party from claims arising from wilful misconduct or deliberate default in technology or outsourcing contracts, preserving strict accountability for such conduct.
Technology and outsourcing contracts often include clauses explicitly excluding wilful misconduct and deliberate default from the scope of any liability caps or protective clauses. However, the interpretation of wilful misconduct in English law can vary from case to case, and parties should use clear and unambiguous language to ensure that the other party is not exonerated from liability for its own deliberate breach.
