Exclusive remedy clauses: A cautionary tale
Oil and gas suppliers, faced with difficult market conditions, will look to take full advantage of the contractual machinery at their disposal to limit their liability to contractual counterparties. A prime example of that is suppliers seeking to rely on exemption or exclusive remedy clauses to exclude certain obligations or to exclude or limit the heads and quantum of damages that they may have to pay, should a breach occur.
This article provides a brief overview of exemption and exclusive remedy clauses (as a matter of English law), and summarises the issues arising from the recent case of Scottish Power UK PLC v BP Exploration Operating Company Ltd and Others  EWCA Civ 1043 (“Scottish Power v BP Exploration”), in which the liability of suppliers of gas was limited to a pre-agreed contractual remedy in circumstances wider than the buyer had anticipated.
Although this article focuses on the English law position, the perspectives offered are of interest in a broader international context. It may also provide useful insight for those involved in the negotiation and drafting of long term sale and purchase agreements.