Your Words Matter in Contract Drafting
On 4 February 2025, the Court of Appeal delivered its judgment in EE Ltd v Virgin Mobile Telecoms Ltd [2025] EWCA Civ 70, a contractual dispute between EE Ltd and Virgin Mobile Telecoms Ltd.
Background
The dispute centred on EE’s provision of 2G to 4G (but not 5G) mobile network services to Virgin Mobile. EE alleged that Virgin Mobile breached an exclusivity obligation under their contract by migrating non-5G customers to a different network (when only 5G customers were permitted to be migrated).
EE sought £24.6 million in alleged lost charges, claiming this was the amount Virgin Mobile would have been obliged to pay if the contract had been honoured. Virgin Mobile denied liability, arguing that:
- There had been no breach of the exclusivity obligation, as only 5G customers had been migrated, which was expressly permitted.
- In any event, the claim was barred by an exclusion clause, which stated that neither party could claim for “anticipated profits”.
This case serves as a prime example of the fine balance in interpreting contractual clauses, particularly exclusion clauses.
Key Legal Considerations
The critical clause under scrutiny stated:
“Neither Party shall have liability to the other in respect of anticipated profits.”
Despite potential breaches of exclusivity, the court focused on how this exclusion of liability clause should be interpreted. The varying opinions among the appellate judges highlight the complexities of contractual language—terms such as “anticipated profits” or “loss of profit” may appear straightforward but ultimately depend on the specific contractual context.
Key Takeaways for Contract Drafting
- Consider the rules of contractual interpretation—each contract is unique, and standard definitions cannot be assumed.
- Avoid assuming universal definitions—terms like “loss of profits” or “anticipated profits” have no single, fixed meaning.
- Intentions must be clear from the contract itself—the court does not consider what one party intended a phrase to mean; instead, it assesses the objectively ascertainable meaning of the contract.
The Importance of Precise Drafting
All parties entering into a contract should carefully consider the wording of each clause, as incorrect or ambiguous language can significantly impact their position. Engaging experienced professionals to draft contracts ensures clarity and reduces the risk of costly legal disputes.
If you would like our commercial team to review your existing contracts or assist with drafting a new contract, please get in touch.