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CA resolves debate over interplay between limitation of damages clauses and the grant of injunctions

Under English law a Court in deciding whether to grant an injunction will consider whether damages are an adequate remedy. If so, an injunction will usually not be granted and the wronged party must rest content with an award of damages.

An important issue in respect of which different courts have expressed opposite conclusions is whether damages are an adequate remedy even if they are limited to a sum significantly below a party’s actual losses by reason of an exclusion or limitation clause.

The Court of Appeal in the case of AB v CD [2014] EWCA Civ 229 has now resolved this debate: the Court considered that the primary purpose of the law is to hold a party to performance of his or her obligations under a contract. Whilst it had been argued that the wronged party who had agreed to cap any claim for damages should be held to that bargain when considering whether damages were an adequate remedy, the Court held to the contrary that if a party to a contract stipulates that if he breaches his obligations his liability will be limited or the damages he must pay will be capped, that is a circumstance which in justice tends to favour the grant of an injunction to prohibit the breach in the first place.

Roger ter Haar KC acted for the successful appellant, instructed by Lewis Silkin LLP.

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