Bristows’ SnippITs - Put your thinking caps on to avoid an explosive result

This post is the latest in the Bristows’ SnippITs series, which pulls together the key practical takeaways from recent court decisions for the tech sector and beyond.

The recent case of Contract Natural Gas Ltd v ZOG Energy Ltd [2025] EWHC 86 (Ch) provides useful guidance on how courts interpret the interaction between framework agreements (MSAs) and the individual call off contracts or transaction documents they govern. 

Key Takeaways

• If parties intend certain provisions, such as liability caps, to be incorporated into a call off contract made under an MSA, then express words will be required. Relying on the call off contract being “governed by and subject to” the MSA may not be sufficient.
   
• Parties should be very clear when drafting liability provisions in MSAs to specify whether the cap applies: (a) only to liabilities under the MSA itself; (b) under the MSA and all call off contracts together; or (c) separately to the MSA, and separately to each call off contract.
   
• Be specific if you intend time-bar clauses to apply to merely bringing a claim, or to extinguish liability altogether.  A clause limiting the right of a party to “bring a claim” after a certain period of time may not necessarily extinguish the liability which is the subject of that claim such that the claiming party could set-off that liability against amounts it owes the other party.

Background

Contract Natural Gas (CNG) and ZOG entered an MSA in 2013. Under the MSA, the parties could agree separate sales contracts known as “Transactions” under which CNG would supply gas to ZOG. Both companies entered into administration and CNG submitted a proof of debt of c. £1.4 million for unpaid invoices, which was disputed by ZOG on the basis that clause 13.5 time-barred the claim. ZOG then submitted a proof in CNG’s administration of c. £13 million in damages for a failure of CNG to supply gas under some 11,000 sales contracts agreed pursuant to the MSA.  CNG only admitted £250,000, being the amount of the liability cap stipulated in clause 13.3 of the MSA. 

Issues

Two key preliminary issues were in dispute here: 

1. Was the £250,000 liability cap in clause 13.3 of the MSA intended to be a global cap, extending to all claims arising under the MSA including under all Transactions, or was the intention that each Transaction had its own separate cap of £250,000?
    
2. Was CNG’s claim time-barred under clause 13.5, as it was brought outside the 12-month period set forth in the MSA? 

Decision 

Liability Cap

The court agreed with CNG that the liability cap was an aggregate cap for all arising claims under the MSA, including all Transactions.

ZOG argued that clause 13 was incorporated into each Transaction, meaning the cap applies to each transaction separately. However, this was rejected by the court. It was accepted that each Transaction formed a separate contract that was “governed by and subject to” the MSA.  However, the judge found that there were no words expressly incorporating all of the terms of the MSA (nor clause 13 specifically) into each Transaction.  Further, not all of the terms of the MSA would make sense if incorporated into each individual Transaction. 

Even if clause 13 (or all of the terms of the MSA) could be regarded as being incorporated into a Transaction, the judge held it does not necessarily follow that the £250,000 cap would apply on a per Transaction basis as clause 13 sets out “the entire financial liability” for “any breach … of this Agreement [the MSA]” and caps “total liability… in respect of all claims arising under the matters set out in clause 13.1”. ZOG were therefore only entitled to claim £250,000, which was effectively extinguished when set off against CNG’s claim. 

Time Bar 

The court held that the time bar did not extinguish ZOG’s liability even if CNG could not bring a claim in respect of that liability. 

The court held that the expiry of the 12-month period barred legal proceedings, but did not extinguish the liability itself. Therefore, CNG were not entitled to assert any claims after the period expired, but they could still deduct the amount of the time-barred claim from any payments to ZOG in respect of ZOG’s proof in CNG’s liquidation.

Comment

While it seems correct that the liability cap set out in the MSA wasn’t intended to be incorporated into each Transaction, a couple of points seem slightly less clear cut. 

1. It isn’t clear why ZOG didn’t argue an alternative point: that if the liability cap was not incorporated into each Transaction, then its operation should be confined to applying only to the MSA and not each Transaction (which it was agreed formed separate contracts).  While not common, there are contracts which do not include liability provisions at all.
    
2. Supporting this, while the wording of the liability cap in clause 13 did purport to set out the “entire financial liability” of the parties, this was in respect of “all claims” arising from breaches or performance/non-performance of “this Agreement” i.e. the MSA.  There was nothing in the liability cap that clearly indicated it should apply to each Transaction.