Bristows’ SnippITs – Part 2: Suppliers beware! [of excluding Everything Everywhere]

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.

In a previous Bristows' SnippITs, we highlighted the risk for suppliers in agreeing to contracts which contain an exclusion for “loss of profit”. This risk crystallises where a customer breaches the agreement and the supplier does not receive the charges it was expecting, as these anticipated charges may not be recoverable if they amount to an excluded “loss of profit”. In this appeal, this conclusion was confirmed, but only by a 2:1 majority. 

Key Takeaways 

• Neither “loss of profit” nor “anticipated profits” are a term of art and should be interpreted on their precise wording and contractual context. Here, the exclusion of anticipated profits amounted to an exclusion for loss of profit.  
• As we observed previously, if the parties intend to only exclude profits earned outside of the agreement in dispute, very clear words would be required to narrow the meaning of “anticipated profits”.  
• There appears to still be some uncertainty (see Lord Justice Philips’ dissent) as to how clear an exclusion (e.g., of anticipated profits) needs to be when it has the effect of removing a fundamental remedy for one party, i.e. a supplier’s loss of profit.  

Background 

EE made a claim against Virgin for breaching exclusivity provisions in their Telecommunications Supply Agreement (TSA) by migrating non-5G customers to alternative networks and adding new customers to those networks.  

EE argued that it suffered financial loss equivalent to the revenue it would have earned had Virgin complied with the exclusivity provision and kept the customers on EE’s network. Virgin, however, denied any breach and contended that even if a breach had occurred, the correct measure of damages was loss of profits. Virgin further argued that such losses were excluded under the TSA’s exclusion clause, which barred claims for "anticipated profits". The court, in a hearing for summary judgment, agreed. EE appealed. 

Appeal by EE 

EE appealed on two main grounds: 

1. The judge was wrong to classify its claim as one for lost profits. EE argued that it had provided the contracted services, meaning that Virgin’s breach reduced the contractual price EE was entitled to, and therefore its claim was for diminution in price rather than lost profits. 
2. The exclusion clause should not be construed as barring EE’s damages claim. EE contended that "anticipated profits" should not exclude sums payable under the contract itself. 

The Court of Appeal dismissed the appeal, finding no fixed legal principle distinguishing loss of profits from diminution in price — the terms had to be interpreted within the contract’s context. The exclusion clause was intentionally broad, reflecting a commercially reasonable risk allocation agreed upon by both legally advised parties. The court also held that "anticipated profits" and "loss of profits" were used interchangeably in this case, covering EE’s claim. 

Dissenting Opinion  

Philips LJ dissented, arguing that excluding EE’s claim would remove a remedy for a key contractual obligation, which the parties never would have intended for such a core part of the contract.  

He also argued that the term "anticipated profits" should refer to uncertain, speculative profits outside the contract (e.g., profits from unrelated business dealings), not direct, quantifiable losses from Virgin’s non-compliance with the TSA i.e., the agreed charges. As such, the clause as drafted should be interpreted narrowly to avoid the “commercially surprising” result supported by the leading judgment.