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Exclusion Clauses and ‘Knock for Knock’ provisions

September 2016 - Issue 85

The recent Court of Appeal decision in Transocean Drilling UK Ltd v Providence Resources Plc 2016 EWHC 1035 (Comm) demonstrates the court’s willingness to give effect to parties’ intentions where they are clearly stated in the contract.

This case involved the suspension of drilling operations for more than two months which caused Providence to incur additional overheads. In the first instance, Providence was allowed to recover these costs due to the breach of contract of the rig not being in good working order on delivery and crew negligence.

However, on appeal, the court recognised a set of ‘knock for knock’ provisions which apportioned the responsibility for certain losses between the parties that would have otherwise been recoverable as damages under breach of contract. The exclusion clause relied on by Transocean was part of the ‘knock for knock’ provisions.

It was held that Providence’s costs clearly fell within the exclusion clause, reiterating the fundamental principle of freedom of contract.

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