UK: Exclusion Clauses Re-Examined - Regus (UK) Ltd v Epcot Solutions Ltd

Last Updated: 14 May 2008
Article by Julia Jones

The recent Court of Appeal decision in Regus (UK) Ltd v Epcot Solutions Ltd considered the enforceability of an exclusion clause which purported to exclude liability for financial losses in a supplier's standard terms of business. In this article, Julia Jones examines the Court of Appeal's comments and the factors which were taken into account in reversing the High Court's earlier decision which had caused some considerable concern to many suppliers.

What's happened?

On 15 April 2008 the Court of Appeal handed down its ruling in the case of Regus (UK) Ltd v Epcot Solutions Ltd overturning a High Court decision that had previously caused suppliers considerable concern. The Court of Appeal decision set out some important factors that may be taken into account in determining whether an exclusion clause is enforceable.

The case concerned the reliance by a supplier of serviced office accommodation (Regus) on part of an exclusion clause in its standard terms of business. The part of the exclusion clause in question sought to exclude liability "in any circumstances" for "loss of business, loss of profits, loss of anticipated savings, loss of or damage to data, third party claims or any consequential losses" (the "Exclusion Clause"). A further clause limited Regus' liability for other losses, damages or expenses to Ł50,000.

The customer (Epcot) complained to Regus about defective air conditioning in the office, and when this was not fixed by Regus, Epcot stopped paying Regus the service charges due under the agreement. Regus brought proceedings against Epcot for the amounts due to it, and in response, Epcot argued that the failure to provide air conditioning amounted to a breach of contract and counterclaimed for loss of profits, loss of opportunity to develop its business and distress, inconvenience and loss of amenity.

In order to defeat part of Epcot's claim, Regus had to show that the Exclusion Clause was enforceable in particular that it was reasonable under the Unfair Contract Terms Act 1977 (UCTA). In a High Court judgement of May 2007, the court had ruled that although in theory it was entirely reasonable for Regus to restrict damages for loss of profits and consequential loss, the clause was unreasonable as a whole as the exclusion was so wide that it effectively left Epcot without a remedy for a basic service such as defective air conditioning. It was therefore unenforceable, leaving Regus exposed.

Regus appealed on the grounds that the High Court judge had been wrong to say that the Exclusion Clause was unreasonable under UCTA and that it should be entitled to limit its liability in that way. The Court of Appeal agreed with Regus and reversed the High Court's ruling.

What is the purpose and effect of UCTA?

The purpose of UCTA is to protect contracting parties (particularly consumers and business parties contracting on other business parties' standard terms of business) from onerous contractual provisions such as exclusion and limitation of liability clauses. UCTA imposes limits on the extent to which liability for breach of contract, negligence or other breaches of duty can be avoided in a contract.

Where a clause is contrary to the mandatory restrictions set out in UCTA or is deemed by the court to be "unreasonable", such a clause will be unenforceable, i.e. the relevant liability cannot be excluded or restricted.

Amongst other restrictions, Section 3 of UCTA is particularly important in the context of business to business contracts where the supplier is dealing on its 'standard terms of business'. This section provides that where a term seeks to exclude or restrict a supplier's liability for breach of contract, such a term shall only be enforceable to the extent that it satisfies the reasonableness test.

What is the reasonableness test?

According to Section 11(1) of UCTA, in order to pass the reasonableness test, a contract term must have been:

".... a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made".

Schedule 2 to UCTA contains a non-exhaustive list of guidelines in assessing reasonableness, which in practice the courts apply when considering reasonableness in the context of Section 3 of UCTA. Such factors include the strength of the bargaining position of the parties relative to each other; whether the customer received an inducement to agree to a particular term; whether the customer had the opportunity of entering into a similar contract without the term; whether the customer knew or ought to have known of the existence and the extent of the term and whether it was reasonable at the time of the contract to expect that compliance with a term would be practicable.

In addition, under Section 11(4) of UCTA, where a party seeks by contract to restrict its liability to a specified sum of money, the courts will looks at the resources available to that party to meet the liability should it arise and the availability of insurance cover.

Why did the Court of Appeal reverse the High Court's ruling?

Available Remedies

The Court of Appeal's view was that, contrary to what the High Court judge had said, certain limited remedies were in fact available to Epcot and had not been excluded by virtue of the Exclusion Clause. In particular, Epcot could seek damages for the diminution in value of the services promised, i.e. the difference in value between the provision of air conditioned and non-air conditioned offices, which could be reflected in a percentage deduction of the fees paid by Epcot for Regus' services. The cost of relocating to alternative offices or the cost of replacement air-conditioning were other possible remedies.

Assessment of Reasonableness

Rix LJ then went on to consider whether the Exclusion Clause was reasonable in light of the fact that it did not exclude all remedies. Rix LJ decided that the Exclusion Clause was reasonable on the following grounds:

  • as the High Court judge had said, in principle it was reasonable for Regus to restrict damages for loss of profits and consequential losses from the categories of loss for which it would become liable when in breach of contract;

  • Epcot's managing director was an "intelligent and experienced businessman" who was aware of Regus' standard terms when he had entered into the contract and had contracted before on identical terms;

  • Epcot had used a similar exclusion of liability for indirect or consequential losses in his own business;

  • Epcot had sought to re-negotiate terms of the contract frequently and energetically, although not the Exclusion Clause;

  • there was no inequality of bargaining power. Although Regus was the larger company, Epcot made use of and took advantage of the availability of local competitors of Regus in negotiations; and

  • the Exclusion Clause advised Regus' customers to take out insurance for the losses excluded by the Exclusion Clause. Rix LJ felt that Regus' customers were better placed to insure themselves against their business losses rather than Regus to insure its customers. This was particularly the case as Regus' customers would frequently change and Regus was very unlikely to be in possession of the level of information relating to its customers which underwriters would require in order to provide insurance. In addition, leaving customers to obtain such insurance would enable them to choose whether, how and at what price they would wish to insure against business losses.

What is the effect of the Court of Appeal's ruling?

The Court of Appeal ruling will give some comfort to suppliers who had become nervous about excluding all financial losses in their standard terms of business following the High Court's ruling last year. The Court of Appeal has also provided some helpful guidance as to the sort of factors it will consider in assessing reasonableness. Although the facts will vary from case to case, as can be seen from the above, factors such as the parties' bargaining strength, the sophistication of the buyer and the question of who is best placed to insure the loss will all be considered. Suppliers could also benefit from including wording in their exclusion clauses advising their customers to purchase insurance for those matters in relation to which the supplier excludes liability.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.