The Court of Appeal in the case of Transocean Drilling UK Ltd v Providence Resources plc [2016] EWCA Civ 372, has very recently considered the issue of limitation of liability arising out of an indemnity and an exclusion clause in respect of consequential losses. The Court has considered in particular a cross-indemnity clause also known as a knock-to-knock agreement.

Traditionally clauses attempting to exclude liability for damage and indemnities have been interpreted in a restrictive way applying principles like the contra proferentem rule. 

In this important decision, no new (substantive) law has been established or created but a new principle of interpretation has been affirmed in respect of the type of clauses referred above. The decision safeguards the intention of the parties expressed in a commercial document and stipulates that the meaning of clauses must be interpreted within their specific context as “the same word or a phrase may mean different things in different documents”.  

This decision stresses the importance of clarity and of being specific in drafting commercial agreements.

The decision is attached.