The Sage Interface: Representation, Entire Agreement and a Liability Cap

The test is objective intention, not what either party subjectively thought. Courts weigh: the timing of the statement relative to signature; its importance to the recipient (did Kestrel make clear it would not contract otherwise?); the relative knowledge of the parties; whether the agreement was later reduced to writing; and whether the statement was actually relied on. Compare Oscar Chess v Williams (private seller, no special skill - not a term) with Dick Bentley v Harold Smith (dealer with expertise - term).

Strong points for Kestrel: the sales manager had special knowledge of both systems; Kestrel had put the requirement in writing; the reply 'understood' evidences reliance; the statement is specific and factual, not a puff.

Points against: the signed order form was executed nine weeks later and on its face records the whole bargain. Where the parties reduce their agreement to a signed document, the presumption is that pre-contractual statements are not terms.

The entire agreement clause. An EA clause is strong evidence that the parties intended the signed document to be the sole source of obligations, so the termhood argument is weakened. But an 'entire agreement' clause is not the same as a 'non-reliance'/'no representations' clause: it does not, without clear words, defeat a claim that a party was induced to contract by a false statement. Any clause excluding liability for misrepresentation is subject to the reasonableness requirement in s.3 Misrepresentation Act 1967 (and, for a business contract, s.11 and Schedule 2 of the Unfair Contract Terms Act 1977).

Practical conclusion. Run the claim in misrepresentation rather than only in breach of contract: (a) a false statement of existing fact; (b) made by someone with knowledge; (c) intended to be and actually relied upon, with the 'understood' email as the anchor. Under s.2(1) MA 1967 the representor bears the burden of showing it had reasonable grounds. Tell the client that this route is why the file must now be searched for any due diligence, caveats or recorded meetings before a letter before action is sent.

Incorporation. The clauses are in a signed document; signature binds the signatory even if unread (L'Estrange v Graucob). There is no arguable notice problem.

Construction. Caps are read contra proferentem and the court asks whether the wording, on its true construction, covers the loss claimed. 'In contract, tort (including negligence) or otherwise' is broad, but a clause is not readily read as covering a statutory misrepresentation claim; 'or otherwise' may be cut down to the same genus as the preceding words. The cap is more likely to bite on the breach of contract claim than on a s.2(1) claim.

UCTA. The contract is on Vantage's written standard terms, so UCTA s.3 applies even though some bespoke work was done; reasonableness is then assessed under s.11 and Schedule 2: relative bargaining strength, whether Kestrel could have contracted elsewhere, whether Kestrel was induced to agree, whether the cap was a genuine allocation of risk, and - importantly - who could insure. A cap equal to the price is often upheld between businesses; an exclusion of all consequential loss is also commonly upheld. Advise the client that the clauses are more likely than not to survive, but that the argument is worth running if the loss is catastrophic relative to the price.

Recoverability. (1) The £9,000 workaround is direct loss of a kind naturally arising from the breach and is recoverable in principle, subject to the cap. (2) The £70,000 lost supply contract is the battleground: apply Hadley v Baxendale limb 1 (loss arising naturally) and limb 2 (loss in the parties' contemplation at the time of contracting). A lost profit on a separate customer contract is very likely to be treated as consequential and excluded. (3) Mitigation: the £9,000 is recoverable as reasonable mitigation expenditure, but the burden is on Vantage to show Kestrel failed to mitigate the rest. (4) If the cap holds, total recovery cannot exceed £45,000 across all heads - which is why the misrepresentation route (outside the cap if the clause does not cover it in clear terms) matters so much.

Can Kestrel terminate? Termination for breach requires the breach to be repudiatory - a substantial failure of the whole benefit of the contract. £18,000 of customisation on a £45,000 system is a serious shortfall and arguably goes to the root, but the safer analysis is that the system still works as a stock-control system and the defect is remediable; that points to damages, not termination. Rescission ab initio for misrepresentation is a different remedy, but it is barred or weakened by: affirmation (continued use of the system, payment, delay since installation), lapse of time, and the court's discretion under s.2(2) MA 1967 to award damages in lieu of rescission.

Immediate steps before issuing.

1. Take a detailed statement from the operations director and collect all emails, meeting notes, the pre-contract demonstration and the tender documents - the entire agreement clause makes the pre-contract file the whole case.
2. Do not let the client act in a way that affirms: serve a written reservation of rights, require Vantage to attend to rectify, and put the £18,000 quotation in issue by commissioning an independent technical report on whether the integration is genuinely impossible or merely expensive.
3. Quantify: £9,000 incurred; £18,000 avoided cost if rectified; the £70,000 contract needs the underlying order and correspondence to prove causation and that it was in contemplation.
4. Send a letter before action setting out the misrepresentation and breach, and put the insurer/partner on notice of the potential claim.
5. Consider a without prejudice negotiation around the cap figure; where the cap is enforceable, the practical value of the case may be under £45,000, which affects costs strategy and whether to use the small claims/ fast track.
6. Diarise limitation - six years from breach or from reliance on the statement.