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IT and telecoms contracts: the double limitation of liability does not call into question the essential obligation

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Liability and its limits are often the subject of fierce discussions during the negotiation of telecoms and IT contracts. The decision of January 15, 2020 of the Commercial Chamber of the Cour de Cassation clarified that an exclusion from the nature of the damages that may be compensated, coupled with a ceiling on the amount of damages that may be compensated, remains a valid limitation of liability clause.

In this case, a company reproached its provider of fixed, mobile and internet telephony with various malfunctions, in particular of access and use of mobile lines and the internet, sources of commercial disturbances. As for it, the supplier opposed a limitation of liability provision stipulated in its general conditions, under the terms of which its liability shall doubly be limited: on the one hand, only to the direct damages with the exclusion of all indirect and immaterial damages, on the other hand, capped at 20% of the sums paid during the last 12 months of the contract.

Challenging the validity of this clause in application of the Chronopost case law and article 1170 of the Civil Code in its drafting resulting from the reform of the law of obligations, the Cour de cassation dismissed the appeal brought by the client. It clearly endorses the analysis of the Court of Appeal, considering that the challenged decision “exactly considered” that this double limitation mechanism does not deprive of its substance the execution of the essential obligation of the debtor, insofar as it is limited to defining the nature and the amount of compensable damages.

This decision consolidates market practices in telecommunications and IT. But it is unlikely that it will end the fierce debates animating the negotiations of such contracts.