The single word that opened a hole in the liability cap

The signal

A headline cap is not the same as the amount actually at risk. Definitions, carve-outs and remedy clauses decide which losses enter the cap—and a familiar word can carry more than one plausible meaning.

The commercial trap is to negotiate the number while treating the sentence around it as standard text.

What happened

Court-record facts. An energy-trading business hired a software company to design, install, maintain and license a customised commodity-trading system. The US$6.92 million contract used milestone payments and included daily liquidated damages for delay.

It also capped the supplier’s liability. The cap excluded “specific remedies expressly identified as such” in the contract and liability for “fraud, negligence, gross negligence or wilful misconduct.”

The project fell behind. The first two stages were completed 149 days late, work was suspended during a payment dispute, and the customer terminated the contract when most milestones remained incomplete. The supplier sued for invoices; the customer counterclaimed for delay and termination losses.

Three linked questions reached the Supreme Court: whether liquidated damages accrued for unfinished work until termination, whether “negligence” included breach of a contractual duty of care, and whether liquidated damages sat inside the cap.

What the court decided

Holding. The Supreme Court held unanimously that the delay clause applied to work that was never completed: liquidated damages accrued until termination, after which ordinary breach damages could apply. It also held unanimously that those liquidated damages were subject to the contractual cap.

On the cap’s negligence exception, the Court divided. A three-justice majority held that “negligence” covered breach of the contract’s duty to exercise reasonable care and skill, not only an independent negligence claim in tort. Losses resulting from that contractual negligence therefore fell outside the cap. Two justices dissented on this issue because they considered that reading to undermine the cap’s main commercial function for the supplier’s core work.

The result was not that the cap disappeared. Different losses received different treatment under the same liability architecture.

Key takeaways

Paraveilux interpretation — not a court finding.

• The cap amount is only one input; scope, aggregation, exceptions and linked remedies determine the effective exposure.
• Common words such as “negligence” can operate differently depending on the duties and structure elsewhere in the contract.
• Delay damages, replacement costs and performance failures may travel through different liability pathways.
• A split appellate decision is a warning that sophisticated readers can assign materially different meanings to the same wording.

The hidden variable

Paraveilux interpretation — not a court finding. The hidden variable was the contract’s classification of failure.

The software work included obligations to deliver specified functionality and obligations to exercise care. The exception attached consequences to that classification. Once a claim could be characterised as contractual negligence, the cap outcome changed.

This is why a cap cannot be reviewed in isolation. The operational specification, service standard, warranty, indemnity, liquidated-damages regime and insurance language may each define or redirect the same failure. A clean headline number can conceal a complex routing table.

Questions for an owner

Practical questions, not prescriptions.

• Which liabilities are expressly inside, outside or subject to a separate cap?
• Do undefined words in the exceptions also describe core contractual duties?
• Are liquidated damages included in the cap and, if so, in which cap and aggregation period?
• What happens to accrued delay exposure when the contract terminates before completion?
• Do indemnities, service credits and replacement costs overlap or operate independently?
• Does the available insurance respond to the exposures that the contract leaves uncapped?

Related reading

Liability caps, indemnities and insurance mismatch maps the full allocation system rather than the headline number. Hidden contract dependencies helps connect remedy wording to delivery and termination events.

Evidence boundary

Source transparency. The business roles above are anonymised. The source decision is Triple Point Technology, Inc v PTT Public Company Ltd [2021] UKSC 29, decided 16 July 2021. The official case page links the judgment and court press summary; the full judgment is authoritative. The factual account and holding above distinguish the unanimous issues from the three-to-two ruling. The Paraveilux interpretation and practical questions are not court findings.

Limitations

This was an English-law dispute about a particular technology contract. It does not establish that every reference to negligence overrides a liability cap, that liquidated damages are always capped, or that damages always accrue in the same way after termination. Wording, governing law, claim characterisation and facts matter. The official case page was checked on 13 August 2026; this brief does not assess later judicial treatment.

This brief is general risk education, not legal advice or an outcome prediction.