English Court of Appeal upholds an exclusion of all lost profits
EE v Virgin Mobile [2025] EWCA Civ 70
David Friar | February 2025
What happens when a party breaches a contract, but the contract excludes liability for the other party’s lost profits? Does that mean all lost profits, or just some?
The English Court of Appeal recently split 2:1 on this question. The key takeaway? When negotiating a contract, carefully review any exclusion for lost profits – otherwise, the contract may be worth much less than you think.
Virgin Mobile and EE entered into a Supply Agreement, under which Virgin Mobile used EE’s mobile network to provide phone service to customers. After entering into the Agreement, Virgin Mobile started moving customers to another carrier’s network. EE alleged that Virgin Mobile had breached an exclusivity obligation, and claimed £24 million that it said it would otherwise have made from the lost customers.
Virgin Mobile denied it was in breach, but said that in any event, EE was prohibited from claiming any damages, because the Supply Agreement excluded liability “in respect of anticipated profits”, and the £24 million claim was for lost profits.
Lord Justice Phillips did not agree. He said it would be surprising if Virgin Mobile could breach the exclusivity obligation with impunity, that it would undermine the bargain, and that it was not consistent with business common sense. He said that the exclusion was only for indirect or consequential lost profits – that is, profits that were lost from dealings outside the Agreement.
Lord Justice Zacaroli took the opposite view. He said that the wording of the exclusion is clear and unequivocal, there is already a separate exclusion for indirect and consequential loss (so that the exclusion for lost profits must mean something more), and the parties negotiated the Agreement with legal advice in which risk was carefully allocated.
Lord Justice Coulson agreed with Lord Justice Zacaroli, although with “a little more reluctance”.
Accordingly, EE was not entitled to any damages as a result of a breach of the exclusivity obligation – meaning that the Agreement is worth much less than EE no doubt anticipated.