Losses arising from the Games - Can you bring a claim?

Losses arising from the Games - Can you bring a claim?

Published:

Author: Harriet Campbell

Described as "the largest peacetime event ever staged in this country" those organising the Games agreed that in the planning stakes, nothing should be left to chance.

Whilst most businesses are looking forward to a period of potentially increased profitability, there will inevitably be some that end up making losses.

Losses arising from Delays

One of the major issues likely to impact businesses during the period of the Games is delay. From delays on major infrastructure projects (with G4S' inability to resource its security contract a prime example) right through to more simple transport and delivery delays, many businesses may find that they are unable to take advantage of the prime business opportunity offered during the Games period. The flip side of this is that other businesses may find themselves sued for their contracting party's loss of profits.

What can you do to prevent or minimise losses?

Whilst most contracts in key industries such as retail and accommodation will already have been drafted with the Games in mind, it is useful to consider whether or not a liquidated damages clause can be agreed even at this late stage for those contracts specific to the Paralympic Games. If you are the provider of goods or services, you will benefit from limiting your liability in this way. If you do not have a liquidated damages clause in your contract and you are delayed in fulfilling your contractual obligations, you may find yourself liable for a damages claim for loss of profits far and above what would normally be awarded. A liquidated damages clause would, in that instance, place a cap on the damages that could be claimed - provided it was a genuine pre-estimate of loss.

In tandem with a liquidated damages clause, if the contract is specifically for the provision of goods or services in time for the Games, it is crucial to include a clause making time of the essence. Without such a clause, it can be difficult to claim damages as a result of what might otherwise be treated as an immaterial delay.

If contractual re-negotiation is unfeasible, the best way to avoid a dispute is to ensure that projects are actively managed and monitored and that even the smallest delay is dealt with as it arises, not when it is too late to remedy.

Claiming Compensation

If a contract is breached as a result of a delay (and assuming there is no liquidated damages clause) typically the courts will award damages for losses which were in the reasonable contemplation of the parties, or where special circumstances were specifically brought to the attention of the parties. The Games is a classic case. By way of example, if a hotel contracts for refurbishment in time for the Games and the refurbishment of the hotel is not completed in time, the contractor could be liable for all the hotel's losses (including, for example, the loss of the increased rates it would have charged during the Games period and possibly the cost of having to pay for accommodation elsewhere for guests who can no longer stay at the hotel).

Should the worst happen and a claim needs to be made, ideally a party would point towards a specific notification that completion of the contract was required in time for the Games. In the alternative, it would be open to argue that the start date of the Games is well known and that all parties were aware that the completion of the contract was required in time for that event.

Whilst prevention is better than cure, even the best laid plans can go wrong. If you do find yourself out of pocket as a result of the Games you should be sure to consider all your options carefully, including bringing a claim for loss of profits.

If you are in any doubt about what to do, seek legal advice.