Our software supplier missed key delivery milestones, so we terminated the contract. Can we still claim delay damages and the cost of replacing the supplier?
Potentially yes. Termination does not usually wipe out delay damages that accrued before the contract ended, and reasonable replacement costs may be recoverable separately. The result depends on whether termination was justified, the wording of the damages clauses, the losses actually caused and the contract’s liability cap.
In Triple Point Technology v PTT UKSC 29, the UK Supreme Court considered an unfinished software implementation project. It confirmed that an ordinary liquidated-damages clause can apply to qualifying delay up to termination, even where the delayed work was never completed. Such damages do not normally keep accruing after termination unless the contract clearly provides otherwise.
The customer may claim additional loss caused by having to appoint another supplier, subject to causation, remoteness, reasonable mitigation and the prohibition on recovering the same loss twice. Triple Point itself involved a substantial claimed replacement-system cost — but it also shows why establishing a loss is not the same as establishing how much can be recovered after contractual limits are applied.
Missing a milestone does not necessarily give an automatic right to terminate: examine the notice, cure period, termination triggers and the obligations breached. For a qualifying services contract, section 13 of the Supply of Goods and Services Act 1982 may imply a duty of reasonable care and skill.
A limitation clause may materially reduce recovery. In the circumstances covered by the Unfair Contract Terms Act 1977, sections 2, 3 and 11 can require a limitation or exclusion to satisfy a reasonableness test — but they do not invalidate all commercially negotiated caps. The treatment of a negligence carve-out also depends on the contract’s precise wording.
If an agreed delay payment is challenged as a penalty, the principles in Cavendish v Makdessi UKSC 67 may be relevant. The usual limitation period for a simple-contract claim is six years from accrual, subject to relevant exceptions.
Review the contract together with the milestone schedule, delivery and acceptance records, default and termination notices, replacement supplier quotations, and invoices. This will distinguish accrued delay damages from post-termination costs, test the liability cap and identify which losses can actually be evidenced. Without the contract, a specific recoverable amount cannot responsibly be stated.