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Failure costs agreement meaning

What does Failure costs agreement mean?
A failure costs agreement allocates who pays specified costs or a pre-agreed fee if a proposed corporate transaction is aborted before signing or completion. Also called a break fee or abort costs agreement, it is a descriptive term used in practice, not defined by legislation or case law. Typically included in heads of terms, an exclusivity agreement or a sale and purchase agreement, it sets triggers (for example breach, withdrawal of recommendation, failure of approvals or financing), the amount or reimbursable adviser and diligence costs, caps, timing of payment and carve-outs (such as a fiduciary out). In England & Wales and Northern Ireland the penalty rule applies: the payment must protect a legitimate commercial interest and be proportionate (Cavendish v Makdessi). Reimbursement of costs is safer than a fixed sum. Scots law is to similar effect. In Ireland, comparable penalty principles apply and courts scrutinise whether a sum is penal. In public takeovers, the UK Takeover Code and Irish Takeover Rules generally prohibit offer-related arrangements, including inducement or break fees, save in limited cases with Panel consent. In private M&A, provisions are common, often capped and subject to regulatory and fiduciary carve-outs.
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NEWS
Property disputes weekly update—key case law, tenancy and rating reforms, service charges, building safety, and practice changes (England & Wales and Scotland)—19 March 2026

In this issue: Key developments and horizon scanning Repairing obligations and dilapidations Residential tenancies Service charges Rent and rates Disputes and remedies Neighbour disputes Enfranchisement and right to manage Contractual issues Easements and covenants Property disputes in Scotland Additional Property Disputes updates LexTalk® Property Disputes: a Lexis®Nexis community Daily and weekly news alerts New and updated content Dates for your diary Trackers Key developments and horizon scanning The Renters’ Rights Act 2025—SDLT The Renters’ Rights Act 2025 is intended to bring in tenant-favourable reforms, yet recent reporting has stressed that the roll-out of assured periodic tenancies may result in SDLT becoming payable on rent for some tenants in the years ahead. While these SDLT provisions are long-standing, general awareness remains limited. Andrew Kerr and Ella Perrett of Burges Salmon assess the position. See News Analysis: The Renters’ Rights Act 2025–SDLT. Repairing obligations and dilapidations ...

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NEWS
IP weekly update: M&S v Aldi design win; expert evidence in patent entitlement; contract breach involving transferred copyright; confidentiality in Dieselgate funding; IPO metaverse reports; new guidance and trackers

In this issue: Copyright & associated rights Designs Patents Confidential Information IP and technology Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Copyright & associated rights Chancery Division allows claim for breach of contract (Photobooth Props Ltd v NEPBH Ltd) The Chancery Division upheld the claimants’ action in a dispute over the supply of photobooths and related accessories. In Photobooth Props Ltd v NEPBH Ltd [2023] EWHC 3478 (IPEC), delivering an oral judgment, the court found that the eighth defendant (MQ), together with the other defendants, had breached both implied and express terms of an oral agreement, including by competing with it and violating rights—copyright among them—that he had transferred to it. MQ had made false, fraudulent statements on which the claimants relied, and the defendants were jointly liable as joint tortfeasors. The court also indicated that, given the defendants’ exceptionally poor conduct throughout the...

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NEWS
Arbitration round‑up: Arbitration Act 1996 s 68 and state attribution rulings; Hong Kong anti‑arbitration injunctions; French exequatur appeals; German reform; institutional updates and drafting traps (19 March 2026)

In this issue: Arbitration in England & Wales Institutional and ad hoc arbitration International arbitration Other arbitration and ADR-related news and developments New and updated content Useful information Daily and weekly news alerts Arbitration in England & Wales Draft your dispute clause and notice of arbitration with care In Ropa v Kharis Solutions Ltd [2026] EWHC 259 (Comm), the Commercial Court’s ruling serves as a clear reminder to draft dispute resolution clauses, notices of arbitration and claim forms with care. The court confirmed that all disputes were to be resolved by arbitration and that there was no obligation to pursue mediation as a condition precedent to starting arbitration. However, the judge noted that the proceedings became necessary due to poor drafting of the dispute resolution clause and the notice to arbitrate, and the costs of the claim were likely increased by a failure to draft them by reference to the requirements of section 14 of the...

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PRACTICE NOTES
2022 appeal round-up and tracker: key civil litigation decisions and forthcoming Supreme Court cases (England and Wales)

Practice Note This Practice Note consists of two strands created to help dispute resolution practitioners remain up to date with developments in case law that affect their field, or which influence civil litigation procedure more generally: selected forthcoming appeals to the Supreme Court are highlighted below; see Key forthcoming appeals to the Supreme Court—2022 summaries of significant appeal decisions in England and Wales (ie rulings of the Court of Appeal and Supreme Court and, where appropriate, certain judgments of the Competition Appeal Tribunal, Judicial Committee of the Privy Council, Court of Justice of the European Union), and ECtHR, which we have covered; see: Key forthcoming appeal cases—2022 You can navigate this content using the table of contents in the left-hand margin. Alternatively, search this tracker using [CTRL]+[F]. This material is not intended to be a comprehensive register of every appeal or major decision relevant to dispute resolution practitioners. Key forthcoming appeals to the Supreme Court—2022 Tort and negligence ...

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PRACTICE NOTES
Detailed Assessment of Costs under CPR: Budgeting, Commencement, Hearings, Standard and Indemnity Bases, and Practical Guidance for Receiving and Paying Parties (England and Wales)

This Practice Note offers a concise outline of the principal considerations relating to detailed assessment. Use it as a starting guide and read it alongside the following Practice Notes, which provide fuller, more detailed coverage: Detailed assessment—what is it, who does it and where? Detailed assessment—commencement Detailed assessment—the hearing Detailed assessment—costs, settlement and agreement What is detailed assessment? A detailed assessment is the process by which the court decides what sum the paying party must pay the receiving party for litigation costs. It applies where the parties cannot reach agreement on costs and where a summary assessment is not suitable. For an introduction to summary assessment and the circumstances in which it is undertaken, see: Summary assessment—overview. The framework for detailed assessment is set out in CPR 47 and CPR PD 47. As a general rule, the costs of the proceedings (or any part of them) are not assessed on a detailed basis until the case has concluded. The court...

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PRACTICE NOTES
2016 appellate civil litigation round-up: key Supreme Court, Court of Appeal and Privy Council decisions on procedure, contract, tort, costs, jurisdiction and remedies

Court of Appeal—professional negligence ARCHIVED : This Practice Note has been archived and is not maintained. The Court of Appeal upheld an appeal in a claim against solicitors, holding that the loss of a chance head of damage was too remote. At first instance, the judge concluded that Lewis Silkin LLP had fallen below the required standard by not advising their client to include a jurisdiction provision in his employment agreement with a franchisee involved in the Indian Premier League’s Twenty20 competition. Because no jurisdiction clause appeared in the contract, when the client later issued proceedings against the franchisee over a severance entitlement, he faced jurisdictional challenges (ultimately dismissed) brought by the franchisee, which postponed his obtaining judgment for £10 million in severance. The client’s case was that, with proper advice on jurisdiction, the contract would have contained an exclusive jurisdiction clause. On that footing, he said, he would have secured judgment for the severance sum sooner (as there would have been no hold‑ups arising from jurisdiction objections) and...

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PRECEDENTS
Software Development Precedent Agreement with Acceptance Testing, IPR Assignment, Service Levels, Change Control, Data Protection, Exit Management, and Open Source and Generative AI Restrictions

Parties This Agreement is entered into on [ insert date ] (the Commencement Date) between the following: [ insert supplier name ], a company incorporated in England and Wales with registered number [ insert company number ] and registered office at [ insert registered office ] (the Supplier); [ insert customer name ], a company incorporated in England and Wales with registered number [ insert company number ] and registered office at [ insert registered office ] (the Customer). Each of the Supplier and the Customer is a party, and together the Supplier and the Customer are the parties. Background (A) The Supplier is [ insert Supplier’s background details and the background to the relevant transaction ]. (B) The Customer is [ insert Customer’s background details ]. (C) The Supplier intends to create certain Software (as defined below) and the Customer intends to appoint the Supplier to develop the same under the terms of this Agreement...

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Q&As
Costs s.26 LTA 1954 discontinuance: lease drafting and litigation

When a tenant qualifies to seek a fresh lease under Part II of the Landlord and Tenant Act 1954 (LTA 1954), expenses are liable to arise both through any litigation and in drafting a new lease that might, in the end, be granted without the need for a contested hearing. This issue concerns the degree to which the landlord may oblige the tenant to cover the costs it incurs in preparing that new lease after a discontinuance, for whatever reason... A tenant enjoying the protection of LTA 1954, Pt II will forfeit the right to claim a new tenancy unless proceedings are started within the time limits set by LTA 1954, s 29A, although those limits can be extended by written agreement and often are where negotiations are advancing with vigour. Because a failure to commence proceedings in time means the entitlement to a new lease is lost, even while the parties are negotiating, a prudent tenant will wish to safeguard its position by issuing a claim...

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UK PARLIAMENT ACTS
170 Scope and nature of general duties

(1)     The general duties specified in sections 171 to 177 are owed by a director of a company to the company.(2)     A person who ceases to be a director continues to be subject—(a)     to the duty in section 175 (duty to avoid conflicts of interest) as regards the exploitation of any property, information or opportunity of which he became aware at a time when he was a director, and(b)     to the duty in section 176 (duty not to accept benefits from third parties) as regards things done

UK PARLIAMENT ACTS
181 Modification of provisions in relation to charitable companies

(1)     In their application to a company that is a charity, the provisions of this Chapter have effect subject to this section.(2)     Section 175 (duty to avoid conflicts of interest) has effect as if—(a)     for subsection (3) (which disapplies the duty to avoid conflicts of interest in the case of a transaction or arrangement with the company) there were substituted—“(3)     This duty does not apply to a conflict of interest arising in relation to a transaction or arrangement with the company if or to the extent that the company's