Mitigation of Risk - Hive-Up
Company A enters contract with X for £(Implementation of IT system). No written agreement. Therefore implied terms and possible "fit for purpose" onerous obligation at common law. No liability cap. Very high risk. 18 months later. Co. A is acquired by Co. B who later wishes to hive-up A`s assets but does not wish to take on the contract with X. So Co. A remains a going concern. Staff are TUPE`d over and the work (to try to close out contract) is subcontracted to Co. B who exclude all liability to X (they would not be liable anyway - no privity). Thus Co. A is rendered a shell with the risk of being sued by X. If they did, co A has PI insurance to rely on. If that insurance policy falls over they would enter administration. This is a mitigation of risk strategy. Does anybody see any IA1986 issues or any other issues (Co. A has no creditors and as of now it is solvent and trading).