RTF Version

ABORTIVE IT PROJECTS CLEARING UP THE MESS

An article published in
Computers & Law, December 2000/January 2001

By S. Clive Freedman and David Quest
of 3 Verulam Buildings, Gray's Inn, London WC1R 5NT

November 2000

Disputes about IT projects generally fall into one or other of two categories. In the first, the customer claims that the system as delivered does not work as it should. The second category concerns projects which are cancelled by the customer before completion on the ground that the software is late or over budget, and often both.^[1] This article is concerned with the rights and liabilities of the parties to a dispute which falls into the second category, and reference will be made to the two reported cases which concerned such projects, The Salvage Association v. CAP Financial Services Ltd^[2] and South West Water Services Ltd v. International Computers Ltd.^[3]

The typical facts of a dispute of this kind are as follows. The customer’s requirements are for a system which is not currently available and which requires new software to be developed. The supplier agrees to develop the software, or to extend or adapt an existing package developed for other customers, and agrees milestone dates for delivery and installation. These dates are sometimes expressed to be contractually binding, but in other cases they are referred to as targets only. The price may be either a fixed price or may be payable on a price and materials basis, and is often to be paid partly prior to delivery by instalments or on the achievement of specified milestones.

The customer complains of slow progress, and becomes concerned that the supplier does not have the resources to deliver a satisfactory package of programs within any acceptable time-scale. If there is no fixed price, he is also becoming disturbed that the project looks like going over-budget. Eventually he writes to the supplier cancelling the project.

The supplier’s typical response is that the fault lies with the customer for failing to identify his requirements clearly enough before the project began and for repeatedly adding new requirements after the supplier had started to develop the software.

Other factors may be present which complicate the dispute. The supplier may have already delivered hardware and some of the modules before the customer cancelled the project, and the hardware may have been ordered from a separate hardware supplier. Sometimes the purchase of the system is made via a financing company, so that there is no direct contractual relationship or no clear contractual relationship between the customer and the system supplier. The supplier may have indemnity insurance, and the underwriters may be slow to confirm that they will meet the liability to the customer.

Although many disputes of this kind occur, few have resulted in reported decisions by the courts. The reason for this is likely to be that these disputes are nearly always settled, either by direct negotiations or with the assistance of a third party mediator. The issues are often so complex that it can be very difficult to predict the outcome of a trial with any degree of confidence, and this uncertainty provides an added impetus to the parties to reach a settlement rather than to press on for an outright victory. A case could occur in which there are six or more parties, namely the customer, the software supplier, the software sub-contractor, the hardware supplier, the finance company and the indemnity underwriter. This would make it all the more important to reach a negotiated settlement, but at the same time would make it more difficult to negotiate a settlement. Mediation is particularly well-suited to cases of this kind.

In this article we will examine some of the legal principles which may need to be applied to disputes of this kind:

The customer’s right to terminate the contract on the ground of delay

Contracts usually contain terms dealing with the time for completion. As stated above, the supplier may argue that these are targets rather than contractually binding dates which must be met.^[4] Where the dates are targets, or where the contract is silent as to the date for completion, there may be an implied term that the system should be supplied within a reasonable time: section 14 Supply of Goods and Services Act 1982. There will often be scope for dispute as to how long is a reasonable time.

Even where there are contractually binding delivery dates, the customer will not be entitled to terminate on the ground of failure to meet those dates unless the delivery dates are of the essence of the contract. Time is of the essence (1) where it has been expressly agreed to be of the essence, (2) where the circumstances of the contract indicate that it is essential that the agreed date for completion is complied with, or (3) where time was not originally of the essence of the contract but after undue delay by the supplier the customer has given notice requiring the contract to be completed within a reasonable time^[5].

Where it has been expressly agreed that time is of the essence or the circumstances indicate that the delivery date must be strictly complied with, the customer will, assuming he has not contributed to the delay, be entitled to terminate the contract. Because of the serious consequences of even a minor delay it is rare for time to be of the essence in IT contracts, but there are some cases where it may be obvious that the delivery date must be strictly complied with, eg where the customer himself has a deadline to meet such as the commencement date of a business relationship with a third party, or the recent year 2000 deadline. Alternatively there may be cases where it is clear that the delivery date is not a critical date, such as where there have been protracted negotiations before the order was placed without the customer giving any indication of an urgent need for the new system. There may be difficult borderline cases in between these extremes.

If the agreed delivery date is not of the essence of the contract or there is no agreed delivery date, then strictly speaking the giving of notice by the customer will not automatically make the new delivery date an essential term of the contract which must be strictly complied with.^[6]The test for deciding whether delay in fulfilling obligations is so serious as to entitle the aggrieved party to bring the contract to an end is whether the delay was such as to frustrate the commercial purpose of the venture .^[7] Failure to meet a new deadline which is reasonable in the circumstances will as a practical matter usually be a sufficiently a serious breach of contract, and notifying a new deadline which is reasonable in the circumstances will generally make it easier for the customer to establish that he was entitled to terminate the contract. However the giving of notice requiring the contract to be completed within a reasonable time is not a step which the customer is required to take before he can ever establish a right to terminate on the ground of delay: he may be able to establish that the delay was such as to frustrate the commercial purpose of the venture even if he has not taken that step.^[8]

Cases involving IT projects in which the customer was held entitled to terminate the contract on the ground of delay are The Salvage Association v. CAP Financial Services Ltd^[9] and South West Water Services Ltd v. International Computers Ltd.^[10]

The supplier’s typical response to the customer’s notice of termination is to assert that the customer was responsible for the delay. If the supplier is correct in this assertion, the customer will often not be entitled to terminate the contract on the ground of delay by the supplier. In building contracts, an elaborate system of express terms has evolved for the extension of the contractor’s deadline for completing the contract, involving certification of extensions of time by a third party, usually an architect or engineer. This system would be unnecessarily heavy-handed for many IT contracts, and the parties’ respective rights and obligations will usually be determined by applying general legal principles.

The simplest case is where the customer has actually agreed a revised completion date. But the customer may also be disentitled from relying on the contractual completion date where he has waived breach of an obligation to complete by a certain date, or where he has himself caused part of the delay, for example by asking for additional functions to be included in the specification or as a result of delay in providing necessary information to the supplier.^[11] In the Court of Appeal in Trollope & Colls Ltd v. NW Metropolitan Hospital Board Lord Denning MR summarised the effect of the nineteenth century case Dodd v. Churton as follows:^[12]

“It is well settled that in building contracts - and in other contracts too - when there is a stipulation for work to be done in a limited time, if one party by his conduct - it may be quite legitimate conduct, such as ordering extra work - renders it impossible or impracticable for the other party to do his work within the stipulated time, then the one whose conduct caused the trouble can no longer insist upon strict adherence to the time stated. He cannot claim any penalties or liquidated damages for non-completion in that time.”

Issues of responsibility for delay have not yet arisen in a reported case concerning an IT project.

Many IT contracts contain an express term requiring the customer to co-operate with the supplier and promptly to provide necessary information to the supplier. Even where there is no such express term, a term will usually be implied to the effect that the customer will do all that is necessary on its part to bring about completion of the contract, and will provide such co-operation to the supplier as may be required.^[13]

Judge Toulmin QC recently elaborated on this implied term in Anglo Group plc v. Winther Browne & Co Ltd,^[14] holding that in the contract between the customer and the supplier of a standard computer system there were implied terms as follows:

“(a) the purchaser communicates clearly any special needs to the supplier;

(b) the purchaser takes reasonable steps to ensure that the supplier understands those needs;

(c) the supplier communicates to the purchaser whether or not those precise needs can be met and if so how they can be met. If they cannot be met precisely the appropriate options should be set out by the supplier;

(d) the supplier takes reasonable steps to ensure that the purchaser is trained in how to use the system;

(e) the purchaser devotes reasonable time and patience to understanding how to operate the system;

(f) the purchaser and supplier work together to resolve the problems which will almost certainly occur. This requires active co-operation from both parties. If such co-operation is not present it is likely that the purchaser will not achieve the desired results from the system.”

Several of these implied terms would also clearly apply to an agreement to supply bespoke software, and could be relevant to assessing responsibility for delays. However, the implication of terms is heavily dependent on the circumstances of the case and these suggested implied terms are likely to be subject to refinement in future cases depending on their facts and the nature of the system provided.

Delay amounting to a breach of contract may give the customer a right to recover damages for losses caused by the delay, even where the delay is not sufficient to give the customer a right to terminate the contract.^[15] The fact that the customer has been responsible for some of the delay does not necessarily prevent the customer recovering damages for that part of the delay which was caused by the supplier.^[16]

The customer’s right to terminate the contract on the ground of excessive cost

In some cases the supplier works on a time and materials basis. It is matter of construction of the contract whether the customer is committed to paying whatever it costs for the project to be completed.

In such cases it is not unknown for the supplier to provide an over-optimistic budget figure for the total cost of completing the project, in order to obtain the contract. The customer may be able to show that the supplier provided this budget figure without reasonable grounds for believing it to be a reliable figure, or without taking appropriate account of the risks of the project. The customer may therefore be entitled to rescind the contract for misrepresentation and to recover the sums paid under the contract and other wasted expenditure. Usually the customer will not discover the true position until some way into the contract. Rescission may be possible even where the supplier has partly performed services under the contract, but in that case the customer will have to give credit for the value of the goods and services received.^[17]

The supplier’s response may include the following points:

The customer’s claims

Where an IT contract has been terminated, the customer will be looking to recover some or all of the following:

Recovery of part-payments of the contract price

In many cases the price is to be in instalments, partly in advance of delivery. If the customer terminates the contract prior to delivery he will be seeking to recover these payments. There are two routes to recovery: either he can claim contractual damages for wasted expenditure, or, where he has received no part of what he bargained for and the advance payment was not paid as a non-refundable deposit, he can claim in restitution on the ground of total failure of consideration.^[18]

The advantage of the restitutionary claim over a claim in contract is that it does not necessarily require the customer to embark on the often difficult exercise of proving that the supplier was in breach of contract and that the breach was sufficiently serious to justify termination. However, whilst the right to recover pre-payments is clear enough where the customer has received nothing at all, the position is more difficult where the supplier has taken some steps on the way to performing the contract, such as partially developing the software or preparing specifications which could be used by an alternative supplier. In The Salvage Association v. CAP Financial Services Ltd Judge Thayne Forbes QC held as follows:^[19]

“… in a case such as this, where the contract is one for services intended to provide a particular product, it is well nigh impossible to prove a total failure of consideration unless no part of the services contracted for is provided. I also agree that it is not sufficient to show that CAP has not provided the ‘final product’ or that the final product is defective. What is relevant is the bargained-for performance. In contracts for work and materials the purchaser is paying for the work as well as the final product, in contract with contracts of sale where he is only paying for the final product ….. CAP’s obligations under the second contract were not confined to selling the system to SA but included designing and building it. Therefore, CAP's obligations under the second contract required CAP to carry out work and incur expense from the very beginning of the contract and such work was done and expense incurred. in my judgment, the work carried out and expenses incurred by CAP under the second contract were part of CAP’s ‘bargained-for’ performance under the second contract and that is reflected in the provision for payment of instalments of the price at specified stages. accordingly, I am satisfied that there was not a total failure of consideration under the second contract and, for that reason, SA’s claim in restitution under paragraph 14 of the Re-Re-Re-Amended Statement of Claim fails.”

The judge held therefore that the plaintiff’s right to financial recovery had to be founded on its claims for damages.

By contrast, in South West Water Services Ltd v. International Computers Ltd,^[20] the supplier argued that the claim in restitution was unsustainable because the customer had received software and hardware and also management services, which involved a very considerable cost to the supplier in time and expense over 1½ years, and the customer argued that this was irrelevant as it was unable to use the hardware and the partially delivered software. Judge Toulmin QC held as follows:

“I adopt the description of a computer system by Scott-Baker J in St. Albans City Council v. International Computers Ltd (cited with approval by Sir Iain Glidewell in the Court of Appeal): ‘By itself hardware can do nothing. The really important part of the system is the software….’ I am satisfied that the fact that ICL delivered hardware which could not be used without the software (as even if there was nothing wrong with the hardware) was of no significant value to SWW. The same consideration also applies to such base Custima and other packaged software as was delivered to SWW. I accept that SWW did not receive any of the benefit for which it contracted until the turnkey agreement. …. In my view the hardware did not have in the significant value to SWW in itself (except for a minimal second-hand value). Equally, I satisfied but the customer contact and work flow SRS did not have any intrinsic value to SWW which would prevent SWW claiming in restitution. In my view SWW did not get any part of that for which they paid the purchase money. They paid the purchase money for ICL to devise and install a computer system to conform to SWW's URS. They did not receive any part of the computer system. SWW did not contract in a vacuum to receive management know-how. They contracted to receive management services to enable the computer system to be delivered not as an end in itself. The project management and training agreement was expressed to be subordinate to the turnkey agreement. The buyer did not get any part of that for which they paid the purchase money.”

The judge relied on the description of a computer system by Scott-Baker J in St. Albans City Council v. International Computers Ltd^[21] (cited with approval by Sir Iain Glidewell in the Court of Appeal): "By itself hardware can do nothing. The really important part of the system is the software….” It seems likely that the judge regarded it as significant that the agreement was described as a “turnkey” agreement.

The differing decisions in Salvage Association and South West Water leave scope for argument in future cases as to what, exactly, is the “bargained-for” performance under the contract under dispute. Where the supplier is in breach the question is of little importance in practice because the customer can claim recovery of pre-payments as damages; this, in fact, was the remedy awarded in the Salvage Association case.

Cases can occur in which the customer may be entitled to recover advance payments (though not a deposit) even when he is himself in breach of contract, subject to the seller’s right to damages for breach of contract. In Dies v. British and International Mining and Finance Corpn Ltd^[22] the buyer repudiated his contract to purchase goods, but was nevertheless held to be entitled to recover a substantial pre-payment (not in the nature of a deposit) made by him, subject to a deduction in respect of the actual damage suffered by the seller through the breach of contract: Staple J held that if the court permitted the whole pre-payment to be retained by the seller, it would be permitting the retention of a penalty, not damages. However, it should be noted that Staple J stated that the foundation of the right was not total failure of consideration but rather “the right of the purchaser derived from the terms of the contract and the principle of law applicable”.^[23] In Hyundai Heavy Industries Co Ltd v. Papadopoulos,^[24] Dies was distinguished. Lord Fraser of Tullybelton^[25] drew a distinction between the sale of existing goods where the seller performs no work and incurs no expense on the one hand, and contracts such as building contracts on the other hand, where the contractor is required to undertake work and to incur expense from the outset. However Dies could still be followed in an appropriate case.^[26]

Damages

The customer will often base his claim on both breach of contract and misrepresentation. The method of assessing damages differs in each case.

Damages for breach of contract are intended to put the innocent party, so far as money can do it, in the same position as he would have been in if the contract had been performed.^[27] Those damages include compensation for any profit (or saving) which the claimant would have received as a result of the contract, or the increased cost of obtaining a similar system from another supplier. Alternatively, the claimant can claim damages for all sums spent and wasted in reliance on the contract. It has for a long time been a subject for academic debate whether the innocent party can in an appropriate case recover both wasted expenditure and loss of net profits, or whether he must choose between these remedies.^[28] The point has arisen in context of an IT contract in Anglo Group plc v. Winther Browne & Co Ltd,^[29] where Judge Toulmin QC followed Anglia Television Ltd v. Reed,^[30] and held that the claimant must elect between a claim for wasted expenditure and a claim for loss of profits. At any rate, the claimant can never be put in a better position by receiving damages than he would have been if the defendant had not breached the contract. If it can be shown that the contract would have been loss-making in any event then this will give rise to a cap on the recovery of expenditure.^[31]

Damages for negligent or fraudulent misrepresentation are intended to put the innocent party into the position he would have been in if he had never entered into the contract, and not to put him in the position he would have been in if the representation had been true.^[32]

A customer making a claim in relation to failure to supply an IT system may seek to recover loss of profits or contribution to overheads, failure to achieve anticipated savings, increased costs, wasted expenditure, the cost of obtaining and installing a replacement computer system, and the cost of wasted management time.

A claim for wasted management time may be rejected if it is not supported by sufficient records.^[33] However in the Salvage Association case,^[34] an estimate of wasted management time was accepted by the court as being reasonable. The Judge stated as follows:

“Although SA is not a trading corporation in the widest sense of that expression, that is only because it is non-profit making. In all other respects, it is a very sophisticated commercial enterprise whose efficiency and productivity depends to a significant extent on the effective use of the time of its management. I am therefore satisfied that the management time that was wasted on the CAP project could and would have been put to productive use in SA’s activities in other areas, had it not be necessary to deal with the CAP project. I am therefore satisfied that there is no reason in principle why these sums should not be recovered by SA as expenditure which was wasted as a result of CAP’s breaches and that they are recoverable in full.”

On the other hand, in Anglo Group plc v. Winther Browne & Co Ltd, a claim for the time spent in relation to obtaining an alternative system by the individual in charge of computers for the customer was rejected as he was not employed on a fee-earning basis.

The customer must act reasonably to mitigate its loss, and cannot recover the full cost of a more sophisticated replacement system if an equivalent system could have been obtained at less expense.

The supplier may be able to argue that credit must be given for the benefit to the customer of work carried out identifying the customer’s detailed requirements and in preparing detailed software specifications which can be used in the process of obtaining an alternative system.

Exclusion and limitation clauses

The supplier’s response to a claim will usually include reference to the exclusion and limitation clauses in the contract. These clauses often result in disputes as to their applicability in the circumstances which have occurred,^[35] and it may be held that they are worded too narrowly to exclude the liability alleged.^[36]

Exclusion and limitation clauses are also subject to the statutory controls contained in Unfair Contract Terms Act 1977, the Unfair Terms in Consumer Contracts Regulations 1994 (where the customer deals as consumer) and section 3 of the Misrepresentation Act 1967. Schedule 1 paragraph 1(c) of the Unfair Contract Terms Act 1977 provides that sections 2 to 4 of the Act do not apply to any contract insofar as it relates to (inter alia) the creation or transfer of an interest in any copyright, technical or commercial information, or other intellectual property. It was confirmed in Salvage Association that this paragraph did not extend to all the terms of the contract, but only to those which dealt with the creation or transfer of rights of those kinds.

In both St. Albans DC v. International Computers Ltd^[37] and South West Water the court rejected the argument that the contract had not been made on one party’s written standard terms of business because some changes to that party’s standard terms of business have been negotiated and agreed.

The onus is on the party relying on the exclusion or limitation clause to prove that the clause was a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made (section 11(5) of Unfair Contract Terms Act 1977). Issues of reasonableness have arisen in a number of IT cases.

Entire agreement clauses often appear in IT contracts. In South West Water^[41] Judge Toulmin QC held, following Thomas Witter Ltd v. TBP Industries Ltd,^[42] that the entire agreement clause was unreasonable and could not be relied on as it purported to exclude liability for fraudulent misrepresentation. However the decision of the Court of Appeal in E. A. Grimstead Ltd v. McGarrigan,^[43] where an entire agreement clause in a share sale agreement was held to be effective to exclude liability for misrepresentation, casts doubt on this line of reasoning, and in Government of Zanzibar v British Aerospace (Lancaster House) Ltd^[44]Judge Jack QC decided not to follow Witter on the ground that clauses excluding liability for misrepresentation should generally be construed as not excluding claims based on fraud.

The supplier’s claims

The supplier may be owed sums which have already been invoiced but remain unpaid at the time of a justified termination by the customer. Such sums must be paid by the customer unless he would be entitled to recover those sums from the supplier on the ground of total failure of consideration.

There may be other sums which would have become due to the supplier shortly thereafter if the customer had not terminated the contract. Where the customer’s termination was justified the supplier has no right to payment for work done unless the payment had already accrued due under the contract at the date of termination.

Where the customer’s termination was unjustified and a breach of contract, the supplier will be entitled to damages (including payment for work done which has not yet been paid for and the profit which he would have made on the contract had he been allowed to complete it), and/or to payment for work done on a quantum meruit basis. In a fixed price contract the customer may try to reduce the damages by arguing that the supplier had so under-estimated the work necessary for completion that the supplier would have lost money in any event; in such a case a quantum meruit claim may be more favourable to the supplier.^[45]

It can be seen that a great deal will turn on the determination by the court of whether the supplier’s delay was or was not sufficient to justify termination. This is heavily fact dependent and represents a serious risk in any IT litigation over contracts cancelled for delay.

The finance company

Often the cost of the system is financed through a finance company, in order to convert the capital cost of the system into tax-deductible rental payments. The legal relationships between the customer, the supplier and the finance company will depend on the contractual documentation, which will need to be carefully analysed. Usually there will be a written contract between the customer and the supplier. In some cases a collateral contract between the customer and the supplier can be established,^[46] or a tortious liability based on negligent mis-statement by the supplier to the customer.^[47] The customer may however want to pursue its claims against the finance company, who can be expected to rely on its exclusion clauses, arguing that as its role was simply to provide finance its exclusion clauses are reasonable and should be enforced according to their terms.

In Lease Management Services Ltd v. Purnell Secretarial Services Ltd^[48] the customer leased a photocopier which did not have a particular feature which the customer had made it clear she required. After unsuccessful efforts to sort the matter out, the leasing company took the machine away, and eventually brought proceedings claiming five years rent, less a discount for accelerated payment and a deduction for the second-hand value of the repossessed machine. The customer counterclaimed for the value of an old machine which had been handed over in part-exchange. At first instance the leasing company succeeded, the judge holding that as it had played no part in the matter other than as finance company it could rely on its very wide exclusion clauses, following the obiter dictum of Dillon LJ in R & B Customs Brokers Ltd v. United Dominion Trust Ltd.^[49] The judge went on to hold that Purnell was entitled to an indemnity from the vendor of the photocopier, and that the vendor was liable for the value of the old machine as damages.

This decision was reversed on appeal. The first ground of decision was that as the vendor was Canon (South West) Limited, and as the leasing company traded under the name “Canon (South West) Finance”, the leasing company had used a deliberately misleading trading style and was estopped from asserting that it was not bound by the salesman’s representations. Secondly, it was held that the exclusion clauses were unreasonable:

“I have to differ from the Judge. I am unable to accept, as a general proposition, that an exclusion clause which would be unreasonable in a contract for sale by a supplier will be reasonable as between a hirer and a finance company because of the latter's non-inspection of the goods and its non-participation in negotiations proceeding the transaction. If there were such a general proposition, acquisition by hire from a finance company rather than by purchase from a supplier would became a trap. A customer would not expect his rights regarding defects to differ according to which of these two acquisition routes he chooses to follow.

In my view each case must depend on its own facts. All the circumstances must be taken into account. In the R & B Brothers case the buyer was aware of the leak when he signed the contract and the conditions of sale were sufficiently drawn to his attention. In the instant case Purnell had no opportunity to inspect or test the machine supplied before deciding whether to accept it. As soon as Mrs Berry had tried it, she rejected it for non-compliance with the disputed term. LMS did not see or test the machine, but neither did Purnell.

I have in mind that by imposing a reasonableness test Parliament envisaged that a condition such as condition 5 is not necessarily unreasonable. There may be circumstances where it is reasonable. But where the condition excludes all liability for breach of any representation or warranty, express or implied, the burden of proving reasonableness will not be lightly discharged. In the ordinary way the buyer would need to have brought home to him clearly that, for instance, although the seller had expressly given him an oral assurance about the goods, the assurance was of no legal effect and was wholly negatived by the conditions of sale. In other words, that what had been given by the one hand had been taken back by the other. In the ordinary run of things, the mere presence of an exclusion clause among a series of small-print standard terms will not be adequate for this purpose. It will not be adequate because it is not reasonable to suppose that a buyer will appreciate that such terms override statements expressly made by the seller with the intention the buyer shall rely on them.”^[50]

It was held that the customer was entitled to reject the machine, was not liable to make any payment to the leasing company, and was entitled to damages for the value of the machine taken in part-exchange.

Purnell was followed in Sovereign Finance Ltd v. Silver Crest Furniture,^[51] a case concerning a lease of a shrink-wrap machine and associated machinery for manufacturing kitchen equipment. However in Anglo Group plc v. Winther Browne & Co Ltd Judge Toulmin QC held the finance company’s exclusion clauses to be reasonable, as it would have been unreasonable for the customer to rely on the skill and judgment of the finance company in relation to the supply of the computer system, and the customer had a direct claim against the supplier.

Conclusion

This article has focussed on the legal issues which arise when an IT project is cancelled. In addition to the legal issues, most cases also involve disputed issues of fact (such as who caused delay) and disputed technical issues (such as whether there was any prospect of satisfactory software being developed by the contractual delivery date). In the circumstances, the outcome of litigation is particularly difficult to predict, and it is understandable that there should be a very strong desire to settle by direct negotiation or mediation.

Clive Freedman and David Quest, Barristers
3 Verulam Buildings
Copyright © November 2000

Note 1   See “Computer Contract Disputes”, Michael Turner, in Computers & Law vol 8 issue 3 (August/September 1997) page 12.    [Back]

Note 2   [1995] FSR 654, 679-680, Judge Thayne Forbes QC (as he then was).    [Back]

Note 3   [1999] Masons CLR 400, Judge John Toulmin QC.    [Back]

Note 4   For example South West Water v ICL [1999] Masons CLR 400 at pages 443-444.    [Back]

Note 5   Chitty on Contracts 28th Edn (1999), vol. 1 paragraphs 22-011 - 22-015.    [Back]

Note 6   See Chitty on Contracts paragraph 22-017.    [Back]

Note 7   Universal Cargo Carriers v. Citati [1957] 2 QB 401, 430-431 and 449, applied in South West Water Services Ltd v. International Computers Ltd [1999] Masons CLR 400 at 442.    [Back]

Note 8   Carr v. J. A. Berriman Ltd. (1953) AJLR 273 (High Court of Australia), Hudson’s Building and Engineering Contracts 11th Edn (1995) vol. 2 paragraphs 9-007 - 9-031, vol. 1 paragraphs 4-210 - 4.212.    [Back]

Note 9   [1995] FSR 654, 679-680.    [Back]

Note 10   [1999] Masons CLR 400.    [Back]

Note 11    See Rickards v. Oppenheim [1950] 1 KB 616 (CA), Dodd v. Churton [1897] 1 QB 562, Trollope & Colls Ltd v. NW Metropolitan Hospital Board [1973] 1 WLR 601; see also Hudson’s Building and Engineering Contracts 11th Edn (1995) vol. 2 paragraphs 9-007 - 9-031).     [Back]

Note 12   This part of Lord Denning’s summary of the effect of Dodd v. Churton was quoted and approved by in the House of Lords in Trollope & Colls [1973] 1 WLR 601 at 607.    [Back]

Note 13   Mackay v. Dick (1881) 6 App. Cas. 251, 263, Chitty on Contracts 28th Edn (1999), vol. 1 paragraph 13-011.    [Back]

Note 14   Unreported, 1 March 2000; see “Blessed are the suppliers …”, Richard Harrison, in Computers & Law vol 11 issue 4 (October/November 2000) page 24. The case also contained observations on the need for independence on the part of expert witnesses.     [Back]

Note 15    Chitty on Contracts 28th Edn (1999), vol. 1 paragraph 13-018.    [Back]

Note 16   McAlpine Humberbrook Ltd v. McDermott International Inc (1992) 58 BLR 1, 35, CA.    [Back]

Note 17   Atlantic Lines & Navigation Co Inc v Hallam Ltd [1983] 1 Lloyd’s Rep 188 at 202; see the comments on this case in Chitty on Contracts 28th Edn vol 1 paragraphs 6-115 - 6-116    [Back]

Note 18   Rowland v. Divall [1923] 2 KB 500.    [Back]

Note 19   [1995] FSR 654, 682-683.    [Back]

Note 20   [1999] Masons CLR 400    [Back]

Note 21   [1995] FS R 686, 696.    [Back]

Note 22   [1939] 1 KB 724.    [Back]

Note 23   [1939] 1 KB 724 at 744.    [Back]

Note 24   [1980] 1 WLR 1129.    [Back]

Note 25   At pages 1147-1150. See also 1134-1136 and 1142-1143.    [Back]

Note 26   See eg Rover International Ltd v. Cannon Film Sales Ltd [1989] 1 WLR 912.    [Back]

Note 27   Chitty on Contracts 28th Edn (1999), vol. 1 paragraph 27-001.    [Back]

Note 28   Chitty on Contracts, 28th Edn (1999), vol. 1 paragraph 27-064, Stoljar [1975] 91 LQR 68, T.C. Industrial Plant Pty Ltd v. Robert’s (Queensland) Pty Ltd [1964] ALR 1083)    [Back]

Note 29   Unreported, 1 March 2000.    [Back]

Note 30   [1972] 1 QB 60.    [Back]

Note 31   CCC Films v Impact Quadrant Films [1985] QB 16    [Back]

Note 32   Chitty on Contracts 28th Edn (1999), vol. 1 paragraphs 6-044 - 6-075, especially 6-054; South West Water, at pages 441-442.    [Back]

Note 33   Tate & Lyle Food and Distribution Ltd v. GLC [1982] 1 WLR 149.    [Back]

Note 34   At pages 684-5.    [Back]

Note 35   See “Warranties, Limitation and Exclusion Clauses revisited”, Harry Small, Computers & Law vol 9 issue 6 (February/March 1999) page 39.    [Back]

Note 36   For example Pegler Ltd v. Wang (UK) Ltd [2000] BLR 218, 70 Con LR 68; see Computers & Law vol 11 issue 1 (April/May 2000) page 29.    [Back]

Note 37   [1995] FSR 686 at 704-711 (Scott-Baker J), [1996] 4 All ER 481 at 492, (CA).    [Back]

Note 38   [1999] Masons CLR 400, 440-441, 444-449.    [Back]

Note 39   (1984) 1 CL & P 92.    [Back]

Note 40   See above.    [Back]

Note 41   [1999] Masons CLR 400, at 440-441; see Computers & Law vol 10 issue 4 (October/November 1999) page 4.    [Back]

Note 42   [1996] 2 All ER 573; See “Warranties, Limitation and Exclusion Clauses revisited”, Harry Small, Computers & Law vol 9 issue 6 (February/March 1999) page 39, at page 40.    [Back]

Note 43   Unreported, 27 October 1999. Contrast also Skipskreditt v. Emperor Navigation [1998] 1 Lloyd’s Rep 66, at 76-77.    [Back]

Note 44   Unreported, 26 January 2000.    [Back]

Note 45   See Hudson's Building and Engineering Contracts 11th Edn paragraphs 4.230 - 4.231 and 1.272.    [Back]

Note 46   For example Mackenzie Patten v. British Olivetti Ltd (1984) 1 CL & P 92, a case concerning the supply of a computer.    [Back]

Note 47   For example Professional Reprographic Services v. DPS Typecraft (unreported, 15 February 1993).    [Back]

Note 48   [1994] CCLR 127, 13 Trad. L.R. 337, The Times 1 April 1997.    [Back]

Note 49   [1988] 1 WLR 321, at 332. Other cases in which exclusion clauses in finance agreements were held to be enforceable are Richards Longstaff & Partners Ltd v. Lombard North Central plc (unreported, 30 July 1985, a computer case), Ormsby v. H & H Factors Ltd (unreported, 26 January 1990, where the Court of Appeal upheld the first instance decision but expressed misgivings about it), W Photoprint Ltd v. Forward Trust Group Ltd (1993) 12 Tr L 146, and National Trust v. Arnall Structures Ltd (unreported, 4 July 1994).    [Back]

Note 50   Per Sir Donald Nicholls V-C.    [Back]

Note 51   [1997] CCLR 76, 16 Trad. L.R. 370.    [Back]