Until now IT users have usually won the backing of judges when
suing their supplier over a flawed system. Now a ground-breaking
judgment in favour of suppliers gives users new legal obligations
when ordering a system.Two ITlegal specialists, expert witness
Stephen Larner and barristerTerry Bergin, explain.
IT directors and senior managers will need to give much more
thought to the business of buying computer systems than many have
done in the past.
A judgment handed down this week in the Technology and
Construction Court has created a new set of responsibilities for
users. Buyers of standard software may no longer have legal
protection unless they themselves have behaved reasonably in the
process of acquiring their computer systems.
Under existing law, the sale of goods, from the simplest ball
pen to the most complicated computer system, is covered by the Sale
of Goods Act 1979 (as amended).
This statute implies responsibilities into the sale agreement,
responsibilities that fall exclusively upon the supplier - to
provide goods of a satisfactory quality and that are reasonably fit
for their specified purpose.
Software itself may or may not be "goods" for the purposes of
the Act. In St Albans City and District Council -v- International
Computers Limited (1996) the judge held that a program is not
"goods", although the disc containing the program would be "goods".
The distinction is not one of great significance because common law
will imply contractual terms equivalent to the statutory terms in
any event.
In litigation about the supply of allegedly defective computer
systems, these implied terms have long presented problems both for
the parties and for the court - how to define the purpose of the
computer system, how that purpose should be communicated between
the parties, who has responsibility for communicating it and how to
assess if the purpose has been satisfied.
These are not easy questions to answer and the implied terms
have previously led to the focus falling in large part on the
supplier's obligations. There has, until now, been no clear case
law from which to draw guidance as to the responsibilities of the
purchaser.
The lack of guidance has meant that, in legal case after legal
case, suppliers of computer systems have had to put forward the
same arguments about the proper division of responsibilities
between them and their customer.
The difficulty is at its most stark in any case involving the
purchase of a standard computer package that the purchaser wishes
to put to a specialised use. This situation should now be greatly
eased.
In a judgment handed down on 1 March in the Technology and
Construction Court [Anglo Group -v- Winther Browne & Co -v- BML
(Office Computers) Limited], Judge Toulmin CMG QC held that certain
terms are to be implied into a contract for the supply of a
standard computer system.
These implied terms impose a series of responsibilities on the
parties. The case is likely to establish a precedent for the way
the law sees the division of responsibilities between a buyer and a
supplier who are in the process of purchasing computer systems
based on standard software.
The judge's comments on the terms required for a contract for
the supply of a computer system are outlined in the panel above
right. For the first time a precedent unequivocally places implied
responsibilities on the purchaser as well as on the supplier. Under
these terms, the purchaser has the responsibility for telling the
supplier if he has special needs with which he expects the package
to cope.
This, in our view, requires the purchaser either to set out his
requirements clearly in advance of the purchase or to take it upon
himself to examine the software offered by a supplier and to
determine for himself whether it is fit for his particular purpose.
If it is not and he wants it changed, he is obliged to inform the
supplier in clear terms of the change he requires.
We believe that the additional responsibility - to ensure the
supplier understands any special needs - obliges the sensible buyer
to define his needs with precision, probably in writing.
The buyer should also discuss those needs with the supplier to
the point at which the supplier is able to confirm his package can
cope, or can be made to cope for a quoted sum, within a reasonable
timetable.
The other major innovation is the acceptance that there may well
be differences between the buyer's requirement and the package
which may only emerge for the first time during the process of
installation. The decision places a responsibility upon both
parties to be reasonable and to discuss how best to use the
software in order to overcome the problems.
There will be suppliers who regard all of this as common
practice in the industry, and they will be right. The significance
of this judgment is that it provides support for the practices of
the industry and gives a yardstick by which the reasonableness of a
software company's support services can be judged.
Judge Toulmin has made a valuable contribution to the ease with
which disputes in the computer industry can be evaluated by the
parties and, in appropriate cases, settled at an early stage.
Stephen Larner and Terry Bergin were hired by law firm Irwin
Mitchell, which represented supplier BML Computers in its case
against the user Winther Browne.
Main points of judgment
In relation to a contract for the supply of a standard computer
system it is an implied term that:
- The purchaser communicates clearly any special needs to the
supplier
- The purchaser takes reasonable steps to ensure that the
supplier understands those needs
- 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
- The supplier takes reasonable steps to ensure that the
purchaser is trained in how to use the system
- The purchaser devotes reasonable time and patience to
understanding how to operate the system
- 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.