Users get more adversarial as contracts tighten

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Users get more adversarial as contracts tighten

A top IT lawyer has warned that relationships in the industry are becoming more adversarial as users take advantage of better contracts and the poor financial fortunes of the supply industry.

Paul Mason

Christopher Rees, head of IT law at Herbert Smith, said there was a "plate shift" in the legal environment for IT users. In recent weeks, Computer Weekly has reported several user organisations suing suppliers, including WH Smith's £4.5m claim against Siemens.

"Relationships are becoming more adversarial because users, having invested in a robust contract, will both have the inclination and the ability to challenge suppliers if an implementation goes wrong," said Rees, whose firm is acting for the National Air Traffic Service in its current lawsuit against EDS.

"At the moment there is definitely a swing in favour of users. There was a period before year 2000 when users were in the ascendant," he said.

But Rees had blunt advice for users thinking of court action to resolve disputes.

"If you have a dispute for less than £500,000, you have got a problem - but it is not a problem you should think of resolving in court.

"A particular size of contract might include binding expert adjudication as your remedy," he said.

Rees said the stakes in legal disputes were also becoming higher due to intellectual property rights and the value embodied in "intellectual capital".

"Increasingly that is the way investment banks are looking at the valuation of businesses," he said. "Broadly, if a computer system controls the intellectual capital of an organisation, the dispute is about more than just the system."

Rees said the recent case of Watford Electronics verses Sanderson CFL, which upheld the supplier's limited liability clause, did not signal a shift of case law in favour of the supply industry.

"In that case it was an outrageous claim, where someone on the basis of a £100,000 contract was seeking to claim millions of pounds worth of damages when they had agreed to a limitation of liability clause. The judgment gives much-needed clarity and certainty to the position. The effect is that people will now have more confidence in relying on their contracts," said Rees.

Despite the recommendations of the Woolf report, designed to encourage mediation in legal disputes, Rees said, "Mediation has yet to become common currency for it lawyers. But it will. It is an excellent tool for resolving system implementation disputes, I am a big fan of it."

paul.mason@rbi.co.uk


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This was first published in March 2001

 

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