IT Disputes - Spotting them Early and Resolving Them Quickly

JimmyDesai.jpgYou might say that you can spot an IT dispute as soon as you see a few emails from your IT supplier to you (the Customer) demanding payment (or some other remedy). You, the Customer, may not being willing to pay for services which you believe have not been provided at all or to a standard which is far below what you were expecting.

However, from my point of view as a lawyer that has dealt with hundreds of IT disputes over the past 15+ years for customers, when I look through the documentation and correspondence in many disputes (which can be vast), it appears that those demanding emails or lawyers’ letters (and the ensuing IT dispute) were a culmination of perhaps weeks (if not months or years) of more gentle emails between the parties which flagged that a dispute was on the way if the matters complained of were not resolved.

Hence, often the IT dispute actually began a long time before the demanding emails or lawyers’ letters from the IT supplier to the Customer (or vice versa) began. Surely a party can stop an IT dispute in its tracks before it gets to the stage of demanding emails or lawyers’ letters having to be sent at all ?

The chain of events or characteristics of an IT Dispute are often as follows:

  • IT supplier complains about Customer’s actions (be it late payment, not providing the IT supplier with a proper brief, not fulfilling the Customer’s side of the bargain by, for example, the Customer conducting or attending acceptance testing etc.)
  • Customer complains about IT supplier’s actions (e.g. late delivery etc.)
  • At this point, it may be that neither party is completely without fault
  • The party at fault (or both parties) might ask for more time to conduct various actions or might ask for more information   
  • The actions of Customer and IT supplier are probably dependant upon one another and so if either party does not do 100% of what it was meant to do then the other party might complain that it could not do what it had to do because of the non-compliance of the other party
  • A party might agree to provide the other party with an extended period of time to do the relevant actions or to provide more information. This can sometimes be wrapped up in some kind of loose written agreement or email chains between the Customer and IT Supplier apparently agreeing what should happen 
  • Customer or IT Supplier (or both parties) might then not conduct the agreed actions on time
  • The parties enter into correspondence asking the other party to conduct agreed actions and, in the meantime, the parties go on and conduct other unrelated activities together (i.e. the project continues regardless of the difficulties between the parties)
  • Customer complains that work has not been done on time
  • IT supplier states that this work would have been done had it not been for Customer’s own conduct
  • Customer queries why IT supplier did not do more to assist Customer or did not act in a proactive way rather than waiting for Customer to conduct the relevant actions
  • Customer withholds payment of various invoices and IT supplier claims payment of those invoices
  • Customer states that it will not pay for work that has not been done or which has not been done to the standards expected by the Customer
  • A more formal dispute begins between the parties 

This process can go on over many weeks, months or years but the culmination is often letters from a party’s lawyers to the other party demanding various remedial action to take place.

The issues that the parties then face include:

  • they are both dependant upon one another regarding the project and so litigation is not an attractive option for either party – the Customer wants the project to be completed and the IT supplier is relying upon ongoing revenues from the Customer
  • the IT project might be business critical or high profile and the amount of money involved might run into hundreds of thousands or millions of pounds and so each party has a vested interest in ensuring that it is a success – entering into litigation can be seen as an admission of failure and this can be damaging to each party (and the individual people from each party who are involved in the project)
  • litigation is time consuming and costly and there is no telling exactly when the litigation will end – again, this is not good for either party
  • It is not absolutely clear what impact this might have on an ongoing project and this litigation may well end the project mid way through the project which is not a good result for either party (or the individuals at each party that are involved)
  • even if the project continues, goodwill and co-operation may be in short supply between the parties

To try to avoid this chain of events, I think (having dealt with numerous IT related disputes in the past) that it would definitely help Customers (and IT Suppliers) if they:

 

  • have some kind of early warning system so that if a party receives a complaint then each complaint is reviewed carefully in the first instance (perhaps by someone that is not actually involved in the day to day management of the project) to see what the substance of the complaint is and whether or not it has any merit
  • that complaints by either party are dealt with swiftly. If it is indeed a party that is at fault then remedial action is agreed as soon as possible in a formal written agreement
  • have the party’s respective in-house lawyers look at the complaint (or external lawyer if there is no in-house lawyer) to advise on next steps. Far too often the parties try to patch up a dispute without a lawyer being involved and the patch up activity/agreement turns out to be inadequate and ends up forming part of and/or extending the dispute itself.
  • use lawyers who can demonstrate that they are IT law specialists and understand how IT disputes might arise and how they can be resolved as they will have a better understanding of the interdependancy between the parties on IT related projects

You may think that a lawyer is not necessary or is too expensive and should only become involved towards the end of this chain of events above. Alternatively, you may believe that involving lawyers may be seen as some kind of admission that the project is not going as successfully as people hoped it might.  

However, experience and case law tends to suggest that waiting until the end of the chain of events above before consulting your in-house lawyer or external IT legal advisor is far too late. It is often the case that if legal advisors had been engaged earlier on then there would be a better chance of resolving the problem at a much earlier stage in the chain of events above and before the matters balloon into a full blown dispute, at which point the relationship between the parties may be irreconcilable. 

I often get calls from clients where a dispute is just brewing or on the horizon.

Even if they just get general initial IT law advice as to how to deal with an IT related dispute, this will provide them with at least some comfort that they are dealing with the matter appropriately and in a way that protects their commercial and legal interests later on if the dispute continues.

Sometimes it can be just a few words and activities early on from an IT lawyer that can avoid a dispute escalating. This can help to make all the difference in keeping a project on track,  protecting the positions of the individuals that are involved in the IT project and avoiding litigation and Court proceedings later on. 

If you would like a summary of some recent cases which demonstrate the principles above then you can obtain these from me (for free) by emailing me at jdesai@beachcroft.com

 

 

 

  

 

 

 

 

 

 

 

 

 

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