Check contracts in light of Dell recall, warn lawyers

IT directors should view the recall of 4.2 million notebook batteries by Dell this month as a wake-up call, lawyers have warned.

IT directors should view the recall of 4.2 million notebook batteries by Dell this month as a wake-up call, lawyers have warned.

Even those not affected by the recall, which was prompted by concerns about overheating batteries, should use it to reassess whether their existing contracts cover consequential damage.

Thousands of IT departments in the UK are thought to be affected by the recall. Dell is supplying replacement batteries and is helping businesses identify the batteries affected, but IT departments will need to take steps to check the laptops either through an internal recall or by getting users to carry out a check.

Businesses are expected to have to meet the cost of distributing replacement batteries, and users will have to wait an estimated 20 days for replacement batteries.

One IT manager, whose firm does not use Dell hardware, said, "It would be a nightmare to manage a recall like this. We have about 1,000 laptops and they are all over the world, in people's homes and on the road."

Businesses could seek compensation from Dell for the disruption caused by the recall, but IT chiefs must check contracts carefully, said Moya Clifford, solicitor in the product liability team of Addleshaw Goddard, because not all contracts cover consequential liabilities.

"One of the most important things when negotiating contracts is exclusion of liability. A contract comes into its own when you have a problem and look to see what you are covered for," she said.

Clifford also warned that businesses that had negotiated big deals with Dell in the US would have to seek compensation through the US courts.

The BBC, British Airways, BMW and Newcastle City Council have all bought laptops from Dell in corporate-wide deals. The BBC said about 130 of its laptops were affected by the recall. A spokeswoman for Newcastle City Council said it was still investigating the problem.

A Dell spokeswoman said the company had processed 90,000 recall orders by Thursday last week. She said it had provided businesses with product lists, customer letters and other tools to help lead them through this process. She would not comment on whether Dell would compensate businesses for the disruption caused by the recall.

"I would have thought Dell would be inundated with [compensation] claims," Clifford said.

Jimmy Desai, a partner at law firm Tarlo Lyons, said it was feasible that firms could bring claims against Dell for consequential damage, but he was doubtful about their chances of success. "They could try to get compensation, but whether they would get it is questionable."

Apple recall

Apple Computer last week followed Dell in recalling Sony-built notebook batteries amid fears that they could overheat and catch fire.

Apple, which is recalling 1.8 million notebooks, said it had received nine reports of lithium-ion battery packs overheating, including two cases in which users suffered minor burns.


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