12 April 2007 | Jimmy Desai

What does 'fit for purpose' mean? How does it relate to IT supplies? Jimmy Desai explains and outlines the issues buyers should consider

The phrase "fit for purpose" is commonly used in IT-related contracts. Yet what does it mean and what should purchasers consider when evaluating a clause that mentions it?

Buyers' rights play a part here. They include:

• Section 14 of the Sales of Goods Act 1979 originally provided that where a seller sells in the course of business there is an implied term that the goods supplied under the contract were of merchantable quality.

• The Sale and Supply of Goods Act 1994 (the Act) replaced this warranty of merchantable quality with the term that the goods supplied are "of satisfactory quality".

• Goods are of satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory, taking account of any description of the goods, the price and all other relevant circumstances.

The quality of goods also includes their state and condition and fitness for all the purposes for which the goods of that kind are commonly supplied.

The Act also states that the implied term regarding satisfactory quality will not extend to any matter which is drawn to the buyer's attention before the contract, or where the buyer examines the goods before contracting and the examination ought to reveal the defect.

The exclusions of the Act include:

• Section 6(2) of the Unfair Contract Terms Act 1977 (UCTA) provides that as a person dealing as consumer, the liability for breach of the obligations arising from section 14 of the Act cannot be excluded or restricted by reference to any contract term.

A person can deal as consumer if (a) they neither make the contract in the course of a business nor hold themselves out as doing so; and (b) the other party does make the contract in the course of a business; and (c) in the case of a contract governed by the law of sale or goods or hire purchase or section 7 of UCTA (miscellaneous contracts) the goods passing under or in pursuance of the contract are of a type ordinarily supplied for private use or consumption.

• Under section 6(3) of UCTA the provisions of section 14 of the Act can be excluded if a party is not dealing as a consumer but only so far as the term satisfies the requirement of reasonableness.

• A party who has prepared its standard terms cannot rely on an exclusion in those standard terms except in so far as the exclusion satisfies the requirements of reasonableness.

An IT supplier will typically exclude its liability for its software being "fit for any particular purpose" when supplying it to a business customer. Whether this works will depend on whether or not it is reasonable.

Here an IT supplier does not want to speculate on all of the purposes for which the business customer might want to use the software and consequently an IT supplier will not usually guarantee that its software is "fit for purpose".

What an IT supplier will normally do is provide limited assurances, for example, that the software conforms with its specification, that the supplier is authorised to grant rights to the software, that it contains no viruses and does not infringe third party rights.

* Jimmy Desai is a partner at Blake Lapthorn Tarlo Lyons