29 January 2010 | Law Update
It is not often a customer has the time, resources and the financial clout to pursue an supplier through the courts to obtain satisfaction. But Sky took on EDS over the IT services vendor’s poor performance regarding the implementation of a customer relationship management system.
After a hearing lasting 109 days and thousands of documents the decision on this case, which found in favour of Sky, eventually ran to 468 pages. It was a difficult case for Sky to prove since there were a number of obstacles in its way
Firstly, Sky had to show that the goods and services provided were not as agreed. This involved a long analysis of what was meant to be provided by EDS and how this fell short.
Even once this had been proven, Sky had to contend with lots of exclusions and limitations of liability in the contract, particularly a cap of £30 million on EDS' total liability. Sky initially claimed damages of £709 million so there was obviously a gulf between what Sky believed it had lost and what EDS wanted to limit its liability for.
A general principle of law is that exclusions or limitations of liability do not work in cases of fraud. The problem is fraud is very difficult to prove and Sky had to go to great lengths to prove deceit on EDS's part, particularly regarding delivery timetables.
Lessons we can learn from this dispute include that:
• As a customer you need to be very clear about what kind of losses you might suffer and what the supplier is prepared to be liable for. Here, Sky believed it suffered greater losses than the supplier's liability cap and therefore had to find a way of overcoming the affect of the cap by proving that fraud had occurred (even though proving fraud is difficult).
• You might want to conduct as much verification as possible on important projects to ensure the supplier can deliver what it says – a customer should, if possible, not rely only on the information provided by one or two staff at the supplier if it is thought such staff might be tempted to sell the system at any cost
• Although contractual remedies might exist to provide you with some recourse against a vendor, there will often be exclusions and limitations in the contract to contend with, as well as the cost of enforcing the contract in court which can be prohibitive. In this case the legal costs of this lengthy dispute alone have been reported to be in the region of £70 million.
* Jimmy Desai is a technology lawyer at Blake Lapthorn
