Fitness burden falls on purchasers

23 March 2000
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23 March 2000 | David Arminas

IT buyers must be more specific when explaining the uses of software in contracts to safeguard their company's interest in possible legal battles, a landmark ruling this month has shown.

"The responsibility for the fitness of purpose in an IT contract has now passed on to the buyer," said Paul Abbiati, a legal consultant with PMMS and member of CIPS's legal committee.

"There is now more of a pressure on buyers to state exactly what they want the software to do at the time of signing the contract," he added.

Abbiati's warning comes after a recent ruling in the High Court's Technology and Construction Court that the buyer has a responsibility to tell the software supplier if the company has special needs that the software must fulfil.

Furthermore, the court ruled that the buyer must devote reasonable time and patience to understanding how a system operates, and that there is a "duty of co-operation" between the buyer and supplier to make sure the system works.

In the case, Judge Toulmin held that wood-mouldings company Winther Browne was wrong to cease payments to its leasing company, simply because its computer system did not perform as it believed it should.

However, Toulmin also found that the software supplier, BML Office Computers, should have acted more quickly to deal with the problem.

"Buyers will now have to think twice about suing," Abbiati said.

Previous judgments had tended to focus on the software not being fit for purpose, said Abbiati. For example, a ruling last year in favour of South West Water forced ICL to repay the full cost of a customer billing software program that did not live up to the water company's expectations.

Abbiati added that the dangers of software problems are exacerbated by market pressures on suppliers, particularly in the fiercely competitive business-to-business e-commerce software sector.

"Software suppliers talk a lot of jargon and they are under much pressure to sell their programs," he said. "To add to that, buyers may be ignorant of their own needs or have expectations of the software that are too high."

The onus on the buyer might be mitigated by whether the software is bespoke or a modified off-the-shelf package, suggested Ian Taylor, head of procurement at the Halifax and a member of CIPS's information systems committee.

"If it is bespoke, the buyer has got to get the specification and purpose exactly right," he said. "If it's a package, there might be a greater reliance on the supplier to get it right. But if a buyer puts undue reliance on a software supplier, they deserve what they get."

Taylor added: "What the ruling does show is that buyers and suppliers should work together more closely."


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