CIOs need to document the promises and representations made by IT vendors during the sales process, according to a legal analysis of a recent dispute in the UK.
In 2010, central London hotel Kingsway Hall successfully argued in court that an off-the-shelf hotel booking system it was sold by IT supplier Red Sky was not fit-for-purpose, and that it was within the hotel's rights to reject and replace it.As one of only a handful of IT failures to not only end up in court, but also progress to hearings rather than being settled early in the piece, the Kingsway Hall case provides a rare - albeit incomplete - glimpse of where contracts can go wrong and what lessons can be learned.The technical problems began a fortnight after Kingsway installed the booking software, recurring and escalating to the point where they eroded trust in the system’s outputs and the advantages the new system was supposed to deliver.Months of conference calls and promised fixes did not eventuate. It ended with a solicitors letter rejecting the software and mounting a claim for losses that landed in court.Baker & McKenzie special counsel Anne Petterd says the Kingsway case highlights the importance of clearly documenting representations made by an IT supplier and communicating them back to the supplier.The judgment itself surfaces reams of documented references to faults and meeting minutes made by Kingsway.“It’s [about] who has the documentation that they have kept from the tendering process to show that clear link between what representations were made [and] what was relied upon to enter into the contract,” she said.Petterd presented the case study at the NSW Society for Computers and the Law last night.AcceptanceThe case raises questions about when a customer is deemed to have accepted a piece of software. In Kingsway, the system went live in October 2006 but wasn’t formally rejected as unfit for purpose until mid-April the following year.Petterd is unable to give a single answer on what stage of the software implementation cycle constitutes “acceptance”.
“To give you the unhelpful lawyer answer: it depends on what the contract says,” she notes.“But that is the point, particularly when you’re buying off-the-shelf software - you need to be very careful about what is in the contract terms.“In [Kingsway] there were formal provisions in the contract for the customer [to] accept. The customer seemed to be quite diligent in saying, ‘There are these problems and these problems. We haven’t accepted it yet’.”
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