ation technology contracts Fer the acquisition and use of computer hardware ancl sofas ‘and related contracts Berti part of the book. Many ‘computer contacts ae not sie ‘contracts as reek for sences and often also favalve Veence agreements WS particularly Sree puter software where the owner ofthe Highs subsisting 9 (Pe software jung them permission to use the software in retum for 9 HES jal property rights is of primary right may be fundamental to is to customers, preements, the existence and scope of intellect permission to perform certain acts restricted by COP) Hot agrecrents to write software often contain numerous fet T° for example, Fe toby for defects, time for completion, the scope of use, MARTE S payment Jon. Computer contracts are subject to numerous legal controls which may make Bete contract void and unenforcenble. A statutory example & We Unfair Contract ry which contol attempts 10 exclude oF restc abilty for negligence and faulty fe of the contract. art ofthe book, ist the fundamental pinipies of com law as it applies to ra acts is examined. Ths ices a dscusion ofthe nate software contracts err pscutely cleat. Following this, ibility tsues related to detec hardware a ret te detective performance of computer contacts 6 xPor ‘including the Hoe negligence and negligent mistterent (neither of which 9 ‘dependant upon the Bees ac) Product Hay is als discussed asthe employers liability for RSI Stasn injury) caused by Tong periods of work at a Keyboard. subsequent chapters, ype of computer contracts ae described: contacts fos the ‘of computer Traay-made software licences (which used tobe referred fo ‘off-the-shelf’ software Be open source software ences, website developme’™ contracts, IF outsourcing Beara contracts for the acquisition of computer hardwareFundamentals of information technology contracts JODUCTION sortant to know precisely what the contract is, This may sound simple enough but there problems where the contact is partyin wen ‘and partly oral. What are the terms of oAlz, the law either by legislation or by common avs 167 Simply terms into a con Bie also necd to be able to classify the contract, For ‘example, i it a contract for services — he service of writing new software or modifying est software —or is ita contract for fo goods The distinction is not always an ey FF ‘make but it ean be important, pat- Beattie terms implied into the contract may be dire depending on its classification. Peete eteruned what sot of contrac itis and what Bs PS ‘and implied terms ct ae, we need t0 consider the consequences of Doreach of the contract, for Pinere one of the parties Fis (o ful his obligations ander the contract, as imposed by arn me cazes, it may enable the other party to BEng he contract tan end and also es (monetary compensation forthe breach) Ip “other circumstances, it may only leave Sy party with a remedy sounding in damages on. Be ge know preceely what the terms ofthe contrat or there may be an issue concerD- Se cresenttion made by one party to induce the ‘ther party to enter into the contract. May bea particular problem whee the contracts ts face that it represents the entire Sent between the parties and nothing clse comnts. Obviously, the law has to provide rem- Soe misrepresentations in appropriate circumstances. Sree ave the fordamental questions considered inthis “chapter which provides a basic toolkit the following chapters in this part of the book: RMS OF THE CONTRACT Beaimes, it may be dificult to determine whether a contin’ particularly where there bean long and protracted negotiations, This spec! discussed in Chapter 15 with some Fee ince a court has had to determine this in the ‘context of computer contracts. Pring there sa contract tis important #0 Foo precisely what the terms of the contract a. Se mational Lid Serious Fraud Office (2008) "0% ‘Civ 104 concerned a data recovery Ber th the Serious Fraud Office. The meaning of ‘database’ for the purposes of the com not cleat. This was serious as the work had been quoted at a price per database. Vouon Gogh it included all the individual persona! st fice, giving a total bill for the work of Benas7s whereas the SFO thought it only covered ‘Microsoft Exchange databases, which made tout payable £22500. The court confirmed the tes vafter deciding what a database meant she context of that contract.peers 01 vonogipow yun Ae 10ele I 6251 12V5214:35 pur spoon Jo 4yldns ayy pu G25 1 SPOON 10 ps 9 JBPUR SUL pes aq 205 asodund si, 10} 1 dgeuoseos ses 2300 Bs qs reqs raye ays 07 wi © Adis pjnoo j2n0> ayy sonp aude 40 eondo se yons sw91 8} ul Avuodoud Jo Josue op SusjoAUE moIpLs asesijos sa;nduton Sunn 405 1eNIUG Ber Seyp prog oy 2204 160 Sa [L661] PIT soIndUieD pouorsouiau sjounery wIUBIC 9 Ai) 5 ure] ats Aq [eoddly yo tno ayy ut pts posse sea quotas anoge O Se aipu! 01 ojqeuose01 99 pinow yor 40 9g 03 way 4p 40} Yous you sya -BuNN axa ae woyp BPouoruout vo9q 1 poy popnpuy axcy ov poae any {EAP pynow sorzed ayy pr HO} Gent pur aanayo }>enIU0> ayp axeU 0} Asessa04 9 se yp 94 IHL AD} 94 ‘9PION JONRO U] “upstaip 20} spews ed ap ypu 1peniuo> ap Jo ed pousey pe) yBaope yous wD) v EAIUED 4p OF OED ssoursng auf oy Asess>au muon Buykes snowy yur yp 3) © 999 aney nul EA parssBns uzoq pey 1 3 uous 2}qouostas se sonied ayy 4q pordope us0q 2464 nom wan) © 07 pu 01 42n0> 249 Joy ynoUe Out :}>es}UOD sp Jo ed WH20j > yp Te Papua} apisnus sanzed agp ex spay a3no> aus 3FXquo puw Jt payday 2q we> wus possaidxoun wy (609 18) PIES 2191) ZO9 WLM L FL61] psv0g pondsops ouos¥oy umyodossayy 1say4 ysiON pr spor) 9 adoyjouy, tx HOSTED PAO Eg paeaipur se scouerswuno1p payruiy ws auop 2q A[uo [RA SHER aAasoFT ME] HLURLIOD Jo s1seq Bai vo Penuo> v oyu suum) kjduuy Kew sano> axp ‘sousHowog “siadeyp Wanbasqns pue stp Ut Be pessmosp axe pu wweviodurs Ayze|noq.zed axe ,zg6T Joy S5>1A195 10 spood Jo Adding 24p 30 E261 PY SpOOD Jo 925 24) Aq sirEnIUED UIELD> OLE poyduat soup se YON ‘SH4ADy paydit IsOKLL Ponypst8oq jo yasou v se Apzeynonsed ‘ypesiwo> ayy opuy Suusey Aydt [ga al ayy ‘Save Aue UL Fees oq pinom step ysinoyppe ‘i>esiu0> axp jo stay djuo axp aq dew Funtaas ut 40 peso ssq}>4 ay s2idio au, sopied 2y) Aq poasde Ajssaudxa u29q $04 yey yw oor O2 st SUI ISI 94, ‘penuoo ayy o10 Apc, deus ey 243 ‘sorjmoysp asorp Jo aur0s awo>to90 ay, AyureLs9> INAEYyHS PEL|UED ay) [68 oy surzay oqo ayy Jo a>uapias BumzUaqns Jo iopEU v oq flat Sun UT Apzed spreN|LOD S}2eNUOD [e10 0} Uor}e|24 Uj “uorra|diuoD 40} aun AUP Jo LorUDKE aA>Up Sf ZOU AzEANYOS 34 JO Sambo st eyes jo wondss9s0p so410 40 uoneayroods ou st au9qp ‘uoNPULOyUT BuNssieL 2940 LHR} [Bey “nurersao sey 1 asne2aq ayqeanzoyusun 9q pinam ai0u e yans uso SIF UE “DOO'SFS Jo UNS § 20) Pr oc uyUC pue Buus0g siz0g 404 azesAyos [ox}ue> sso90xd aytzM on sBaxHe PIT DIeMYjOS Sy ee airy dour you ayy ojdurexe 10g 7} Jo ancy ayp uo stusay ay ye wrEIKOD 104 s2op 4qzea]> Beqsisno roenuos e reqp soreaspuy umpuezoutaur 10 ajou pouiis © axon st sone] ay Jo >fduuex> By Fugue uy Ajued suo 110 Suga ur you st y2eNUOD ayy 2394" $1 wa;qoud ZeIMOnIEd y ‘uonisod Suyuyeueq eam e ut aq Av oy s1283) B02 0} sonred saxo pur ssauinstioa Suproiord pur ssautey jo sisazo1u axp ut sua) poxydu pu Bones:2>1 Aq posqwosdiwo> yeysouios uooq sey ojdioutid plo siyn yBnowp 9eaIUOD sty UE ITE Hog susie) yeyen Apsrzoud 2080 0} aay oq plnoys sauized ay IeyL I39yo 9Ep 0 ~ IeNUOD Jo Wop. S29 jo worupen yssfFug ayp Seypuersypymou ss1, y>eNUO> ax 04 Safed ap Aq, Uodn poaute guaredde sua ay jo aos yno aypns 40 Pes|uOD 2p owUH (Sura) paydurt) suLI) [eUOREPPE {Bosur ou 97] ap pur presuopydiens yyy Ajessooou you are sSuney ‘Suncam ut Aous st 19E.1 S209 op 2704" wana ing “(axoge woSA Ur aseqerEp se Yons) UOSPpaid Fup] ase Axsnpuy syd Fxe> op ur pasn spiom Aucus yey) Suspueysynsjou pur siuauimd9p [E89] UI Puno} <[uoUNLi0D QBs woRLe! je32) eoxay>oy oup ‘>s9]28o], ut poss} 2u0 Buypraosd ‘iogeut Asv9 uv 2g 01 zeadde Sg8hu s1yp ‘(essoyj0 40 poop q) Sunim uy sf DeTIUOD OY ayp a1aym SuoNENNS Aue UY 2es}uoo a4 jo sus9,Terms of the contract ssuccessful development and installation of softwate will be possible only ifthe soft- Serand client cooperate fully with each other. The case of Anglo Group plew Winther Mestad (2000) 72 Con LR 118 gives an example of a duty to cooperate being implied “phe client did not want a bespoke system and a standard package was delivered but Gnevitably that the client's other software systems would have to be modified to ft Wiad system. Ths required full cooperation between the partes and this was par- Bortant, as the clicnt did not have the full technical knowledge of a computer pro- Gee judge said that, in relation to a contract for the supply of a standard computer [ess an implied term that: scr communicates clearly any special needs to the suppliers ser takes reasonable steps to ensure that the supplier understands those needs; splier communicates to the purchaser whether of not those precise needs can be met Ee ow they can be met If they cannot be met precisely the appropriate options should foat by the supplier; splice takes reasonable steps to ensure that the purchaser is trained in how to use the Porcher devotes reasonable time and patience to understanding how to operste the Bperchaser and supplier work together to resolve the problems which wil most certain Se This requires active cooperation from both partes. If such cooperation is not present Bikey that the purchaser will nt achieve the desired results from the system. ontrols over express terms Bias implying terms into a contract, the law may impact upon the express terms. It may S term, agreed by the partes, void and unenforceable. Normally this will be the result of Srovision. For example, a term in a software licence which prohibits or rests the TFs necessary back-up copy of a computer program by a person having the right to use gr egreemert x declared void and unenforceable by section 296A(1) of the Copyright, Ge anc Patens Act 1988. The Unfair Contract Terms Act 1977 i important in controling Geof terms which try to exclude or limit lability for negligence and breach of contract Beother things. Another way the courts will contol contract terms i by using the common I example, by declining to enforce a term which isin restraint of trade such es where 9 puter programmers contract of employment prevents him working for «competitor of his pret for a period of five years without any geographical limitation. A common ploy in some seas is where the party in the stronger bargsining postion inserts some draconian terms Trrowing that the courts may interfere with them, seks to sive as many of them 35 he can Hing cause, sometimes referred to asa ‘blue pencil’ clause, may be worded a follows Hs the event that any provision of this agreement is unenforceable but would be enforceable Fastot the wording ofthe provision were to be deleted it shall apply withthe minimum of such Miletions being made as required to make the provision enforceable. Bec terms are uitly to be met with judicial favour. Judges will not write the contrat forthe eris and draconian contracts in restraint of trade may be consigned to the Souths waste bin Bother then the judge striking out the offending parts. The general rule, however is chav if 7 crcrabe, that isthe contract can stand without it the term will be deleted, leaving the ret of Bc caatract in force. Ifthe term in question is of fondamental importance tothe contract then 223 fe : 3Tees SHIN [20021 €: paw dayporr a pry sured ssousngy ug uy sonzed ylog x05 [PSURED sure sanau pyno> rnoxp 9424 Scr Soup pry Augen © apmpxe or uopwuauy ue wonp 01 singe 03 “°° 915821434 PINOM IL uonreiussardar yenye2}uo>-210 Aue uo pays you axey dau ey) Bp toeno> a4) ut paSpoynowpe ancy sonaed agp azayss ase> © uEaeKp Pus PUMPED 2>H0f Gey “voneruasoidas ayy wo porpa seq dyed v o1oyos Jquo soydde ¢ wondes teyp BurKes won Foorioiu eqs parofaxjeaddy Jo uno aq, “(2261 PY StHay, eNO sup) 2m) 49 papuoute ©) /o61 iy wonewasaidazsyyy axp Jo ¢ UonD2s 49pun ssouD{qeUOsed: Jo 383} a4} 01 JD9/qn® ‘OS Beioq ren ‘pure uoneyuasoidousia 26; Ayiqey Suypnppxa ‘ase worse Ue Pay] UE SEM STE Sap v3ed puooos 2«p vex paxapssu0d spat qr ‘22ueIsul sy yy “TpETTUOD amp Ox oMU oY Buy Seesie ur s2tqo 24) 44, uodn parjaa uaoq 2avy Aazed sogu> Aq ape suoreyuassidas 20 yuawiowes Ibe aera poppe goss asnej> yuatu2aa8e annua ue popniouy pue suLssy Loris prepueis Wo see Kpesiion aveayos rainduion & 61 YSA [2007] PIT LHD wostopuns a pr7 s1uou3>2pq PAOfieM OL Caadeyp stir saye] uoneyuaseadoustur uo won22s aqp 39s ‘SUSU “oxen 2519) 30 1994] 247 Jo SUL UT) “SoRAEd aqp Uadenjaq yuouIDEIB oxTUD oe SHuDEOIGDS 1 eH Spay 9g) 01 wan; apMPDU! 0} J9PNIUOD UHL feu20j a1 20} WOLD SF (qsED epee LHLEP Sep} 10 pressiiexs wre Aq purnog Huq qwox2ad 0 S9sE9 2410s Us “pur) senyMoysp ons 109 Spano 01, Sonued atp uaamjaq ‘enue ayp Jo a3ed s] suoREpuaLAUODa: 5 sadojpAap aEAJOS ae Go squauasynbos Syusep> yp ano HuNyos s91.] & 40 1UadUT so L9H9] © FEMPAH|s MOU OF 1]NHHEP 24 Gleur yt 'sose9 autos uy s}usuna9p Jem|resIUED feuLIOS 24) Yum 11ytIO> ayD J! 30 SzOqPO 94 Wo3y Geowip suoneyuasasdas ayp yo Fuspurisiapun sAazed ou0 j1 Aetsads> 19}e| swosoyqnon aanad Gro “nog 40 yero 10 BURL uw aq Aeur ypyy ‘suonEALSaHdas Yong 7DeAIUOD MI Z9pUN suORER Jqo Jo mo Surdxze9 ax) pur azewyjos pue siainduio> jo uope>y}>ads pue m>uetuzo3z0d ayy 0} $8 Sculep parersBitexo ayeun 01 hsea stg W9es}UOD v Jo UONEWAIO} 243 0} dn Buypes| suonenoHu UL ANAWaaxOV FalLNa seeurvp 07 popu 10u som yuetUtEP axp pure azemyjos axp 28m 0} aAUTUOD PIO? guayp oun ‘sxojsoq., reaoid pyoows sone] xp sequed a4p taae>q paasBe Apsozdxe oso YL Popryuoo roeniuco ¥ ou: parody susp. ayn Jo kare 2:94 s09 © UE END PPX NOD a, WP say Aq azesaos ay Jo 2xn panunuo> 24) 20) soBewep anos rWeUTEP ay, “Woddns porues Seto ou 1uewey> ax porasoyuT quar aun pu Jodojax2p asesujos ap 30 sts Atsodoxd yom Soya 2up posinboe quewaye aqn pur diyszoarzes oqul uo sodoys4op azearyos ay, 224198 Godcins 10} Ked 0) Surmunuoa yuoqp ayy wodn TeonmpuoD azeayjos ayy 9sn 0} 29U2DH 2H ape Guojipuo> pur suum prepuers sal ay ;puD ue 01 204204 ayy BupAq OU pInom woddns 40} ed Dur nf) 01 anu woo 0 azngey pue sans ayexedes ose sunuyUreur BupoRuo pe 2UaDy Ie Eijos au Jo ies ays poyean paosBe Apsaucha surzy ay, spzed a Aq poe Assoudx9 su> She yu>rssuo>uy ata yoru SuorEpuo> pure stui21 prepares pastsn PuE MoU! 3 J080]242P 20} Shuinjr apeu tadojanap azenuos axp dq pantuagns swoneyonb 214, sxemyjos axeysind 1 EN Tron paui90u0> (4) 8671 DEAMA [2002] PIT a0 49407 Plowey a prT suonImjos axvsnf swiza} quaysisuoou} ‘yon noosord yeauus9 uy ynsa4 dew Os op 01 se s1ySES JGoomnieys ureysa> Kem fe) 0} durante o} you UayeI aq ASML 9sP> yeOHT Yss9JayAON2N “S}IMOD 2H tx pasar rou pe dazed 23490 949 Aq anyea 2025 We pasdone 29 Seas Aayy EMH St 2FgeB>IOGUAUN 2 seus ypu surzay ueqworesp Buraoy Jo dopd a4) 2sun0> 30 épredoat ut oq sn 19ENIUOD SIND 2 juauiaibe anus veeNature of the contract © considered that this part ofthe judgment in Watford Electronics was wrongly decided but sadvance any real argument as to why that was so In that case, the contract also contained agreement clause but added that it superseded all prior representations, negotiations Eopart from fraudulent misrepresentaton). However, by virtue of subsequent conversations Gers betwveen the partes, the judge held that the software developer had waived the entire ment clause [question as to whether an entire agreement clause also serves to exclude liability for false tractual statements is not wholly cleat. Obviously, the precise wording of the clause will sortant. If it purports to exclude or limit liability for misrepresentation, then it will be Gable only to the extent that it meets the requirement of reasonableness. If, as in the Electronics case, it states thatthe parties have not relied on any prior representation, per~ Whe better view is that it does seek to exclude lability For misrepresentation and is not sub- Sethe requirement of reasonableness. This will however, need a reversal ofthat part of the ‘of Appeal’s judgment in Watford Electronics. [TURE OF THE CONTRACT Soot always easy to separate hardware and software and this fact has been demonstrated on foceasions in the courts. For example, in Dyason v Autodesk Inc |1992] RPC 575, there was confusion as to whether a ‘dongle, a device required to be inserted into a computer before Gram would operate, contained a computer program and in Gale’ Application {1981] RPC he jadge at first instance, overturned on this point by the Court of Appeal, drew a distinc Sbetween a program on disk and one hard-wired into a ROM chip. Such confusion is largely of the difficulty many lawyers have when dealing with a highly technical field such as ter science but it docs not stop there, Even if the technological aspects are fully under- 4, the application of the law to them may sill perplex. though there is some common ground and some similarity in other provisions, contracts Spordware and software are governed by different legal rules. Computer hardware, if itis sold, Te subject to the Sale of Goods Act 1979 and related consumer protection legislation, Breas an agreement to write software (*bespoke’ software) will be within the scope of the ‘of Goods and Services Act 1982, There are other differences, for example, as regards the: ory controls over exclusion clauses. This simple distinction is not always easy to apply in ce because hardware equipment often incorporates software and the contractual position Sacly-made (off-the-shelf) software is far from cleat. Nevertheless the classification in terms Jegal nature of the transaction isimportant and the author's suggested approach isto look predominant purpose ofthe transaction. In other words, did the person acquiring the sub- E mutter think that he was obtaining hardware or software? SConsider a person parchasing a new motor car. Motorcars are goods and the transaction is subject to the Sale af Goods Act 1979, section 2(1), which states: “ acontract of sale of goods is a contract by which the seller transfers or agrees to transfer the “Property in goods tothe buyer for a money consideration called the price. suhole purpose ofthe transaction isto transfer ownership in the car. Suppose the cars faulty, ws and that fault is traced 10 a computer program installed in the electronic ignition “The purchaser would still expect, righty, to be able to obtain a remedy from the seller ‘he Sale of Goods Act even though he has not obtained ownership of the copyright sub- jin the computer program. Afterall, the buyer wanted to acquire a car not a computer pro- = Therefore, a contract to purchase a computer is a sale of goods contract notwithstandin sypesquoa Abojouyoey vorewsoyulj0 srewwewepuns [Eraup Jo sesodind ay} 20 spoo8, yo Suueows ay) uy tou Kyeayp are suresBord seynduo> re4p IPS IPMPHD LICL 4S “Tee USA [L661] PIT Si2Indus0y pouosromsa.UT A pound IENSICL 2 AED Sungly 15 1 “ypeoadde yeyp Jo Ay>yidums aandasap 2x peosojurex axey S952 aTEAKyOS OMI, Sst poo? ay) jou uoReULojut 94) oF a.>4 Si>3pap Yong sIOLD jeaeUILTEA are a13Kp 30 Pood apn 0u st yo[d oy osne2>q Ayduus Apowios v 2x18 0u jo] Sunssiu saBed sey x0 ede se} 3131 Sides 20) aanr9y9p Aype>ssiyd s15J009 a1p JE Apaurore 2ai8 [9 Mey spoof so as 400g v YIU GGoyeur ay 0} wim a4 ay, {jo suiay asomp Jo 220d891 Ut eNUOD spoo8 Jo apes jADTeI}O> ¥ 01 SEI s18 aresyos 243 yaims paxousp swoH a]aHButey Xue 4509 IY “sIDEN|LIOD 2o1A.8 axe sIDENUOD aTEA Sjos 1oyp 914 94p Soos0yUIDS Ao4LI09 21qIHUeY v 40} p2ou 941 InOYyIM paytUsIEsY 9q HOD oxEALJOS eu 198) 9, SHI stuyUOD paxdayap sway 2]q:Buer axp 01 aanepaL HONEUEZOGUT 2xp JO 2DL2d YH up 2899 Aapysy 94) UE SY s]uEM 19HOIsN> oy YeYA erEp 20/pue stuLsBoAd oy Jo Aloo v st AO} “2510} 210 ton2 a1eMjos Jo suI9) UL ples 2q UD 2ulNs aU -pAssIUISIP SoM oNDIAUOD SUrEBE pode aun pur sooqsu38 20) 1yenW09 e AfLuEUEWJOpaxd ‘orOjs9Ip ‘sem eNUOD ayy pue parseduit Sek UORTEHOIAT 34) KPI YBnOsyY winIpoU 24) AsIdUE sem Yoo ay, ~YOREUE;LL ZaL -pjnord jo 9914398 947 ~so1a19$ B Jo worstaoud 949 som yENUOD ayp 30 auMyeU [HN|UDSSD a4 *(S}009 21H SF eq) pagidelns asa spook yowe TIN PY UoIsAIC] YUE S4oINd aIp Jo 1zMED Jeuorsinicy 24, “spo08 you s221432$ suszouoD Ajuo Y>Iyss jp] Mo2Rs 19pUn AYR aq YOU PIE Siquonbosuos ‘pu ‘sso.4198 you ‘sjooq pariddns pey 94 ywyp sJey>Dq sty Wo pone sea yf -poyst 488 30u ara sioworsna Jf 294d aseqpand 941 punjas 0} pasiuerens ay pue Huyjquies sppo paxy {gus pasn aq 0} ABajens Buus v paquasap pra zaps peur dq sxooq payddns peg Aa|ySy ssoufsnq 0 ape e yo asano0 ax Ur popsnoad 4 saDkAIDS jo aungels 24 4 SE Sais 24 1 MoU} 24 y>ryM taUTDTRIs v apeuL pey ay eM sea aBsUYD UL “g96T IDV suOKIdDSICq |pPLL Dy) Jo F1 UONS sapun soUAYO UF 10} UONTAUOD sm asUIEAE [wade ue mjFNOIg jyysy suejjadde sep T¢9 df 6ST (F661) HUMID YBNOv0G uopUET uoHInS A AAIYSY LU} 4OO4 IY {go soyine axp dq patigjaid ypposdie ayy jo worveorpur uw aan8 sjooq © paafoaut Y>IypA 950 y “yonsesues ay Jo Aaear ay Prop» OY [po1u>s {yuo soy azeMyjos ayy 03 tonEppe Ur SuI9H >1qfFUR) Jo LaNypp ay, sBUeSpP soUODD4 JUKE =sSupaze ay) Jo o1nyeu ayy ‘ioynduson suoyp ayy o1uo 1 Surpeoy Aq 0 ounUO Pasansfp s1 2xEAjos 2244 “}peI14109 spook Jo apes e BunsaBkins “papraoid aq dew: sostp anauSeur 10 feondo se ysns Stott 2}4:3ue1 wy) 138) 24) WO posnd9y ancy S12}1ZM aos YBlnoyIiy “]DENUOD spoo8 Jo a[es & OF ppesoddo so yoesyu0a 2244496 w aq yn 1 Uap V 304 URAL jpeoMoods st You auRAKYOs jo 350 fen 1 uyers9g “siouis yea] pur sofipn{ pajzznd Buoy sey sizenuo> asPMyjos Jo aUNIeU IH, ‘souany]v Aduns 10u pur yuaUHUR|SsE ue st 1u9uE Spore yp 31st 30yp ‘pauiaysuen st drystoumo yyStaddoo ou Js wono os st sty, “wousanb ut 291428 54) Furaq azeasyos 43 Jo wonsuny axp ‘2914195 © 0 uoStAoud ayp st EAIUOD aM Jo anjeu \ueU Sgucopaxd aup ‘ianamop] “enue spook jo aes Paare|jOo v axey Us am ‘pauz9>u0D are Hulse Sped pue sos1p anouieus 20 jeatydo ‘jenuvus soded sv 3 sv eq S| SN 01 OstAOIE AqLO 24, ‘regs Auedwo> e ayy uonse us Burp, st axdurexe 203 ‘ysixddoo y ** Aauout fpue uonse ur sung wey sayyo sjaneyp jeuossad ye Huypopuy “5 se pauysp are Spoo8, ‘661 By P00 Jo 2785 247 Jo (1)19 UoHDNS 19pu, :spo08, you sue saxeqerep 40 SuIEsBeud 19)ndu0> fSse> due ut ‘pur povsnjsuesy Ayjeuliou you s} sys Auisdoxd yers2>qfaIu 294 uw yYtLAdod 25) 01 2 ay ‘81221109 spoo8 Jo ayes 2q 10UUe> aUOTe azeMOS Jo UoHSIMbae ay! 04 S12Es1UOD s]2es]U09 asemyjos, ‘polugjut 9q pjnow a] wi Bunsisqns (sIyu Crodoud yenysayarut s2qp0 Aue pur) ‘ufftsddlos oy esio.z2q30 ‘sreanjos somduzoo 2sn 0} posrnbox s1 souaay|v yeu sf 9pRA 218eq Y IUDUE ESaife 291209 jesate09 ‘aeredas w 01 1alqns 3q Aqrensn ys aeUp (,paypuNG, Se Or p91I9}95 UO) eprscid st azemyjos s94y0 Jf send wo> 24 wRps porpoquis azemyos 2oyndutoD Jo uorsM>Ut 241 43e1}U09 04 Jo o2N}ENNature of the contract {fF Goods Act 1979 and the Supply of Goods and Services Act 1982, However, at first =; Mr Justice Scott-Baker accepted that software was goods within the Sale of Goods Act {although he did not have to decide the point) because ‘itis difficult to see what it can Beer than something to which no statutory rules apply ..2 Not @ very convincing argu- PBS Bas often been the case, it was a Scots judge who most ably defined the nature of a software in the context of a licence for ready-made software. In Beta Computers (Europe) Ltd y Systems (Europe) Ltd [1996] FSR 367, Lord Penrose in the Outer House of the Court of Edinburgh had to determine the nature of an agreement to acquire ready-made soft- He decided that the supply of such software for a price isa sui generis (unique) contract Ethan a sale of goods contract or a hybrid contract. He considered the Copyright, Designs Betents Act 1988 and concluded that the supply of the medium on which the program is must be accompanied by an appropriate licence conferred directly or by implication from Seauistion of the software. An essential feature of the arrangement was thatthe supplier fook to make available to the purchaser both the medium and the right of access and use tbe software. Bbare are some differences between English and Scots contract law and, at that time under s possible to grant third parties rights under a contract. Nevertheless, the judg i an excellent analysis of the nature of a software contract and an important feature of Sss2 as that the predominant purpose of the contract ~ that is to acquire the right to use Softvare~ would be subjugated if it were classed as a sale of goods contract. Subsequently, Breland and Wales and Northern Ireland, the Contracts (Rights of Third Parties) Act 199 E third parties a right to enforce a contract ifthe contract expressly provides that he may Bée relevant term of the contract in question purports to confer a benefit on him and the fact docs not provide that the third party cannot enforce it. Certain types of contract are Bisded such as an employment contract where, otherwise, a third party could enforce the act against an employee. The third party may be identified in the contract by name or as Beember of a class of persons or by answering a particular description. These provisions will forceability of software licences by the copyright owners in the case of ready The European Court of Justice considered the nature of a software contract in Case C-41/04 ob Verzekeringen BY v Steatssecretaris van Financien [2005] ECR 1-943, which involved a bility to pay VAT on software, The software in question was standard software package which S then modified so that it could be used by Dutch speakers. The modification work was sub ial. There were two separate contracts, both similar in value. The frst was for the purchase fhe standard package and the second contract was for the modifications. It was held that the Biracts had to be viewed asa single transaction being a contract for the provision ofa service ‘modification was the dominant part of the whole as the software was of no use to the client jour it. Looking at a transaction which includes delivery of pre-existing software (including Bestop also hardware) and subsequent substantial modification to the software from the per- HPective of the predominant purpose is pragmatic approach. However, it till eaves a grey area, [Be example, where the amount of software development or modification is more finely balanced Ge the value and utility of the pre-existing software. The court did not examine this type of Peston. Ie might be more logical in such a case to look at the contract as comprising two sep- {Sette transactions, spenwe> Atoouoe: wonewow ye sieoweoins [EAapayo Jesus Aypeosg B01) 01 424 29 pjnom ‘sosodind jeanréad 405 yous pur me] wouILUOD Jo sseq a4 Ho Su) Het 0} 494 29 plom stano> axp “oso se se pu suza py[d Azoamiys 01 320/qns ose ase Gioesiioa 2otaios1onoff“L-9 SUONIDS “ZZ61 IDV SULL, PENUOD JTWC 2tp KBE aDuepIOoDe Gr ayqeuosea are sup op 01 Sunuzodand sutia axp jt paytpows 10 popnprx> os aq Ajuo we stHs>) oy ut op sofessouinsuon-uou uve paypout to papnpexo 2q ou ss} pada 9° Becimsuoo yo ase ay ur -pu sodng 24} 40) uodeam jyosn Alon w are sway paydunasa se 21eum) Sogn woos deur sty -(euOD fqeesed 40 Aerpisqns ¥) essUoD fesareyioo e oF 322(qRs 9q XeUL Stemjos 24) yuun pasiysuen sop onouew 20 jeordo se ypns ston ojqifuey Auy ‘paus>409 Graseinyos oun sv aty se aseof 0 speNUOD axeayos 1aynduion & or Kidde x04 [Yn spO08 Jo 37° 24) Shy eu © ou pod ae y>ryo ay spo05 yo apes ay) UE poutEyuoD sua} 24 Up SKE TP Bp so 241 a1adoxd jo saysues ou s azouy se s>euoD spooH yo aps © 2q owUED 20u22q 8 50> Sse 1 spo08 yo uon yop 24) wo papny>x> snip st y48}2Kdor “ssoinduto> 10 s2e> Joy0U se yos Spossossod ur sung, 21q7ue}axour ayp yu poyses3u0> 2q 01 “apz0 Aouout e 20 soxeys Auedio> Bop ue ut Bun, es s48444doo asneoq “yo 20 >s1p ay o1 posodclo se) janes [euosiad v sp Gap soinduso> e uo payressut 10 asp eaido 30 anaUBetH F Uo 1Uopysex wresBOud JayndwoD 2qF Seruy we yxn‘suresSo1d soynduso> ga yun pouzysues ya 8tsKdoo aq uono ‘gun S95 Jouour pur uonoe uy Bunp ueyp spypo spHENP jeuosiod Te ‘Stpnpur se jay aqp Jo (1)19 wonD2s 4q pauyep a1e spoo8, 21369 Sor0u se sono woF4 spoo8 axp 19s 01 1481s au) Sey 2]P>5.24) EAB pure Aayenb Laoy>¥JqIES 0 2q GOR RGisosop a1ouy yoyeu asm spoof axp weqp sruatasmnbar se ans sireztio> oyu suLiIy weLIOdUL [Ssust yas jo ioeniuo> jo soyeynos asus As9n 8 ur2q 01 woREppe Ut YpHoM JuoUE Mato> 2x7 us ue uoduu A298 s1 2 SIU, “yons se aseAyos 1ayndut0> 0% Aide ou Sop 661 PY Bp005 30 apes oxp “ypu utfag of, suoneay dun yo8ajex0498 anny 294921 © Jo suFaU Aq pasiMboe Ggenen st axeaayos yo Adoo © eqn 1x} aq pur axemyos sainduto> Jo 2ameU jePeds LL ojo ‘au apgeoyfde “woneutusay ‘ssn par asuied s)20jap 20) Ayeqey ‘sonuearem se ysns spadse yale uyeap stus9) oqo snoratUNE HEEL > [ts quatusoise anuooy] ypu se uaWuIsse ue aysuAcoo Jo diyszouNo Butss9ysue% Woy de ing 1yStahdoo jo ruoUuaisse Ue poy[e> $1 UoR>esUEs Jo wHB0y sip pu PeaTsU paxsaySUEN Be jun 1u8:14doo jo dryssoumo “soumpawsos ‘s{ soideya ur poquunsep se ‘sjusutounbor saua}p 247 {spuyps0o9 ul War #20) UaH TIM areayos ayodsoq yam UON>duILD ty ayeAdosdde 2q RIL golf asisnppxo Ury “01 sous 24 2sf9 BUOKUE 0} s2oUadI| MEA On 9845 24 HM FUME IUAdOD frei) os anisnppxo-tow aq fia a2ua2q] amp “qjensn azoyy “2xeMyos yeu Jo 1PadsO1 UE SraqNO OF fot] 1es8 JouUP> Jaume 19ezAdoo atp ve suPgUE Y>ryM saA2604 “SAISMIDND 99 LEU 1URD4] “sioqo 07 saousoq 11e43 OF 994) 2g PUR aseMJOS axp UL myBAAdoD yp UFEIIT OY EM TEM Geve3aq, 2011954 1uEIB 07 zajo4d [lar Jouo yYFLAdOD ayy, (4Ado> axp Aq papunser S12e G wuiopsad oy parinbar z9%uoy you sf 20u99]] © YSUAdon awp Jo Lzrdxo sayy) “vouso.01d wit ‘1 lq 81 aeaayos auf se Buoy se sey [4 29U2>4] ay TEI posse aq weD IL O50 YIGAL Syoneinp jo vonust ou og deur axoqp 10 9uNy Jo pousad ‘ayqemauas sdeqsad ‘poxy © 10} 99 gs 251201} >yy, sod, axp ~ 99) 204304] aNP 404 WINI>x ur aseAJos oxp a5n OF woxssnULIad BuIA gyos ayp Jo Adon v Suysnboe Auedwo> 10 uosied axp on sou yft2Adoo ayy Sq porur. Rpuyo suaoq{ © jo Aem Aq st suwaxyos sanduon Butzinb2e Jo poypaus wouNO> sour 2 NOILISINODV FYVMLIOS Luonysinboe auensi05Software acquisition nly of Goods and Services Act 1982: implied terms ‘of Goods and Services Act 1982 implies terms into contracts under which the prop- Hip) in goods passes, an also into contracts fo the hire of goods and contracts for B scotland continues to rely on common law rights) Some of the terms implied by the Ee Goods and Services Act 1982 are similar to those implied by the Sale of Goods Act Besmples of contracts governed by the Supply of Goods and Services Act 1982 are hybrid Be that is, those which involve part services and part goods such as a contract for the fof a portrait In this particular instance the service isthe actual act of paintings the tne canvas, frame and paint, The Act also governs a contract purely for services such fora haircut, Has the Supply of Goods and Services Act any relevance for computer Monitacis? As far as ‘goods’ are concerned, the situation is the same as with a sale of Saeract because the definition of goods excludes things in action of which copyright isan eThe 1982 Act will be particularly relevant, however, if an independent computer firm Grammer is engaged to write» computer program as this should come within the mean~ Meevice The dcaftsmen of the Supply of Goods and Services Act elected not to attempt to Kerrie, probably in deference to the very wide variety of services offered both to con. Band to businesses? A contract for writing a computer program will fall within that part Bhat desling with the supply of services: sections 12-16. The fact that goods such as paper Fe and optical or magnetic discs may also be transferred docs not prevent the contract Ging a contract forthe supply of services: section 12(3). pstems, also known as knowledge-based systems, and other types of software, includ Iebases, which provide information or advice could, arguably, be construed as supplying a Sond thus fall within the ambit of the Supply of Goods and Services Act 1982. If this view by the courts, bearing in mind that ‘service’ is not defined in the Act it ill result in the ye terms from the Act being implied into a contract for the supply of such computer systems, The dealer who supplies an expert system may be deemed to be supplying 2 (ahat is providing the advice available from the system) even though others, such a8 the Bee who provided the knowledge used in the system and the makers of the system, are Saaible (in a non-legal sense) for how the system operates. This is because section 12(1) of apply of Goods and Services Act 1982 states that a ‘contract forthe supply of «service D acontract under which a person (the supplier) agrees to carry out a service Bess sometimes be dtfcultto determine the identity ofthe supplier where computer sofware Meotdined ready-made. For example, if an expert system or knowledge-based system is obtained aaercaler, i be the supplier or is it the company which made the expert system? In other ds, who is the contracting party! Two possibilities exist Sher the contract is between the person acquiring a copy ofthe system (the “eequirer) and the dealer; dor itis between the acquirer and the software company, in which case the dealer acts as the company’s agent. Spe answer to this is of crucial importance because of the doctrine of privity of contract: only Be partes to a contract can sue on it, except where covered by the Contracts (Rights of Third Barkes) Act 1999 or the equivalent rule in Scotland. Ifthe expert system turns out to De Beeesn specie services have been cde by statutory insruent, Thee incde servis in elton avec Beene Fe rapa directors and ervices rendered toa building society by der ofthe soit. g 3 3 2Bjgevosea: sey ey shes one oy a, HUH ajo: v manasa an yn faz9 BM GOS Bey sourwsojsod 20) 2ura 2p auyeLmep 01 atte posse ue 10 a>ueutioped 20) aun poese Ge yo 2bunsqe ayy ut exp somes FL HONDAS me] oAMINOD 1 poystaUaag 2aeypytom tHE 1 Burs « noxp sous jo anon 9 uy Hunde ssoyiddns o sydd dquo sp “uyedy souewos Sx ioy aur ai stasoU0> 296] BY SIH pus spoOd yo Ans 2yp Aq poy iy DY mMROUY aoueuriojsed 40} SUlLL Brenna 0) sea azeangos ayn yoy ut een 247 “A TOYO JO 289 ayp protease A1u2P Signet aso areajos aq) 2m ox pause eutix0 es x, “Hom axp aaj ob eS Poa Send dqens alse pynos iadopiop aremajos a ¥eqy BenIuOD oxy Ewa} soadno ut Jo rag Boxe pue ¢1 wor jo ypeaig v sem at0Wf YUL PIPH sea 28eD Hoprmaossy ames 240 ‘prepusis aato2{q0 Seay sso wresSoud xp spouts uonsonb ag 599 s24p ous soeGof cs suay or eR 22UFEL Hoa ssop 3 “oenuo> Uy aqges 2q Ts Wy 24p 2}nf musad ox eouonbasUon w SE 2422}90 SE Heesioxd ayy pue s1ouuresaid saynduro> ajge woy} papadx9 2q Ayeutou pynoss rip sprepuslS Beyond aunseous 01 sp) wesfoxd sayndiso> w aye oy posedus way e 4O}RHALL woIOrd Go open yenopp oy: Jo quo qu2.oduie> jgedosea¥ Jo pe!29489 94 pIno> TM INS Jo Pl SE osoroxs 0; pavradxa sj ataaos v wo Kxze9 01 pauedand Sug se ano ssw spjoy Oy wosrac Bye ne uotuon ye wonsod smowxand yp saves SLL TINS PUE 21> 3|qeUOST.: im AIS Sep amo {ses pm ‘soutsng o assno ayy Rugs syns ou aeyp wy w soya eT woHeeS lipys pue aueo ajqeuoseey “cae PY s9a14295 pul spooD Jo AIddng oxp J0-¢1 oNDas DENUOD Te oor aun 01 wo am apf 2esue> o1413 © sm yg Joj azBajos SusNOND® Mout dOL7P Spenco v yey pauszyuod anor SIH ay) UF 2213} PDYIO Hn Y>HH UI #59 wSd [8661] foaraias powouig do A woopossy aboayos ay, UE pawayuo> uo SEY SHA, ZR6T PV ag pte Spoo! Jo Ayddng ay) Aq poranun st pur xadoyop areas at ue 1USyP 2 aoe Benuen oolaios prenuopysrenis © st si, IdoHp ¥ Jo wonbar ayp Ye PU 4} HOWL st 2Ie peop J duits onus st uonenys aq. wiod iq) wo Aso4yne Jo-pe] © st =¥=Kp Pu 42AIHOY tron st st uorusod jefe] au, o1nboe aqp pus Axed oxemyjos ay) uaamag 1es1U09 Bgnoge Suig or yuo ue se sto 2qe9p a exp MaLA gp ssHOyUTE AeA aTeMYOS 2 © 9 4ie sea A 2F2U) END 1245 ay P8AN0> JQ "sue ay ares ap syed oe aps} woneioxGsoUr Spy zou & st Sueduson oxeanyos 9 Joy wHBe se JHEP ML ssusis seinduso> Bag-apiape oy padsas at penn sddns apy UL sosne> wondiuaxe afgeuostar pus Ye Geode Surpn put sopistoo 0} ysim osye Aes siqeaq_sseuorsn> seymop sed J0p Aaysqruns Hg Suorsts samp jo Angzqeyox pu Aoe194 ay) o1 se soaps AysHes pmnoys wlodn pare PUE pov tye) 249) papuait UoRPuOsU! Jo 2ntape sopraoud yprym aseayos Aue pue suis Ses Buyer ofp ‘as2s54, “(GFE HD Z [CSOT] aBMND SyoANay A Damas 398) Bbope uv pusuiwiooas pue apes 0 sqeap axp uo Aap © sf azoyp‘Auanbosuon ‘pus wersés Soyo pv ajqeuns e apr 01 3,69P 24 Uo S421 JauostD 24 9poH a JO wed Jo JF SEH Begrs rydains vasoys uonysod agh or sens 1 sjadsou awos ay pre pauzopzad 29 01 221 Be gina so.ape oun pay qeu sey 12]eap ay ‘suoreds ado Suyddns 914195 & no Poy? Boe unop A ep ayassod s 4 twaysts Hodko ages w {dns or payse 999 Sey 19] © HL curysis ayy Ur paureyuo> 289 xn paptaosd ou suodxo ayy se yons work ayy jo taudoyasop ayy a paso sroyiO Soro wen» deur pue drysuonep yernoes}U09 e wo puadap rou sop Yor 2auRRyFu ut A oq dou saxp ny enon tos} Edy S| OYM MOLT OF padu soHFAbre oH aAN22IAP Lojysinboe oueMy0SHardware acquisition eestion of fact that is, it depends on the facts of the case. The case of Charnock v Liverpool eration [1968] 1 WLR 1498 gives an example of an unreasonable time. The defendant was liable in damages because it took eight weeks to repair a motor vehicle when a nor- ‘competent garage would have taken about five weeks. A contract for the writing of com- =: programs should have detailed provisions about completion times and all section 14 does provide a safety net 0 catch those instances where there has been an oversight or when some onal or unforeseen work is required. What is a reasonable time will depend on the nature She programs and their complexity, taking into account the time required for testing and Eeptance, How long would a reasonably competent software developer take? Stion 15 of the Act states that, unless the contract fixes the payment or a method of calculat payment, the supplier will be paid a reasonable amount. Usually, the contract will mention fee, but this provision might be useful ifthe supplier takes on additional work at the request fhe other party and no mention is made at the time of agreement of the charge for this extra Te means that the supplier cannot, much as he might like to, charge an unreasonably high ‘Comparative fees and prices for writing similar software would provide a good indicator Iehat is reasonable, although it would be sensible to include a mechanism for working out pay- for additional work, such as by including a schedule of rates, RDWARE ACQUISITION far as computer equipment (hardware) is concerned, this may be purchased outright or hired, [purchased then the Sale of Goods Act 1979 will apply and terms as to quality, complying with Escription, satisfactory quality etc. wll be implied into the contract, subject to any valid exemp- [Gon clauses. There have been some important changes to this Act. The Sale and Supply of Goods, [Act 1994 replaced the old section 14(2) ofthe Sale of Goods Act 1979 (which required that goods [here of merchantable quality) with a requirement that goods must be of satisfactory quality. This stated by section 14(2A) to apply if the goods meet the standard that a reasonable person ‘would regard as satisfactory. Account is to be taken of the description of the goods, the price (if {elevant) and all other relevant circumstances. In a welcome tightening of the implied term, sec: ‘Gon 14(2B) defines the aspects of quality to be taken into account, being: |e fitness for all the purposes for which goods of the kind in question are commonly supplied (this is simply a restatement of the previous law); f= appearance and finish; J freedom from minor defects; & sofety; and i= dorability. ‘This implied term is condition in England, Wales and Northern Ireland in consumer sales and “applies where goods are sold in the course of business. In terms of sales to non-consumers, i is ‘2 warranty rather than a condition ifthe breach isso slight that it would be unreasonable for the ‘goods to be rejected. In Scotland, it is simply a term, the remedies depending on whether the Breach is a material one. For a breach of condition (or a material breach in Scotland), the buyer imiay reject the goods without prejudice to any claim for damages. ‘The old requirement that goods must be of merchantable quality caused injustice in a number ‘of cases, It did not appear that the goods had to be durable and the presence of minor defects didBUN juaUeZCURLL parse ZZ9'6ETF ue ‘ounypuoco poysem og'r¢73. a spemu0a ayn sopun pred gg¢"1673. = go da apeut Boa soFeuep cx 9767993 0} papsuD sem WIP 24J, ‘sxEAYOS a4p Jo rap 10) BUIPEOP x9 at 129Ur OF Hey PINOM JodoqaAap azEmyos 2xp reYs aedpp auues9q H Lay I>EAIUOS B 2typrdos oy popniuo sem quay ayy eqn pou Sea 1 a8e9 MosOPDOSSY aBajog a4 UI pam Soss0] pur soeuadx> raqio dur se pm se ino pled sey oy AauoW Lue Z9A0008 pur Yeo14 ed Joiy0 217 Jo wostar {q pazeypstp se resUOD aif Yeon “enUOD ay) Jeno! 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St 1 “aonb Asc Sees J0 2921 J0 2808229 MON “HagRP B Hons jo ods ur saBEULYP 04 UU e an Hs de Bag ax '283n09 30 so¥ndatod oy a90/4 9 14H 349 2940 24p at OU pep pute wayqord Surspoo, Beauou dpoapiad ese ys prey sroindwuos «yo ass am exp parpisuon tine tp est BAY (psoas) pr7 Cx) Buoys pr suas soindoy wornyy wpe Aagend aqe.ey> Bear 30 30u sex ey sono, mouse Aare} w yor ose stnoo an xoyndui0> jo ma1409 Sy a sn Woy Joyns Pu uaop e249 AenuNLe> ou PIP 1p Bp Ies © ecko 01 wala poy sonoy Bury ese ypns seo date Jo J94ng aif yeep portSonce FEY Jo M05 949 $56 AD [e861] PIT (4Bnasoquers) ysLIng a ioB0y Ut >}dutExd 0) *uoM Sods 940g ayn jo main nanedrdse ay 0 ws0s s3N0> xp pip devorseoo Jue >qqeaue4 Seusun seo oq s9puas ou pap salut oft dquo patanoa pay ep 3e> plo-yon-saukp Ut ainzise Beide> we ce Ua MV ¢ [Ze6t] soroyy wosung A wopsutog tn ‘pur ageiueysisuaun 203 oy, Bae 10U pip 209 sat # jo yun Sysars-amod ayy 0% yea Ho ue yeu Psy sem 1°99 LI aT Badin,» prr-yrqeg fo segs ux dure 104 ‘ajqequeyozotaun spook rapuas Ayesso9N you ppesqued Jo wea1gBreach of contract iy. the injured party might prefer to hold the other party to the contract but would compensation for the breach and if the breach concerns @ minor term this is usually solution. However, the injured party does not always have a free choice as the law lays tales determining and limiting the scope of remedies. \ditions and warranties ally there are two types of terms in contracts: ‘conditions’ and ‘warranties. The distinc SS important because breach of a condition gives the other party the right to repudiate the and claim damages, For example, consider a contract to deliver a computer by ‘I June latest: If the machine has not been delivered by that date the buyer can treat the failure to as a breach of a condition and he can cancel the contract as time for delivery is usually trued as being a condition (see Hardley v Hyams [1920] 3 KB 475). Furthermore, the buyer laim damages that would be equivalent to the difference in cost of buying another similar pater elsewhere and any other expenses and losses he has been put to asa direct consequence Bebreach, with the proviso that he mitigates his losses that is, he keeps them to a minimum, Buyer may have wanted the computer to expand his business and he will be able to claim the ating loss in profits, provided the seller knew or should have known of this — that is, it was seasonable contemplation of the partes, {On the other hand, a breach of warranty allows the aggrieved party to claim damages only. contract is still in force and must be completed by both parties. They must both perform the ander of their agreed duties under the contract. For example, if a supplier has agreed to @ computer system and the contract states that the terminals are to be a deep yellow Dut, instead, he delivers a computer with lemon coloured terminals, this will amount to a of warranty unless there is some special reason wiry the deep yellow colour was specified buyer will be entitled to damages only and he will still have to pay the purchase price of the puter, although he may be able to set off a sum representing the damages. Damages are (on the basis of the damage naturally arising from the breach and in the contemplation the parties. In the example given, the damages would be likely to be nominal only. In Koufos v C Czarnikow Ltd [1959] 1 AC 350, a ship was chartered by sugar merchants to Seasport a cargo of sugar. The ship owners knew that there was a sugar market at the port of Estination but did not know that the merchants wanted to sell the sugar immediately on its val. The ship deviated from the agreed voyage and arrived about ten days late; in the mean- [Eire the price of sugar had fallen and the merchants lost over £4,000, It was held that this loss [Bbould be recoverable from the ship owners because they should reasonably have contemplated Pat the delay would have resulted in a loss. The ship owners knew there was a commodity [Market atthe destination and that prices would be liable to fluctiate, so that any delay could lead [Ses diminution of the value of the cargo. Unfortunately, this does not appear to work the other [ey the ship owners would not be entitled to any share in a windfall profit if the market value [ef the cargo increased dramatically and was sold for much more than it would have done had it Served on time. How does the basic principle that damages are based on the losses that were within the con: [emplation of the parties when the contract was made to work in the context of computers? Suppose that you run a computer bureau and carry out ordinary data processing work. You ecide to expand the business and buy a more powerful computer to be delivered by a certain ate. You tell the supplier that you need the computer to carry out some additional data process- fng but neglect to inform him that you are negotiating a very lucrative top secret government contract on the basis of having the new computer. If the computer is delivered late, then you [would be entitled to damages based on the loss in profits in the normal course of business but 3 3er urnewnys ue axe yuepu2ppayp pus aq) ul PoueD 02 ys sty Huta Agar ANP Bead on ponavoo ang ‘op 01 pajus sea 2y se 12eNIUOD aun [POUED 10U PID AUEPLAIEP A spuos v fjensns Aroagpp 20 a Boxe “pure Du ey Aq 2.09 104 sean HOH a Proreyy Us parayduson u22q 2Aey pinoy pItys yom poseads syp op o1 oRenUeD- (sseu> oq posespand per] 9 Woy uso) quem ap yeqs ppose ot paw swseuD sys wo ang Xpog Parkes YUEPUD|DP a419T9 GY | [OS6L) mHayuaddo aspsryPRI UI Bpuon bo) asa Uy) pur Aveszes ¥ 90024 “OR}puoD Ee 4S WED Ua] BSOUILELHOS aout asesjos pure aueatprey ay 30 Jayddns aun Aq aura ajqeuoseas & unontaxo aq ue> up saya “uorpuod J say>e21q se parean 2q aU S12J9p BSH} TEE Bony tou soop Youa1 a4 0 ev4od ayy 40 Kpadosd paanizi9s2q our 124105 ay wo pared Eeeut foino pur siwauinoop pue paydnsso> 10 so] Sug Aqerunues axe SOUH-2 Jf 2AANOFL Brduuy oF pavadx> 99 pinom sojddns a Sumpouios “Kvesses Jo. yoraaq & Se popsedoy Soo weyy Noe 24p i 209 poprsosd UeKN JoNo Ags seus yo dosHAsUEN ap serra s4ueduio> #30) areayjos pur arenpiey jo worsiaoud oq Jo} ape st enone 1 Bang jsut aeuRGOUK se poquasap 2q pho» s1>enuaD zamndusoD Uy SUA) JO HOS 1M Tuonputo jo Ypeauq »9q AeaP pYniom stay oyLSBoUTE aes qua.app e sodyp or aioe oun pute ssynduoo jo 2yeut sejn>qed w Jo Azaamep axp ao} st DeNUOD ayp 5p ‘aUNEXD Suonrpuo> Ajsnotago are Goryat-19x2Moy Swim 9u10s 29 det 2394, Squte}2>un UEINpONL! oso 24 prnoo nox siesUO> 1 AaEgEN9y 40 2aHT9p attorjm SaaS 258 PEN Bsr peoig e u2oq eu 2ioyy uN sme tp HuyPPop YoU puesta. ve TUPYoo] Jo dem STL Beso an Ae sry was ay Jo s09 24) spaonox pus aezto9 ayp>UED O1 YB a wuTOnd Gpdutnnbse wosiad acy Sural#‘uorgpucd ® Jo qovaig e 24 pynom pute yezIUO> 2qp Jo 1004 1p OF B prnon yoeaug yong ‘sauronai sputsng ut saps Ajpemata wots a aye pyn0> PE pepe aout 94 pow sip sure) pur sajgey‘npotp seunuuesS pur Hugjads e Fumrenws0) yses8 Bose youor uy. dry se qons sounieajapn(our ou s20p 28ey>eI a axa H “sUsaefe Sus9> Saad pon yo uy panos Apesou soumoyrensn 440 249 fe Sey wesfoud aya 3 END Si gos001 2 1 5008 yonaig xn up pues As aq rome 9p aEzIEN yo Yoeatg e240 POL>P Moo> 2 ay yg 'snaresoypw-yng 8 x04 10u Soop pe aReyped jeuospoud,v 9g 0} Jd Sons up 29 pouurep spr pasmboe sf ures Burssvoud pros 2ydusex> Jog aes © Re posse prmom wim a seo pu Sprnb 40a yan 2g pyno> pry Ayeouypa 9m, He stind oyap Buryen suis poussouo ypeoiq 2g) jt axomoy emuoD 2p ateHpngay JON Sep Suyqpus uontpuose jo qpeaiq® aq pynon sta pu Ayyromeosun speioy 29 pynow at BHP] Sipe se poo 1st 20:39p-2a4 © pey dys xp 1 aKdaex9 40g “wo, rpenivon 2yp Jo aH 3B etutinyp yea ah jo amieu 9, uu) ayer uF Yons sea asONe 2H Bigs 20y esyuo> os» pox uy wor © exp yoy ssp UH '9e SD [Z96t] HHP HOFDT Fpsnnoy apr o> Butddays sy Buoy Buoy san yoeoude sty 0) em. 24p posed spin a5 UL Sioroiqe saye Sencodsoseu pouu>.p some spe Suu reagoK, poye> 278 S20 Serpousiye 24 Ciueaze ese possep 39 xinuaqyo ‘sye}u9 Ye 749 TE ues OEP UCD Gostors ayy 01 poooud Apaiay 29 gs wun ag uog) “SBOP 31 3 1UzTUED 2430 001 OF Bab peatg aut sowioy 0 se 194} 24) Wo pusdop ym pue y>r>sG ayy Huypunoans siya Jo tei up pass oq a. wx “uayorg st 01 4 om yp Usaaiag eave Lon wut 94] >) Fenpeavoo e S9ui9w0g ap seme 0U St SONUELIEN pu FUORIPuED toMI9q MORPETH swe} ayeulwouul jensmun ase Kaya yt Ayjepadsa ‘nd 2q ya suresdosd 20 yuouidinbs Sep yore o1sosn ayn je Jo zyddns eiunmaogu z9pisuensiojaioup pinoy 13%nq y PEN [eR Stetod sip yo ous 1 po190dx9 24 K\qetosear oUt p[no> pur “OL 104 Pp toy ddns aypasTED= Gjdns sy sy “oent409 yu24Us9408 a4 250] NOK pypous BunAUE or pant 9q YOU PInaw wok qpesqued Jo w2e34Breach of contract the car must be ready by 25 July 1948 and that he would refuse to take delivery after that ‘The car was not ready by that date, so the defendant bought another car elsewhere and back the price he had paid for the chassis. It was held that when time for delivery is of Tessence of a contract for the sale of goods (that is, a condition) and, after the stipulated tin Jelapsed, the buyer waives his right to cancel by pressing for delivery, converting the term into ty, he may later give notice setting a reasonable deadline, once again making the time for sya condition of the contract. Late delivery and late payment soot unusual for new software to be delivered late. In this case, the client must be careful when fing extensions of time and should bear in mind that he will hope to avoid fudging the issue he date at which he can repudiate the contract on the grounds of the software developers late “This essential that any extensions be agreed in writing with the new date being firmly ds. condition, If this is not done, the client must allow a reasonable time when delivering. Sektimatum to the software developer. Itis not satisfactory 0 allow work to dragon for months B then to suddenly state that the contract will be repudiated if the software is not completed fhe end of this week. Seis common to find provisions for late delivery and late payment included in contracts. The act might state thatthe supplier will pay £150 per week if he delivers late or that the buyer pay interest at 0.75 per cent above the current base bank rate, should he be late in making int, Predetermined and agreed damages, known as liquidated damages, are frequently ted in contracts. ‘Liquidated? simply means that the damages or the method of calculating [oem are fixed and agreed. Liquidated damages are tobe distinguished from a penalty. Liquidated Temezes are 2 genuine pre-estimate of the loss resulting from the breach, whereas a penalty, [Gaich might be out of all proportion to the loss suffered, will not be enforced by the courts, The Gipulation of liquidated damages for breach of a particular term contradicts the possibility of [Gost term being a condition. Terms backed by liquidated damages will usually not be regarded as Gonditions, therefore, unless the scale of the breach is considerable. J) Other terms and breaches Se practice, many terms wil be innominate terms, in which cas it will only be possible to deter Keane whether breach of the term allows a party to repudiate the contract in the light ofthe actual Kets of the breach. A similar approach applies in respect of the terms implied by sections 13-15 (Gethe Sale of Goods Act 1979, as amended by the Sale and Supply of Goods Act 1994, in relation te the sale of goods to non-consumers. Under section 15A of the Sale of Goods Act 1979, in England, Wales and Northern Ireland, i the breach isso slight that it would be unreasonable to eject the goods, it wll be treated as a breach of warranty. In Scotland, it depends on whether the Breach is deemed to be a material breach. Provisions concerning the performance of a computer system, how fast the programs work in Iprctice anl the degre of compatibility with other equipment arc likely to be innominate terms Terms probably classifiable as conditions from the outset desl with aspects such asthe time for Méclivery and the description of the actual computer concerned. Time for payment is usually Greated as being a warranty unless the contract states otherwise or the circumstances suggest a Gifferent interpretation (see, for example, section 10(1) of the Sale of Goods Act 1979). By its very nature, when delivered, bespoke software often contains errors and it may be some time before they can all be traced and corrected. Its a brave software producer who claims that Fis software is error-free. The contractual position was considered in Saphena Computing v stoesquoo Abojouyse} uoneuuoyulo siewowepuns [fe‘ajgeytene 99 20U p[noM woISsPsar Ip F>UE Pino gedon.e Jo 320 A194 94) ‘spoo8 au} pardonse Apeaye pey Aased posouBae oyp jt ipaU0EY Biwoud posse sey Aused paxoyie aypj1 suno> a4) Aq pasopuo 2q Ayuo jim yons se pu Apatuas munbo ue 51 uojsspsas asne20q yueuoduiy <1 yy “HY Mone wasaidassyyy ag) Jo z Kon?3 Reorss10s02 Jo not} uy soFeWep plea Leu nod v WoneursoudodstuL yUo20UUL 10 yUsB\fB9U Jo S24) ur si0jaray,, “sooueiswndup autos Ut diyspuey asne> Aout stup ing oHEINOsosdaustu LO} 1 plepueis aif s| uosspsoy -AvoDasies aious uonenus ap ape ‘Z/61 13V SULLA], DENUOD A. 2ip Aq popuswe sv 296] Y uoHeUDsoudaxsyy OU, on Sea 1 1eUL apew 24 aUIH ay Bposarieg Apsouoy ay ye) Avs Ajduuts Aeur yuowoyeys os Suppo uosiod oyp ‘2aoud oF Nap au pes no pre Aguous Xue so40501 09 YS v YpEM 12412801 “(ye 1e apeUL taag JOAaU PRI [esse opise 1re11U0 a4) BUN) 2]qeyEAe S| UoSS!OsD4 Jo APaUUDE a4R me] MOLULLOD 78 UaKp (BNLT fe 10u 10 Joyreye Tuuse> ow ‘Issopfoay 40) AAUa|Mpnes} apeur u2>q sey woNe\UDsexdar OHH JT us .0UUL mL pure fyusByyfou ‘quojnpneyy a suonequaseudaustul Jo Suuo} 3x4) 226 94, “any pRDuaNYUE 99ey 204 [MA [ges quouiojes au ss120j ann a4p 01 uodo soko sry pM. AENUOD 347 O1E pasoIUD sey 2} KPIUID ap 2AcY 10U 4 9q anqUN sf yuOWTEIS ax YEN SHOU ‘speUI st WoreIUase1do1 a4 Woy fo} fazed 241 31 isn014qo “anszun aq 01 mo sums wows oWp f1 LOHTEINasaadaxsTu JO sI5eq Oy Bio acest 2q Leu Apoutas v ase> yprys ur pes}uo> a apapuE> oy Aised 19410 24p 2>mpUr PM eur yf yas i2es1U09 a4p 01 dn Zuspea] suoneNoou sy} 30 asinon a4p Ur pres SurtpDUIOS — uoneL saasoido1 v 99 01 pyes st 12eNUOD ap o3U! paresodso>UF a1H039q JOU SSOP yWILUDYEAS 9KA JT ‘anuyun aq 0} ino SusTy juoWIDrEIS Up Jt aed pansusBBe axp oF 2qqe[HRAP fre soxpauuas jenysenuoa jputzou uoyy suaddeg step Jf Sopred 24p Jo uoua.UY o4p sem si eK S528; 2tf uo Jopisuo> syano> axp Jf WI [emDesTUOD Jo ues 94) 0} poyeasy> aq ABUE y PUE PaUTUE Sisjap 2q 07 Aipernus spaou yuauiayeys axp jo Hinpuris ay, “Soxpourss op asi aa Aeus ‘omsnun jt Saxomoy ‘squausoqeys jueBesenx sso “wiatp Wo 1pTNONq 28e> P odds you plnox suNoD a4p pue Ajsnorzes u2yen 9g 02 10U aze syuoWIA}ES Yong “srE|NIBUUTUL, TuINq se paquDsop 2q Keus 10> SuLoBe Ge 2[durexe 20) ‘open soyou puey-puonss axp Woy punoge sajduexq “yjnd, Buspoape se fo} patos sotm awos a1e os94p {snolsos wat 346) 0} pa}22d9 S| 2u0 04 |e4p pIist os aze IAL Sis autos “anpord aq Ang 0} nog aanpur oy Axo WOH] UP UL aRAyUN XIduu S4e YUM sHUSLE Ssyeys 2xeur Ae pur apes & aeus o7 snopsue aq Aew 24 {32} O01 OF UeD 24 ‘SoUINOLOS “saumyeay 3599 219 FAY oF wry ade9 pjnow nox pu sutoy BuO} us pposd a4) aquossp oF uossod sos ¢ 10) Uouyun JOU St 3 "2oUEWLO}JOd sy pu areayos 241 BuFpueOu siuoUIoWeS yeu Ae bogs 10 24 ‘o1eauyos samnduio> Fuysinboe oy mata e yun uosiadsayes w ypim Suneno¥ou ase NOs Jp NO|LWLNASSudausIW, sson19 Buyuyeuioy ax 205 a|geH] 94 02 98E3D pjnom sayddns ayy “pus te o1 PesIHOD axp wYFNOIq, poy 2x) 9sne29q “nq j[asuNy woHIB1209 sa139 yno Aaxe> pynod ‘9pon soanos axp Jo Adoo e pry fou oy yp 2689 zejnaqzed sty UT SUN a]qeUOSEDL w UY StOsI9 2xp 1P2xs09 oF damp e pUE bur e aneq pynom aoyiddns agp ‘dens uy ADaFOp aaKy “AeRUL AUK Jey axEANYOs JaAr}oP J} eNuED jo y>ea1g v aq ‘SlOJLaNR YOU [HOM yf “uoREYIpou! JogLINy pu Sunsoy asmber AAjensn pinow 1f 184) pu fe 4oy pure soue 4940 popueY sem yee APoUIUIOD w YOU SEAL aHEA jos reip pardanze yeaddly jo uno ayy, “sureaosd oy7 ut srou ns 2196 2324) jy POrPUILL Ain} sean stuesoud yo 19qurnu » Buysi 303 DesUO> Y “OL9 USA [G66T] s9!>NaBY woHs9210° POHTY uoryequasedarsin237 summary mputer It is important that this computer i directly com- id the supplier confitms in good faith, before the contract ugh the contract itself is silent on the matter. Some fhe computer, itis found that, although the com. eee rh ery other respect, is not compatible withthe company's other machines Bor esonably be made so. Before the 1967 Act the company acquiting the cOmpUCE Baan ered fr this innocent misrepresentation, unless it was deemed to be contae aaa would be too late to have te contract st aside, Now the courts would Pe Tikely 10 v ch might be considerable in our example. The better approach would Wy to insist that an express term was inserted into the contract f0 the mast be compatible with the existing equipment, ‘a subsequent agreement between an internet Besgine that a company buys a con ‘with its existing equipment ani Be, that the computer is compatible althot ‘after accepting delivery and paying fort damages instead, wh been for the comp: that the computer to be acquired m San actionable mistepresentation may be compromised by Be partic. In [Way Ledv World Online Telecom Lid [2004] EWHE 208 (Comm), He provider (the claimant) made a contract with the defendant offers telephony services Bevugh the caiman’ server. The agreement was bad upon projections of the numbers of cus Homers, proportions of customers using the service during peak and other times (the cal profile) er he erage duration of calls. Although the call profile was not supporasie «0 reasonable rounds there had been a subsequent meeting at which revised Figures eis allegedly agreed and Henn ioc tothe defendant on the agreed prices reduced accordingly. This could Be 858 potential aims for miseepresentaion. According claim for misrepreseros he defendant sas in breach ofthe agreement by taking steps to divert (the md potential customers to the defendant's own server, a compromise of tion failed. However t defendant used the word ‘migrate’ actual a [Bivmary is Terms of a contract may be _ written or oral or a combination of both; = express or implied. Iegislation or by the courts (common law). (e Terms may be implied by if necessary to give business effc ied by the courts only i acy to the contract, Je Terins will be impli cular terms may be implied in contracts for the supph atrolled by: ‘ple, exclusion clauses may be struck outs, of trade ly of computer systems. = Part f= Express terms may be ¢ — legislation ~ for exam © the courts, where the term isin restraint Ie Terms may be implied to set quality standards. Ie Entire agreement clauses are common but may be seen as exclusion clauses where they for pre-contractual represen E exclude liability tations Te Contracts for writing software are contracts for servi wad Services Act 1982, which implies terms into such contracts, ible care and skill. ices controlled by the Supply of Goods for example vices are performed using reasonal — requiring that the se re sale of goods contracts for which: n of hardware a fm Contracts for the acquisitio Sale of Goods Act 1979 including that the goods mm terms are implied by the rast be of satis factory qualitysummary Feezine that a company buys a computer. It is important that this computer is directly com: Wwith its existing equipment and the supplier confirms in good faith, before the contract de, that the computer is compatible although the contract itself s silent on the matter. Some G after accepting delivery and paying for the computer, it is found that, although the com- Sewworks well in every other respect, itis not compatible with the company’s other machines {Gznnot reasonably be made so. Before the 1967 Act, the company acquiring the computer have no remedy for this innocent misrepresentation, unless it was deemed to be a contrac seem, as it would be too late to have the contract set aside. Now the courts would be likely to damages instead, which mightbe considerable in our example. The better approach would been for the company to insist that an express term was inserted into the contract to the Eethat the computer to be acquired must be compatible with the existing equipment. FS actionable misrepresentation may be compromised by a subsequent agreement between bperties. In I-Way Ltd v World Online Telecom Ltd [2004] EWHC 244 (Comm), an internet provider (the claimant) made a contract with the defendant offering telephony services the claimant’ server. The agreement was based upon projections of the numbers of cus. proportions of customers using the service during peak and other times (the call profile) she average duration of calls. Although the call profile was not supportable on reasonable feds, there had been a subsequent meeting at which revised figures were allegedly agreed and Sebate due to the defendant on the agreed prices reduced accordingly. This could be seen as sromise of potential claims for misrepresentation. Accordingly, a claim for mistepresenta- Terms of a contract may be — ‘written or oral or a combination of both; © express or implied. eems may be implied by legislation o by the courts (common law). Terms will be implied by the courts only if necessary to give business efficacy to the contract Particular terms may be implied in contracts for the supply of computer systems, Express terms may be controlled by = legislation — for example, exclusion clauses may be struck out; = the courts, where the term is in restraint of trade. ‘Teems may be implied to set quality standards. Je Entire agreement clauses are common but = may be seen as exclusion clauses where they exclude liability for pre-contractual represen- tations. Contracts for writing software are contracts for services controlled by the Supply of Goods and Services Act 1982, which implies terms into such contracts, for example: — requiring that the services are performed using reasonable care and skill. ‘Contracts for the acquisition of hardware are sale of goods contracts for which: — terms are implied by the Sale of Goods Act 1979 including that the goods must be of s factory quality. 237 sypesiuoo ABorouypay vonewioyu jo swewuawepuns FE