Technology and Commercial Contracts Update

Author:Mr Mark Rasdale, John O'Connor, Don McAleese and Yvonne Cunnane
Profession:Matheson Ormsby Prentice

Landmark decision in the case of BSkyB v EDS

The London Technology & Construction Court (a division of the English High Court) yesterday issued judgment in a long running case between BSkyB and Electronic Data Systems (now HP Enterprise Services). This is one of the most noteworthy IT cases to come before the courts. While the decision does not change the laws of Ireland and is not binding on Irish courts it would be of persuasive effect before an Irish Court. However, the lengthy judgment provides analysis of common risks associated with competitive bidding and with time and cost critical projects, in the technology sector and beyond. It provides invaluable insight into how a court is likely to approach contested pre-contractual representations and how they might be mitigated by bid teams and their advisers.

It is also reported that the decision, which rejected a number of the claims made by BSkyB, will be appealed by Hewlett Packard.

The Background

Following a tender process in 2000, BSkyB selected EDS to design, build, manage, implement and integrate the process and technology for a customer relationship management system at two of BSkyB's contact centres. The relationship proved unsuccessful and ultimately BSkyB took over the implementation of the project. The project was stated to have an initial value of £47.6 million. BSkyB claimed that as a result of the failure by EDS to implement the system and the consequent delay that the actual implementation cost was in the region of £200 million. BSkyB claimed damages of some £709 million, which in addition to the claim for costs also included claims for lost business benefits and lost profits.

The Legal Issues

BSkyB claimed deceit, negligent misstatement and breach of contract in relation the manner in which EDS won the deal and implemented it. Significantly, the contractual limit of liability, which corresponded to the contract value, did not apply to instances of deceit and so the potential liability is significantly greater than the supplier had negotiated in the contract. No award of damages has yet been made, although it is reported that it could be in the region of £200 million.

In particular, it was claimed that EDS represented that it had carried out a proper analysis of the amount of time it needed to implement and go-live with the system. It was held that no proper analysis was carried out by EDS and that it had no...

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