Legal threat to suppliers over software bugs

Legal threat to suppliers over software bugs

No business or accounting software package is ever totally bug free.

Software suppliers have long since acknowledged this and happily continue to sell products to anyone who will buy them. The conventional wisdom that bugs don’t matter if they don’t affect the end-user is less certain in future, however, after a landmark legal judgement this summer.

In October 1994, the High Court awarded damages of over #1.3m to St Albans City and District Council after it sued ICL for supplying a defective financial system. The Court of Appeal reduced the damages, but upheld the original judgement – and set a precedent which will reverberate around the software industry.

According to IT lawyers Tarlo Lyons, the case provides numerous lessons for both suppliers and buyers of software. Speaking at a presentation in London last week, Tarlo Lyons partner Dr Ian Walden warned suppliers not to presume that the existence of bugs and errors is an acceptable industry practice.

And he said that although the decision is not the catastrophic event some have suggested, the terms of contracts for the supply of software need to be re-visited and given proper consideration.

Lawyers at Nabarro Nathanson issued 18 guidelines after the judgement.

For customers, the key ones are not to assume their claims will be limited by contract terms or conditions – both the original judgement and the Court of Appeal ruling have shown the law is willing to help customers who have suffered loss as a result of defective computer technology.

End-users should, therefore, not assume that contract documentation put forward by the supplier is non-negotiable. If the two firms’ conclusions agree on anything, it is that proper attention to contract terms at an early stage will help avert a disaster later on. Victory in court after a long-drawn out and expensive legal battle is unlikely to be nothing more than pyrrhic.

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