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Saturday, 4 February 2012 |
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Breach of IT contracts
Wednesday, 11 June 2003
Yet another breach of contract case involving the provision of an alleged faulty computer system has been heard by the courts.
This action was heard in the Supreme Court of New South Wales and involved two separate matters. The first was an action by Business Bytes Pty Limited (Bytes) for payment of fees owed to it by a vehicle distributorship, Ateco Automotive Pty Limited (Ateco) for work undertaken in relation to the installation of a new computer system. This claim was successful.
The second matter was an action by Ateco against Bytes claiming damages for breach of contract, negligence and under the Trade Practices Act in relation to advice given by Bytes and the installation by Bytes of a new computer system for Ateco. Essentially, Ateco's grievances were that the new system failed to perform to expectations and that the new system cost Ateco substantially in excess of the amount originally estimated by Bytes. Ateco failed entirely in its claim against Bytes.
The interesting points to note from the courts' analysis of Ateco's claims are as follows:
- the Judge found that both the cost and efficiency of the new system had been materially impacted by Ateco's refusal to undertake or have undertaken a Requirements Analysis. Bytes had, despite frequent recommendations that a Requirements Analysis be undertaken, been told by Ateco that a Requirements Analysis was unnecessary as the new system merely had to be capable of performing in the same manner as the existing system
- Ateco's failure to agree to a Requirements Analysis was in part due to a lack of understanding by key personnel of the importance of a Requirements Analysis. Furthermore, in saying that the new system had to merely perform in the same manner as the existing system, Ateco had not taken into account the rapid growth being experienced by the company as evidenced by the subsequent acquisition of new franchise and the purchase of a warehouse in Perth
- there was some confusion within Ateco in that some executives continued to seek modifications to the existing system thereby diverting Bytes from developing the new system, and
- the problem was exacerbated by Ateco refusing to allow any training to take place. Such training would have identified issues arising from the use and operation of the new system before implementation.
The Ateco case is a good illustration of how important it is for customers acquiring computer systems to take an active role in the selection and implementation of the system. Internal management needs to be coordinated and ideally a person or team within the customer's organisation should be given the responsibility for the successful choice and implementation of any new system. In this case, Ateco could not complain that the new system failed to meet its expectations because it had not taken the time to consider its actual present and future requirements. Management of the project by the customer was disorganised with the result that tasks were not prioritised and the importance of training not appreciated.
The irony of the case is that after Ateco ended its relationship with Bytes it acquired yet another computer system from a third party. The case reports that the system is working but that it was only installed after a Requirements Analysis, with training of personnel, was carried out!
This article was supplied by law firm Freehills.
Irene Zeitler (irene.zeitler@freehills.com)
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