Latest News - 15 February 2010
15 February 2010 - BSkyB wins Dispute – Fraudulent Misrepresentation
Be careful what your salesmen say! In a recent important court case the court looked at a perennial issue of salesmen conning customers about what was on offer to induce them to sign the contract.
Jonathan Eales a partner in Kenneth Bush says “In most consumer and business to business contract negotiations the issue of enforceability of clauses excluding and limiting liability raises its ugly head. Most of those involved with contract drafting know that it is not possible under English law to exclude liability for fraudulent misrepresentation. In a long awaited High Court Judgment in January 2010, which runs to over 400 pages, a judge has held that exclusion clauses are void and that BSkyB has won its fight against EDS over an allegedly failed IT system. The Customer Relationship Management system was defective in the buyer’s view and BSkyB’s legal costs between 2007 and 2009 alone ran to £40m. EDS probably spent as much but, with £700m at stake, those costs are chickenfeed.
One of the witnesses for EDS claimed to have an MBA from Concordia College and described the buildings where he had attended lectures. BSkyB’s QC produced a certificate in court which the main witness accepted as from that organization. The QC could prove he had bought it on line for his dog Lulu. The College did not exist and the witness lost his job the day after he gave evidence. However, it is the detailed examination of legal issues on exclusion of liability which are of interest in the judgment.
When did you last have your clauses excluding liability in contracts checked by a lawyer? Are they reasonable enough to be valid under the Unfair Contract Terms Act 1977? Do you ensure you do NOT exclude liability for fraud? If you exclude it the entire clause can be void.
Notes
1. A Lawyer article on the case is at http://www.thelawyer.com/reaching-for-the-sky/1003263.article.
2. Herbert Smith acted for BSkyB and they said the damages would come to a minimum of £200m. The judge will hear arguments this month to determine the level of damages paid. BSkyB claims £700m in damages from EDS. The judge decided that there had been fraudulent misrepresentations made to win the business. The software was to run BSkyB’s new contact centre.
The claims were for deceit, negligent misrepresentation and breach of contract by EDS and the damages sought were much higher than the original contract value of £48m. Indeed the legal fees are over £70m in total on both sides, possibly double the value of the contract. The contract began in 2000 when EDS was hired to build a customer service system and the contract terminated in March 2002 after a "woeful" performance by EDS.
3. The judgment is on line at
http://www.bailii.org/ew/cases/EWHC/TCC/2010/86.html