Pictured above: Steve Skiba
A High Court judge's ruling has proved the devil is in the
detail of a business' standard terms and conditions, according to
Steven Skiba of law firm Berryman, who warns that overlooking
contract reviews, to ensure that terms and conditions marry up with
how a company represents its services or products, could lead to
costly legal proceedings.
"The decision of the High Court in this software contract
dispute provides a salutary reminder that all suppliers should
regularly check standard terms of business to ensure they
accurately reflect the way in which sales are made to customers,"
comments Skiba, a Partner and commercial litigation specialist at
Berryman.
"For the software company involved in this case, this oversight
has cost it more than £100,000 in damages awarded by the
judge to the claimant."
The case was about an automated hotel room booking software
system supplied by Red Sky IT (Hounslow) Limited to the Kingsway
Hall chain of hotels. London's Kingsway Hall Hotel bought the hotel
management software under Red Sky's standard terms and conditions.
Once installed, instead of enabling the promised increase in
revenue and occupancy, the software in fact proved to be unsuitable
and under-performed for the hotel, costing it dearly in terms of
reservations lost due to shortcomings in the software.
"The Hotel claimed damages and, despite the software company's
assertion that because of the wording of its standard terms and
conditions it wasn't liable for shortcomings of its software, the
High Court, rejecting the argument, awarded Kingsway damages
totalling £110,997.54, to cover a loss of profits and
goodwill, wasted expenditure and to offset additional costs to
cover extra staff hired to cope in the absence of a robust IT
system," Skiba explains.
"This is an interesting area, but is not unique," says Skiba.
"There are plenty of cases brought about due to failures or
inadequacies in standard terms of business. However when a business
has robust terms and conditions in place, which accurately reflect
the way the business operates today and which correspond with how
the company and its staff sell the products, it certainly
strengthens the company's position if ever those terms and
conditions are brought into question over the product or service
delivered and sold."
He adds: "For as little as £500 plus VAT a business can
hire a lawyer to run an audit and general health check on their
business contract and standard terms and conditions, and advise
them on how to ensure these translate into all areas of the
business including staff inductions and contracts. Standard terms
should be kept up to date with new or different practices and when
new sales personnel join the business. Sales personnel should be
made aware of what the terms and conditions say and how the company
expects them to be implemented.
"This seems a small price to pay when compared to the six figure
financial settlement awarded by the judge in this latest case and
presumably the additional liability of costs."
Berryman's commercial litigation team is running a series of
seminars and workshops later this year that will cover topics about
terms and conditions and contractual remedies.
Berryman is a Midlands' law firm based in Nottingham, which
provides an extensive portfolio of legal services within four key
areas: Business Services, Property & Construction, Insurance
Services and Private Client. It employs over 130 people and has 18
partners. For more information, T: 0845 310 7200, or visit www.berryman.co.uk