Court Rules Software Supplier's Standard Terms Unfair

A recent case highlights the importance of getting standard terms in contracts right.

It involved a hotel group, which entered into a contract with a computer software firm specialising in software for managing hotels. A standard term in the software supplier’s contract said that the software would work in accordance with operating manuals, which would be supplied before the contract was formalised. The conditions attached to the contract provided that if this term were breached, the software supplier would be liable to the hotel group only for the provision of maintenance and support.

The contract also contained a term that excluded any warranty that the software was fit for purpose. In the event, the software proved unable to cope with the demands placed on it by a busy four-star hotel in London and regularly froze.

The hotel group sued and the software supplier attempted to rely on the exclusions in the contract. The court ruled that the contract terms limiting the supplier’s liability were void (under the Unfair Contract Terms Act 1977) because they were not reasonable and, in addition, the operating manuals had not been supplied.

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