Landmark Decision for IT Suppliers - Pre-Contract Representations
The High Court in London has issued a landmark judgment in the long-running dispute between BSkyB and EDS. BSkyB claimed in excess of £700m in damages from EDS alleging that EDS’s bid team made fraudulent misrepresentations and breached their contract in the manner in which they won and subsequently performed the contract to supply and install a customer relationship management system for BSkyB. BSkyB ultimately claimed that EDS failed to deliver the system and as a result BSkyB had to develop the system in-house. The case is the first fraudulent misrepresentation case involving an IT project to proceed to the English Courts.
EDS argued that its maximum liability under the contract was capped at £30m. The High Court rejected this argument and held that EDS’s contractual cap on liability did not apply to damages arising as a result of deceit/fraudulent misrepresentation. BSkyB have said that they anticipate damages will be an amount of at least £200m as a result of the ruling.
Since the events in question EDS has been acquired by Hewlett Packard. Hewlett Packard issued a statement saying that “this is a legacy issue, dating back to the EDS business in 2000, which HP inherited when it acquired EDS in 2008.”
The case is likely to have significant implications for the IT services sector. It will see suppliers exercising greater vigilance in the statements made by their contract bid teams and will make the assessment of potential risk under a contract more difficult.
