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Reflect reality in your contracts
The recent case of Kingsway Hall Hotel v Red Sky IT (Hounslow) Ltd has highlighted the need for a supplier’s standard terms and conditions to accurately reflect the reality of the situation for both parties. One size certainly does not fit all. The ‘standard’ terms and conditions of the supplier must be aligned to the particular business practice and needs of the customer.
Kingsway bought a new hotel management software package from Red Sky IT subject to Red Sky’s standard terms and conditions. Kingsway was not provided with the operating documents which formed part of the standard terms and conditions, but Kingsway signed the contract nevertheless.
The software supplied by Red Sky IT quickly proved unsuitable and Kingsway sought to recover damages from Red Sky IT, claiming the software not to be of satisfactory quality or fit for purpose (which are the statutory implied terms).
Red Sky IT sought to rely on the standard exclusion terms within its terms and conditions, which attempted to exclude the statutory implied terms relied on by Kingsway.
The High Court found for Kingsway and stated that the standard terms failed to reflect the reality of the sales process and that the software provided to the customer had not been fit for its purpose or of satisfactory quality. Red Sky IT’s contract was criticised by the court because it did not reflect the reality of the situation and its exclusions were held in this case to be unfair and invalid as a result. Damages were subsequently awarded to Kingsway.
The ruling identified a ‘clear disconnect’ between how the software had been sold to the customer and the basis on which the supplier’s standard terms were drafted. Where there is uncertainty of terms, there is likely to follow litigation, delay and expense. Most litigation stems from verbal contracts or poorly-worded written contracts, so getting your contract right in the first place (and in writing) is the key.
Suppliers should regularly review their terms and conditions and make sure they accurately reflect how they supply their products or services in practice. Birkett Long can help you draft your commercial contracts, or review the terms and conditions of a contract before you sign on the dotted line.
For expert advice on all kinds of commercial contracts, speak to David Cammack, partner at Birkett Long LLP, on 01206 217311 or by email at email@example.com