White SW Computer Law
|Intellectual Property, Information Technology & Telecommunications Lawyers|
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The Supreme Court of New South Wales has examined a case in which a customer was dissatisfied with the installation of an inventory control computer software and hardware solution. The customer, A had contracted B to install a new system for the use in a vehicle distributorship, but claimed the new system was unsuitable and wanted to be reimbursed for its replacement. B had also commenced legal action to recover its fees - this had occurred before A made its claim.
Amongst other things, A claimed:
A terminated the contract and alleged, amongst other things, that the system provided by B was so inadequate that A received no effective benefit from it and it had to be entirely replaced.
There was extensive evidence given in relation to the pre-contractual negotiations, including the fact that B had raised the necessity of conducting a requirements analysis to identify the tasks which the new system would be required to perform. However, A did not agree to this. The court accepted that the failure to undertake a requirements analysis, in the circumstances of the case, meant that it was difficult to give an accurate estimate of the likely cost of the new system and led to problems in the installation of the system.
The court found that A also increased the scope of the project during implementation, continued to seek modifications to the old system which diverted resources from being used in the development of the new system and failed to train their personnel with the new system, meaning that issues in the use and operation of the new system were not addressed before implementation.
B introduced expert evidence that the installation of the new system was poorly managed by A, in that, amongst other things:
The court concluded that despite problems in relation to the parts component, A did receive significant value for the work which had been done by B. The hardware was appropriate and was used for the further new system, the system as implemented was Y2K compliant and performed many of the required functions in an appropriate manner.
It also found that although the fees which B sought to recover from A far exceeded the estimated cost, there had been poor management of the process by A, a failure by A to give adequate instructions and provide the required training and other resources to complete the process. Further, significant costs were also found to derive from the many additional requirements imposed on the system.
The claim by B to recover it fees succeeded and A's claims failed, with A also having to pay the legal costs of B.
Accordingly, it is important that if the supplier is of the view that a requirement analysis1) is an essential component to a successful project it should state so in writing repeatedly before entering a contract and try to have same inserted as a term into the contract. If the customer refuses then this should be documented at all stages of the project along with the problems that may arise as a result.