26 March 2010 by Matthew Miller

And the winner is…

In 2000 Electronic Data Systems Limited (EDS) won a tender to develop and deliver a new customer relationship management (CRM) system for use in BSkyB’s various call centres. The original project budget was £50 million and, according to the original project timetable, the new CRM system should have been installed within 18 months. However, the project was not a success. The fully functional CRM system was not completed and installed until March 2006, 4½ years behind schedule, and by that time the cost of the project had reached £265 million. Ouch.

Unsurprisingly, BSkyB sued EDS in the High Court and won. As yet neither the final award of damages nor any decision on the substantial legal costs has been made. In February EDS made an interim payment of £200 million on account of BSkyB’s likely damages, so although EDS is appealing the High Court’s decision it does not seem to be very confident of getting a result.

In the project contract EDS sought to limit its total liability to £30 million but the value of BSkyB’s claim was just over £700 million. As a supplier cannot limit its liability for fraud, it was crucial for BSkyB to show that EDS had made fraudulent misrepresentations when seeking to win the original tender process. To some extent it was successful in doing so. The EDS bid team leader, who was found to have made dishonest statements to BSkyB, came in for particular criticism. He claimed to have completed an MBA when, in fact, he acquired the qualification from a website so one of BSkyB’s barristers acquired an MBA from the same website, but with better grades, for his dog Lulu. The judge did not regard the relevant EDS employee as a credible witness…

On a serious note there are some basic lessons to learn here, particularly for suppliers. Like (i) regularly reviewing sales procedures and training to try and ensure that sales representatives do not make statements which cannot be backed up or timetables which cannot be delivered and (ii) making sure that supply contracts include “entire agreement” clauses to exclude liability for (non-fraudulent) pre-contractual statements. Conversely, on the customer side, the lesson is to try and ensure that any key pre-contractual statements made by suppliers are expressly included in the supply contract.

Of the parties involved, EDS (now owned by Hewlett Packard) has obviously taken a real hammering even before any final decision is reached on the damages and although BSkyB is claiming victory in reality the litigation has been very costly and very disruptive for its business. The real winner is definitely Lulu. After all, not too many dogs end up with an MBA.

5 March 2010 by Sarah Davies

You and Your Garden The Legal Jungle

With spring and the promise of longer days approaching, you may be thinking about getting outdoors and into the garden. It may well be a place for fun and relaxation, however, there can be many legal pitfalls lurking in the bushes…

19 March 2010 by Yezdan Izzet

Scheming Deposits…

Most residential properties which are let on short term tenancies now qualify as Assured Shorthold Tenancies, yet it is surprising that so many landlords are unaware of the statutory requirements relating to rent deposits.

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