28 September, 2010
In a recently reported case a London hotel obtained judgment against its IT systems supplier. The case is interesting as it is a classic contract dispute and it provides a useful overview of the way in which the Court approaches such cases. The case occupied the Court for 10 days and it is clear from the 51 pages of the judgement that this was really contentious litigation with both parties believing they were in the right.
The hotel entered into a contract in October 2006 for software to deal with advance reservations, checking in and out and the payment of bills. The agreed price was 49,999. The hotel stated that the system supplied did not work properly and despite being given an opportunity to put things right the IT suppliers had failed to do so. The hotel rejected the IT system within 6 months and replaced it with another system from an alternative supplier. The IT supplier said that this was not a bespoke system, the hotel had seen it demonstrated before placing an order and had evaluated whether it was suitable for their requirements. The IT supplier also alleged that the hotel staff were not using the system correctly and that its contract contained clauses excluding liability.
The Court analysed the initial discussions between the parties and the paperwork which formed the basis of the contract. The Court heard evidence from hotel staff and the IT supplier's staff. Expert evidence was obtained by each party to provide the Court with guidance as to the complaints and what level of functionality could reasonably have been expected. The Court found that the IT system was defective in that it incorrectly reported room availability; screen freezing occurred regularly and check in of group bookings was unwieldy and prone to error. The Court decided that the IT system was not fit for purpose and was not of satisfactory quality. The hotel was entitled to reject it. The Court assessed the loss suffered by the hotel including loss of profits and goodwill, wasted expenditure on the IT system, additional staff costs and wasted staff time. Judgement was given for the hotel in the sum of 110,997.54.
The case underlines the need for clarity in the contract paperwork and when things go wrong to document the problems, even if only by email. Those emails may form the basis of the evidence given to the Court years later. As the Court was willing to consider a calculation of losses based on sales occupancy information collated by the hotel it also means that in the event that a claim seems likely such information should be retained.