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Liability Exclusion – Pegler v Wang
IT Supply Contracts
The case of Pegler v Wang concerns, and has implications for all those purchasing major IT systems, and perhaps more immediately for those tendering for such contracts. Invitations to tender tend take place in the midst of great uncertainty, optimism, and sometimes self-delusion and greed. To win a contract to install a substantial system can be very profitable for the company issuing the tender.
Over the years, the myth of the perfect installation has been destroyed, and it is now accepted that in any such installation there will be difficulties and the courts have recognised a duty on purchasers to work with suppliers to resolve difficulties. Nevertheless, in this case the purchasers made it quite clear that they preferred a system which could be certainly guaranteed to provide a solution rather than a leading edge technical solution which might cause problems. It appears that the tenderers made promises about the capacity of the software and in particular about the stability of the installation as requested by the purchasers.
Entirely predictably, the software failed to live up to expectation, and in due course and through the litigation, it became clear that the installation was in fact a high-risk project, precisely not in the way requested by the purchasers.
The clause contained exclusions of liability for consequential and other losses. Wang sought to rely upon these.
Judge Bowsher ruled that because of the relative knowledge and ignorance of the tenderer and purchaser, the clause would be defeated by the Unfair Contract Terms Act 1977 as unreasonable. A misrepresentation made by a supplier who was particularly in a position to know the truth about his representations when the buyer would have no such opportunity, will face a steep hill to climb before avoiding liability.
The case was interesting also as to the calculation of damages and will (or should) cause considerable re-thinking in the computer industry.
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