Disputes relating to IT contracts are on the increase, as technology infiltrates every aspect of business life. For many companies, their hardware, software or IT support services are their main line of business. However, in any business nowadays, a problem relating to IT, whatever that may be, can often have a very serious effect on the ability to trade.
‘Given our increasing reliance on technology in all aspects of business, it is not surprising that the need for effective dispute resolution in this area is increasing,’ says Kiran Solanki Solcitor at Crane and Walton Solicitors LLP.
‘The courts frequently have to adjudicate on IT breaches such as licensing conflicts, disputes with vendors, disputes about service levels, poor project management, and disputes over who owns intellectual property rights.’
Kiran Solanki looks at what is required in order to resolve a contract dispute related to technology.
Common types of IT dispute
There are various types of IT disputes that frequently require legal assistance to resolve.
It may be that an IT service provider fails to comply with the terms of their contract in implementing an IT project, such as a delay beyond the expected time frame, or using inexperienced members of staff, or not providing the software agreed in the contract.
General poor contract and performance management can also cause disputes. This could also damage your business, for example if there is too much downtime spent trying to rectify problems from poor performance, or delays in commencing work.
Disputes often occur over who owns the software licence on a project, or other intellectual property. Consequently, it may not be clear who is owed payment for these, and who is able to use them in the future without interference.
Disputes also arise about e-commerce sales and websites, and software development and supply issues.
We are also seeing more disputes arising out of the use of AI, blockchain, cryptocurrency and digital currency.
Hardware v software or bespoke v SaaS contracts
Different issues may arise depending on the type of contract and the type of IT services supplied. For example, a one-off supply of hardware may be subject to disputes around fitness for purpose, delivery failures, or failure to pay. Similar issues might arise with a one-off software supply, such as a company website, or a case management system.
For more bespoke services, and ongoing services, such as provided by a SaaS (Software as a Service) company, the issues can be even more complex. An ongoing relationship between the parties is vital, and so any dispute must be addressed quickly and with care, to avoid more widespread ramifications.
How to resolve an IT dispute
It is important to open up lines of communication as soon as a dispute arises, particularly if a contract is ongoing. An IT dispute can involve complex issues that can have a significant impact on a long-term project and a company’s overall value. To avoid derailing a project in progress, discussion and negotiation is the first step. It may be that an adjustment to contractual expectations is required, or an amendment to scope and timings, so everyone knows what to expect. It is also vital that disputes relating to ongoing payment for services or equipment already delivered, or payment terms relating to services still to be completed are resolved promptly, so losses are minimised.
Often the way the parties must first look to resolve a dispute will be set out in their contract terms. There are a number of alternative dispute resolution (ADR) options that the parties may have to use first before resorting to court action. These are discussed in more detail below. ADR as an alternative can be quicker, and less expensive than court proceedings. However, it does require some form of cooperation between the parties, so it is not always suitable for every situation. It is also not appropriate where there is an emergency situation, for example, where an injunction is needed to stop further damage from occurring.
After negotiation and ADR methods have been considered, the parties can have their dispute resolved by a judge in court, who will consider all the evidence and make a binding decision on how to resolve the dispute.
What sort of evidence is needed in an IT dispute?
Because IT contract disputes are often complex and critical to a business with the potential to cause significant damage to both parties, the evidence required to resolve such a dispute is key. It is imperative to be able to provide proof of the contract agreed between the parties, to show what was expected of both sides. Evidence is also needed to show what went wrong, and how that impacts the business in order for the court or ADR specialist to assess the level of damages to be paid. Because this is a specialist area and constantly evolving, it is usual in these types of disputes for parties to rely on expert evidence.
Common methods of alternative dispute resolution for IT disputes
It is often specified in an IT contract that the parties must try one or more alternative dispute resolution (ADR) methods before they can take a matter to court. These can be particularly beneficial in this type of dispute, because often the parties would prefer to keep working together, which can become nearly impossible if the dispute ends up in court. If it can be resolved to everyone’s satisfaction by an ADR method, it can be far less contentious. ADR proceedings are private, and so can be kept confidential, and are often less expensive than court action. Both parties can decide on which arbitrator or a mediator to use, and so they are less likely to feel aggrieved following a decision.
Mediation
This is where a neutral third party, called a mediator, is called upon to help you resolve your dispute. The mediator does not adjudicate on the dispute, but instead they will encourage both parties to work through their issues and reach a settlement between them. Mediation can be used to help to break an impasse, because it uses a neutral third party to act as a go between, which can help reduce the tensions of a face-to-face confrontation.
Arbitration
This is where an independent third party, called an arbitrator, considers both sides of a conflict and makes a decision on the outcome. If both parties agree to arbitration it will be binding on both parties. It is usual to choose an arbitrator who is an expert in IT issues, so they can apply their knowledge and experience in making a decision.
How can we help?
IT disputes are more and more commonplace now, and it is vital that professional advice is sought as soon as an issue arises to ensure it is resolved speedily to the satisfaction of all the parties. This can mean your contract getting back on track, and minimising losses and disruption to all concerned. Conversely, the longer an issue is allowed to continue without effective resolution, the more damage can occur, which is often irreparable.
For further information and assistance, please contact Crane and Walton Solicitors LLP in Coalville on 01530 834466. Crane and Walton LLP also has offices in Ashby, Leicester and Melbourne.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
