Facts
The claimant company, Astea (UK) Limited ("Astea"), was a
provider of a software package called "ServiceAlliance" (the
"Software"). The Software, which was designed for independent use
but could also be linked with other software systems via
integration software, had three core elements which:
- allowed the user to take a call from its customer to record
that a product was broken and allowed the user to check as to
whether a contract existed with that customer and whether billing
was appropriate;
- allowed the user to write onto its system what the issue was
with the broken product and what action was required to fix the
problem; and
- allowed the user to track spare parts for its products and had
a program which could automatically re order certain parts.
The defendant company, Time Group Limited ("Time"), was a
manufacturer and retailer of personal computers. As part of its
business Time ran a Call Centre for which it needed appropriate
computer based support. In 1999 Time decided to replace its
existing computer system with three different software packages.
The first package was an office accounting package called "Tetra
CS/3". The second package, which was to facilitate the sales
function of the Call Centre, was produced by Time and was known as
"Pulse". The third package was required to manage all aspects of
service and repair. Time chose to use the Software provided by
Astea.
n July 2000 Time and Astea entered into a Licence and Support
Agreement for the Software (the "Contract"). Astea granted to Time
licences to use the Software and also agreed to provide services
which included configuring the Software and integrating the
Software with Tetra CS/3 and Pulse. The parties originally agreed
that the scheduled date for the implementation of the Software
would be 1 August 2000. This date was confirmed in the Contract
despite the parties agreeing prior to the execution of the Contract
that the implementation of the Software would not occur until 1
September 2000. By implementation, the parties were referring to
the date that the Software would become operational, or the
"go-live" date.
Following the execution of the Contract there was slippage to
the scheduled date for implementation of 1 September 2000 to 30
October 2000 and then to 6 November 2000. In fact, Astea did not
install the integration software which linked the Software with
Tetra CS/3 and Pulse until mid November 2000. Once the Software was
installed, the next key task before the Software could "go-live"
was the testing of the Software as installed and integrated with
Tetra CS/3 and Pulse. Time took over the role of testing with
Astea's personnel assisting. Despite the installation of the
Software, Time delayed in paying Astea's outstanding invoices
rendered pursuant to the Contract.
At an important meeting between the managing directors of Astea
and Time on 6 March 2001, the issue of Astea's outstanding invoices
was discussed. Time also suggested to Astea that the implementation
work be suspended temporarily until Time could decide whether to
proceed with implementing the Software. There were many factors
which contributed to the delay to the implementation of the
Software which included:
- significant problems with the implementation of Tetra CS/3 and
Pulse;
- delay by Time in choosing the computer hardware necessary to
enable the Software to run;
- a dispute between Time and the supplier of Tetra CS/3 which had
a significant impact upon the work of integrating the Software with
Tetra CS/3 and Pulse;
- delay by Time in paying Astea's invoices;
- absence of Astea's personnel due to illness;
- delay by Time in providing information to Astea on data
issues.
Following the meeting of 6 March 2001, Time refused to pay
Astea's outstanding invoices. The end result was that Astea issued
these proceedings against Time to recover the outstanding sums due
under the Contract. Time's principal defence to Astea's claim was
that due to Astea's failure to ensure the Software had "gone live"
by 6 March 2001, Astea had repudiated the Contract, and Time had
accepted Astea's repudiation. As such, Astea was not entitled to
payment of the sums claimed.
Time also made a Part 20 claim against Astea alleging that the
software provided was of no use and that, as a result of the
failure to complete the services under the Contract, Time had
suffered a loss.
Judgment
At trial both parties agreed that Astea's contractual obligation
was to complete the services within a reasonable time. The key
issue which Judge Seymour had to decide was whether Astea was in
breach of this obligation by its failure to perform all the
services under the Contract by 6 March 2001. In determining this
issue Judge Seymour held that it was necessary to take a broad
consideration of what in all these circumstances would have been a
reasonable time for performance. This broad consideration involved
taking into account the following factors:
- any estimate given by the performing party of how long it would
take it to perform;
- whether any estimate had been exceeded, and if so in what
circumstances;
- whether the party for whose benefit the relevant obligation was
to be performed needed to participate in the performance or not at
all;
- whether it was necessary for third parties to collaborate with
the performing party in order to enable it to perform;
- what exactly was the cause, or what were the causes, of the
delay to performance.
Judge Seymour also emphasised that the onus was on Time to prove
that Astea had by 6 March 2001 exceeded a reasonable time for
completing the services under the Contract. Time did not lead any
expert evidence on this issue. Instead, Time relied on the original
estimate that Astea had given as its time for performance and
compared that estimate to the actual resources which Astea had
allocated to perform those services, the implication being that
Astea had not committed enough resource to meet its own time
estimate for the performance of the services. Judge Seymour did not
accept Time's argument and held that as at 6 March 2001 Astea had
not exceeded a reasonable time for performance.
Judge Seymour was particularly persuaded by the fact that Time
was in fact not ready to receive the integration software earlier
than 30 October 2000 because of problems with Tetra CS/3 and Pulse
and that Astea's staff had been willing and helpful throughout the
testing period. Assuming Astea had been in breach of Contract as at
6 March 2001 by taking longer than a reasonable time to perform its
obligations, Judge Seymour went on to consider whether this breach
would have been repudiatory. He held that in a situation where work
had been carried out before the alleged repudiation, the
application of the test of repudiation must consider whether a
failure to perform the remainder of the obligation will deprive the
other party of substantially the whole benefit of the contract.
Obviously a flat refusal to perform the services would amount to
a repudiation of a contract. However, where what was alleged to be
a repudiation is an indication to continue at a speed considered by
the other party to be unreasonably slow, Judge Seymour held that it
would be difficult to conclude that what has been offered would
deprive the other party of substantially the whole benefit of the
contract. Judge Seymour held that in this case, even if he had
found that Astea was in breach, he would not have found this to be
a repudiatory breach. Astea had never refused to complete the
services at any time and, as at the date of the alleged
repudiation, there was no suggestion that the resources Astea had
devoted to the project were inadequate or Astea's intention to
complete the services was not genuine.
As to Time's Part 20 claim, Judge Seymour held that even if he had
found that Astea was in breach of contract, Time had failed to
establish that it had suffered any loss by reason of such a
breach. One of the key reasons Judge Seymour gave for this
finding was that Time had failed to mitigate any of its losses by
permitting Astea to complete the services.
Commentary
Time's defence was difficult for a number of reasons. First,
there was no express agreement between the parties that the
software would be implemented by 6 March 2001. Second, Time had not
issued any notice to Astea making time the essence of the Contract.
Third, by its delay in taking any action against Astea, Time had
effectively waived Astea's breaches to implement the software by
the scheduled dates in October and November 2000.
As delay is a common feature in the performance of many IT
contracts this decision is useful as it provides guidance as to
what factors a court may consider in deciding whether a performing
party has exceeded a reasonable time in the performance of its
obligations under a contract. These factors are set out above. Of
course if a contract includes specific dates for performance, then
this decision will not assist unless those dates have been waived
either by express agreement or by conduct. Where a dispute concerns
delay to an IT project, expert evidence will sometimes assist the
court's consideration of whether a reasonable time for performance
has been exceeded. For example, an expert could give evidence on
how long the relevant technical operations should have taken or
give a view as to the expectations of the IT industry as to the
appropriate level of resourcing for a particular project.
As to proving a repudiatory breach of contract, this may be
difficult unless a supplier, such as Astea, has given a flat
refusal to continue to perform under a contract. Where the concern
is that the supplier is taking too long in completing its
obligations, the most appropriate action for a customer to take is
to give notice to the supplier making time the essence of the
contract. This may be done by writing to the supplier and advising
it of a date by which the works must be complete, setting out the
reasons why this date is both necessary and reasonable. If Time had
taken such action in this case then it would certainly have had a
stronger defence to Astea's claim.
