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Rob Kelly |
Tony Dolbear |
Jessica Lee |
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Storm clouds for Red Sky when an exclusion clause in an IT contract was held unenforceable
In Kingsway Hall Hotel Ltd v Red Sky (Hounslow) Ltd the court refused to permit the supplier of information technology systems to the hotel trade – including front and back office reservations and point of sale systems – to rely on its standard exclusion clauses to exclude the statutory implied terms of satisfactory quality and fitness for purpose on the grounds that the clauses were unfair.
Red Sky supplied a standard front and back office and point of sale software package to Kingsway Hall Hotel, a four star, 170 bedroom hotel in central London. Kingsway encountered numerous difficulties with the system, principally that the software reported fewer rooms available for reservation than was in fact the position so that available rooms were not re-let. Kingsway gave Red Sky time to resolve the problems but when Red Sky failed to do so Kingsway replaced the system and claimed damages against Red Sky.
Red Sky defended the claim and relied on exclusion clauses in its standard terms and conditions which sought to exclude, or at least limit, any liability it might have had to Kingsway under the Sale of Goods Act 1979 or the Supply of Goods and Services Act 1982. The court held that Kingsway had been entitled to reject the software package, which was not of satisfactory quality nor fit for its purpose, and ruled that Red Sky's exclusion clauses were unfair so that Red Sky could not rely on them. Kingsway was awarded damages for loss of profits and damage to its goodwill, the price of a new software package and additional staff costs incurred dealing with the problems.
The case is fact specific but it serves to illustrate the need for parties to be vigilant about the terms on which they negotiate, and enter into, contracts, particularly if on another party's standard terms.
email :rkelly @ hlf-law.co.uk
Tel : 0800 043 0538
