Information Technology- Finland

In October 2006 the Tampere District Court ordered a software company to pay damages of €510,000 caused by a fault in software it had delivered. The value of the software delivered was only €53,915. The dispute related to the use of the Terms and Conditions for IT Procurement 2000 (known as the 'IT2000 terms'). According to the court, mere reference to the IT2000 terms in the contract was insufficient to create a binding effect of the terms in the absence of evidence demonstrating that the terms were available to the purchaser before the agreement was signed.

Facts

The software company had supplied an automatic cash register system to the buyer. The buyer was a retail chain that intended to use the system to charge customers for purchases. The cash register system included a barcode reader and software to process the information read by the barcode reader. However, the system could not process the data as quickly as the barcode reader could read it. As a result of the defect in the software, customers of the retail chain were not charged for all their purchases. The losses suffered by the retail chain due to the software fault were estimated at €537,555.

Applicability of IT2000 Terms

The software company admitted that there was an error in the software. However, it claimed that due to the reference to the IT2000 terms in the contract, the limitation of liability clause of the IT2000 terms applied. The limitation of liability clause limits damages to 15% of the purchase price. Therefore, according to the software company, its maximum liability would be €8,087.25, considering that the value of the software delivered was €53,915.

The court held that the IT2000 terms did not apply as the software company was unable to show that the IT2000 terms were part of the contract. During the hearing it was established that the parties did not discuss the IT2000 terms or the liability clause of the terms during the negotiations, and the terms were not included in the annex list of the contract. Further, the software company did not deliver the IT2000 terms to the buyer. As the contract was prepared by the software company, the court stated that any ambiguous clauses were to be interpreted to the software company's detriment.

The court considered that the damages should be equal to the amount lost by the retail chain because some of the purchases were not added to the cash receipts. It held that the software company was liable to pay €510,000 in damages to the retail chain.

Comment

The IT2000 terms are commonly used for software deliveries. However, software companies should be aware that when using the IT2000 terms and similar general terms and conditions, the terms must be clearly stated in contract negotiations in order to become part of the contract between the parties. Mere reference to the terms is not enough. The terms should be discussed in the negotiations, given to the contracting party and clearly marked as an annex to the software delivery agreement.