Our business dispute solicitors are seeing a sharp rise in the number of firms seeking legal support when things go wrong with their IT related contracts. This includes both supplier and consumer businesses on both sides of a dispute. In this article, we discuss the common causes of IT contract disputes and how you can resolve them.
Common types of IT contract disputes
There are a few common types and causes of IT disputes that our business dispute solicitors see cropping up time and again. These include (but are not limited to) the following:
- Contract disputes: Disputes often occur when a party tries to move away from what it promised/contracted to do. Common examples include using different software than what was originally proposed, constantly changing the members of the project teams, excessive delays, poor or non-existent sharing of information, data etc., charging for extras that were in the original scope of works and refusing to accept errors (and resulting arguments about payment for the work associated with those errors).
- Service level agreement (SLA) disagreements: IT service providers are often bound by SLAs that define the level of service they must deliver. Disputes can arise when there are breaches of the agreed-upon SLAs, such as service downtime, failure to meet response time targets, or inadequate performance.
- Data breaches: A data breach can occur if a cyber security provider has delivered a solution that is not fit for purpose. In this case a business may be able to recover damages if they can prove that the cyber security provider was the cause of a data breach.
- Software licence disputes: IT projects may involve the use of a software licence, databases, or other intellectual property. Disputes can arise over the terms, royalties and payment schedules.
- Poor project management: IT projects are often complex and time consuming. Delays are common. However, delays can occur due to poor communication and/or miscommunication between the supplier and the client. A delay can often have a knock on effect as businesses typically schedule periods of time for downtime for upgrades or migrations.
How to prevent IT disputes
The key thing to remember when it comes to preventing IT disputes is the importance of having a well-drafted contract drawn up between you and the other party right at the beginning. It is surprising how many complex IT projects proceed with very little documentation in place. This means that the parties proceed with a project without:
- Clearly defined deliverables and objectives
- Detailed specifications and requirements
- Roles and responsibilities
- Governing law and jurisdiction
- Force majeure and termination clauses
- A dispute resolution clause
The parties should have the contractual documentation in place that they can refer to during the project which will help them avoid disputes.
Effective communication is another essential factor to prevent disputes from arising. Some things to put in place to support this would be:
- Having dedicated project managers on the supply and customer side to manage their roles and obligations under the project
- Having regular progress reporting in place
- Having clearly defined milestones
- Having a system of written communication for amendments and changes to take place for the project
Implementing all of the above will certainly go some way towards minimising the risks of a dispute arising or, if one does, will provide valuable guidance as to how the problem can best be resolved in terms of the procedures to follow.
How to resolve IT disputes
The best way to avoid an IT dispute is to take steps to ensure that one does not occur in the first place. That means ensuring that the proper documentation is drawn up and the project proceeds in the way set out in it.
If a dispute arises during the project, it is important to address it early. IT projects are very often complex, stressful and involve long hours. IT projects rely on good and harmonious working relationships. If those breakdown, it can be difficult to resolve and get the project back on track. Early intervention is often needed. That might be adjusting milestones, changing the scope of the project, switching our team members and/or resolving payment issues. Legal advice and support may be needed, often in the background.
If a dispute arises, there are a few courses of action that might prove a good way of resolving the challenges you are facing with your IT contract; it might even be the case that the terms of the contract say you have to try one particular form of dispute resolution before you can take the dispute to court (litigation). Below are some ways in which an IT dispute can be resolved:
- Mediation: This, in brief, involves using a neutral party called a mediator to help you resolve the dispute with the other party.
- Arbitration: This type of dispute resolution involves an independent arbitrator deciding what the outcome will be when it comes to resolving the conflict. The arbitrator’s decision is normally binding on the parties.
- Litigation (court proceedings): Generally speaking, litigation should usually be considered your last resort for many different reasons – some of which include costs and time spent and both of which can be considerable. Put simply, litigation involves going through the court process to a trial and having a judge make a binding decision on what will happen in your dispute.
What if matters reach a stalemate, or the issue at hand is technical?
In this case, we strongly recommend seeking help from an experienced business disputes solicitor at the earliest stage possible. This can help with finding a solution before matters escalate. Our business dispute solicitors place a heavy emphasis on keeping disputes away from the courts wherever possible, and will always consider whether a different method of resolving the problem is an option.
IT disputes are unfortunately common. The often occur due to breaches of contract, service level disagreements, data breaches, vendor conflicts, licensing disputes, and poor project management. If you are currently in a dispute, you should seek advice from an experienced business dispute solicitor. It is also important that you are proactive and seek advice from an experienced business dispute solicitor if you think that a dispute might arise and you want to try and find a solution.