Following a long running legal battle, judgment in BSkyB Limited (Sky) v HP Enterprise Services UK Limited (formerly Electronic Data Systems Limited) (EDS) was handed down on 26 January 2010, with EDS held liable for deceit, misrepresentation and breach of contract.
In 2000, Sky awarded EDS a contract to design and implement a customer relationship management system following a competitive tender process. Sky claimed that EDS had acted deceitfully during the tender process by describing the system as "proven" when it was not, by overstating its capabilities in relation to resources and implementation methodologies, and by understating the amount of time and cost required to implement the system, leading Sky to select EDS in favour of other bidders.
Sky was successful in its argument that EDS's misrepresentations in respect of the amount of time required to complete the project, were made fraudulently rather than negligently.
EDS was found to have made further negligent misrepresentations during the course of the project which induced Sky to agree to amend the contract, and was also found to be in breach of the contract having failed to use reasonable skill and care or conform to good industry practice. In particular, EDS had failed to capture Sky's requirements, adequately resource the project or properly document the design and development process.
The final amount of costs and damages is yet to be determined by the court. However, given that EDS's contractual cap on liability of £30 million is not effective against liability for fraud, it is anticipated that final damages may exceed £200 million. EDS has announced it plans to appeal the decision.
The judgment is a major victory for Sky, and forms one of the most significant commercial cases to come before the courts for many years. Suppliers should take great care about what is said and written in their tenders and sales proposals – and ensure that they can back up promises – whether in relation to cost, timescales, functionality of products or availability of suitable resources.
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