PART 1
Technology. Every business needs it. You either build it yourself or buy it from a third party. As litigators focussed on tech disputes for decades, we’ve seen the same problems with IT outsourcing leading to court appearances again and again. The solutions aren’t groundbreaking – they lie in careful drafting and smart conduct during the contract performance. But in the pressure of finalising negotiations on a complex contract, or driving forward a sizeable and challenging IT project, they can often be overlooked.
In this series of articles, we share lessons which have been learned the hard way in relation to five contentious areas of tech contracting. We start with management of the project.
Project implementation
Typically, an IT project starts with a scoping phase, followed by design, build and testing of relevant hardware/software/systems. This work can span months or even years, depending on the scale of the project, and the challenge for both parties to the contract is to keep to time and budget. It is not uncommon for one or both of these to overrun.
The usual arguments made by the customer are that the supplier is incompetent – that it hasn’t managed the project properly, hasn’t deployed its best personnel or simply hasn’t worked hard enough (usually a combination of all these factors). A failure to meet “good industry practice” is a common accusation.
The supplier’s retort is likely to involve the customer not properly engaging with the scoping/other phases of the project. There are usually various “customer dependencies” without which the supplier is unable to deliver on timelines or functionality.
Truth be told, when it comes to who’s at fault, it’s often a case of “six of one, half a dozen of the other”. Ultimately, drafting that doesn’t make crystal clear what is expected to be delivered when and governance structures that don’t adequately keep both parties on track are usually the underlying causes.
So how can you tackle this in your next IT contract?
- From a drafting perspective, focus on spelling out the key milestones, thinking carefully about which components of a project are dependent upon others to ensure a sensible order for completion in an achievable time frame.
- Be clear on penalties for missed deadlines; for example, delaying licence fees when milestones are not met, or weighting the pricing structure so that it’s more closely tied to delivery of the most important components.
- Concentrate also on governance and oversight provisions – who should be on the board, how often should it meet, where should issues be escalated and how should records be kept?
- When you’re in the scoping/designing/testing phases of the contract, think carefully about any changes you agree to accommodate a slipping schedule. It’s not uncommon for a supplier to propose solving a delay by merging milestones together or redrafting timelines informally. This might be a workable solution but, as a customer, you need to consider the impact this will have on rights you would otherwise have for late or failed delivery.
- Ensure that governance meetings happen when they should – and often. Both parties should use these meetings to issue-spot ahead of time, and take actions to mitigate any delay/cost overruns as best they can.
- Where overruns happen, ensure that there is a solid paper trail recording what has happened and who is responsible. Contracts usually have a formal change request procedure built in for major alterations to the specifications or timetable. Follow this procedure to the letter, where applicable, and ensure that any written records of change are formally approved by authorised signatories. Where this isn’t done, contractually agreed consequences/protections of change requests may not bite.
- For less significant changes, think carefully about any informal amendments – for customers, in particular, such “Band-Aid” solutions run the risk of still not correcting the delay/cost issue and undermining rights you would otherwise have as a result of supplier non-delivery.
Read the rest of the series to discover other common areas of contention.
Next Tuesday, our team will be presenting a webinar on “Tech Contract Disputes” where we’ll explore the most commonly encountered issues arising out of technology contracts and provide guidance on how to draft in a way that maximises your chances of avoiding disputes with other businesses and/or consumers.
Tuesday, 09 September 2025 – 4:30 – 5:30pm BST
Contributors
Cooley