IT - Negotiating Certain Terms in IT Contracts

In Vogon International Limited v The Serious Fraud Office [2005], there arose a dispute relating to the interpretation of the payment terms in the contract between the parties.

The Serious Fraud Office (SFO) set Vogan International Limited ( "Vogon '), used to retrieve e-mail data from computer tapes during a criminal investigation. Prior to entering into the agreement, Vogon calculated its estimated fees based on the number of completed backups. If Vogon laterhas its quotation of the SFO, was the cost in proportion to the number of completed Microsoft Exchange databases identified.

Vogon processed 39-backups from the tapes by the SFO in relation to two Microsoft Exchange databases made available. Vogon sent an invoice to the SFO for £ 314,375 for the work of the 10 days required to process the 39 backups.

The SFO said that the sum due to the number of completed Microsoft Exchange databases is based, so paid Vogon £ 22,500.

The courtruled in favor of the SFO as follows: --

The word "database" was not only sense and so it was necessary, the word in its contextual significance to explore;

The question was not what the word "database" was the importance of the situation, but what it meant in the contract;

under the Offer and the accompanying cover letter, all references to databases were references to a server;

In addition, the construction of Vogon Database commercially unlikelyGiven the difference between the resulting costs;

Vogon could not claim to be a case of errors or forfeiture as this in contrast to legal principle and

The SFO should Vogon Vogon identifies costs for such a large sum to be paid was dishonest and opportunistic.

Vogon appealed against that decision to the Court of Appeal ( "CA"). The CA held that: --

the court was correct in its interpretation of the contract and the award of the SFO costs;

However, the court was wronga finding that it was dishonest and opportunistic against Vogon where dishonesty is not argued by the SFO, Vogon nor have the opportunity to defend themselves against such determinations.
Comment: The parties should consult legal at the beginning of the negotiations. This could avoid excessive legal costs and save valuable time in the event of a dispute.

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© RT Coopers, 2005. This briefing note does nota comprehensive or complete statement of the law on the issues discussed nor constitute legal advice. It will deal only with general issues. Specialist legal advice should always be sought in relation to the particular situation.