Software Was Fit For Purpose

London Borough of Southwark v IBM UK Limited [2011] EWHC 549 (TCC)

The London Borough of Southwark was looking for a "master data management" system which was to act as a central index of data used by Southwark's different computer systems. The idea was to prevent duplication and wrong entry of data. Southwark first had discussions with SAP but it then decided to deal with IBM. MDM was a fairly new area and IBM suggested that the Southwark use a combination of its own products (principally Websphere), its consultancy services and a third party product from Orchard called Arcindex. Southwark took on responsibility of reviewing Arcindex – it was not suggested that IBM had recommended the software. After both Websphere and Arcindex had been delivered and installed, the project petered out and eventually was cancelled by Southwark who brought proceedings for return of monies spent on the grounds that the software was not suitable for its purpose or of satisfactory quality. This meant determining what, if any, express or implied suitability obligations did IBM have with regard to Arcindex: if and to the extent that there were any such obligations, whether there were any breaches of contract. There were further issues, including whether the Sale of Goods Act applied and whether UCTA applied to the exclusion.

The Arcindex software was supplied by IBM to Southwark on terms which stated that Southwark's right to use the software was to be determined solely by a licence granted to Southwark by Orchard and that no title, ownership or copyright was transferred by IBM. The warranty clause provided that "any warranties and indemnities relating to [Arcindex] are the responsibility of [Orchard]. [Orchard] will provide the warranty in [Arcindex] ... in accordance with the licence terms in Appendix A ... there are no additional IBM warranties, and any implied condition or warranty of merchantability or fitness of purpose are excluded." Appendix A contained Orchard's licence grant and also an undertaking that Arcindex would perform in accordance with the specification. Southwark acknowledged that the software had not been prepared to meet its individual requirements. Appendix D, the Specification, identified broadly what Arcindex was to provide in terms of functionality.

The contract took the form of an Order which started: "This Order specifies all the variables necessary for the completion of an ICT Goods and Associated Services contract". Just above...