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For advise on drafting complex commercial contracts contact IBB's commercial contract lawyers based in West London. http://www.ibblaw.co.uk/service/corporate-and-commercial
I would like to talk about the recent case of Fujitsu Services and IBM, which emphases the need for commercial contracts to be carefully drafted.
IBM had entered into a partnering agreement with the DVLA to provide IT services, including a sub contract with Fujitsu.
Fujitsu alleged it had been deprived of work under the sub-contract and that as a result it had incurred losses of some £36m. Fujitsu alleged that IBM also owed it fiduciary duties and/or an obligation of good faith.
IBM, in turn, denied that it owed any such duties and argued that any losses were excluded by the terms of the contract.
At a preliminary hearing, the Judge held in favour of IBM.
• The Court found that fiduciary duties did not commonly arise outside the settled categories, not least because independently contracting parties do not normally undertake to subordinate their own commercial interest to another. The fact that Fujitsu was reliant on IBM for work allocation and had reposed faith in IBM was not enough in itself to give rise to a fiduciary relationship.
• If there was to be an express duty of good faith in a detailed contract such as the sub-contract, clear words to that effect would be expected. There were none.
• Turning to the exclusion clause, the words clearly excluded any claims for loss of profit and this was not commercially unreasonable. Interestingly, the Court found, as a matter of construction, that the clause, which was in fairly standard terms, did not exclude an action for an account of profits.
This case emphases the value of, and the need for, well drafted contracts. Clearly there was room for improving the exclusion clause and IBM would have been in a much stronger position had the sub contract expressly excluded any fiduciary relationship or obligation of good faith.
For more information on this case or any aspect of commercial or corporate law please contact David Clark on 01895 207973 or email firstname.lastname@example.org or visit http://www.ibblaw.co.uk/people/david-clark
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