Can you contractually rely on the professional advice from your service provider?
Byon January 20, 2012
A judgment from a recent court case suggests you can now contractually rely on the advice from your service provider – even if the contract terms try to exclude it.
Standard contracts provided by the vendor will often try to exclude its responsibilities as a specialist. You might be familiar with the following examples:
- ‘The seller hereby excludes any warranty that this service is fit for its intended purpose’
- ‘The seller has no responsibility or liability if the service is not of satisfactory quality’
- ‘These terms are the entire agreement between us, we hereby exclude liability for your reliance on our pre-contractual promises, written or verbal representations, diagrams or mutual understandings unless it is attached to this agreement.’
Contracts – hidden responsibilities you might not be aware of
Contracts in the traditional sense have written terms. These terms usually outline the responsibilities each party has to one another. They also usually include what process will be followed and what costs will be payable to each party if the contract terms are not followed (breached).
However, there are also terms in contracts that are enforceable, but are not written down. They are called ‘implied’ terms. These are terms that because of the conduct, or expectation of conduct, from one party to another, the law states that certain responsibilities will exist between parties in an agreement.
Some contracts try to exclude these unwritten terms. However, the courts usually take a dim view where a party who has the most to gain tries to rely upon the exclusion (usually an external outsourcing/technology service provider), even though it would be unreasonable for them to do so.
Key points – Your service provider:
- Is responsible for ensuring its service is fit for its intended purpose before they deliver the services for/with you
- Cannot state that your pre-contractual requirements were ambiguous if challenges arise during the delivery of the services (which often results in the service provider asking for more money). It is up to the partner to validate your requirements prior to them accepting their participation in the project/programme
- Cannot ‘contract out of’ being responsible for its advice. If its terms try to exclude responsibility for giving you the wrong advice or misrepresenting its capability or expertise, then it is likely a court would deem such terms invalid
- Cannot misrepresent its abilities and the time it will take to implement the solution
- Has a duty to warn you of any issues that might have a material impact on the service provision they are purporting to provide
- Cannot expect you (the purchaser/client) to be responsible for being able to validate whether its service is appropriate for your requirements. The service provider must make it clear what process it must go through to validate whether its services are suitable to meet your expectations or not
- Where technology projects form part of the programme, the service provider must ensure that its warranty periods are fair and reasonable – even if the contract terms state otherwise.
To learn more about hidden responsibilities,what advice you can rely on and how these will help pre or post contract please read our free white paper on why service providers have more responsibility to get errant projects back on track.