The High Court has found Atos Origin IT Services UK ("Atos Origin") liable for around £1 million in damages for breach of a software development and supply agreement with De Beers.
De Beers initially signed a £2.6 million contract with IT outsourcing provider Atos Origin at the end of 2007 for upgraded IT systems for use in relation to its diamond aggregation processes, the operation of which was to be moved from the UK to Botswana. In June 2008 after much delay, Atos Origin stopped working on the project because it considered that the project had altered substantially in scope, timescale and costs from the originally agreed terms, and De Beers refused to agree a formal variation.
The judge ruled that this amounted to a wrongful repudiation of the agreement which put Atos Origin in deliberate and wilful breach of contract. However, the judge also found that De Beers shared responsibility for delays and additional costs in the project. For example, failures and delays by De Beers in finalising certain requirements, particularly in relation to finance; change requests from De Beers that represented an alteration in the scope of the work; and shortcomings in the design of the system. As a result, the judge awarded damages to Atos Origin, which were offset against its liability to De Beers.
The case demonstrates that unilateral action taken by one party without consent (written or otherwise) is considered a breach of contract, despite any claims for justification by the other party’s failures or delays. Following this judgment, service providers such as Atos Origin should not threaten to suspend work or perform their obligations under an agreement unless there is a clear contractual basis to do so. At the same time, customers should be aware that a failure to cooperate and assist their service provider may also constitute a breach of contract or at least entitle the service provider to damages.
The court ruling, which provides a detailed insight into how an IT outsourcing engagement can fall apart, can be read in full here.