Limits of Liability Provisions for IT Service Contracts

Clive Davies, Senior Counsel, Fujitsu Services Limited, UK

Some of the most negotiated and critical provisions in information technology (“IT”) service contracts are those relating to the limits and exclusions of liability. As a partner in private practice and as an in-house counsel I have drafted and discussed these clauses from the perspective of the supplier and of the customer on numerous occasions. I have observed that there are certain key issues that always come up – and some consistent, some balanced and some frankly destructive behaviour on the part of the lawyers and their clients involved. Customers understandably seek to pass the risk of providing vital key services to their contractors. Most suppliers will only wish to accept a reasonable and proportionate level of risk and will only want to take on, for example, unlimited liability in restricted circumstances for the simple reason that the return they will receive will not provide them with sufficient reward for extensive exposure. They cannot “bet the company” on every contract. Equally, most customers recognise this is the case and whilst they may argue about the levels of liability, accept the principle of a reasonable approach. Occasionally, customers in certain sectors seem to think very extensive limits and unlimited liability is the norm for the majority of contract risks. In the long run this can be counter-productive as it may discourage suppliers from participating in the market in the first place thus limiting choice for customers. And this is not all one way by any means. Some suppliers also adopt a dogmatic approach, simply saying “this is our policy” in response to a request for flexibility and a higher liability cap. This article will review the issues and approaches and seek to persuade both suppliers and customers (and their advisers) that taking a reasonable and balanced approach will be in their mutual interests. Ultimately, all parties benefit from successful service delivery and choice in a viable and evolving marketplace for IT services.

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Contract IT June 2020 Vol.13, No. 51, Spring 2020

Clive Davies

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Clive is a senior counsel with Fujitsu in the UK advising in particular on major IT service contracts with customers in the public and private sectors. Prior to joining Fujitsu Clive was the lead IT and outsourcing partner in London at two leading city law firms. Clive specialises in advising on large outsourcing agreements. He has a particular interest in improving the contracting process, believing that a successful contract supports effective delivery. Clive lectures and writes regularly on IT subjects. Clive is past chair and Fellow of SCL, a Co-Chair of ITechLaw's In-House Committee, an editor of Communications Law and a member of the LexisNexis In-House Advisory Board. Clive specialises in major outsourcing contracts. He has a particular interest in improving the contracting process, believing that a successful contract supports effective delivery. Clive lectures and writes regularly on IT subjects. Clive is past chair and Fellow of SCL, a Co-Chair of ITechLaw's In-House Committee, an editor of Communications Law and a member of the LexisNexis In-House Advisory Board.

Fujitsu Services Limited

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Fujitsu Limited is the leading Japanese information and communication technology (ICT) company headquartered in Tokyo, Japan, offering a full range of technology products, solutions, and services. Approximately 132,000 Fujitsu people support customers in more than 100 countries. We use our experience and the power of ICT to shape the future of society with our customers. In 2018, Fujitsu Limited was the world's fourth-largest IT services provider measured by global IT services revenue. Fujitsu Limited has operations across Europe, the Middle East, India and Africa with more than 25,000 employees across the region. We work with customers to create new value and competitive advantage in the digital era. In the UK and Ireland, Fujitsu Services Limited offers an integrated product and service portfolio that includes; IT consulting services, technology products, managed services, cloud-based solutions, and systems integration. We are experts in digital business transformation, and have a proven track record of enabling both private and public sector customers to digitalise with confidence. We have helped many of our customers to digitally transform to meet changing consumer needs and take advantage of the benefits brought about by digital disruption. Our IT services and solutions play a vital role in underpinning many of the daily services that people take for granted. From managing the distribution of child benefit and pension payments and UK driver and vehicle records, right through to processing payments on the high street and enabling utility companies to supply energy and water, our IT solutions touch the lives of millions of people every day. With over 8,000 employees in the UK and Ireland, Fujitsu Services Limited is the largest Japanese employer in the region. Our goal is not only to deliver great results for our customers, it’s also to be a responsible business that respects its customers, employees and suppliers. In 2015 we were recognised as Business in the Community’s Responsible Business of the Year. We are dedicated to supporting the wider communities in which we operate, and partner several charities within the UK and Ireland including Macmillan Cancer Support.

Contract IT June 2020 Vol.13, No. 51, Spring 2020
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