A Practical Guide to IT Law

Nikki Cordell, Sam De Silva, Sara Ellacott, Victoria Hordern, Stewart James, Andrew Katz, Andy Lucas, Jennifer Pierce, Stuart Smith, Jeremy Holt, Jeremy Newton

• Publisher: BCS, The Chartered Institute for IT
• Year: 2020
• Print ISBN: 9781780174884
• eBook ISBN: 9781780174907
• Edition: 3
• Topic: Law
• Subtopic: Business Law
• Index: Law

This comprehensive guide for management professionals discusses the IT-related legal issues faced by businesses on a daily basis. Legal concepts and terminology are notoriously difficult for non-specialists, but this book explains in plain English the relevant legal frameworks and gives examples from actual cases. New material in this edition include chapters on GDPR, cyber security, cloud computing contracts and Agile.

1 IT CONTRACTS

Jeremy Holt

This chapter outlines the contents of a contract and lists the matters that should be covered by different types of contract. If you do not have time to read the rest of the chapter, the appendix lists the main points that you should consider.

INTRODUCTION

Pity the unfortunate manager. It has been bad enough trying to get the computer project organised. Now, possibly at the last moment, the contracts have arrived, some with print small enough to make the reader go blind. The manager suspects (rightly) that these contracts are one-sided in favour of the supplier, but knows that the project will only proceed if those contracts (or something similar) are signed. How does the manager work out what needs to be done and from whom advice can be obtained? This chapter provides a practical framework of help in this situation. If you are looking for an academic guide to computer contracts, you will need to look elsewhere.

PARTS OF A CONTRACT

The first point to consider is the form that contracts normally take. At its simplest, a contract consists of:

1. the date on which the contract was entered into;
2. the names and addresses of those entering into the contract;
3. a short description of what the contract is about (generally entitled ‘Background’, ‘Recitals’ or even, regrettably, ‘Whereas’);
4. definitions of terms used in the contract;
5. what the supplier is going to do for you;
6. what you must do for the supplier;
7. what you must pay the supplier.

Do not forget we are engaged in contract first aid here. If all else fails, concentrate on points (5) and (7), that is, what the supplier is going to do for you and what you are expected to pay. Standard terms that are not specific to this individual contract (what lawyers call ‘boilerplate’) are generally grouped together at the end of the contract.

IMPORTANT BOILERPLATE TERMS

These are some of the more important boilerplate clauses you may come across.

Force majeure – this says that neither party shall be liable for any failure to perform the contract because of circumstances beyond its control such as an Act of God, fire, flood and so on. This is more likely to be invoked by the supplier than the client because this clause effectively absolves the supplier from responsibility.

Entire agreement – this says that the entire agreement between the parties is set out in the written contract and so no other previous representations by the supplier may be relied upon by the client. This is a reasonable principle, but the client must make sure that the contract deals with all the important points.

Notices – this specifies the agreed means of sending formal notices. Normally, this requires a notice to be in writing, to avoid issues surrounding an oral notice (i.e. proving delivery and contents). However, what qualifies as ‘writing’ may differ from contract to contract. For example, some clauses may expressly state that a notice is not valid if sent by email. A notices clause may also specify the personal details of a party on whom a notice must be served to ensure it comes to the attention of the appropriate party.

Dispute resolution – it is sensible to agree an alternative dispute resolution procedure (such as mediation) that must be carried out before any dispute is referred to the courts or to arbitration.

Governing law and jurisdiction – ideally this should be English law enforced in the English courts. An alternative is to agree arbitration, but as this happens behind closed doors then the supplier may worry less about bad publicity.

WHO ARE YOU GOING TO CALL?

You are not going to be able to do all this on your own. You are going to need professional advice. Computer law is a specialist area, and a rapidly changing one (it did not even exist as a field of legal practice 30 years ago) and the correct advice from a lawyer experienced in this field can save a great deal of trouble later. The function of a good lawyer is to assess risk, help the client to understand the level of risk and then reduce it.

There are two directories of lawyers that you might like to consult: Chambers’ Guide to the Legal Profession and The Legal 500. New versions are published each year, and each has sections on lawyers who specialise in computer law (sometimes called ‘information technology law’). These two books can generally be found in the reference section of a public library, and can also be searched without charge on the web. Alternatively, you can ring the Law Society or the Society for Computers and Law for suggestions of lawyers who work in this field and who could help you.

CHECKING OUT THE SUPPLIER

It may seem like an obvious point but make sure that you know who you are dealing with. This will mean, at least, doing a company search. A credit check would do no harm. As the Army maxim has it, ‘time spent on reconnaissance is seldom wasted’. If you discover that the supplier company was set up last year and has an issued capital of £1, you may like to consider asking for a guarantee of the contract from a more substantial body.

Business is not all about making rational decisions on paper. Do you get good vibes from the supplier? On small things, do they do what they say that they will do? If, for whatever reason, you do not trust them, do not go ahead with the contract under any circumstances, as this will only lead to worry and tears later.

LETTER OF INTENT

As the supplier may need to start work on your project before contracts are signed, and because the negotiation and agreement of the contract terms may take a little while, the supplier may ask for a letter of intent from you. Alternatively, you may like to suggest one so that you are not pressurised into signing the contracts before you have reviewed them properly.

A letter of intent is no more than written confirmation from you of your intention to enter into a contract with the supplier. What is critical, however, is that your letter of intent states that the letter is not intended to be contractually binding. Otherwise, you may unwittingly enter into a contract earlier than you intended.

Where there is a non-binding letter of intent and the supplier, at your request and to save time, starts work on the project, it is reasonable for the supplier to ask to be paid for this initial work carried out regardless of whether the project proceeds or not. There are two important matters to agree here. The first is the rate for the work carried out (e.g. a daily rate). Work normally starts under a letter of intent on a time and materials basis; the definitive contract may include a fixed price for a specified deliverable. The second is an overall cap on the total amount of payment to the supplier for this work. This obligation to pay the supplier should be contractually binding (unlike the rest of the letter of intent).

THE SUPPLIER’S TERMS

It is a good idea to ask for the supplier’s proposed terms at as early a stage as possible. Do not wait until you have told them that they have been awarded the contract. There is of course no obligation on you to accept that you will purchase a new computer system on the basis of the supplier’s terms. You could propose your own terms entirely – this is certainly an approach taken by large organisations with extensive experience of computer contracts. However, it is generally better to use the supplier’s contract terms (unless they are completely unreasonable) as a starting point and amend them to your satisfaction.

If a particular point is important to you, make sure that you get it in writing from the supplier. It may well be that a critical aspect is not dealt with in the supplier’s draft contract at all. If so, you must, for evidence’s sake, get it in writing from the supplier. An ordinary letter from the supplier is sufficient provided that it is either referred to in the main contract or included as a schedule or as an attachment. If the supplier drags their heels and, despite repeated requests from you, refuses to confirm a point in writing, you should write to the supplier saying that you are only entering into the main contract on the basis that this point is agreed. If the matter ever goes to court, the production of your letter will be of great assistance to your case.

WHAT CONTRACTS ARE THERE LIKELY TO BE?

Any computer system will require the purchase, licence and maintenance of hardware (the server, PCs, printers, etc.), software (the application software and the operating system software) and services (such as support and maintenance). Previously, the emphasis was very much on the hardware, but nowadays the focus is much more on the software and services. Nevertheless, this chapter discusses all the contracts you are likely to need.

Generally, it is better to decide upon the software first and then to choose the appropriate hardware. Alternatively, you may enter into a contract for consultancy services first, to assist with this process. Consequently, this chapter will deal with such contracts in this order.

Contracts for consultancy services

Long before the order for a new system is placed, the client may enter into a consultancy contract, perhaps relating to a feasibility study, analysing requirements, recommending a system to meet those requirements, helping to select the appropriate suppliers, or assisting with preparation of an invitation to tender. A large part of the work carried out in the computer industry is under consultancy contracts. The client may need help on a one-off basis or require skills that do not exist within the client’s workforce, so need an outside consultant to carry out the work. Sometimes the consultancy arrangement is dealt with by means of an exchange of letters; a formal consultancy agreement, however, is a better option for both parties.

• Defining the deliverables – one of the most important issues that must be dealt with in such a contract is a detailed description of what the consultant is expected to do. If the description is loose or inexact, this can give rise to differences between what the client is expecting to receive and what the consultant is expecting to deliver – which can, predictably, lead to disputes. So, defining the nature and quality of the deliverable is particularly important.
• Payment arrangements – the payment to the consultant by the client may be on a time and materials, fixed price or estimated maximum price basis. It is an aspect of consultancy that the amount of work required will be uncertain. The disadvantage of a fixed price payment mechanism (as with any other contract) is that the consultant will inevitably include a contingency element in the price quoted. If the consultancy can be broken down into a series of stages, payment against milestones will allow each party to gauge how the work is going.
• Copyright – copyright will almost always be an issue. Broadly speaking, there is a simple choice as to how the parties deal with ownership of copyright in the consultant’s work. Either the consultant can assign to the client all intellectual property rights in whatever is produced (provided that the consultant has been fully paid) or the consultant can grant a perpetual licence to the client to use such intellectual property rights for the purposes of the client’s business (see Chapter 4 for more details). It is important to note that if there is no agreement with a consultant about copyright, the client does not automatically get ownership of such copyright. It stays with the consultant (although there may also be an implied licence for use of the copyright by the client).
• Confidentiality – it goes almost without saying that the consultant should be obliged to keep confidential any information given by the client about its business. The problem is that once a consultant has carried out an assignment for one client in an industry, the consultant may be ideally placed to carry out assignments for other clients within that same industry. Sometimes, therefore, clients go further and stipulate in the contract that not only must their own information be kept confidential, but the consultant must agree not to carry out projects for the client’s competitors for a period (perhaps a year) after the work is completed.
• Insurance – in order to provide peace of mind to the client, the client may require the consultant to take out professional indemnity insurance. This is still relatively inexpensive as, in practice, it is rare for claims to be made under such policies.
• Key personnel – the client will want to know the identity of the staff who the consultant will be using to carry out the work. It is normal for the client to be able to veto any staff members of whom they disapprove for whatever reason.
• Termination – the client will want to retain the right to terminate the consultancy contract if the consultant is guilty of serious misconduct or any other conduct likely to bring the client into disrepute.

Contracts for software licences

At its simplest, any contract for software should allow you to use the software in the way that you envisaged without the risk that anyone can come along later and say either that you cannot use it any more or that you have to pay more money. It follows, therefore, that one of the first checks you should do is to confirm that the software supplier either owns the copyright in the software or has the right to license it to yo...

Table of contents

• Front Cover
• Half-Title Page
• BCS, The Chartered Institute for It
• Title Page
• Copyright Page
• Contents
• List of figures and tables
• Contributors
• Acknowledgements
• Abbreviations
• Foreword to the 3rd edition
• 1. IT CONTRACTS – Jeremy Holt
• 2. CLOUD COMPUTING – Stuart Smith, Mark Poston and Rachel Anderson
• 3. CLOUD COMPUTING CONTRACTS – Sam De Silva
• 4. INTELLECTUAL PROPERTY LAW FOR COMPUTER USERS – Jennifer Pierce
• 5. CYBER SECURITY – Andy Lucas
• 6. GDPR AND DATA PROTECTION: THE LAW – Victoria Hordern
• 7. DATA PROTECTION IN PRACTICE – Andrew Katz, Michaela MacDonald, Tim Astley, Usha Guness, Jiri Svorc and Chris McCormick
• 8. IT IN THE WORKPLACE: PROTECTING THE EMPLOYER – Jeremy Holt
• 9. IT IN THE WORKPLACE: AVOIDING EMPLOYMENT PROBLEMS – Nicola Cordell
• 10. OPEN SOURCE SOFTWARE – Andrew Katz and Michaela MacDonald
• 11. AGILE SOFTWARE DEVELOPMENT – Stewart James
• 12. SETTING UP JOINT VENTURES – Andrew Katz
• 13. RESOLVING DISPUTES – Sara Ellacott
• Index
• Back Cover