EDS agrees to pay Sky £318 million in IT contract dispute

EDS and Sky have finally agreed to settle a costly and long-running dispute over an IT contract. In January, the High Court agreed with Sky’s claim that EDS had mis-sold a customer relationship system. The CRM system should have cost £50m and the contract contained a limitation on EDS’s liability of £30m. However, Sky claimed damages of £700m. It said that it had been induced to enter into the contract based on a fraudulent misrepresentation – ie a statement that an EDS knew to be false. The High Court had agreed. All that was left to be decided upon was the amount of damages. The parties have now come to an out-of-court settlement and EDS has agreed to pay £318m in damages.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: ‘This case shows the scale of the damages that can be incurred if something goes wrong, which frequently does happen with IT projects. That is why it is important for a supplier to have a good contract in place at the outset so as to be protected against a catastrophic event that could cause disproportionate losses. In most cases, it is possible to cap liability, although the clause needs to be well-drafted to comply with the law. If the clause does not work legally, courts often refuse to uphold them.‘