The parties contracted for IBM to provide its own software, third party software (Orchard’s) which Southwark LBC had asked IBM to provide, and associated services. The framework agreement part of the contract provided that the ordered software was of satisfactory quality and in conformance to the relevant specifications set out in the contract. The order part of the contract added that all warranties and indemnities relating to the Orchard software were the responsibility of the software vendor, which had its own licence terms. The IBM/Southwark framework agreement also said that all express or implied warranties and conditions were excluded. The project ended up stalling and then stopped. Southwark complained that the software was not of satisfactory quality in accordance with the Sale of Goods Act and claimed against IBM.
The High Court dismissed Southwark’s claim. The framework agreement and the order had to be read together, so the reference to the Orchard software being of satisfactory quality had to be read in conjunction with the warranty in the order. The software conformed to the standard set out in the order. The judge said that satisfactory quality should be interpreted in that light rather than given the meaning under the Sale of Goods Act. It was clear from the wording in the contract that no statutory terms (including fitness for purpose or satisfactory quality) would be implied. The judge added that, in any event, the Sale of Goods Act would not apply in this case because there was no sale of any goods, as the contract made clear that there was no transfer of property in the software as the software was licensed rather than sold and on termination of the agreement all copies had to be returned or destroyed.