A recent high-profile case of EDS v BSkyB has demonstrated the importance of following proper procedures when completing a bid, tender or informal pitch. Although it was an IT case, the principles would appear to apply to contracting in other areas of business. Aside from the headlines about the scale of the damages (an interim award of £200 million was made) the judgment gives two clear warnings that your business should take note of:
Check your tender and bid procedures are followed
- Review your internal procedures, protocols and training to ensure that your sales representatives do not make statements during contract negotiations which cannot be backed up or delivered against. The dishonesty of one key employee can have a significant detrimental effect on your business.
- Retain copies of your draft tender programme and resource allocations as they may help you demonstrate that (even if you were mistaken) you did not make a negligent or dishonest mistake.
- Unless you consider the premium prohibitive, make sure that your business is insured against losses caused by the dishonesty of a senior employee. If you have insurance in place, consider what the effect on your business would be if an uncapped claim exceeded the level of cover available.
Check your entire agreement clause
- An entire agreement clause is a contractual clause that aims to prevent the party relying on it from being liable for any statements (including pre-contractual statements) that are not included in the contract. A well-drafted entire agreement clause can exclude liability for any negligent (but not fraudulent) pre-contractual statements.
- Review your entire agreement clauses to make sure they exclude liability for any non-fraudulent statements. You should also ensure that key information is expressly included in the contract.
- Always remember that a contractual limitation clause cannot limit your liability for any fraudulent claims that are made during the bid or tender process.
If you would like to discuss any of the issues raised in this e-mail please contact Roger Wilkinson.
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.