STEPS TO SAFEGUARD YOURSELF:

• Suppliers may need to become more ­circumspect when trying to sell their ­services to avoid the risk of misleading their customers.

• There may be an increase in claims alleging deceit against suppliers (which to date have been difficult to prove and are rarely successful), not least because such claims may allow customers to bypass ­liability caps that would otherwise limit the amount of damages they can claim for.

• New clauses will need to state something like:

  This Agreement represents the entire understanding and constitutes the whole and entire agreement between the Parties in relation to its subject matter and supersedes any previous discussions, correspondence, representations or agreement between the Parties. To the extent that any pre-contractual representations do not form part of the contract, the Parties irrevocably agree that both Parties are and will hereafter treat those representations as being withdrawn and having the effect that they were never made and further the Parties each warrant that they have at any time not relied on any representation or statement not embodied in this contract, and in particular but not exclusively, Statements in Pitches and other sales discussions. The Parties further agree that no duty of care is imposed on either Party by this contract and that each Party waives any and all remedies not contained in the contract.

  
  It seems unlikely that this would successfully avoid liability for deliberately telling lies or making statements known not to be true on public policy grounds.

• intentional misrepresentation is based on common law principles established over 200 years ago and examined frequently since and one of the leading cases preceding this case was  South West Water v ICL [1999] B.L.R. 420 in which ICL was found to have made misrepresentations about the availability of a subcontractor.

• The judgement shows these pre-contract statements may now more easily be taken at face value, and will not be dismissed as "mere puffery", even where the underlying commercial situation makes it unlikely that either party has any real belief in their truth.  Although salesman may feel that it is normal for the statement not to be relied upon, the effect of the judgment is that it will now be more difficult proving it.

• All risk reviews and post-contract performance assessments should be conducted, where possible, in a manner that will attract privilege (i.e. as part of a legal review to assess liability under the contract to date).

• All parties must take greater care over pitch documentation, both in terms of the wording and the extent to which any reliance on it will arise and this will involve some additional degree of legal review.

• The judgment highlights the need to educate the sales team about the risks attached to unfounded comments, because however well legally review your documents, you cannot legally review all documentation produced as part of the sales process and informal correspondence, such as emails, IM, SMS and telephone calls, can be equally damaging.

• Both sides should consider the dangers of chasing unrealistic timetables.

• Greater openness on both sides when planning projects of this scale should be adopted mixed with more honest upfront discussion.

• Sales teams will need to ensure that they do not make hasty or ill-considered promises that could sow the seeds of a future deceit claim and be more circumspect in order to avoid the risk of misleading their customers and ensure that they can deliver on promises going forward.

• Parties should insist on fuller documentation detailing each promise made and the timescales for fulfilment of those promises during the sales process

• Ensure that  potential liability is made subject to any agreed cap

• make sure that the “entire agreement” clause in the contract works: the court in this case held that that particular clause in the BSkyB/EDS contract did not operate to exclude negligent misrepresentation;

• become more reluctant to take on difficult or complex projects, where the risk of failure (and, therefore, exposure to damages) is higher than normal or, if they do take on such projects, will raise their prices to reflect that increased risk which, in both cases, could slow innovation

• be more honest and up-front with customers about delivery problems (In the early days of delivery, EDS was externally assuring BSkyB that everything was on-track while, internally, producing notes and memos attesting to rising panic and concern at the undeliverability of the project;

• From first contact, limit who has authority to make statements during the bid process

Remember that Customers will:

• be more inclined to allege deceit against service providers especially as they can now by-pass liability caps;

• be encouraged to push the boundaries in their claims by seeking to recover damages for financial losses (such as loss of cost savings and loss of profits) that are usually excluded by liability caps;

• ask service providers to provide firm evidence to support statements made in tender responses, including particularly dates for delivery.

• document the selection process in detail so that decisions can be linked to specific service provider representations and show reliance on those representations.

As a result, both parties to a proposed contract should:

• conduct detailed pre-submission reviews of bids to ensure that all representations and assurances are detailed in the contract and, if not, are fully excluded

• conduct due diligence on all such representations and assurances to ensure that delivery is in fact achievable prior to final bids being submitted;

• ensure that service provider and customer bid teams are closely aligned at all stages of the process to ensure that sales and delivery expectations are met on both sides

• ensure that the right people are on the teams;

• consider whether or not English law is the right jurisdiction for the contract

• consider whether a court is the right forum for a dispute to be heard, rather than arbitration, which could offer a more private resolution

• spend greater time and resource in the preparation of bids and documentation