28 June 2002

Stéphane Lemarchand

In the IT contracts matter, the system integration agreement is among the most-used contracts. Given the factual technical nature and complexity of the matter, few disputes come to the French Supreme Court. Therefore, it is important to consider a decision rendered late last year. The Supreme Court had the opportunity to give a decision about difficulties relating to the performance of a system integration agreement.

In this matter, the parties had signed an agreement in 1994, in which the service provider agreed to provide an integration system composed of hardware and software. The service provider had recommended the implementation of a complex and sophisticated computer program, which first required a detailed preliminary study of the client’s needs and means.

However, the implementation of the computer program failed. Therefore the question was to determine in what extent, each of the parties, the service provider as well as the client, have performed their contractual obligations. The client highlighted the absence of the preliminary study. The service provider used the classic argument of the absence of necessary client collaboration required for such a project to be successful.

The French Supreme Court's decision underlines three interesting points:

  • the issue of the share of responsibility and liability between the client and the service provider, in the case of a defective performance of a system integration agreement;
  • the importance of the notion of "contractual documents";
  • and the weight to be given to a judicial expert statement in such litigation.

1. The issue of the share of responsibility and liability

The share of responsibility and liability in this particular case was decided as follows:

  • the service provider was held liable for 75% and the client 25%.

In order to determine the share of liability the Supreme Court considered the following elements:

Concerning the responsibility and liability of the service provider

The Court considered that the implementation of the computer program was conditioned by the performance of a preliminary detailed study of the client's needs and means to be conducted by the service provider. The service provider neglected this obligation to conduct the preliminary study, but nevertheless decided to continue the performance of the contract.

The Court inferred that the service provider had under-estimated the scope of its duties and that, as a consequence, it was impossible for it to fulfill its contractual undertakings.

Therefore, the service provider was held liable for the failure because it was the duty of an IT specialist to verify the feasibility of the project that it proposed to set up.

Concerning the client's responsibility and liability

In matters of IT contracts and particularly system integration agreements, it falls especially upon the client to collaborate with the service provider in charge of the integration.

In the present case, the Court considered that the client had breached its contractual obligation by not undertaking the validation of the different software, in order to allow the service provider to continue the project. Therefore, based on the total absence of collaboration between the two parties, the Court decided that the client would have to bear 25% of the liability.

2. The notion of “contractual document”

The legal qualification of the nature of the service provider's obligations leads to a debate as to whether or not certain documents exchanged between the parties and presented as advertising material should to be considered contractual and binding materials.

In IT matters, most projects start with competitive commercial offers from different service providers. Preliminary studies and other analysis are also sometime necessary to help the future client make its choice. In such a context, service providers often propose in their commercial proposal to commit themselves to an obligation of results. For this reason it is important, at the time of the drawing up of the contract, to identify the obligations to be carried out by the service provider and consequently to exclude from the contractual scope, if necessary, all of the documents which have been communicated prior to the conclusion of the contract. It is especially important not to forget to insert in the contract the “four corners” clause often titled "contractual documents," (or in US and UK contracts, the “entire agreement clause”) which determines the sole documents to be considered as contractual documents. In this particular case, if the advertising materials mentioned an obligation of result, the contract expressly excluded them from the contractual scope. The service provider was, therefore, held to an obligation of means. Under French law, this qualification does not have any effect on the intensity of the obligation itself but only has a probative role as it determines the burden of proof. If there is an obligation of result, the breach of the service provider is presumed and it falls on it to exonerate itself by proving a fault of a third party or of the victim of the breach or of a force majeure event.

3. The weight of the judicial expert statement

In most cases, due to the very technical aspect of these IT projects, the Court often requires the technical advice of a judicial expert. However, the French procedural rules in such matters provide that in the case in which a Court requires a judicial expert opinion, the conclusions and the investigations issued by the judicial expert do not bind the Court, but the Court may not distort the judicial expert statement. Under French law, such statement is nothing more than the formalisation of a technical opinion. Therefore, the Court can either take the statement into account or disregard it. In this matter, the Court referred to the investigations of the judicial expert but nevertheless, expressed the exact opposite of the expert conclusions. The Supreme Court confirmed this position by specifying "the Court of Appeal had not misrepresented the expert's statement."