Interpretation of software contracts - SAM Business Systems Limited v Hedley and Company

Abstract The High Court decision in the IT case of SAM Business Systems Limited v Hedley and Company [2002] 1 (SAM Business Systems) provides useful guidance on the interpretation of software contracts, and follows the recent Court of Appeal decision in Watford Electronics v Sanderson CFL Limited [2001] by adopting an approach which is in favour of a freedom of contract stance when considering the application of the Unfair Contract Terms Act 1977 (UCTA) to software contracts. In SAM the Judge concluded that a software supply agreement which excluded liability for misrepresentation and breach of contract was reasonable under UCTA because the supplier also provided the customer with a money back guarantee if the customer rejected the goods within a short acceptance period. The case is also of interest for the Judge’s finding that a software system sold as tried and tested should not have any bugs at all, and if there are any bugs then these should be considered as defects. The case is of further interest, for the Judge’s conclusion that, in the circumstances of this case, a supplier cannot charge a maintenance fee for correcting bugs in a tried and tested system.