"Touchstone: A basalt or slate rock used for assaying precious metals. Before accurate analysis was possible gold and silver was struck against the touchstone to test for quality against a known standard."

Advertising Puff or Downright Lies?

January 28th, 2010

BSkyB claimed that EDS had fraudulently misrepresented their ability to deliver a customer management relationship system (for which Sky was prepared to pay £48m).  The contract had a limitation of liability clause but if Sky could prove fraud then the limitation did not apply.  EDS claimed they had just mistakenly pre-estimated their ability to deliver within the timetable set.  The Court found that not only had they not taken enough care over evaluating the timetable, they knew the timetable could not be met, so their representations were false (deceitful) and the cap on liability fell away.

The truth is it is far better to raise any “difficult” issues during contract negotiations as falling out over them later on can be very costly.  If you realise that more than mere advertising puff has crept into the negotiation when it is clear the situation cannot sustain it, then raise it, as it is far more likely to be resolvable if the parties are still working closely together to achieve a common aim, than when they have fallen out due to failure or delay.  If a particular requirement is very important to you get it down in writing, better to be said than left unsaid and uncertain.  The purpose of a contract is to set out commercial and legal terms but it must be a workable document which each party understands and fairly represents their rights and obligations.

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