How Explicit is Your IT Warranty?

New study reveals 78% of IT companies have disputes that end in litigation

Arlington, MA  March 12, 2001  A recent study by Cutter Consortium, an IT consulting company, sheds light on a growing need for more explicit warranty clauses between IT organizations and customer companies. According to its study, 78% of IT organizations have been involved in a dispute that has ended in litigation.

Of those organizations that report having entered into litigation, a staggering 67% involved a situation where the functionality and/or performance of a delivered product simply failed to meet the claims of its maker.  In 45% of those situations, the defects were so severe that they rendered the product unusable.
William Zucker, a Senior Consultant with Cutter Consortium and a litigation attorney, analyzed this survey for Cutter's Business Technology Trends and Impacts Advisory Service.

Says Zucker, "The nature of the complaints speak to a greater need for explicit warranty clauses in the contract -- with clear statements of what the software can do, agreed-upon standards of performance, and metrics for judging whether those standards have been met."

There was no correlation between litigation and precontract risk assessments that review the job complexities so that all parties have a full understanding of the tasks to be accomplished. According to Zucker, "The use of 'statements of terms' or letters is simply to help the parties negotiate the final agreement and avoid renegotiation of already agreed upon terms.  Their uses are limited when it comes to avoiding postcontract litigation.

"Theoretically, a risk assessment is being performed so that parties can enter into a contract with open eyes ... but relying upon a crystal ball is inherently flawed.  There will always be unknowable risks, changed conditions, and latencies that could not be accounted for at the time of contracting and that, without proper relationship management devices, will result in litigation."

The survey confirms that most contracts do not consider or incorporate relationship management nor build collaboration.  In fact, data shows that only 7% of responding organizations have built in monthly review meetings to their contracts.
To schedule an interview with William Zucker, or to receive a copy of "IT Litigation Update," contact Laura St. Clair by phone at +1 781 641 5113 or by e-mail at [email protected].  For more information about William Zucker, visit