Reading long, tedious contracts is no-one’s idea of fun. Who doesn’t click to say they have read and accept the terms when they buy something on the Internet? But when you buy something for your business, you probably wouldn’t take such a casual attitude. Or would you?
Buying something online, even if it’s a piece of software and the terms of the licence are crucial, doesn’t seem to justify spending time reading the terms and conditions. And anyway, you can’t negotiate them if you don’t like them.
It’s a take-it-or-leave-it offer. But a computer program for your business, such as a dealer management system, is too important to leave to chance, even if you can’t get the supplier to change most of the terms. Especially with computer software, where what you pay for is a licence to use the supplier’s intellectual property – the terms of the contract are crucial. A cautionary tale about the problems one dealer ran into has recently emerged, reminding us of how a contract can turn round and bite you. Whether you have read it or not makes little or no difference to its enforceability: you need to be aware of what it says.
In a case from earlier this year, Blade Motor Group Limited v Reynolds & Reynolds Limited, a dealer group bought a licence to use Reynolds’ dealer management system, KDMS. They used it for years, but in 2016 decided to change to another system, Pinnacle.
When they asked Reynolds for support during the transition, the supplier told them that the contract precluded them from terminating their licence until 2019. Worse, Reynolds claimed unpaid fees of £40,000. The parties exchanged correspondence, but were not able to reach a settlement, and Reynolds then applied a software lock that is built into their software.
The dealer, unable to access a lot of its data, took Reynolds to court, seeking an injunction to require them to restore access. For a variety of reasons, the judge declined to grant it. That in itself makes this an important cautionary tale: you don’t want to find yourself in a situation where you need an injunction in order to run your business – injunctions don’t come cheap – and if the judge won’t give you an injunction that makes it worse.
As it happens, one of the factors that persuaded the judge not to grant the claimants’ injunction was that they were only locked out of their historic data – they could still process the current information.
Had that not been the case, the judge might well have thought differently. There was also a delay of six months, which suggested to
the judge that the matter was not as urgent as the claimants said it was.
This was an interim application for an injunction, meaning that there was no trial of the issues. There is an argument to be had, if and when the matter comes to trial, about the terms of the contract – it turns on whether when the licence was renewed in 2014 the dealer was aware that it was signing up for a new minimum term of five years.
Peter Groves is a legal expert on motor dealer issues who writes for Motor Trader