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By Andy McCue, 29 July 2003 09:34

NEWS Over three-quarters of UK businesses have been involved in legal wrangles over technology contracts in the last four years as companies become increasingly reliant on IT, according to new research. The survey of 102 UK businesses by law firm Tarlo Lyons found customers are becoming more demanding of their IT suppliers and are more likely to enter into litigation to resolve project failures. Software development projects are the biggest cause of legal headaches for businesses, accounting for over half of disputes. Peter Moody, partner in dispute resolution at Tarlo Lyons, said: "Software development is fraught with problems, particularly on big implementations. There's the classic problem of scope creep on the part of the customer and the fact the goalposts often shift as soon as the contract is signed. If you don't have sufficient flexibility or definition in the software development contract then there's usually a mismatch between what the customer is expecting and what the client is expecting to deliver." Integration issues arising from buying packaged software are also a major cause of legal disputes between customers and suppliers, as are the terms and conditions of licensing agreements. Moody said companies that fail to analyse contracts properly when they buy software meet problems when they want to sell a part of their business or outsource and discover they can't without the supplier's consent. He said: "That inevitably leads to problems. There's still a certain level of naivety on the importance of carefully analysing licensing conditions before taking any technology." Software firms going bankrupt is also likely to be an increasing source of legal dispute for users, although Moody said customers are generally becoming more technology savvy about what they expect of vendors. He said: "There's an increasing reliance on technology and customers are becoming more sophisticated and not putting up with whatever they are given by suppliers these days. They are becoming a bit more exacting in their standards." The main advice from Tarlo Lyons is for good contractual definition that specifies exactly who is responsible for what and when it should be delivered. Intellectual property rights and termination clauses should also be studied closely. Moody said: "That tends to be a particularly fraught area when there's a dispute, because the customer may well have paid a significant amount of money and potentially may have no rights over the software that has been developed so far."