Tuesday, October 8, 2013

"R" is for Remedy

The traditional definition of a contract is “offer, acceptance and consideration.”  I offer Seller $100 for a car.  Seller accepts; I hand over the money.  Seller is obliged to turn over the keys.

But what if Seller does not?
What if Seller hands over the keys to a vintage Yugo, rather than the ’57 Chevy I saw in the drive?
If I discover the car lacks an engine, an interior, tires, or I don’t like the color?
I need a remedy.
The contract outlined does not contain any remedies, let alone any warranties.  As a result, my only recourse is to the standard remedies provide by contract law:
Money damages. 
The “benefit of the bargain,” or the money I would have made had the deal gone through.  In this case, I am out the $100 I paid to Seller, but also planned to sell the car for a $500 profit.  Arguing whether Seller is liable for that $500 would enrich the lawyers for both sides.
Full return of the money or property given as consideration.  Regarding the car, Seller might simply offer to give me my money back.
The contract is set aside as the result of fraud, mistake, duress or undue influence.  Rescission would not be available in the car transaction, as described.  Money or other property given as consideration is returned.
The court rewrites the contract to correct errors or inequities.  Courts are reluctant to grant reformation, believing it is the duty of the parties to their homework before executing an agreement.  More, the parties are always free to rewrite their contract privately, without recourse to the courts.
Specific Performance.
The court orders one party to hand over the goods or perform the services specified in the contract.  Available only if money damages are inadequate – for example if the goods or services are not available from any other source.  Generally not available, however, in contracts for personal services, as courts regard compelling someone to perform work against his or her will to be too close to slavery.  Beyond that, who would want vital services performed by someone not committed to doing their best?
These remedies are often insufficient, at least in the context of an IT transaction.  Remedy is available only after the fact, generally after much litigation and is typically limited to money damages.  The advantages expected from a new system, such as reduced costs, increased productivity or competitive advantage, generally cannot be recovered, not to mention the value of the time employees might have spent trying to correct a faulty system.  To compound the loss, the costs of litigation generally cannot be recovered.

The statutory remedies, then, do little to address the needs of the aggrieved IT buyer, who needs a system that works, on time, and for the agreed price.  Thus the best remedy for a faulty system, or a simple disagreement with the vendor, is diligence in identifying the business need the new system will address, in designing the system and in setting an implementation plan designed to identify and solve problembs before the system enters productive use.