St Albans City and District Council v International Computers Ltd [1996] 4 All ER 481
The extent of damages available for the provision of faulty computer software.
Facts
The appellant was the defendant company which had supplied computer software to the respondent, and for which the respondent had been awarded £1.3 million. The software had overestimated the number of community charge payers in the council’s area with the result that there was a shortfall of £484,000 in revenue from the charge. The additional effect was that the council had to pay and increased precept to the county council of £685,000.
Issues
The issue in this circumstance was whether the total amount of the council’s losses were recoverable on the contract. It was also an issue, as to whether a limitation clause in the contract which purported to limit the appellant’s liability to £100,000 was subject to the provisions of the Unfair Contract Terms Act 1977, and whether this clause, if the 1977 Act did indeed apply, met the requirements of reasonableness under the 1977 Act.
Decision/Outcome
It was held that a distinction should be drawn between the precept payment, which only arose because of the fault in the software and the community charge shortfall which formed an ongoing obligation which the council had always been subject to, and therefore was held not to be recoverable. It was further held that the limitation clause within the contract was subject to the requirements of reasonableness for the purposes of the 1977 Act. It failed to satisfy this requirement because it formed part of the appellant’s general terms and conditions.
Updated 20 March 2026
This article accurately summarises the decision in St Albans City and District Council v International Computers Ltd [1996] 4 All ER 481. The case remains good law and continues to be cited in discussions of the Unfair Contract Terms Act 1977 (UCTA 1977), particularly regarding the reasonableness test applied to limitation clauses in standard-form business contracts involving software supply.
Readers should be aware of two broader legal developments that affect the wider context of this case. First, the Consumer Rights Act 2015 replaced most of UCTA 1977’s provisions insofar as they applied to consumer contracts and notices, consolidating and reforming that area of law. However, UCTA 1977 continues to apply to business-to-business contracts of the kind at issue in St Albans, so the case retains its direct relevance in that context. Second, the legal treatment of software supply contracts has evolved: subsequent case law and academic commentary have continued to debate whether software is properly characterised as goods, services, or something else, and the Supply of Goods and Services Act 1982 and the Digital Economy Act 2017 (among other instruments) have shaped the broader regulatory landscape for digital content. The article does not address these later developments, but they do not undermine the core ratio of the case as presented. Students should ensure they consider this broader statutory context when relying on St Albans in assessed work.
