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.


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.


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.


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.