Cidore Trading has asked Scantom Software to develop and deliver new accounting software. An appropriate contract was made and a detailed specification annexed to it. When the software was delivered, it was found to be slightly slower than allowed by the benchmark tests in the specification. Additionally, one particular feature was missing in that the software would not produce annual VAT summary reports as detailed in the specification. The total price is 85,000, 10 per cent of which was payable upon commencement of the work. The time for delivery is three months. Cidore has refused to accept the program and has withheld the final payment of 76,500. Scantom presses for more time to add the VAT report and argues that the speed of the software is so close to that specified as to be of no consequence.

Possible outcome of resolving the dispute by Litigation: Scantom sues Cidore for wrongful repudiation of the contract and seeks damages equivalent to the outstanding sum plus interest and other direct costs. Cidore submits a defence and counterclaim based on the shortcomings of the program. Cidore claims the return of the 8,500 already paid plus 12,500 in wasted management time, etc. At the court action, the judge holds that Scantom is guilty of a breach of condition and that Cidores repudiation was lawful. He awards Cidore 21,000 plus costs, leaving Scantom to pick up the bill for 31,000 in legal costs also. This result is unsatisfactory from the point of view of both parties. At the end of it all, Cidore does not have the program it wanted and will now have to engage another software development company. It may be another six months or so before the program is ready. This could seriously handicap Cidores business. Scantom is even less happy as three months work has been wasted and it has a bill for 52,000. Scantom now thinks that it would have been better had it never heard of Cidore a view that is reciprocated by the latter