Contact | Search |

Court of Appeal decision in digital transformation case

Court of Appeal decision in digital transformation case

The Court of Appeal recently held that a customer who instructed a supplier to provide digital transformation services was not entitled to delay payments (liquidated damages) of c. £1.6m.

This is because the prompt issuing of a “non-conformance report” by the customer was said to be a condition precedent to the customer receiving delay payments, and no such report was promptly issued. The Court reached this result notwithstanding the term “condition precedent” not being used in the contract.

The relevant provision provided that:

“6.1. If a Deliverable does not satisfy the Acceptance Test Success Criteria and/or a Milestone is not Achieved due to the CONTRACTOR’s Default, the AUTHORITY shall promptly issue a Non-conformance Report to the CONTRACTOR … The AUTHORITY will then have the options set out in clause 6.2.”

“6.2 the AUTHORITY may at its discretion … choose to … require the payment of Delay Payments…”

The Court of Appeal reached this decision because:

  1. It is not necessary for the term “condition precedent” to be used if the contract clearly provides that the relief is conditional on a requirement.
  2. The “if .., then ..” structure in the clauses was clearly conditional and without the non-conformance report, the clauses would not operate properly.
  3. It is not necessary for the deadline for the condition precedent to be expressed as a precise time period – “promptly” is sufficient.

The case shows that both contract drafters and litigators must pay close attention to remedies provisions to ensure that conditions precedent are not inadvertently included and are fully complied with.

The case can be found here: Disclosure and Barring Service v Tata Consultancy Services Ltd [2025] EWCA Civ 380.

AUTHORS

Lizzie Williams Partner

Lizzie Williams is a partner and solicitor advocate specialising in commercial litigation.

Lizzie Williams is a partner and solicitor advocate specialising in commercial litigation.

Lizzie has a diverse commercial disputes practice and wide-ranging experience of litigation and arbitration including urgent injunctions, appeals and group litigation. Lizzie acts for a wide range of clients, from high net worth individuals to large corporates, including technology companies, established brands across a broad range of industries, public sector entities and startups.

Lizzie has particular expertise in commercial disputes with a technology angle. Lizzie advises on traditional IT disputes (involving hardware, software development, outsourcing and licensing) and disputes involving emerging technologies (including artificial intelligence, digital assets and blockchain). In addition, Lizzie advises on disputes arising out of cyber-attacks and online payment frauds, disputes involving investments into technology companies, disputes about technology procurement processes and the management and resetting of distressed digital transformation projects.

Lizzie is recognised as a "Key Lawyer" in Commercial Litigation and Artificial Intelligence in The Legal 500. Clients say Lizzie “is the best commercial litigator around” and praise her “calm, responsive and very creative approach delivered with considerable expertise”.

Lizzie is the author of the Practical Law practice note AI Disputes and Risk Mitigation and the book A Practical Guide to Smart Contracts and the Law and regularly speaks at industry events.

Lizzie graduated from the University of Cambridge with a First Class degree in Law in 2010 before training and qualifying at Herbert Smith Freehills, where she worked on a variety of complex litigation and arbitration matters for a number of years, before joining Harbottle & Lewis in 2017. Lizzie is a member of the Society for Computers & Law, the Tech Disputes Network, the Cyber Fraud and Asset Recovery Network and the Silicon Valley Arbitration & Mediation Center.