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Drafting tip: Forestall a fraud claim — if someone else ghost-writes technical stuff for your sales pitch, consider disclosing that fact

A sales guy at CDW, a large technology reseller, made a pitch to one of his long-time customers, explaining why CDW and its alliance partners could handle a major computer-system upgrade that the customer wanted to do. The customer was skeptical that CDW could handle the job.

The sales guy had a technical person ghost-write a set of questions, which the sales guy sent to the customer. The customer’s owner testified that, had he know that the email was ghost-written, he would have asked to deal with someone at CDW who had more technical competence.

The customer sent a purchase order, and the project proceeded. Things didn’t go well, though. The customer sued CDW for breach of contract — and for fraud. The trial court granted summary judgment in favor of CDW, but the appellate court reversed, on grounds that fact issues existed as to what terms were part of the parties contract (a battle-of-the-forms issue, of the kind discussed in the commentary to this Common Draft clause). In doing so, the appellate court reinstated the fraud claim. See BVS, Inc. v. CDW Direct, Inc., No. 13-1766 (8th Cir. July 17, 2014).

The fact pattern here is not unlike that of BSkyB Ltd. v. HP Enterprise Services UK Ltd., [2010] EWHC 86 (TCC), discussed in the commentary to this Common Draft clause. In that case, the court found that an EDS a sales executive had made fraudulent representations about EDS’s capabilities; this resulted in the contract’s limitation of liability being pierced, leading eventually to EDS’s having to pay some $460 million — more than four times the original value of the contract — to settle the case.

Lesson: As noted in the above-cited Common Draft commentary, “they lied!” is the trial lawyer’s weapon of choice, especially in disputes about technical contracts. The business risk to CDW might now be different if the sales guy had said, in his email, that he had asked someone to draft technical questions for him, instead of just posing the questions.

(This isn’t to say that the customer will be able to prove a fraud case against CDW, but only that CDW would have had a much-stronger argument for dismissing the fraud claim on summary judgment if the sale guy had disclosed the ghost-writing of the technical questions.)

Another possibility: Provide a risk-factors disclosure sheet to the customer, because that might even help make the sale.

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