Clarification on what constitutes 'Reasonable time' for performance

United Kingdom

Astea (UK) Limited -v- Time Group Limited

This first instance Judgment offers useful guidance on the various factors a court might take into consideration when deciding whether a party exceeded a reasonable time in performance of its contractual obligations.  The point at which a breach of contract becomes repudiatory was also discussed and clarified by the court.  The case serves to highlight the commercial pitfalls of not stipulating the timings of a project that are essential to both parties and the importance of clarifying expectations before commencement of any contractual agreement.

Background

The Claimant, Astea (UK) Ltd ("Astea"), was a software provider and offered a package called "ServiceAlliance" ("the Software").  The defendant, Time Group Ltd ("Time") was both a manufacturer and retailer of personal computers.  Time operated a call centre to conduct its telephone sales operation and required suitable computer-based support.  Time approached Astea in April 2000 to provide the service package to run the system.  On 23 July 2000, Time contracted with Astea for the supply and integration of the Software.

Time, because of a perceived delay in performance by Astea, refused to make the payments to Astea for which the contract provided.  Astea then sought to claim these monies and Time resisted on the grounds that Astea had already repudiated the contract due to its failure to complete the services by 6 March 2001 and that Time had accepted the repudiation.  Time also contended that, even if the breach did not constitute a repudiation, Astea's failure to complete by that date was still a breach entitling Time to claim damages.  Astea contended that it was under no contractual obligation to complete the services by 6 March 2001 or any other specified time.

Reasonable time and Repudiation

There was no express agreement that the Software would be implemented by 6 March 2001 and the contract offered no guidance on what constituted 'reasonable time', a term implied into the contract by s14(1) of the Supply of Goods and Services Act 1982.  The Judge felt that, in addition to the application of hindsight, it was essential to give regard to all the circumstances as they existed at the time, to evaluate what would have been a reasonable time for performance, and then come to a conclusion about whether that had been exceeded.  Such circumstances included: any time estimate given by Astea, whether this had been exceeded; whether it was necessary for Time or any third party to assist in the performance of the contract; and the cause(s) of the delay.  He found that Astea had not been in breach at 6 March 2001.  The fact that Time had not in any event been in a position to accept the software earlier than October 2001 and Astea's generally helpful attitude and competence in devoting resources to the project persuaded the Judge that Astea had not exceeded a reasonable time for performance.

The Judge then gave thought to the circumstances in which it might be said that the contract had been repudiated, had Astea been found in breach of its obligation to complete performance of its contractual duty within a reasonable time.

He indicated that normally a flat refusal to continue performance would amount to a breach.  This was distinguished from a situation where a considerable amount of work had already been completed, causing the repudiation to be "an indication of an intention to continue to perform at a speed considered by the other party to be unreasonably slow".  In the latter case, the question would be whether, by reason of the time that would need to elapse before the innocent party gained the contemplated benefit, that party would, in commercial terms, be deprived of substantially the whole of the benefit of the contract.  The burden of proof was on Time to prove that a reasonable period for performing those obligations had expired.  On the evidence, the Judge remained unconvinced that Astea had exceeded a reasonable time for performance of the contract and that such a breach, even if there had been one, was not repudiatory and would have resulted only in damages.

In summary, there was no express agreement in the parties' commercial contract that the Software would be implemented by 6 March 2001.  Had there been a date stipulated, a failure to adhere to it would likely, in the absence of other factors, have constituted a repudiatory breach.  The absence of such a date on the other hand, would be unlikely to justify termination.  In addition, Time did not address the 'delay' by issuing a notice making time 'the essence of the contract'; had they done that, and had it been subsequently ignored, termination might have been reasonable.  As Time delayed in taking any action against Astea, they impliedly accepted the breach and waived their rights.

Comment

This case serves a useful reminder of the dangers of relying on the term implied by statute that a supplier must supply goods or services within a reasonable time.  This is reputedly difficult in the area of IT where a huge software project can encounter many and unforeseen difficulties and the likelihood of third party involvement, or the requirement of assistance from the customer, are high.  Attempting to put a time limit on the development or integration of software is an inherently difficult process, which needs to be realistically considered before a final date for completion is included in a contract.

If you would like any further information about this case or any of the issues raised please contact:  Susan Barty by email susan.barty@cms-cmck.com or by telephone on +44 (0) 20 7367 2542, or Phillip Carnell by email phillip.carnell@cms-cmck.com or by telephone on +44 (0) 20 7367 2430.