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Many Small Problems Make One Big One

he courts will, in general, not regard a small breach of contract as rendering the contract fundamentally breached. Small breaches of contract can normally be rectified by a payment of compensation, the court may take a different view.

This was the position in a recent case involving consultancy Accenture, which had built a software based billing system for British Gas, a subsidiary of Centrica. There were several material defects in the software, none of which was fundamental.

Centrica argued that when there were a number of material defects they could collectively amount to a fundamental breach of the contract. Accenture disagreed, but the Court of Appeal backed Centrica’s position.

Accordingly, the case can now proceed to trial to see if the defects as claimed by Centrica constitute, as a matter of fact, a fundamental breach of the contract.

The case shows that a series of small problems can render a contract fundamentally breached. However, each case will have to be argued on its own facts.

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