Replacement computer system in breach of contract

Longhorn Packaging prevailed in a suit initiated in 1999 against Computize for the breach of contract both entered into in order to renew and upgrade Longhorn’s computing system and accounting software. Having agreed to provide Longhorn with a computer solution to its slow functioning system and Y2K compliance concerns, Computize recommended that the necessary P.C.s and accounting software be bought from third parties, and that it would set up and install the system. However the P.C.s were largely defective, breaking down constantly, crashing and even burning up and shocking users; the third party accounting software proved useless, and support by Computize insufficient, reaching the point where it would no longer take Longhorn’s calls. forthcoming Y2K compliance pressures forced Longhorn to return to its former software provider and to seek an independent consultant to assess the situation and recommend a remedy, which ultimately amounted to the complete substitution of the system provided by Computize.

Longhorn delivered a notice of termination of the agreement to Computize, and requested a full reimbursement for moneys paid for the equipment, the software and the consulting services made necessary by the malfunctioning of the first two.

The appeals court held that Computize breached its agreement by failing to comply with a material obligation thereof, namely providing faulty equipment and insufficient expertise to solve Longhorn Packaging's problems. Though both the hardware and software had been purchased from third parties, it was found that Computize would support said third parties and that it had a responsibility to make sure that both worked properly.

Ultimately, damages were awarded to Longhorn in the amounts that it paid for (i) the P.C.s, (ii) independent consulting services, (iii) the cost of the substitute system, and (iv) incidental costs to cover expert witness fees, litigation costs and the replacement of the accounting software.