British Telecommunications Plc is seeking to introduce a clause into contracts with its equipment supplies that could result in many telecommunications companies being faced with crippling financial damages. British Telecom wants to make suppliers responsible for losses incurred by Telecom for faulty goods, and the fact that it hopes to impose unlimited liability on suppliers […]
British Telecommunications Plc is seeking to introduce a clause into contracts with its equipment supplies that could result in many telecommunications companies being faced with crippling financial damages. British Telecom wants to make suppliers responsible for losses incurred by Telecom for faulty goods, and the fact that it hopes to impose unlimited liability on suppliers would have serious ramifications for many telecommunications equipment companies; terms would include subcontracting work. Telegraph poles Smaller suppliers are particularly fearful of unlimited liability being introduced into contracts, but are reluctant to lodge a complaint for fear of losing business from, for what is for many their largest customer; open criticism is theerfore unlikely. Trade bodies have, however, voiced their concern: the Electronic Component Industry Association has complained that conditions applied to much telephony equipment are unsuitable for trade with electronics companies, while the Telecommunications Equipment Manufacturers Association, TEMA, also fears the consequences for its members, saying such clauses have already been introduced by British Telecom in a number of contracts. Smaller companies, who wish to remain unnamed, complain that the telecommunications giant wants to impose, unilaterally, unsuitable contractual conditions for the electronics industry; it has been said that such clauses may be fitting for contracts for telegraph poles but not for the complicated transactions involved with telecommunications equipment. They say goods are bought to technical specifications, which lay down specific performance criteria; suppliers are thus aware of the liability to which they are subject. Unlimited liability, however, would mean that suppliers could face damages as the result of faults in installations of which they were completely unaware. Companies often supply equipment without knowing how British Telecom will eventually use it: one supplier outlined a scenario whereby a British Telecom PABX developed a fault, resulting in major losses for a financial services institution; if Telecom were sued, unlimited liability could mean original suppliers being faced with a large bill for damages. With over half of its UK sales to British Telecom, Motorola Codex is one company that could face damages if terms of this kind were introduced into its contracts with Telecom. The company, however, is more confident than most that suppliers will be able to steer clear of damages; though it can foresee clauses being introduced, a company spokesman considers claims unlikely to succeed in court. There is also a feeling in the industry that Telecom could do its image a good deal of harm if it is publicly seen to drag a series of smaller companies through the courts. Despite this, Telecom suppliers will still be biting their nails in the coming months. The present dispute can be traced back to a document, containing similar provisions, presented by British Telecom to the electronics industry 18 months ago; at the time, suppliers were confident that British Telecom would drop the standard conditions threatened. But although there were some changes, the central issue of unlimited liability remained. For its part, British Telecom started compensating its own customers for consequential losses in April.
