A never ending story

The Neverending Story by Michael Ende

There are some words or phrases that have been in use for so long within certain types of contracts that you would think everyone knew what they meant.  Sadly, this is not case.   BMS Computer Solutions Limited and AB Agri Limited ended up taking their dispute over the meaning of one key word to the High Court, each being advised by specialist solicitors, leading counsel (i.e. QCs – the really expensive ones) and junior counsel (itself a misleading term as junior in this context means “not a QC”, and should not be read to imply someone straight out of bar school). This must have been expensive.

So what was the word at issue: PERPETUAL.  You or I would naturally expect something that was perpetual to last forever or be never ending.   Surely that is what the word means?  In the hands of lawyers, though, perpetual can mean “operating without limit of time”.  It’s a subtle distinction, but “operating without limit of time” implies that other types of limit can apply.

So to our High Court case’s facts (see the full judgement here). The licensor of certain software granted a licence in a variation agreement with the following term:

The Program Licence will be extended to be a UK-wide perpetual licence usable on any processor or PC at all ABN UK operations including the compound animal feed operations of Cereal Industries as per the existing Agreement of 21 March 2000 up to a maximum aggregate annual tonnage of 2.45 million compound feed tonnes as defined in the Agreements.”

Nothing remarkable about that, except that it was in a variation agreement.  This was varying a licence agreement where the licence to use the Program Licence was not stated to be perpetual.  The licence agreement had an associated software technical support agreement.  The agreements were arranged so that if the support agreement was terminated, the licence agreement also terminated.  All perfectly standard.

However, by sticking the word “perpetual” into the licence term in the variation agreement, there was raised the inevitable question, does the software licence terminate when/if the support agreement is terminated? Sales J ruled that perpetual meant, as stated above, operating without limit of time, so as, in the context of the variation clause set out above, to grant a licence for an indefinite duration, but subject to any other contractual provisions in the licence agreement, including the terms governing termination upon termination of the support agreement.

It would appear from the judgement that there was never any clear intention that the variation agreement was to grant a never ending licence, but having a never ending software licence with only limited support is not uncommon.  Perhaps this is an example of contracting (or strictly, varying a contract) at speed and repenting at leisure?

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