Case Study A Markham based Smartphone Company called HDC asked a software company SDC to develop...

Case Study

A Markham based Smartphone Company called HDC asked a software company SDC to develop software for them. The software company gave a total estimate of 10,000 dollars for a total work of 20 days. It was agreed between the two companies that HDC would be paying SDC 30 percent before the beginning of the work, 60 percent after the initial version and 10 percent on the competition.

After 10 days, of work, SDC wrote a letter that the work will take more time since their chief software developer has left the company. After 15 days SDC wrote back saying that they would be only able to deliver the source codes and would provide an assistant developer who will finish the rest of the work. After 20 days, when HDC asked for the final version, SDC told them that it can provide them with 80 percent of the work and would like the 60 percent as promised. However, fearing the non-completion of the project, HDC canceled the contract and asked for a full refund. SDC has threatened to take HDC to court for a breach of contract.

Case Brief

HDC versus SDC due to an alleged breach of contract Legal Rationale

According to SDC, there was a breach of contract but according to HDC, the software company did not deliver them what was promised.

What legal advice would you provide to both parties? Why?

Expert Solution

Below is the legal advice to HDC:

HDC cannot cancel the contract at this stage and ask for full refund because SDC has already started working on the contract and have invested manpower, time and money in order to complete the requirements as per the contract. Though they have not been able to deliver as per the contract, but it does not mean that full refund is asked from them since they have already invested in contract completion.

Below is the legal advice to SDC:

As per the original contract, it was agreed that 60 percent of the payment would be provided after the initial version was provided by SDC. However SDC asked for 60 percent of payment after completion of 80 percent work and not after submission of initial version. This is considered as a breach of contract and cannot be entertained by HDC. Moreover HDF asking for full refund is also contractual breach and SDC must maintain its ground and submit initial version for 60 percent payment.

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