Zhongyiyou Network v. Shengshi Xinghui Company Computer Software Development Contract Dispute
——Identification of the late performance of the computer software development contract developer
First trial case number: (2018) Beijing 73 Minchu No. 44
Second trial case number: (2019) Supreme People’s Court Zhimin Zhong No. 433
【The main takeaway of the trial】
During the implementation of the computer software development contract, with the further clarification of the requirements of the entrusting party, the continuous deepening of the exchanges between the two parties of the contract, the specific situation of the phased completion of the trustee, the objective changes in the market situation and the consideration of transaction cost control, it is normal for software content and functions to be adjusted and improved, and it is not advisable to simply assume that the software developer’s delivery of the software exceeds the performance period specified in the contract.
【Case Introduction】
Appellant (plaintiff in the original trial): Beijing Zhongyiyou Network Technology Co., Ltd. (referred to as Zhongyiyou Company)
Appellee (Defendant in the original trial): Beijing Shengshi Xinghui Network Technology Co., Ltd. (referred to as Shengshi Xinghui Company)
On July 27, 2016, Zhongyiyou Company (Party A) and Shengshi Xinghui Company (Party B) signed the contract. Among them, the project acceptance agreed: 1. Acceptance at the development stage: Party A shall test and accept the products developed by Party B at each development stage according to the development plan. If it does not comply with the development plan, Party A has the right to request Party B to modify; 2. Acceptance of product delivery: (1) Acceptance criteria: a. The program runs normally; b. All the functions mentioned in the function manual are realized; c. The project is completed on time. Agreement on liability for breach of contract: 1. Party A's liability for breach of contract: If Party A fails to pay the contract amount on time according to the contract, Party B has the right to immediately stop the work of the current period and not refund the development costs of other periods; if Party A fails to accept the contract on time according to the contract For the project, Party B acknowledges that Party A has passed the acceptance check by default and asks for development costs. 2. Party B's liability for breach of contract: If Party B does not complete the project on time and in accordance with the contract, Party A has the right to terminate the contract and recover the development costs that have been paid; if Party B does not complete the project function as agreed in the contract, Party A has the right to terminate the contract and recover the development fees already paid.
Zhongyiyou Company filed a lawsuit request with the court of first instance: 1. Termination of the contract involved; 2. Shengshi Xinghui Company refunded the software development payment paid by Zhongyiyou Company and compensated for the corresponding interest loss; 3. Shengshi Xinghui Company bears all litigation costs in this case. Shengshi Xinghui Company's original trial argued that Shengshi Xinghui Company agreed to cancel the contract, but the reason for the cancellation was not its breach of contract. Shengshi Xinghui Company fulfilled its contractual obligations and delivered the work results as agreed. During the implementation process, Zhongyiyou Company changed the requirements many times, which led to the extension of the execution period and caused Shengshi Xinghui Company to pay a lot of additional costs for this.
The original judgment of the Beijing Intellectual Property Court: (1) The Software Development Contract signed between Zhongyiyou and Shengshi Xinghui Company shall be rescinded from the effective date of the judgment; (2) Other litigation requests of Zhongyiyou Company shall be rejected. The case acceptance fee of 2,900 yuan shall be borne by Zhongyiyou Company. Zhongyiyou Company appealed to the Supreme People's Court against the judgment of the original trial court.
The second instance of the Supreme People's Court held that Zhongyiyou Company's appeal request could not be established and should be rejected. The confirmed facts of the original judgment are basically clear. Although there are flaws in the applicable law, the results of the referee are correct and will be maintained after the facts are ascertained in accordance with the law and the relevant flaws are corrected. The judgment was as follows: the appeal was dismissed and the original sentence was upheld. The second-instance case acceptance fee of 2,900 yuan shall be borne by Zhongyiyou Company.
【Typical meaning】
According to Article 107 of the Contract Law, if a party fails to perform its contractual obligations or the performance of its contractual obligations is not in conformity with the agreement, it shall be liable for breach of contract, such as continuing performance, taking remedial measures, or compensating for losses. It can be seen from this that the breach of contract stipulated in the Contract Law mainly includes the two cases of refusal to perform contract obligations and non-compliance with contract obligations. Among them, performance of contractual obligations does not comply with the agreement includes delayed performance, incomplete performance, defective payment results, damage to payment and other types. In this case, one of the multiple disputes between the two parties was delayed performance, that is, it fell into the category of "performance of contractual obligations not in accordance with the agreement" as stipulated in Article 107 of the Contract Law.
This case involves a software development contract. Because the software development contract involves many uncertain factors such as development requirements, development time, development progress, debugging and testing, acceptance and delivery, therefore the software development contract is more likely to cause disputes than the general contract. In order to complete the development work on schedule and achieve the expected development effect, the parties to the software development contract often prepare and confirm in advance software development documents such as software development requirements, software function specifications, project development plans, and software testing requirements. Among them, the software development requirements book or requirements clause is a description of the purpose of the software development contract, and the degree of compliance with the requirements is a common cause of disputes over software development contracts. The project development plan or the terms of the development plan mainly clarify the completion time, completion content, and work that both parties need to cooperate in each development stage, so as to control the development process and discover problems in a timely manner.
In this case, the two parties of the contract failed to negotiate and formulate the requirements or function specifications in time during the implementation process, and failed to jointly develop the software development plan in time during the initial stage of performance, which all inevitably took some time, thereby increasing the risk and difficulty of the trustee's failure to deliver the software on schedule. For such situations where the requirements (or functions) and the development plan have not been agreed in advance, the court of second instance has clarified the rules for determining the delay in the performance of the developer of the computer software development contract, that is, it is normal for both parties to adjust and improve the content and functions of the software, but it is not advisable to simply assume that the software developer exceeds the performance period agreed in the contract to deliver the software.
This analysis is based on the case mentioned in Summary of the Judgment of the Intellectual Property Court of the Supreme People's Court (2019), you can referred to the original article through links below:
Link to the Part I: http://www.chinaiptoday.com/post.html?id=832
Link to the Part II: http://www.chinaiptoday.com/post.html?id=833
Link to the Part III: http://www.chinaiptoday.com/post.html?id=834
Link to the Part IV: http://www.chinaiptoday.com/post.html?id=837
