ERP software contracts are almost always one-sided against the Customer in favor of the ERP Vendor. Enterprise software contracts frequently contain clauses and language that are highly beneficial to the ERP Vendor in the event a customer initiates ERP software litigation. Due to the nature of these one-sided contracts, ERP Customers are often left with little to no contractual recourse for the damages that they have suffered due to the failure of the ERP Implementation project.

ERP Software Contracts often contain a “Limitation of Liability” provision that limits the amount of damages recoverable in a failed implementation to the fees paid to the ERP Vendor over a set period of time. However, by the time the ERP Customer realizes what has happened or has decided to move on from the failed project, the ERP Customer has already been damaged far beyond the fees that it originally paid to the ERP Vendor. Suing an ERP Vendor on the basis that the ERP Vendor made fraudulent misrepresentations during the sales cycle to induce the Customer to sign the software implementation contract or software licensing contract may allow the Customer to recover damages that are higher than the damages limitations in the contract.

To establish fraud, the ERP Customer usually must prove the following: (1) the ERP Vendor made a false statement of material fact; (2) with the knowledge that the statement was false; (3) with the intent that the statement induce the Customer to act; (4) that the Customer relied on the truth of the statement; and (5) that damages resulted from the reliance on that statement.

While these elements sound straightforward, they are difficult to prove. Further, there are important legal differences based on differing jurisdictions and the substantive law governing the ERP software lawsuit. Consulting a firm or attorney that has experience in dealing with fraudulent actions related to ERP implementations is imperative when deciding whether to bring an action for fraud or fraudulent inducement in an ERP lawsuit.

While a claim for fraud or fraudulent inducement is generally more difficult to prove than other claims in a failed ERP implementation, fraud and fraudulent inducement must be considered when evaluating the case an ERP Customer has against its ERP Vendor for a failed ERP implementation. For more information, please see the video below: