Case Note Gammasonics Institute for Medical Research Pty Ltd V Comrad Medical Systems Pty Ltd [2010] Nswsc 267

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CASE NOTE

Gammasonics Institute for Medical Research Pty Ltd v Comrad Medical Systems Pty Ltd [2010] NSWSC 267

New South Wales Supreme Court, heard by Fullerton J

Gammasonic v Comrad[1] demonstrates the reluctance of the courts to interpret the Sale of Goods Act to include software downloads as a “good”, preferring to leave the matter up to statutory review. It primarily discusses whether a software package delivered by online download is effectively classed as “goods" for application of Sale of Goods Act[2] and outlines the progressive court decisions that have considered the question and have begun to recognize software attached to a medium, like a cd package as a “goods”.

It also briefly addresses the applicability of statutory warranties of fitness for purpose and merchantable quality and supports that fitness for purpose and merchantable quality are implied by common law giving reference the test for implication in fact outlined in BP Refinery (Westernport) v Shire of Hastings (1977)[3]

Background and overview

The disputing parties are Gammasonics, a provider of services to radiologists in NSW, and Comrad, a business that provide software and information management systems to radiologists in Australia and New Zealand. The dispute concerns a contract between the parties for the delivery and installation of a software package via remote internet download called “Comrad RIS”; which was to manage workflow, patient registration and appointments, online referrals and processing of Medicare claims for Gammasonics.

The software was downloaded onto Gammasonics’ server and Gammasonic were purportedly responsible for hardware configuration and the network infrastructure specified to run the software.

Comrad delivered the software via internet download and certain areas of the software did not function as required. Gammasonics claimed to terminate the contract for breach of terms including “failure to deliver a functioning software package, failure to provide goods of a merchantable quality and/or for the delivery of a software package which was not fit for its intended purpose.” [4] Comrad in turn sought an award for damages due to the repudiation of the contract by Gammasonic.

Trial Proceedings

This case is an appeal from Local Court against orders made by Magistrate Quinn in favour of Comrad for the amount of $58,011.21. There Magistrate Quinn was not convinced the software supplied by Comrad was a “good” as defined in s5 of the Sale of Goods Act 1923[5] and “held the act did not apply”[6]. She also found Comrad failed in the delivery of certain components required for the software functioning; however it was stated that it was “Gammasonics' own acts or omissions and not any conduct for which it had contractual responsibility that rendered the system unworkable, such that Gammasonics’ purported termination was a repudiation of the contract thereby entitling Comrad to sue for damages.”[7]

Material Issues

The following are the key issues that arise from the judgement and contain the essential elements of the case which will be discussed in this case note.

1. Whether a software package delivered by online download is effectively classed as "goods" for application of Sale of Goods Act.[8]

2. Whether equivalent terms of fitness for purpose and merchantable quality are implied by common law.

3. Breach of essential terms

The matter of whether a breach of contract is a question of mixed fact and law is also addressed in this case but it will not be extensively discussed within this case note.

Whether a question of mixed fact and law arises was dealt with early in the case and Fullerton J was satisfied that the question of whether her Honour erred in holding that Comrad was not in breach of the contract, involved a question of mixed fact and law and as such leave to appeal ought be granted.

Comrad also filed a notice for contention on two points one concerning the...
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