An agile methodology is a project approach based on the Manifesto for Agile Software Development which involves a high frequency of delivery and a high degree of change. Parts of the project are delivered in incremental steps, allowing for adaptability and flexibility within the project. See our overview of the agile methodology here.
Austech Applications Pty Ltd v Oz Wide Trading Group Pty Ltd [2021] VCAT 345 (Austech v Oz Wide)1 concerns a contract for an agile software development project between Austech Applications Pty Ltd (Austech) and Oz Wide Trading Group Pty Ltd (Oz Wide) that was signed in 2017 for the development of software that would assist in managing the day-to-day processes of Oz Wide’s business. The project was intended to take 26 weeks but quickly went awry. Oz Wide purported to terminate the contract on 21 December 2018 due to Austech not having completed development of the software.
Oz Wide argued that Austech had breached its contractual obligations as Austech had failed to deliver the project within the contracted timeframe and used what it said was an inappropriate methodology. However, the Victorian Civil and Administrative Tribunal found that Austech had not breached its contractual obligations, including its obligation to deliver the project with the requisite standard of care, skill and judgment, because a hybrid agile methodology is appropriate for software development projects of this nature. Oz Wide had not undertaken appropriate testing or provided expected feedback, and the contract did not specify how the schedule would be extended in the event of a delay. For these reasons, the Tribunal awarded Austech $84,706.
Businesses should use the takeaways from Austech v Oz Wide to prevent similar future disputes from arising if using or considering an agile methodology for projects.
Failure to deliver in the contracted timeframe
Oz Wide attempted to argue that Austech failed to deliver the project within the contracted timeframe. Oz Wide’s position was that the parties had agreed to extend the development period to 38 weeks to allow for variations and delays to the project but that Austech had failed to deliver the project within this 38 week timeframe.
Austech’s position was that the 26 week timeframe was extended due to delays in the project, but not by any specific timeframe, and therefore the contract had not expired.
The Tribunal found that the parties had not agreed to extend the 26 week development period by any specific additional period because the contract stated that the original 26 week development period only applied if Oz Wide provided information requested by Austech in a timely manner, and the contract contained no provisions providing for the calculation of a new time frame.
As Oz Wide had failed to provide this information and the parties had not agreed on a new specific schedule, Austech was therefore no longer obligated to complete the project within any specific timeframe.
The Tribunal further found that the contract expressly provided contingency for the project not being completed within the original 26 week timeframe. Termination by Oz Wide for non-completion within a specific timeframe was contrary to the intention described in the contract that the project would continue until completion. On that basis, by purporting to terminate, Oz Wide repudiated the contract, and the Tribunal also found that Austech accepted that repudiation.
Additional contractual clarity, such as a contractual mechanism to clarify how the timeframe would be extended if there was a delay in the provision of information by Oz Wide, would have assisted the parties to understand their contractual positions and avoid a dispute emerging.
Utilisation of a hybrid agile methodology
Oz Wide also argued that Austech failed to implement an appropriate project methodology by using a hybrid agile methodology. It said this resulted in Austech:
- providing initial ‘versions’ of the software that were incapable of being used or tested;
- delivering test versions with hundreds of bugs and functionality issues; and
- failing to understand the functionality Oz Wide wanted developed.
The Tribunal found that a hybrid agile methodology was appropriate for a software development project of this nature, and that the other issues raised by Oz Wide were inherent to in-progress agile projects. The Tribunal recognised that:
- the sprint process develops specific functionality for testing and feedback purposes and not ‘versions’ of the complete software that could be tested in its entirety;
- a trade-off of using an agile project methodology is that more bugs and functionality issues will exist due to less detailed functional requirements as multiple modules developed simultaneously. The existence of bugs and functionality issues during development is not a breach of any obligation for care, skill, and judgment; and
- agile methodology involves iterative development where functionality is provided as the relevant module is being developed. This functionality is then further clarified as part of the testing and development process, so there is no requirement to understand the functionality at the start of the project.
Parties looking to use an agile methodology need to be comfortable with these essential characteristics. However, Oz Wide and Austech could have avoided this dispute by contracting for the specifics of the agile methodology, rather than trying to perform an agile project under a contract designed for waterfall project methodology. You can read more about how to do this in our series of articles on the topic (available here).
HWL Ebsworth’s IP and IT team has extensive experience in advising businesses regarding arrangements for development, licensing and support of on-prem and cloud software, IT procurement and contracting in the IT industry. If you are concerned about contracting for an agile project, please contact us for further information on how we can assist you.
This article was written by Luke Dale, Partner, Daniel Kiley, Partner, Nikki Macor Heath, Special Counsel, Max Soulsby, Solicitor and Bellarose Watts, Law Graduate.
1 Austech Applications Pty Ltd v Oz Wide Trading Group Pty Ltd [2021] VCAT 345.
