Facts

Respondent National Genetics Institute retained petitioner NetBase Computing Inc. on a "time and materials"
basis to "assist NGI with" the development of a custom software application for management of its medical
laboratory results. The services to be rendered by petitioner were mostly to be performed "offshore," at
petitionerÆs offices in Noida, India.
Petitioner rendered services and incurred related expenses during the period from November 1996 through
November 1997 pursuant to the terms of three written agreements between the parties. These written
agreements covered different work phases (at different hourly rates) on what was essentially one project - the
development of a "System for Management of Test Results" (SMTR), utilizing Microsoft Visual Basic
language and running on MicrosoftÆs SQL Server database product.
The project took longer than originally anticipated and the system was never completed. Respondent refused to
pay for any of the work performed by petitioner after July 4, 1997 and informed petitioner that it was
terminating the agreements. Petitioner initiated arbitration against respondent, alleging breach of contract and
quantum meruit.
Respondent counterclaimed for fraud, negligent misrepresentation, breach of contract,
breach of express warranty, breach of implied warranty of merchantability, breach of implied
warranty of fitness for a particular use and negligence.

The petitioner contended that respondent had breached the partiesÆ agreement by terminating the agreement
before project completion and by failing to pay for the services rendered. Alternatively, petitioner claimed it
was entitled to recover the reasonable value of its services through the date of termination.
The petitioner maintained that all causes of the project delays were attributable to respondentÆs project
manager. The project manager delayed the project through poor communication; delays in responding to or
failures to respond to inquiries from petitionerÆs personnel; failure to review and approve the project design
documents as agreed; changes in project requirements throughout the project and failure to properly manage
the project.
The petitioner initially demanded $177,000 for the amount in dispute but at the start of arbitration, and after
discovery, petitioner revised its demand and contended that after deducting a previous credit of $40,000 offered
by petitioner for "rework" portions of the application code, respondent was only indebted to petitioner in the
amount of $137,334.71, plus prejudgment interest and attorney fees.
RESPONDENT CONTENTIONS:
The respondent contended that the agreements between the parties constituted
a contract for the development and sale of completed software subject to the Uniform Commercial Code.
The respondent alleged that petitioner had breached that agreement by failing to deliver completed software
and that in the absence of such software, petitioner was not entitled to recover anything.
The respondent further asserted that petitioner had fraudulently induced the agreements by false promises that
the project would be converted to a fixed price agreement upon achieving certain milestones and by false
representations of the abilities of its programming personnel.
The respondent contended that the project delays and ultimate termination of the project were a result of
incompetence by petitionerÆs personnel and that petitioner had breached an express warranty that the services
rendered would be in accordance with "good commercial practices" as well as implied warranties under the
UCC.
The respondent maintained that it was not obligated to pay anything to petitioner and was entitled to a full
refund of the amounts previously paid to petitioner, a total of $85,592, plus additional consequential damages

Settlement Discussions

OOn May 21, 1998, a week prior to the filing of the arbitration demand, respondent demanded $85,592 in return for a waiver of its alleged claims against petitioner. On Jan. 19, 1999, respondent offered to settle for a dismissal of petitionerÆs claims and a payment of $30,000 on respondentÆs counterclaims. On the same day, petitioner offered to settle in return for a payment of $149,000 on its claims. On the first day of the arbitration hearing, respondent offered to pay petitioner $30,000 for a release of all claims. On the third day of the arbitration, respondent increased that offer to $70,000. The final award was entered 13 months after the case was filed.

Other Information

Arbitrator G. Joseph Buck ruled at the close of evidence that there was no evidence of fraud by petitioner. In his written award, the arbitrator ruled that the agreements between the parties were consulting contracts for services "to assist with" the development of software on a "time and materials" basis, and not agreements to provide a specific product at a fixed price. The arbitrator allegedly found that some of the work was substandard, but that petitionerÆs credit covered that work. The arbitrator ruled that the rest of the services performed by petitioner met the criteria of performance in accordance with "good commercial practices" and that respondent was not excused from paying for these services. The arbitrator awarded petitioner $133,334.71 in damages plus pre-award interest at the statutory rate (10 percent) from Sept. 14, 1998, onwards. Additionally, the arbitrator awarded petitioner a total of $105,000 in attorney fees and expenses.