How will you be celebrating the millennium? Will you be savouring the challenges of business in the year 2000? Or will you be worried that the heady days of the late 80s and 90s will - like the ghost of Christmas past - come back to haunt you in the form of multiple legal claims?
Users are being urged to take immediate action to identify and remedy year 2000 problems within their systems before it's too late. But what if they don't remedy the problems - who will they blame for the consequences?
Even if they do attempt a remedy - from whom will they recover the costs?
The legal position is complex and has led some commentators to conclude that there will be wide-scale litigation. Suppliers may be liable for the millennium bug under the law of contract or tort. As far as contractual liability is concerned, we need to see what express warranties may have been given in relation to year 2000 compliance.
If there are no express warranties, then we need to consider what implied warranties have been given. Warranties are implied by contract law into all contracts for the sale of goods or the supply of services. In relation to goods, the key warranty is that the goods are of satisfactory quality.
A court may decide that hardware or software which is not year 2000 compliant is not satisfactory. Whether this will be the case depends on many factors - one of the most important being the expected life of the product at the time it was bought.
For example, in the case of a PC supplied in 1993, it might be reasonable to assume it would be redundant before the year 2000 and so would be satisfactory in this respect. However, it can also be said that an accounting package purchased by a small to medium-sized enterprise in 1993 may be expected to be in use beyond the year 2000.
Where there are express or implied warranties, we need to see to what extent any written contract terms may have excluded or limited liability under those warranties. Where there are exclusion or limitation clauses, we need to consider whether they are valid .
In this context, business-to-business contracts are treated differently to business-to-consumer contracts. In the case of a supply to a business, exclusion and limitation of liability clauses will only be enforceable if they are reasonable, which is not always possible to categorise.
Recently, limitation clauses in the standard terms of business of ICL were found to be unenforcable and provided no protection to a claim in excess of z1 million brought by St Albans District Council. A supplier cannot be certain of being able to shelter behind the exclusion clauses in its standard terms of business. These clauses must be kept under review in the light of developing law in this area and the recent ICL case.
In the case of a supply to a consumer, the position is more restricted and the warranties implied by contract law can never be excluded. It can be illegal to attempt to exclude them and criminal penalties may apply.
That said, there is less scope for a consumer to suffer losses in the event of system failure than there is for businesses. For businesses, damages may be potentially huge. It is these losses that customers may seek to recover from the supplier.
Liability may also arise in negligence. One reason why someone might wish to bring a claim in negligence is where they do not have a contract with the supplier because they were not the original purchaser. Since there is no contract, the supplier cannot seek the protection of its standard terms of business. Such claims are more akin to product liability and mainly relate to property damage, physical injury or death.
What are the solutions for suppliers at this point? There may be many options, including ensuring that all systems sold from now on are compliant, obtaining if possible warranties and indemnities from manufacturers/suppliers, providing full information to customers and reviewing terms of business.
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