White SW Computer Law
|Intellectual Property, Information Technology & Telecommunications Lawyers|
Melbourne Office - PO Box 452, COLLINS STREET WEST Victoria 8007 Australia
Sydney Office - GPO Box 2506, SYDNEY New South Wales 2001 Australia
Telephone: Melbourne Office - +61 3 9629 3709 Sydney Office - +61 2 9233 2600
Facsimile: Melbourne Office - +61 3 9629 3217 Sydney Office - +61 2 9233 3044
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In many cases, older computer systems stored dates as a 6 character ( “byte” ) field, which includes 2 digits each for the day, month and year. eg 290598 for 25 May 1998. In such systems, 1 January 2000, is represented as '010100' which could be either 1 January 1900 or 1 January 2000. Accordingly, any function, which is dependent on a date calculation using 6 byte field dates, is a possible source of error.
Typical information technology disasters that may occur as a result of a date related error include:
Typical causes of action arise from:
If a condition or essential term of a contract is breached
Terms which are of such importance in IT projects may include
If the term is a warranty, then a claim only arises for damages or for rectification of the problem. Typical warranty breaches may include (depending on degree):
Implied terms that:
Statutory protection depends upon, amongst other things, whether the product is a good or service and whether or not the customer is a “consumer” of the goods or services.
Actions against manufacturers and importers of goods which do not correspond with description, are of unmerchantable quality, which do not conform to sample, are unfit for purpose or manufacturers who do not comply with express warranties.
Defences include that:
Make use of product markings such as warnings and instructions to assist in managing your liability.
Common law rights to rescind a contract for misrepresentation. Representations as to the performance of a computer made in good faith can still be a negligent misrepresentation.
An action in the tort of negligence requires :
Previous claims in tort have included:
Make it clear that the information or service provider is not assuming a duty of care.
Damages which may be recovered from the supplier will be the amount of money necessary to restore the customer to the position it was in before the statement, subject to the loss being foreseeable.
At common law there is a duty on a party to mitigate the loss suffered by breach of contract.
“Trust in the infallibility of a computer is hardly a defence when the opportunity to avoid the error is apparent”
Are you adequately covered by your existing insurance policies?
Points to consider in choosing appropriate insurance coverage include:
As the watchdog over corporate activities, the ASIC is involved in educating the business community as to the risks involved in the Year 2000 issue.
The ASC recommends that the following be considered in a Year 2000 project:
In some circumstances, a failure by the directors of a company to implement a Year 2000 plan could constitute a breach of their duties. For example, the Corporations Law and under common law, directors are required to exercise care and diligence in the exercise of their powers and the discharge of their duties. A careful and diligent company director should consider the potential impact of the Year 2000 problem on their company and act on any potential problem areas.
The continuous disclosure regime may require corporations, which are listed or unlisted disclosing entities, to disclose any material effect the Year 2000 issue may have on the price or value of their securities. A company which was subject to the continuous disclosure regime could be required to make disclosure about any substantial costs associated with addressing Year 2000 issues or the likely consequences if it cannot address those issues.
For companies which are disclosing entities and/or public companies the Corporations Law requires the directors' report to include information on likely developments in the operations of a company and the expected results of those operations. Where the financial impact of the Year 2000 issue is likely to be material to the future results or financial condition of the company, it would be reasonable to expect that directors would disclose information in relation to their Year 2000 planning.
Directors should also consider their financial reporting obligations in relation to the Year 2000 issue. Financial statements are generally required to disclose capital and other expenditure commitments contracted for at the end of the company's financial year. That disclosure may be required to include expenditure commitments under contracts with external consultants to undertake any modification of computer software.
In addition to company office holders, investment advisers should also consider whether the companies they are recommending as investments have implemented a Year 2000 plan.
This Act is now in operation in Australia. The purpose of the Act is to “encourage the voluntary disclosure and exchange of information about year 2000 computer problems and remediation efforts”. Prior to the Act commencing, when a vendor made a Year 2000 related statement that was inaccurate, the vendor may have been liable for damages for misrepresentation, misleading and deceptive conduct and negligence. Provided that a Year 2000 statement complies with the Act in that it:
the vendor may not be liable for civil actions including negligent misstatement, misleading and deceptive conduct, misrepresentation and defamation in relation to any matter arising out of or incidental to the making of a Year 2000 disclosure statement. The Act does not provided protection when: a Y2K statement is made with the knowledge that it is false or misleading or recklessly as to whether the statement is false or misleading; a Y2K statement is made pre-contractually; the Y2K statement is made under a contractual or statutory obligation; or when a Y2K statement was made to induce consumers to acquire goods or services.
Software and hardware vendors should check that their existing Y2K disclaimers and replies to Y2K surveys comply with the Act, particularly in relation to stating that the statement is made for the purposes of the Act.
The scope for liability and the quantum of damages from claims involving information technology increases daily. Year 2000 problems are applicable to many day to day situations and need to be addressed within a total risk assessment and minimisation plan rather than in isolation.
WHITE SW COMPUTER LAW
JUNE 1999 www.computerlaw.com.au © White SW Computer Law 1999
This paper is designed to give a brief introduction to this topic. If you are interested in obtained further information, our web site - http://www.computerlaw.com.au contains a number of related papers, which we have presented and published. If you have any further queries, please feel free to e-mail Steve White - email@example.com, or telephone our office.
Steve White is the Principal of the law firm White SW Computer Law. This firm was established by Steve White after his involvement in the IT industry for a number of years.
White SW Computer Law is a Melbourne based boutique law practice which provides legal services to the IT industry, IT customers and parties with Intellectual Property matters. It provides commercial legal advice and litigation with an emphasis on Intellectual Property and Information Technology issues.
Steve White holds dual degrees in law and computer science and has been a technical instructor for IBM, in Australia and South East Asia, in the use of local area network products and services, operating systems, database design and communications systems. Steve is a member of the Law Institute of Victoria, the Law Institute of Victoria Information technology sub-committee, Victorian Society for Computers and the Law, the Australian Computer Society (Professional Member Grade).
This article is a guide only and should not be used as a substitute for proper legal advice, readers should make their own enquiries and seek appropriate legal advice.