HAVE YOU CAUGHT THE Y2K BUG?

If you plan on giving yourself a headache on 1 January 2000, make sure it is as a result of your midnight champagne, not the Y2K bug!

Whether your business is related to information technology or not, you should implement a Y2K compliance plan to test your date dependent equipment and software and to determine whether your suppliers have audited their businesses for Y2K compliance. Disruption to your suppliers' businesses, such as an inability to process purchase orders, may lead to you failing to comply with your contractual obligations due to inventory shortfalls.

Have you considered:

• Pre-ordering stock to avoid inventory shortfalls or using alternative suppliers
• Requesting written confirmation from your suppliers that their business is Y2K compliant (This will assist you in litigation arising from loss and damage suffered by your business)
• Reviewing your existing supply contracts to determine who has the responsibility for Y2K compliance.
• Drafting all new contracts in a way that makes the other party bear the responsibility for Y2K compliance and where this is not possible, so that your business' liability is limited.

Additional issues need to be considered if your business is a company. In order to avoid a breach of their duties, company directors should determine the potential impact of the Y2K problem on the company, act on any potential problem areas and comply with their financial reporting obligations. 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 for modification of computer software to overcome Y2K problems.

Businesses involved in the sale of computer hardware and software need to be particularly careful in their Y2K planning. The recently introduced Year 2000 Information Disclosure Act 1999 encourages the voluntary disclosure and exchange of information about year 2000 computer problems and remediation efforts and may give some protection to vendors of computer hardware and software.

Before the introduction of this Act, if 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.

The Act states, with some limitations, that a vendor may now not be liable in relation to 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.

To take advantage of the protection provided by the Act, vendors must ensure that their Year 2000 disclosure statements comply with the Act, which lays down a number of requirements that must be complied with. Vendors who have already drafted Y2K disclaimers and replies to their customers' Y2K surveys should review their documentation to ensure that, in addition to the other requirements, they state that their Year 2000 disclosure statement is made for the purposes of the Act.

Small business owners who ignore the Y2K issue do so at their own peril. If your business or your suppliers' businesses are not Y2K compliant, major interruptions to supply and resulting legal liability may put a quick end to your new millennium celebrations.

STEVE WHITE
WHITE SW COMPUTER LAW
MAY 1999 www.computerlaw.com.au © White SW Computer Law 1999 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.