Industry faces legal minefield of Year 2000
Is the computer problem surrounding the click over to calendar year 2000 caused by a virus, a bug or a fault? Legal firms and information technology companies will have to decide on the most appropriate term in order to modify legal documents and reduce the space for conflict.
However, the debate about the classification of the problem is just one small aspect of a larger legal picture. As is widely known by now, the issue at heart is the inability of many computer systems and time-based electronic devices to function beyond 2000.
Figures released by the United States-based market research company Software Productivity Research estimate the problem may cost businesses US$1.5 trillion, including $300 billion in litigation.
One way to minimise the problem in legal terms is to review and rewrite the contracts and agreements between IT vendors and their customers and to make sure clauses that protect both parties are included.
Warranties, for example, should state that all new software and systems will not be affected by the problem.
Legal firms also recommend that agreements allow customers to carry out tests to check software will work after 2000.
Customers also should ensure they have access to the source code in order to make changes should their system fail.
The issue touches on the sensitive subject of copyright and lawyers warn that these agreements also may need to be amended accordingly.
A liquidated damages clause, obliging suppliers to pay a penalty if the 2000 problem occurs, also has been suggested.
Legal firms such as Bird & Bird, an international law firm with a branch office in Hong Kong, and one of the British Government's representatives on Task Force Year 2000, has started to draw up model agreements which cover the problem.
Bird & Bird, which hosted a special conference on the issue in Hong Kong last week, says existing contracts contain a number of grey areas.
Support and maintenance contracts, for example, seldom refer to the Year 2000 issue.
Licensing agreements also may cause legal problems if a firm finds the software it has a contract to use no longer works after 2000.
The Year 2000 problem provides ample room for litigation.
However, lawyers warn it is a long, expensive and disruptive process that is best avoided.
A senior associate at Bird & Bird in Hong Kong, Richard Fawcett, said: 'The interest of both parties is to negotiate a solution before the problem goes too far.'
