UK: Y2K Claims

Last Updated: 26 March 2001
Article by Richard King

Introduction

If you are reading this briefing note, you may already have identified a Y2K problem, whether in your business IT systems or some other product whose functionality depends upon in-built micro-processor technology and is date-based (so called "embedded" software). Or you may simply be concerned about suffering such a problem at some point in the near future.

In either case, you may be a user of the product in question or its supplier and you will know that the problem, whether real or hypothetical, is caused by the product’s inability to recognise the year 2000, either at all or as a leap year. Above all, you will be concerned to find out who is to pay for the cost of rectifying the problem, as well as any other costs suffered as a result, and whether any other liability issues need to be borne in mind.

This briefing note is intended to provide an overview of the more fundamental legal considerations that will apply when seeking answers to these questions. More often than not, parties’ rights and obligations will be delimited by a contract: we consider the importance of express and implied terms. In certain circumstances, the law creates rights and obligations where no contract exists: we consider the potential relevance of the law relating to negligence and strict liability. We conclude with a short explanation as to why you must act quickly if you believe you have a problem.

Contract - Express Terms

Many contracts, particularly those entered into more recently, will contain express wording to deal with the issue of millennium compliance. A warranty of compliance contained in a licence or contract of sale will leave the supplier liable to the user in the event that non-compliance is established.

Some contracts, however, may include words whose effect is to relieve a supplier of liability for non-compliance, either expressly (on the face of it unlikely in modern contracts at least) or by way of a general exclusion of liability. Any such term will be subject to a test of reasonableness imposed by the Unfair Contract Terms Act 1977 and 1994 Regulations where one party deals as a consumer or where the term forms part of the standard terms of the supplier.

If liability is not excluded in principle by express terms in a contract, its extent will often by capped. For instance, liability may be confined to direct (as opposed to consequential) losses, or to a pre-determined amount which may be dictated by the value of the contract.

Contract - Implied Terms

In the absence of express terms in a contract which define where responsibility lies in the event of millennium non-compliance, terms implied by statute may assist - if not themselves expressly excluded.

In the case of the sale (or license) of any product, including software if it is supplied in a physical format (eg a CD ROM, or pre-loaded or "embedded" in a separate hardware device), there may be implied one or more of the following terms:

  • that the product is of satisfactory quality, broadly defined as being fit for its ordinary purpose having regard to all relevant circumstances;
  • where the intended use of the product is made known to the supplier, and where there is reliance on the supplier, that it is fit for that purpose; and
  • where the product is sold by reference to a particular description, that it corresponds in all respects to that description.

Where not effectively excluded, one or more of these implied terms might, depending upon the circumstances (not least the date of supply), render a supplier liable in the event of a breakdown of the product by reason of millennium non-compliance.

In the case of the provision of services, there will be implied into the contract of service a term imposing on the provider a duty to perform the service using reasonable skill and care, to be assessed by reference to accepted standards of competence in the relevant field of activity. A contractor engaged in 1999 to devise a proprietary software programme who fails to ensure that it is millennium compliant would be in breach of this term, although a similar failure in 1990 may not put the contractor in breach.

Subject to any express contractual limitation on the amount of its liability, a supplier or contractor will be liable for any loss which was reasonably foreseeable as a consequence of the breach when the contract was entered into provided that such a loss would not be deemed to be too "remote". To the extent that a customer incurs a liability to a third party as a result of having been supplied with a non-compliant product, it might well be able to pass on that liability to the supplier as a foreseeable consequence of its breach of contract.

Negligence

A supplier of a millennium non-compliant product could equally be liable to a party with whom it has no contractual relationship where that party suffers damage, whether actual or threatened, to its property by reason of the non-compliance. It will need to demonstrate that the supplier was negligent, in other words that a reasonably competent person in the same position would not have allowed the act or omission to happen. The supplier will not be liable to the same party for any purely financial loss suffered by reason of the negligence.

Strict Liability

If the third party with whom the supplier has no contractual relationship is an individual and suffers physical injury and/or damage to his property by reason of the non-compliance, the Consumer Protection Act 1987 imposes liability on the supplier without the need to prove negligence. It will be sufficient for the third party to show that the product which was responsible for the injury or damage was defective.

Company Directors

If a company has failed to take appropriate steps to ensure that its products are millennium compliant, and if it can be shown that one or more directors had a responsibility to ensure that appropriate steps were taken and had no valid reason for failing to do so, the directors could incur personal liability to a third party which otherwise has a claim against the company whether for breach of contract or negligence.

Time Limits

A claim for breach of an express or implied contract term must be brought within 6 years of the breach in question, ie the date of supply.

A claim in negligence must be brought within 6 years of the damage being suffered or, if later, where the claiming party could not have known of the non-compliance and its potential claim, 3 years from the date of knowledge.

A claim in relation to personal injury, whether for breach of contract or negligence, and any claim under the Consumer Protection Act 1987, must generally be brought within 3 years of the injury or damage being suffered.

Criminal Liability

There are a number of areas in which a company or its directors might incur criminal liability by reason of millennium non-compliance. These include:

  • under the Trade Descriptions Act 1968 if, for example, a product is wrongly stated to be millennium compliant; and
  • under the Health & Safety at Work Act 1974 if, for example, an employee suffers injury as a result of an incident at his employer’s premises which would not have occurred but for a non-compliance problem.

Important Steps

If you have any concerns as to whether you have a claim, or may be exposed to a claim related to millennium non-compliance issues, you should seek detailed advice at the earliest opportunity. Your time for bringing a claim may shortly expire. Damage limitation may be possible. Failing that, should litigation become a real prospect, the new court procedures mean that the well-prepared litigant can obtain significant tactical advantage over an opponent.

This information is necessarily brief and it is essential that professional advice is sought before any decision is taken

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.