This is the fifth in a series of articles in which Christopher Hamel-Smith addresses some of the key legal issues arising out of the Y2K challenge. They were written in order to make a contribution to the Trinidad & Tobago business community’s efforts to prepare for the transition into the Year 2000 and to manage the associated risks. Forming part of a broader series on "Information Technology and the Law" by the same author, these articles were first published in the "Business Guardian" over the period June 10, 1999 to September 9, 1999.
Many businesses are being inundated with questionnaires about their Y2K status. You need to make a number of important business judgements about how to handle these. To which do you respond? What and how much do you say? And how do you say it? Unfortunately, there is no simple solution. However, there are a few practical tips that can help in making judgements about these Y2K communications and in managing the legal risks that they pose.
The first question is whether to respond at all. While responsible businesses recognise the need for effective communication on Y2K, you may find that in some cases you can safely consign the questionnaire to the bin. This will mainly be the case where your relationship with the inquirer is so limited as to justify ignoring its questions.
In relation to those inquiries that you cannot ignore, consider whether a generic response would be appropriate. Now that we are in the final stages of the countdown to the Year 2000, there is an absolute need for focus. By ignoring some Y2K questionnaires and providing a generic response where you can do so safely, you can devote your scarce resources, particularly time, to those relationships which are really important to your business and to those situations where a detailed and specific response is appropriate.
Watch Your Contents
In responding to any Y2K inquiry, it is of course vital to be accurate and to avoid exaggeration. Inaccurate statements can expose you to liability for misrepresentation, and even fraud. However, you also need to be conscious of the risk that even a poorly worded response to a request for information, without any intention to mislead, could result in an inadvertent assumption of legal liability.
Casual and uninformed communication on Y2K issues by company personnel can be dangerous, as it may lead to inaccurate and misleading information being provided. It may also result in embarrassing and damaging contradictions between what is being said by different representatives of your company. Even oral responses can pose risks, since these may be misunderstood or even deliberately mischaracterised by a party who is desperately seeking to shift blame from itself in the event of a Y2K loss.
To mitigate these risks, your company should consider centralising the responsibility for responding to all requests for information concerning Y2K. This will also facilitate the maintenance of a proper record of your communications. All other employees (particularly those, such as frontline staff and members of your sales force, who interact frequently with customers) should be instructed and trained about what they should and should not say and how they may refer inquires to the centralised unit for response.
Where you determine that a general response will suffice, you should have standard text explaining the company’s position on Y2K. Management must carefully check this for accuracy. It should also be legally vetted to minimise the risk of increasing the company’s legal exposure, while providing as much relevant information as the business thinks appropriate. It should certainly include an appropriate disclaimer. For example, a disclaimer would stress that the statements reflect your current understanding and intentions but that the information is subject to change. It would also clarify that the statements do not constitute any form of warranty, representation or undertaking and do not alter any legal rights or obligations in the existing contracts.
The full Monty
Despite your efforts to minimise situations in which you will have to condescend to a detailed and specific response to a Y2K inquiry, those that you receive from major customers and other key business partners are likely to require a detailed response. Indeed, depending on the relationship and its importance to your business, you may consider taking the initiative to communicate with a key business partner even if it has not yet made a Y2K inquiry.
Management and legal professionals should carefully and individually consider each detailed Y2K response before it is sent. This must be done in the context of:
- The nature of your business relationship with the particular party to whom you are responding;
- Your existing contractual arrangements; and
- The precise terms of the inquiry being responded to.
Of course, each detailed response is likely to incorporate aspects of the text developed as your company’s generic response. However, it can also be specifically tailored to say as much as your business judgement suggests it would be wise or useful to communicate to the particular business partner, while minimising the risk of legal liability. In addition, with each detailed response, the terms of the disclaimer should be carefully refined, both in relation to its content and its tone.
By focusing resources, making informed and appropriate business judgements and using appropriate legal risk management techniques, businesses can increase their chances of successfully negotiating the tightrope between fostering effective communications with key business partners and avoiding unnecessary additional exposure to legal risks. Companies that manage this exercise successfully may even be able to turn adversity to advantage. They can do so by demonstrating business leadership, as well as by cementing their relationships with key business partners, through effective communication and developing a co-operative approach to tackling a thorny issue.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.