This is the fourth 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.
Responsible businesses will recognise the need for effective communication with their key business partners, including their financiers, suppliers and customers, about Y2K issues. They will seek to foster a cooperative and problem-solving approach to tackling Y2K. However, the content of such communication, both written and oral, requires careful consideration in the light of the legal and liability issues involved.
Great care and skill is required to walk this commercial tightrope. In order to achieve its business objectives, while avoiding unnecessary exposure to legal liabilities, management must make important judgements about what to say in relation to Y2K, as well as how to say it.
Key Suppliers
In the case of key suppliers your are likely to have initiated communication in order to get information which you need to implement your Y2K plans.
With suppliers of computer-related products (including embedded systems) you will obviously insist on sufficient information to help determine whether you can rely on such equipment to cope with the date change into the year 2000 and with other vulnerable dates such as September 9, 1999 and February 29, 2000. As with contractual documents, so too with inquiries of your suppliers, it is important to recognise that references to "Year 2000 compliance" or to being "Y2K ready" are not satisfactory. These terms, if undefined, are simply too vague. The challenge is to use appropriate and precise language in your inquiries so as to cover all of the requirements of "Year 2000 compliance" that are relevant to the particular products or services from that supplier.
However, you are likely to also need information about Y2K matters from suppliers of other types of goods and services on which your business depends, and not just from your supplier of computer-related products and services. In this area, as with the rest of your Y2K plan, it is critical that you act in a tightly focused manner and concentrate your scarce resources (particularly time) on those supply-chain relationships where you simply cannot afford to experience a failure. In my view, there is no merit in taking the all-to-common "scatter-shot" approach, involving the use of questionnaires to each and every supplier. This only dissipates your efforts and squanders valuable resources, particularly time.
Rather, you should consider identifying those key suppliers (including utilities) whose failure can cause a "mission-critical" disruption at your own business. Once you do so you can focus on engaging in meaningful exchanges of information with this limited sub-set of suppliers so as to maximise your prospects of:
- Ensuring continuity of supply from these suppliers;
- Putting in place alternative arrangements for supply from other sources, where available; and
- Planning for any possible disruption to supply so as to mitigate the consequences of same to your business and your own customers.
Customers
Many of your customers have been asking that you provide them with all types of information about your company and its products and services in relation to a range of Y2K issues. I do not believe it is possible to come up with a single satisfactory approach to responding to all of these types of Y2K questionnaires and inquires. A great deal will depend upon the nature of the relationship with the party making the inquiry. For example, in many cases such relationship may be so limited or unimportant as to justify ignoring the request for information altogether.
On the other hand, inquires from key business partners, including your bankers and major customers, may need to be responded to with some level of detail. In each case, a careful business judgment must be made as to whether to respond at all. If so, you also need to decide whether to provide a general and generic response or to respond in a specific and detailed manner.
Again, given the limited time remaining to address these matters, it is my view that a very focussed management effort needs to be made to:
- To identify business priorities; and
- To ensure that a detailed Y2K response is only provided where there is a proper business justification for allocating the resources needed to provide it.
In relation to each business partner where a detailed response is required, the content of your further Y2K communications should be carefully and specifically considered in the context of:
- The nature of your particular business relationship;
- The terms of your existing contractual arrangements;
- All previous relevant communications between you; and
- The precise terms of any Y2K enquiry or questionnaire being responded to.
Unfortunately, there is no one-size-fits-all solution for this important and urgent business problem. Nevertheless, there are practical tips that can assist in making judgements concerning your Y2K communications with third parties and in managing the legal risks which these pose to your business. In my next article, we shall take a look at some of these tips, as well as issues related to the value and use of legal disclaimers.
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.