Y2K and Contract Law

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Hi Folks,

Y2K is filtering through the ranks. My question is: In considering contractual arrangments between entities does Y2K provide a force majeure letout on the contract?

If not, should contracting entities be required to declare their exposure to Y2K before the signing of contracts takes place?

Do we have a legal lurker prepared to offer an opinion and some wording to cover such a request?

Is there a site I could seek further info on this one?

Thanx in advance for any help/suggestions.

-- Bob Barbour (r.barbour@waikato.ac.nz), October 20, 1998


Commonsense says that if Y2K causes massive disruption on the scale of, say, WWII, it will be deemed to be force majeure. If it's a tiny glitch that hits only a few desperately unprepared companies, they'll be sue-able (or more probably, not, because they'll be bust).

Commonsense also says that if you get Y2K explicitly written into a contract you'll have a better chance of suing someone than if you don't. It's also likely that putting Y2K in a supply contract will result in many of your possible suppliers will choose not to do business with you, leaving you with a a mix of the extremely well- prepared (if such exist) and the totally hopeless (who know they're goners in 2000!). They may well also seize the opportunity to quote higher prices.

Commonsense says sometime soon a legislature will enact a good-faith law which will say that if you acted responsibly to deal with Y2K, you can't be sued unless Y2K is explicit in a contract.

Commonsense means nothing to lawyers. I'm not one. If you want one, get your chequebook ready ... the cynic in me says that applies to legislators as well, the first bit sure does.

-- Nigel Arnot (nra@maxwell.ph.kcl.ac.uk), October 21, 1998.

In the UK FI have included clause 25 Year 2000 in their "General Conditions of Contract for Services". "For the avoidance of doubt, unless otherwise agreed in the order form, the Company will not be responsible for any impact on the performance or functionality of any Customer system attributable to dates prior to, during and after the Year 2000." Note the "prior to". FI is in the business of providing IT consultancy and services to clients, but the General Contract condition would apply to any such service.

-- Richard Dale (rdale@figroup.co.uk), October 21, 1998.

Don't know if that answers the question or whether the wording could be modified/used for any general get out clause. FI often 'manage' clients legacy systems maybe with date problems.

-- Richard Dale (rdale@figroup.co.uk), October 21, 1998.

First off I am a young married black attorney and a full on y2k believer. I will be prepared but I am not running. I believe there will be MAJOR disruptions. Chaos is possible but for obvious reasons Montana is not an option (just don't believe we will be welcome). As for contract law and y2k in the traditional interpretation force majure would not apply because y2k is not a natural event. Businesses that rely on computers to fulfill contractual duties have a duty to ensure that any system they rely on is capable of doing the work that engage in. As for the business that relied on the programmers who created the date problem they had a duty to MANAGE their workforce. Failure of managers to manage is not an event caused by God. It is in all probability a negligent action that rises above the protection most state laws provided corporations in making everyday business judgments. Corporations will argue that it is force majure but they will have a hard time getting around the reams of evidence that programmers knew this would happen if the systems were not replaced. All this litigation stuff may be irrelevant because the natural consequences of y2k may be the destruction of wealth on a scale not even I can forsee, possibly unimaginable. We may kick start capitalism relatively quickly, but not after the reset button has been hit. I am optimistic despite the possiblities because I, MY WIFE AND POSSIBLY OUR CHILD (WISH US LUCK) WILL BE PREPARED. I SWEAR IT. GET READY. DON'T READ ANYTHING ELSE ABOUT WHETHER THIS IS REALLY GOING TO HAPPEN OR NOT. All the old people say us young folks never had to go through any bad times, ie., wwII, well here's my chance to prove my mettle. I will survive and proper in the next millenium.

-- martyn collins (martylaw@yahoo.com), October 21, 1998.

sorry about the typos in my original post. I was in a hurry.

-- martyn collins (martylaw@yahoo.com), October 21, 1998.

Welcome Martyn.

Thanks for the postings, Nigel, Richard and Martyn.


-- Bob Barbour (r.barbour@waikato.ac.nz), October 21, 1998.

Martyn, Welcome. Good post. See you on the other side.

-- R. D..Herring (drherr@erols.com), October 21, 1998.

Hi Martyn. Nice post. I wonder if folks have considered the exclusions to their home owners policies for riot, war, etc. If there is a breakdown in the cities but society as a whole does manage to recover, don't ya think all those homes that went up in smoke will result in denied claims? Of course that assumes the insurance companies are still around. I agree with you on Montana, although there are some fine folks up there. If you're in SoCal, come on out to the high desert. You'll be welcome there. Regards, Brett.

-- Brett (brett45@bigfoot.com), October 22, 1998.

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