With limitation statutes imposing imminent deadlines on actions to recover the costs of Y2K compliance, the channel has to be wary of potential liability claims prior to the year 2000, warns Roland Burt, consultant with commercial law firm Middletons Moore and Bevins.
Burt says the failure of companies to commence legal proceedings within prescribed time periods can result in the loss of the right to bring those proceedings before the courts.
"The prevalent attitude seems to be one of deferring legal actions until after 2000. Companies want to wait and see what happens first. But because of limitation statutes, if you purchased or licensed a non-Y2K compliant product before 1997, it may be necessary for you to bring legal proceedings against the supplier before 2000," said Burt.
"In warranty cases, limitation periods are generally dated from when the defective product was supplied or when the misleading statement was made - not from when the defect was detected. If you wait for the defects to become apparent in 2000, it may be too late," he said.
He claims the limitation period in respect to products is six years, meaning on January 1, 2000 companies will only be able to claim damages on non-compliant products purchased on or after January 1, 1994. In respect to misleading statements by suppliers the limitation period is three years, with companies unable to claim damages on statements made on or after 1 January 1997.
Burt says that it "depends on the circumstances" as to whether the vendor or the reseller is to be held liable as the supplier.
"Resellers certainly have to be aware of liability," he said. "They must be conscious of some risks if they've supplied non-compliant products."
Burt says that while he knows of a number of Y2K-related claims cases currently before the courts in the US, he doesn't know of any in Australia at this time. "It can be expected that this will change in Australia sooner rather than later, as Australian companies begin to discover non-compliant products," he said.
According to Burt, the two big elements facing claims are the recovery of costs taken to replace or remediate non-compliant products and the consequential costs associated with the loss of profitability and supply caused by the actual malfunction of technology occurring on or by the year 2000.
"Most Y2K strategies are focusing on the actual process of compliance rather than cost recovery. Unfortunately, limitation statutes mean that the legal ramifications need to be viewed with equal urgency," says Burt.