The channel must be wary of potential liability claims prior to the year 2000 as deadlines for commencing actions to recover Y2K-compliance costs draw closer, a legal expert has warned.
Roland Burt, a consultant with commercial law firm Middletons Moore and Bevins, said 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," Burt told ARN last week. "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," he warned.
"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.
Burt claimed the limitation period in respect to products is six years. Therefore, on January 1, 2000 companies will only be able to claim damages on non-compliant products purchased on or after January 1, 1994.
Concerning misleading statements by suppliers the limitation period is three years, with companies unable to claim damages on statements made on or after January 1, 1997.
Burt said 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 risk if they've supplied non-compliant products."
Burt added 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."
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," Burt said. "Unfortunately, limitation statutes mean that the legal ramifications need to be viewed with equal urgency."