Contract issues

ince the sale and use of software and hardware is generally mired in contracts -- hardware and software licenses, maintenance and repair agreements, etc. -- the next step is to inventory and have your attorney analyze all materials relating to the software/hardware to determine their representations, warranties, and limitations on liability. Such an analysis will allow you to determine your remedies in the event his or her systems are not year 2000 compliant. Statements in sales contracts regarding software and hardware or their performance may often be treated as an express warranty. Since such express warranties can also arise in materials relating to the software and hardware, such as advertising, operation manuals, and other literature, these materials should be closely reviewed as well. However, care should be taken to identify any clauses excluding statements in these materials from the sales contract. If no express warranties apply, a remedy might be available through doctrines of "implied warranty", provided these warranties are not disclaimed.

f it appears that your software and hardware are not year 2000 compliant but are warranted as such, the vendor should be given written notice of your expectations. If your remedy is limited to repair or replacement, as it will be with most sales contracts, repair or replacement should be demanded along with a timetable for doing so. Where repair or replacement is unduly delayed or impossible -- a very real possibility where the year 2000 problem is involved, owing to the magnitude of the problem and the limited time for correction -- you may be able to assert that a "failure of essential remedy" has occurred, thereby potentially allowing your recovery of consequential, incidental, or special damages (such as loss of customers) even in cases where contracts limit or exclude them. Vendor reliance on "force majeure" clauses or other clauses disclaiming liability for "Acts of God" and the like may be deterred if you provide a clear statement of your position that the vendor made the software and hardware noncompliant, not God, and that compliance could have been achieved with the exercise of due care.

here is also a possibility that a vendor will initiate (or already has initiated) a contact with you, stating that its software and hardware are not year 2000 compliant. This will trigger your obligation to mitigate damages once a contract breach is apparent, and even where vendors have no contractual obligation to fix your software and hardware, such notice could lessen their exposure to tort liability. Where vendors do have a contractual obligation to fix your systems, pay close attention to the terms of proposed fixes: will they meet your compliance timetable, or is there a failure of essential remedy? Are the vendors attempting to modify their obligations (e.g., requesting payment for compliance measures which appear to be required under warranty)? Regardless of whether or not a fix is proposed, vendors should be put on written notice of your  expectations so they cannot later claim that he or she waived remedies or acquiesced in modifications to contract terms. If you are is bound to a vendor by a long-term contract, the vendor's failure to help you attain year 2000 compliance may allow your escape.