1998 Lane Reports

Swatting The Millennium Bug

Sunday, November 1, 1998
by Marc J. Lane

Some call it the "Millennium Bug." Others describe it as the "Y2K problem." Either way, it suggests the possibility that, come January 1, 2000, you just might be in for all kinds of business - and financial - headaches.

The doomsday scenario predicts that banks, phones, ATMs and even the power grid may fail us - all because many software programs and embedded chips use only two digits to store date information. When the calendar moves from December 31, 1999, to January 1, 2000, some futurists forecast a cyber-rollback to January 1, 1900; others see results ranging from a muddle to a meltdown.

Besides stocking up on staples and buying your own personal copy of The Survivalist's Guide, what should you do?

Many of our business clients have already contacted us to undertake Y2K studies and to prepare compliance surveys of their third-party suppliers, subcontractors, consultants and distributors - firms which themselves may be contaminated by the Bug. We also encourage all of our business clients to review and consider revising their contracts and insurance policies to reduce the risks to a minimum.

But here are a few very specific pointers to think about:

Make sure every company you depend on in the operation of your business agrees, one way or another, that it won't permit a Y2K problem in a computer system, software or any equipment owned, leased or licensed by it to interfere with satisfying its obligations to you.

Demand that "every" company from which you purchase goods or services secures the same assurance from every company on whom its performance, in turn, depends.

Insistthat the parties with whom you contract will cooperate with you, share information and do whatever they can to minimize the Y2K problem's impact on you.

Get yourself off the contractual hook, whenever you can, by having your customers - and everybody else relying on you - release you from any Y2K damages incurred because of your suppliers' Y2K problems and those of other players over which you have no control, including the Government.

Steer clear of Y2K "certifications." Harmless though they may appear, they reallocate risk and may amend your contract rights in ways you never suspected.

Other techniques to mitigate Y2K risks include contractual limitations of liability, indemnity agreements, creative "act of God" definitions, source code escrows and insurance riders.

However you proceed, be armed with competent counsel, hope for the best and, as always, plan cautiously.

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The Lane Report is a publication of The Law Offices of Marc J. Lane, a Professional Corporation. We attempt to highlight and discuss areas of general interest that may result in planning opportunities. Nothing contained in The Lane Report should be construed as legal advice or a legal opinion. Consultation with a professional is recommended before implementing any of the ideas discussed herein. Copyright, 2003 by The Law Offices of Marc J. Lane, A Professional Corporation. Reproduction, in whole or in part, is forbidden without prior written permission.

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