The Court of Appeal recently stated that software fell under the 1979 Sale of Goods Act, which makes it clear that it should be 'of merchantable quality and fit for its purpose'. It can be argued that non-millennium compliant software fails to meet the terms of the act. Action should be taken by the supplier to remedy this fact, perhaps by means of a suitable upgrade, in order to avoid being sued by companies which encounter year 2000 problems. However, a specific precedent for 2000 has not been set, and it's unlikely that many cases will emerge much before the date itself. This may be due to companies failing to appreciate potential effects, and postponing any 'corrective' action.
Many software licences exclude the fitness of purpose clauses, leaving software unprotected.
It is imperative that new contracts or licences include year 2000 related clauses. An alternative is to estimate how much it would cost the company in system downtime if a particular application faulted in the year 2000, and write a specific clause penalising your supplier for those costs. For an existing contract or licence agreement, if the length of time to run goes beyond the year 2000, then it can be argued that the software must keep working for the full duration of the contract. The supplier may have an obligation to make its software Year 2000 compliant at the their own expense. Conversely, suppliers may disclaim liability for providing Year 2000 upgrades at no additional cost under the maintenance agreements, arguing that the Year 2000 problem was well-known in the computer industry and constitutes an 'assumed risk' of the customer.