It is a principle of English law, long established, that if you are aware that a party with whom you have contracted has no intention of fulfilling their side of the bargain, you may institute proceedings immediately. You do not have to wait for the date when obligations are actually breached. In legal terminology, there will be an "anticipatory breach" of the contract, and you can sue straight away.

Bringing proceedings early may have considerable advantages - indeed it may be a legal and financial necessity. There is a widespread suspicion amongst user groups and in the press that a number of small to medium-sized software houses and dealers intend to wind themselves up and reform as a new company as a means of escaping their Year 2000 liabilities. This fear may be somewhat unsubstantiated: such a course of action may amount to fraud. Transactions in which assets are sold at an undervalue to a new vehicle may be reversed; indeed creditors of the company will frequently enjoy a legal comeback against the assets of the directors personally. However, all of this is expensive and time consuming. The amount of expenditure involved may be prohibitive to all but the largest companies. It is far easier to hit companies before they reform.

Moreover, there will be certain software houses and dealers which are, quite simply, unable to meet the demands of all of their customers. Insolvency may be the result. If this appears to be a possibility, then the advantage in suing early is too obvious to need spelling out.

Even against a large and solvent software house, there may be a tactical advantage to be gained from suing early. As has been pointed out in the legal press, suppliers are very concerned to avoid publicity and the risk of creating a legal precedent. Therefore, they may be persuaded to negotiate a confidential settlement rather than risk fighting the matter in court with all the attendant publicity.

It may be that there is an additional legal imperative to sue early. The law imposes a time limit: all claims must be brought within six years of the cause of action accruing, a date which may be as early as the date of supply of the software. If this time limit is not complied with, the putative plaintiff loses all rights against the would-be defendant. If this six year deadline is approaching, then it would be advisable to seek legal advice as soon as possible.

Exclusion Clauses

Many contracts will contain specific clauses in which the supplier disavows liability for loss or damage suffered in consequence of bugs or defects in the software. The effectiveness of these clauses - regulated principally by the Unfair Contract Terms Act 1977 ("UCTA") - is a somewhat technical question. However, it is possible to give certain guidelines.

UCTA will, for present purposes, regulate contractual exclusion clauses where a party contracts "as a consumer". If, as an individual, you purchase items unconnected with your business or professional activities, you will deal as a consumer. However, even if the purchase is connected with your vocation, you may still deal as a consumer depending on the regularity with which you use the item in question. A barrister buying a wig, for example, would do so as a consumer. Moreover, the fact that software is purchased by a business will not necessarily prevent it from dealing as a consumer. This will depend on whether the transaction is an integral part of the business of the company and whether the transaction is of a type carried out with some regularity.

Broadly speaking, if you purchase software as a consumer, then the obligations implied into the contract which have been outlined above may not be excluded by reference to any contract term. Even if you deal otherwise than as a consumer, any term which on the face of it excludes such liability is only effective in so far as it satisfies the requirement of reasonableness.

UCTA identifies a number of factors to which the court is to have regard in assessing whether a contractual term is reasonable. These are as follows:

• the relative strength of the bargaining position of the parties, taking into account (among other things) alternative means by which the customerÆs requirements could have been met;
  
• whether the customer received an inducement to agree to the term, or in accepting it had an opportunity to enter into a similar contract with other persons, but without having to accept a similar term;
  
• whether the customer knew or ought reasonably to have known of the existence and extent of the term;
  
• and whether the goods were manufactured, processed or adapted to the special order of the customer.