Contract Risk and Opportunities
University of Phoenix
Tuesday, May 8, 2012
Prof. Lirio Bernal-Sanchez
Contract Risk and Opportunities
This report will serve as a review of the legal risks and opportunities that are present at the moment of a business formalize contracts. The report is based in a contract simulation of Info Build a software company and Majestic Hotels to establish an electronic reservation system.
A contract is an agreement that is enforceable ...view middle of the document...
A contract is a promise between two or more parties creating obligations enforceable by law (Jennings 2006). Span Systems has a one year contract with Citizen-Schwartze AG, a German bank to develop transaction software for the banking giant. AG has become dissatisfied the quality and expresses concerns regarding the late delivery schedule. AG’s most influential negotiator has threatened to rescind the contract on the basis of performance breaches. The contract between AG and Span contained clauses under performance, change control, communication, and reporting project structure. Within each section legal issues with corresponding legal principles arose. Identifying risks, how to avoid such risks, minimize liability and create opportunities are essential elements for businesses to be aware and for managers to operationalize.
The principle of standard performance within a contract details requirements for complete performance. Considering reasonable acceptable levels determines performance (Jennings 2006). A contract between Span and AG contains concurrent conditions and contemporaneous conditions. AG provides changing information to Span to develop software for their particular requirements, but Span is experiencing difficulty meeting the timelines and quality due to constant changes. After eight months AG contends Span’s deliverables are behind schedule and quality issues have arisen. The contract states Span will incorporate ordinary changes, but qualifying information is not present. As with many long term projects involving developing or building, complex execution can result in errors that creates performance issues.
Many of the legal risks identified in the scenario are a result of reduced clarity in words and phrasing. Failure in performance may, in fact, result from
A contract is an exchange of promises between two or more parties to do or refrain from doing an act, which is enforceable in a court of law. (Wikipedia) It is very important to read and understand a contract before agreeing to its term. During the negotiation process one can make changes or add but once the contract is signed and agreed upon the deal is sealed. The Contract Creation and Management simulation serves to highlight the importance of reviewing on existing or new business contract in order to avoid misunderstanding. It is best to review and study the contract before reaching an agreement to make sure the contract is beneficial for both parties and for the success of the contract.
Citizen-Schwarz AG (C-S) and Span System signed and agreed to a one year contract wroth six million dollars; however, the contract agreement has not been going as expected. Span System has not been delivering as scheduled and their quality is poor. Leon Ther, Citizen-Schwarz AG biggest influential negotiator threatened the rescission of our contract based on what he considered to be unacceptable quality of deliverables and schedule slips....