Recognizing Contract Risk and Opportunities LAW/531
Contracts are a binding, critical part of any business deal between two or more parties. Because of the binding promise between these parties it is important that the contract is clearly worded, negotiated if-need-be, and reviewed before they are signed by all applicable parties. Cheeseman (2010) stated “A contract is a promise or a set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes a duty” (Chpt 9, Para 2). The following Memo will identify the legal issues presented in the Contract Creation and Management Simulation as well as identify what a manager ...view middle of the document...
Span immediately reviewed the contract clauses to identify the numerous risks that have developed and could be interpreted as a breach of contracts between the companies. Span needed to find where it stands favorably for re-negotiation of the contract so as not to lose C-S. The following five clauses were reviewed:
• Breach of Contract under Substantial performance of contract: C-S could be in breach of contract for demanding immediate transfer all the unfinished code and the rescission of contract as the project is more than 50% complete. To avoid the breach C-S would have to prove that Span has completed only around 40% of the project and parts of the completed work are of poor quality with many defects,
• Span could be in breach of contract for failing the delivery of software within the scheduled timeframe. To avoid this breach Span would have to prove that the delays are the result of C-S changing requirements and slow approvals due to changes in C-S management structure, (Simulation, 2011).
• Breach of Contract under Internal Escalation Procedure for Disputes: C-S would be held in breach of contract unilaterally indicating rescission, which violates the progressive management dispute negotiation process. C-S agrees that they have not followed the provision; therefore they have no means to mitigate this risk, (Simulation, 2011).
• Breach of Contract under Requirements Change: C-S would be held in breach of contract as the requirements changes have caused a significant impact on workflow rather than the ordinary changes listed in the contract. C-S must prove that they are adhering to the signed-off system study report. The term “ordinary” was very ambiguous and should have been better defined in the original contract, (Simulation, 2011).
• Breach of Contract under Communications and reporting: C-S could be held breach of contract due to management changes affecting approvals and deliverables. C-S would have to prove that it was Span’s delay with the turnaround time, and no fault of C-S, (Simulation, 2011).
• Breach of Contract under Intellectual Property rights: C-S may be in the breach of contract for handing the Span proprietary data over to another vendor although the contract is still in force. C-S claimed this as rumor and hence no breach of contract, (Simulation, 2011).
The interpretations of a contract play an important role in the adherence of its clauses. Vague or ambiguous wording such as the term “ordinary” will leave it open to interpretation which can cause many contract disputes. Other changes in the contract such as requirements or timelines need to be clearly defined in specific terms that leave no room for interpretation. The contract between Span and C-S is an example of a bilateral contract where C-S offered to pay Span 6 million for a one year contract to design banking software. Span accepted this contract by agreeing to design the software for the payment. The issues that...