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Recognizing Contract Risks And Opportunities Essay

1481 words - 6 pages

Recognizing Contract Risks and Opportunities
Jennifer Breeden
Law/531 Business Law
March 6, 2011
Monica Cosentino-Benedict
Recognizing Contract Risks and Opportunities

To: Span Systems Management
From: Jennifer Breeden
Date: March 6, 2011
Subject: Recognizing Contract Risks and Opportunities

The purpose of this memo will be to analyze the recent contract between Span Systems (Span) and Citizen – Schwarz AG Bank (C-S). This contract’s purpose was to have Span build a transaction processing-based software system for C-S and in return C-S would pay $6 million dollars (University of Phoenix, 2002). These two companies ...view middle of the document...

As the dispute grew more heated, C-S and Span could easily have accused each other of material breaches that raise the liability level for each side. If Span had not agreed to work with C-S, they could have accused them of inferior performance due to the fact that bugs were in the software delivered, along with Span working behind the timeline. Span heard a rumor that C-S was in negotiations with another company to complete the rest of the project and gave the other company all of the codes needed for the software. If Span’s intellectual property had been given to another company, this could have also been considered a material breach, meaning serious failure to follow the contract clauses. The issue of the timeline was something that kept coming up, which could have been an anticipatory breach by Span. Both companies were to have management meetings with each other to examine the deliverables on a bi-weekly basis. Because of project management changes, these meetings were not being held and that gave Span no option to disclose an anticipatory breach where they could have told C-S that they anticipated being behind schedule. If C-S had decided to take this breach to court, they could have asked for consequential damages because if Span did not complete the software for C-S they could have lost a huge business venture.
C-S decided to threaten a rescission because of these breaches, but Span was ready to negotiate due to the fact that C-S had not followed through with all of their clauses. The review meetings were not happening; requirements continually changed out of the “ordinary,” and the ‘Internal Escalation Procedure for Disputes’ not followed all led both sides to negotiate (University of Phoenix, 2002). These liabilities and risks can be common with many contracts between businesses. To move ahead from these risks, opportunities, and alternatives need to be addressed to keep working relationships intact. Span needs to maintain a working relationship with C-S for future business endeavors as well as with any customer encountered.
When any dispute arises, both parties must agree to work together to keep the relationship intact and to focus on the rewards reaped. In the situation with Span and C-S their contract disagreements gave many opportunities for both companies to mitigate risks and steer clear of future liabilities. Both companies could have accused each other of breaches of contract and both had substantial evidence to prove their case in court. Most businesses do not want to move to a courtroom due to the legal expense, loss of time and production and the damage it does to business relationships. For Span, there were many opportunities to attack C-S. The company did not follow through with “ordinary” requests, did not follow through with alternative dispute resolution clause, did not conform to bi-weekly meetings, etc. All of these opportunities for legal action were avoided by...

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