Recognizing Contract Risk and Opportunities Memo

Recognizing contract risk and opportunities memo:

A contract is an agreement between two or more parties for the doing and not doing of something specified (Online Dictionary). Contract plays a very important role in business agreement, so it is very important to read and understand each clauses of the contract before sign-off and agreeing to its terms. Otherwise, it often causes misunderstanding which leads both parties to go through the litigation process, which costs money and time for both parties. Careful review and study of the contract before making an agreement is very important for a successful business partnership.

Span System signed and agreed to a contract worth six million dollars with Citizen-Schwarz AG (C-S) eight months ago. It was a one year contract between C-S and Span System on banking software development project which has not been going as expected. Leon Ther, the influential negotiator of Citizen-Schwarz AZ, asked for the immediate release of all unfinished code and asserted the rescission of the contract based on the unacceptable quality of deliverables and schedule slips. Fortunately, both parties were able to resolve their problem without going through the litigation process since Span System was able to amend some of the clauses from the contract and both parties were able to come to terms of agreement. Therefore, to avoid associated risks and minimize liabilities in the future, a manager of Span System wrote this memo to Citizen-Schwarz AG addressing ways to resolve possible future issues. This memo also identifies and seeks benefits of any opportunities from those issues.

Span System and Citizen-Schwarz AG agreed to a contract with ambiguous language which became the basis of dispute. This ambiguity leaded both parties to numerous risks which related to breach of contract. According to the contract between Citizen-Schwarz A-G and Span System, if 50 percent or more of the work is done in that case neither party can cancel the contract. However, Citizen-Schwarz is claiming the breach of contract under substantial performance of its deliverables and poor quality of the software. Citizen-Schwarz could be held in breach of contract for asking immediate release of all unfinished code and asserting rescission of contract because Span System completed 50 percent or more of the project. On the other hand, Span System could be held in breach of contract for not been able to deliver product on schedule time as per agreement. To eliminate the risks in these issues: Citizen-Schwarz AG has to prove that the project is not completed 50 percent by Span System based on their poor quality and late delivery of the software. Span System on the other hand, has to prove that it was impossible for them to deliver in timely manner because of C-S's growing requirements and changing management slowed the process of approval.

The second breach of contract was under the requirement