Contract Creation and Management Simulation Memo

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TO: All Employees
FROM: Corporate Office
DATE: November 2, 2009
SUBJECT: Contract Creation and Management Simulation
CC: Board of Directors
Span Systems is a California based custom e-banking software developer that has entered into a $6million contracted with Citizen Schwartz (C-S) to develop banking software in one year. The companies are eight month into the contract and there has been poor performance, organizational changes, and project delays are the issues that can result a breach of contract. The purpose of this memo is to describe the legal risk, indentify specific measures to avoid risk, describe legal principles, and evaluate the alternatives managers can take .

A contract is formed when two parties with the correct mental intent, under correct circumstances within the boundaries of the law, and with detriment to each of them agree to do certain acts in exchange for the other’s acts. (Jennings, 2006). Span Systems and Citizen Schwartz (C-S) have entered into a bilateral contract. C-S signed a contract for software development for a one year, and Span Systems will deliver software to their clients. A bilateral contract is one in which both parties promise to perform certain things (Jennings, 2006). Both parties are obligated to perform under the contract, however, but C-S and Span Systems have not performed according to the contract. C-S has demanded the transfer of all unfinished code and termination of the contract. The companies state that each other is in breach of contract. The legal issues identified are performance, change requirements, and communication and reporting.

Contract performance is the first legal issue identified in the simulation. Once Span Systems and Citizen Schwartz have contracted they have the obligation the obligation of performance. C-S finds Span System in breach of contract because 40% of the contract has been completed. Span disagrees with C-S findings and state that 60% of project has...
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