Contract Liability

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Contract Liability

Contract Liability

Findings
Software developer, Span Systems and a German Bank, Citizen-Schwarz AG (C-S) decided to collaborate in a contract to fulfill a project. The project is one-year long and is worth $6 million. Span Systems experienced late deliverables and quality issues, which affected the project’s timeframe. Span Systems and C-S have decided to re-negotiate the contract because the requested changes affected the project’s scope. Kevin Grant, the project director for Span Systems and is in charge of monitoring the performance of the project. Harold Smith is representing Span Systems as their attorney, and Leon Ther is the top negotiator for C-S.

Span’s marketing manager in London reports that C-S is talking to an Indian-based software developer about completing the project Span started. The marketing manager also alleges that C-S shared software codes with the Indian business and the company began working on completing Span’s partial development (Contract Creation and Management, 2011). Breach of Contract under Requirements Change

Issue

Can C-S make changes to requirements and still expect Span to deliver quality work in a timely fashion?

Rule

C-S was to notify Span about any ordinary changes as soon as possible and pay Span Systems any accruals at the rate agreed. Enhancements were to be handled as per the procedure outlined in Information Technology Project Methodology Standards.

Analysis

Breach of contract under requirement changes is one of the clauses that give both companies the most difficulty. The clause was not specific enough when first written and leaves much room for error. The requirements from C-S are not ordinary, but grew unusually according to Span. Span will have to prove that the unacceptable deliverables were because expectations skyrocketed at a high pace. Span could argue the breach of contract under requirement changes clause and most likely win. However, Span does not want to lose C-S’s business, and the developer should recommend negotiating and amending the clause.

Conclusion

To help minimize the legal issues and risks for both companies, any changes to the end user and system requirements other than those stipulated in the contract will be monitored by the Change Control Board (CCB).

CCB is comprised of a project manager, and a lead IT engineer from both Span Systems and C-S to identify the impact of change, to monitor the performance, and communication between the companies. Both companies should pay for the costs. C-S will also upload daily project updates on the extranet for its authorized personnel to inspect. C-S agrees to compensate Span Systems for the changes of new requirements.

Breach of Contract due to Span Systems Failure to Perform

Issue
Can Ther ask for immediate transfer of all unfinished code and rescission of the contract by claiming breach of contract under failure to perform?

Rule
The contract states neither party may cancel this agreement in whole or in part subsequent to more than 50% of the project completed.

Analysis

Span Systems is eight months into a one-year contract. Span Systems complete more than 50% of the project however, the quality is unacceptable. Span is not meeting standards and it does not seem like C-S will meet their deadline for the end of the year. Even though Span Systems has reasons for falling behind, those exceptions were not included in the original contract.

Conclusion

C-S has the right to rescind the contract and search for another company to complete the project. The company should avoid these risks in the future; the manager should make sure Span’s ideas about the project mirror C-S’s perspective. The contract needs to be more specific, and anytime changes are made that are not “ordinary” action should be taken.

In regard to Performance- weekly analysis on the project dates should take place and...
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