Contract Negotiation

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Contract Creation and Management Simulation

LAW/531

In the contract creation and management simulation involving Span Systems and Citizen-Schwarz AG (C-S) the conflict involved and possible resolutions could be beneficial or catastrophic for both companies. Legal risks for corporations in the process of implementation and development of a program are many. To prevent this there must be direct, quantifiable benchmarks that are acknowledged by all parties involved. Any contract ambiguity that occurs can result in differences in opinion on interpretation and the resulting need for negotiation, mediation, and possibly litigation. This would result in time, money, and effort for both parties which is not a desirable outcome.

The simulation starts with a difference in opinion between companies on progress and defects in workmanship, which has pushed C-S to the point of threatening a cancelation of the contract if not rectified immediately. The contract is clear in many ways but both companies have drifted from the benchmarks and communication procedure established. Additions and alterations to the original program has resulted in an effort on Span Systems part in order to please C-S, but has cut corners to meet the deadlines. With the delays in production and the error rate occurring C-S is nervous that the project will not get completed on time.

C-S and Span Systems have both failed to employ the “Communication and Reporting” clause and as a result there are differing opinions on the position the project is in. As the simulation progresses there are paths that create an adversarial relationship and ones that foster good will. Since this is a negotiation process at this time as a manager it is important to be realistic, offer middle ground, and understand where each other is willing to adapt to make the project successful. An example would be bringing in a C-S project manager to review and give input to the project in real-time. Span Systems could give monetarily to the solution by paying for the C-S project manager but that is not necessary as C-S’s motivation to succeed in the project and would pay for that themselves so offering that would just cost money for Span Systems that it did not need to spend. As a manager it is his or her responsibility to evaluate the risk of causing further chances of litigation by asking C-S to pay for the cost of the manager. Through the end of the simulation it becomes apparent that the contract is sound, but the transparency and communication process should have been stronger. Allowing communication to occur in such varying methods and not adhering to the contract terms of two-week updates have caused miscommunications between the companies.

The risks involved are the loss of future contracts and the financial gain, loss of revenue on the current project through increased investment to complete the project, loss of revenue through cancellation of the contract, or litigation that will result in legal fees, downtime in the project and the possibility of a monetary penalty if a negative ruling. There is a risk of revenue loss for both sides, but primarily for Span Systems. As with many risks, the opportunities for a renegotiation of the contract are present. Through proper communications there are improvements in the relationships between the companies resulting in the possibility of future contracts being awarded, completion of the current project in whole. Span Systems with proper negotiation in the simulation finally placed themselves in a positive light with the C-S, moved toward contract fulfillment and the possibility for future projects with C-S.

The pressure from C-S and primarily Leon Ther and his demands for contract cancellation and the turnover of code to them could result in loss of intellectual property, future business development, and damage to Span Systems in the market. By Span taking an aggressive stance they tended to alienate C-S and head toward litigation. C-S...
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