To: Citizen-Schwartz AG
CC: Aaron Gershonowitz
Date: [ 5/25/2010 ]
Re: Week 3 Contract Risk and Opportunities
The contract between Span System and Citizen-Schwarz, AG has created some issues which we need to look into further. This memo is designed to identify what a manager can do to avoid certain risks, minimize the liabilities, as well as benefit from the opportunities.
A contract is voluntarily entered into by two parties. In this case it is Span Systems and Citizen-Schwartz AG. There are four basic requirements for a contract. These are the agreement, consideration, contractual capacity, and lawful object(Cheeseman, 2010) This contract is enforceable by a court of law. To avoid these types on conflicts, it is important that both parties have a clear understanding of all the terms of the contract. The problem with the conflict with the contract is that it can slow down production and lead to unnecessary additional fees. The problem here is that the contract is being found to be ambiguous and there are claims being made and changes sought on behalf of C-S. The context of the contract is to be a one year contract worth 6 million dollars which involves Span Systems creating a custom e-banking software program for Citizen-Schwartz AG. Under the current contract there are five clauses in place to help avoid any problems. They are breach of contract under substantial performance of contract, breach of contract under internal escalation procedure for disputes, breach of contract under requirements change, breach of contract under communications and reporting, and also breach of contract under intellectual property rights.
The first breach of contract clause focuses on performance. The clause states that neither party can void the contract if more than 50% of the work has already been completed. The ambiguity of the contract is there is no clear indication of what justifies 50% of the work. At this point 8 months of the 1 year... [continues]
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