Law 531 Contract Creation and Management

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Contract Creation and Management
Johnny B Good
LAW/531
April 30, 2012
Professor Law

Contract Creation and Management

This week assignment is to provide analysis on the Contract Creation and Management simulation provided in the University of Phoenix (UOP) materials website. The simulation involves two companies; Span Systems, a California-based custom e-banking software developer and Citizen-Schwarz AG (C-S), a Stuttgart-based bank with revenues of over $20 billion. Through C-S’s regional offices in the United States, they contracted out Span Systems to develop a Java-based transaction processing software so they can enter the competitive $640 billion retail financial services market in America (UOP, 2002). The contract between Span and C-S is for one year and worth $6 million. This contract is Span Systems’ biggest and most prestigious banking software project to date and is targeting C-S’s bigger e-Customer Relationship Marketing (CRM) order in the future. Span System’s chances of getting the order hinge on the performance of this contract. In this simulation, I act as Span Systems’ project manager and must deal with problems that have risen or risk losing this contract and any future business relationship with C-S.

Eight months have passed and the project has progressed but C-S’s Information Technology Outsourcing Director is now involved. C-S states: -Span’s deliverables in the last couple months have been behind schedule and the quality has been unacceptable, with major bugs being detected in the user testing stage (UOP, 2002). -C-S contents that they cannot afford the schedule slip because of its deadline for the release of the transaction software in the market (UOP, 2002). -C-S wants the immediate transfer of all unfinished code and the contract rescinded (UOP, 2002). Although Span Systems agrees with the statements, they claim it’s not their fault and states the following: -Requirements have grown disproportionately since originally determined, difficult to accommodate within earlier budget and timelines (UOP, 2002) -C-S’s approval and review times affected due to change in project management structure

Span System’s CEO does not want to lose this contract and advised to settle the dispute amicably; however, before any negotiation begins he wants me to look at the clauses in the contract that favor Span Systems and prepare negotiation points. I chose the following contract clauses with their pros and cons as negotiation points: 1. Breach of Contract under “Internal Escalation Procedure for Disputes” Contract clause states “Prior to the filing of any formal proceedings with respect to dispute, the party believing itself aggrieved (the “invoking Party”) shall call for progressive management involvement in the dispute negotiation by written notice to the other party” (UOP, 2002). Pros – That C-S has unilaterally indicted rescission of contract is a clear violation of its contractual obligation of “progressive management involvement in dispute negotiation (UOP, 2002) Cons – None, unless C-S has reason to refute (UOP, 2002).

2. Breach of Contract under “Requirements Change”
Contract Clause states in the event that C-S requiring any ordinary changes to the user and system requirements originally agreed to, C-S will notify Span Systems as soon as possible during regular business hours and pay Span Systems any accruals at the rate agreed to. Any changes in functional requirements or enhancements will be handled as per the procedure outlined in Information Technology Project Methodology Standards” (UOP, 2002). Pros – requirements have grown unusually as against ‘ordinary changes to user and system requirements’ agreed in the contract. This has been an obstacle in meeting timelines originally agreed to (UOP, 2002) Cons – Quality measurements of deliverables will play a key role in determining whether Span’s claim is valid. If the deliverables have been of high quality, then Span would...
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