Running Head: Recognizing Contract Risk and Opportunities Memo

Recognizing Contract Risk and Opportunities Memo

University of Phoenix
 Span System

Memo
To: Span Systems Management

From:

Date:

Subject: Contract Creation and Management

Span System Managers:

As everyone knows we started a development project with Citizen-Schwarz AG

(C-S). The project was going as planned until Leon Ther of C-S brought forth a

dispute over the quality and schedule of deliverables. Keep in mind that this project

is worth $6 million. Leon Ther of C-S is claiming that Span Systems is in breach of

contract and asserted that C-S can’t afford schedule slips because of deadlines. He

has asked for immediate transfer of all unfinished code and has asserted the

rescission of the contract. I am writing this memo to brief all managers on how we

were able to amend some of the clauses within the contract and come to an

agreement with C-S. I will also briefly discuss some of the risks that associated with

this issue.

As a manager, I want to stress how important it is to understand a contract

before all parties agree to the contract. Once agreed upon it is called concurrence of
wills and both parties are bound to the contract. One of the risks we took was

agreeing to a contract with uncertainties still present within the contract. In light of

this issue before we enter into another contract, Span Systems will have legal

personnel review and revise contracts until all uncertainties are clear and

understood by all parties involved.

After review of the original contract, we found several clauses that would have

been considered a breach of the contract. The first clause was a breach of

performance. The contract stated the neither party could cancel the agreement after

50% of the work was complete. The programming was well over 50% complete at

the time Leon Ther of C-S wanted to cancel the contract. One thing that Leon was

correct about was the quality of work. He had every right to cancel based on the

quality of the work we had given them.

The clause that helped us the most is the Internal Escalation Procedure for

Dispute. This clause states that “prior to the filling of formal proceedings with respect

to a 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” University of Phoenix. (2011). If this would have ended up in court,

C-S would have been in violation of this clause when Leon Ther called a rescission

of the contact. I would like all management to take note of how this clause helped us

negotiate a solution.
 I would like to inform you on a clause that caused us the most trouble. The

clause of Requirements Change required C-S to report ordinary changes as soon as

possible within regular business hours. Due to the quality of the product this clause

may be used against Span because the clause was not clearly defined. The problem

began when C-S made changes to the project management structure, which caused

the need for change in the product. The changes were not in the original plan

therefor causing delays. Even thou the contract did state there would be scheduled

status meetings, the contract did not state how those status updates would be

addressed if changes needed to be made.

I would like to conclude this memo on this thought. If this had gone to court, the

outcome would have been devastating to this company. We would have lost time,

money and one of best clients. Span Systems was able to renegotiate the contract

and in doing so we keep the best client we have ever had.

Thank you all for your time and dedication to this company

Heather Miller
HM

Project Manager

University of Phoenix. (2011). Contract Creation and Management [Computer

Software]. Retrieved from University of Phoenix, Simulation, Law531 – Business
Law course website.