Contract Creation and Management
MBA560: Enterprise Risk
Businesses in today’s environment must ensure that contracts have minimized risk and maximized remedy in the case of a breached contract. Disputes that are not mutually resolved may end up in litigation resulting in cost outlays due to legal and time expenses. Companies such as Span Systems (SS), a leader in banking software, and Citizen-Schwarz AG (CS), a powerful bank in Europe, should have a clear process for entering into contracts and renegotiation such that will avoid breach of contract conflict. Both parties have an obligation to fulfill each term of the contract and failure to meet said terms is considered a breach of contract.
SS entered into a one-year, six million dollar contract with CS to provide robust banking system software which, upon completion, will become solely owned by CS. The contract terms clearly outlined the need for a fully-functional system to be in place by the specified contracted date. The decline of the relationship between SS and CS began when a breakdown occurred in the timeframe outline for the deliverables. Other failures include a change in management, changes to system requirements, project scope and organizational changes. As a result, the contract is in danger of being breached by both parties, however, CS has threatened to exercise rescission from the contract based on SS performance. CS and SS legal teams have an opportunity to remedy the situation through renegotiation of the contract terms and a resulting restructuring through amendments that will solidify each company’s standpoint regarding execution of the contract.
The original language found in the SS-CS contract was ambiguous in defining the acceptable terms of the performance of the contract. “Th ...