Contract Creation and Management Essay

Contract Creation and Management
LAW/531
February 11, 2013
Elizabeth McVicker

Contract Creation and Management
The aim of this paper is to analyze the issues presented in the simulation “Contract Creation and Management”. The simulation provides information about current clauses under the contract between Span Systems and Citizen Schwartz AG (C-S). Span Systems is a leader in custom e-banking software. The customer is Span Systems and Citizen Schwartz AG (C-S) a large German Bank. These two companies are facing issues that includes under performance, requirements changes, project structure changes, lack communications and reporting, and dispute resolution. To identify and solve such issues Span has put me as the Project Manager of the e-banking software project to find alternatives to amend the contract, maintain business relationship, and more important to foster future business. The contract agreed and signed between Span and C-S included provisions on Performance, Change control, Communications and Reporting and Project Structure.
In business contracts are the basis of many daily activities. By definition “a contract is an agreement that is enforceable by a court of law or equity (Cheeseman, 2010, p. 153). In some instances the contract is well written and created to avoid conflict and to facilitate successful business relationships. In fact, contracts shall be written this way always as this document is a legal document. Despite how well the contract is written issues may arise creating adverse situations that affect the parties involved. When the issue is not solved parties seek legal advice to determine if a legal settlement is needed. However, the best approach is try to negotiate. Most of the time is evident that the contract may be facing issues but those can be easily solved if the parties involved maintain clear, open, and constant communication.
The case
Span is working on a one year contract with Citizen-Schwarz AG (C-S) to develop a Java-based transaction processing software program at a cost of $6 million. As aforementioned issues arise anytime even for Span and C-S started about six months after the contract was signed. Now, eight months into the contract the situation has reached its limits. Leon Ther Outsourcing Director and an influential personality at C-S is frantic because Span deliverables have been behind schedule and the quality is unacceptable. The lateness of could adversely affect the release of the new software in the market. Ther is so furious that he is asking for the transfer all unfinished code to C-S to find another company to complete the job and asserted a rescission of the signed contract.
As Project Manager I realize that the issues with deliverables lies in both parties. “User and system requirements have grown since originally determined in the system study stage, making them difficult to accommodate within the originally agreed upon cost and timelines” (University of Phoenix, 2013). The complexity of the system requirements make the changes unordinary. So the changes does not fall under the ordinary changes agreed in the contract. Therefore, the clause of requirements change has a breach. During negotiations to solve the conflict I have also identified breaches in clauses to amend. “Internal escalation procedure for disputes” has been breached. The clause is clear “before any legal proceedings take place there must be management involvement and written notification to the other party” (University of Phoenix, 2013). The lack of communication definitely seems to be cause for a breach in this clause. This contract is facing issues also because the deliverables are being behind schedule and the quality of the deliverables is being unacceptable during the last couple months. This delays and poor quality create a breach in the clause for substantial performance of the contract.
After identified the breaches I receive the advice from Span’s attorney. The attorney advice that

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