Individual Assignment: Recognizing Contract Risk and Opportunities Memo

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University of PhoenixBusiness LawLAW531January 18, 2010Span SystemsMemoTo:Span Systems ManagementFrom:CC:University of PhoenixDate: January 18, 2010Re:Contract Creation and ManagementTo the Managers at Span System:I am writing to inform you about problems we are facing with our current contact with Citizen Schwarz AG, the duration of the contract are not going as planned. One of the negotiators of Citizen Schwarz has offered a cancellation of the contract made with us. Mr. Ther, the negotiator feels that there was too many errors made that lead him to the decision to request cancellation of the contract. Mr. Ther feels that it is in the company's best interest to end the dealings with our company (University of Phoenix, 2002).

We have managed to come up with an agreement to end some of the clauses in the contract. Mr. Ther informed us that they did not want to render the contract void, it was only a suggession for the company he represents, and none of us wanted to go to court with this.

So I would like you to know what risk we will face from the circumstance, I would also like to discuss some ways we can have to help decrease any future liabilities and ways to avoid any of the risks we can face (University of Phoenix, 2002).

There are times when working on products some problems may occur. There can be problems with the quality of the product and time needed to complete a product. When these problems occur all parties involved need to meet together to see if they can come up with some other way that they can agree upon that will help in the completion of the project and the receiving of a product that is satisfactory (University of Phoenix, 2002).

We understand that most contracts are binding especially when two parties can come together and work out an agreement that work best for the client and the one rendering services. When a problem occurs, then both parties can come together an negotiate the contract so that both parties can benefit from it and avoid the risk of going to court which can be expensive. In every contract agreement the purpose must be clear for all involved before the contract is signed (University of Phoenix, 2002).

No organization can grow without depending on commitments. In no one carries out their promises then the resources gathered are wasted. When two or more companies come to an agreement and a contract is signed this is a sign showing that all parties promises to uphold to their end of the agreement. Each clause in a contract must be clearly stated so that there would be no room for a misunderstanding (Jennings, M. M., 2006).

We had completed half of the project so we could not end our agreement. This was the first thing on the agenda to discuss. When Mr. Ther had made the suggestion that the contract be cancelled, 50% of the project was already completed. Since we were half way done, if Mr. Ther suggestion to cancel had went through, a breach of contract would have occurred. The quality of work we had done was not to the satisfaction of Citizen Schwartz. This gave the company reason to complain and we could not dispute that (University of Phoenix, 2002).

A breach of contract could have been valid if we had not performed any of our services to complete the product for Citizens Schwart as well as if they had cancelled the contract without giving us the opportunity to complete what we had already started. A breach of contract can also be when one party makes it hard for the other party to fulfill a promise made. This is why it is so important for both parties to come to an agreement and get the agreement documented for both parties purposes. When an individual or company goes into a contract knowing they had not intention of fulfilling their promise this can be showed as a breach of contract (, Inc, 1999-2010).

The next thing on the agenda that had been discussed was the clause of the increased procedures from within. There are steps that needed to be taken in order to avoid litigation in which companies must follow in order to come to an agreement before taken a further step toward litigation. The company must put in writing their complaint addressed to Span Systems to give them notice of their disputes and allow them time to repond to their complaint. If Citizen-Schwartz had failed to do this and we had went to court this would have been to our advantage (University of Phoenix, 2002).

All companies can avoid going to court if they can meet together and negotiate their options. Litigation can be an expensive, long, and time consuming process. Litigation should be the last resort after both parties has exhausted all their options to come up with an agreemnent that all involved would agree with (, Inc, 1999-2010).

The one thing that would have been the worst against us would have been the clause that clarifies the requirement change procedures. This means that Citizen Schwartz would have to immediately report any changes within the business hours. The company must provide the necessary funds to finance the changes made. Because the changes were made they had an inmpact on the complaints from personnel about the work performed, the production, and the delivery schedule. There was no clear understanding of these issues. There needed to be meetings scheduled in order for both organization's managers to be clearly informed about the issues. Citizen Schwartz had decided without notifying Span Systems that they were sending a representative over to oversee the work done and communicate anything needed to be updated, this was a direct breach of contract. Citizen Schwartz, in good faith, has taken upon themselves to pay all the expenses necessary to make sure the terms of the contract are carried out (University of Phoenix, 2002).

All companies, when dealing with contracts, must inform all parties in an ample amout of time when a change needs to be made. Each party must be able to review and make sure that they understand what is wanted. All parties must be in an agreement in order for the changes to take place. When the changes haave been agreed upon it must be documented and each party is held responsible for their role in the agreement (University of Phoenix, 2002).

The contract states that Citizen Schwart would only gain the legal rights and ownership of the product we make for them after we received full payment of our services, if done sooner, this would be cause for us to raise the invasions of intellectual property rights up. Since we were only half way through we have not received full payment yet. This did not stop the rumors being spreaded about Citizen Schwartz drawing up another contract with another organization about preparing the product that is rightfully ours. We recently found out that the rumors was not true and therefore could not accuse Citizen Schwarts of breach of contract (University of Phoenix, 2002).

When a contract is signed and the clause states that once the agreement is fulfilled then all rights of a product belongs to the person purchasing it then everyone must abide by the clauses listed in the contract. When one or all parties fails to coply to the agreement them a problem can and will occur. Span Systems had heard a rumor and had they acted upon it it would have made them look bad. It is good to see that they did not take action before they found out the truth. The majority of the time, as we all know, a rumor is just what it says a rumor and there is no truth behind it.

In conclusion, no one can predict the outcome of litigation. If we had taken Citizen Schwarts to court we would have been the big losers, not only would we have lost a lot of money, but also the rights for both companies to ever do business in the future. The good news is that because we took out the time to negotiate we are now in the position to complete a project that is far profitable that any we have completed before. I like to say thank you for your hard work and your dedication in completing this task which would be beneficial to both you and the organization.

, Project, Inc. (1999-2010). Suing for Breach of Contract. Retrieved January 18, 2010,from All Business: A D&B Company:, M. M. (2006). Contracts and Sales: Introduction and Formation. In Business: Its Legal, Ethical, and Global Environment (Ch., 13, p. 497). Mason, OH: Thomson.

University of Phoenix. (2002). Legal Environment of Business. Contract Creation andManagement Simulation . Phoenix, Arizona, United States. Retrieved on January 15, 2010,From, materials.