Contract Creation and Management

Essay by mike2680University, Master'sA, January 2010

download word file, 6 pages 3.0

Contracts, no matter how large or complex, are promises negotiated between parties and should be written to ensure business agreements are fulfilled by both parties. Clarity of purpose is the hallmark of successful contracts because contracts are never free of interpretation (University of Phoenix, 2009) and poorly written contracts can ultimately result in breached contracts. In today's markets, businesses need ways to ensure that contract risk and liabilities are minimized and remedies to these risks are maximized. This paper will explain the legal risks and opportunities both companies face regarding the contract made. Afterward, this will identify what both organizations can do to avoid those risks, minimize the liabilities, and benefit from the opportunities. Finally, this essay will evaluate the alternatives presented to resolve the issues identified in order to smooth relations between both corporations but more important to save the contract by making the necessary amendments to satisfy both organizations.

Legal Risks and OpportunitiesAny time when two companies enter into a bilateral contract, there are always legal risks involved from both ends. In this particular case, the main dispute between both companies is regarding quality and the schedule of deliverables. Evidently, legal risks arise from the original contract between Span Systems ad Citizen-Schwarz. The following contract clauses are identified as breaches of the contract: Substantial Performance of Contract, Internal Escalation Procedure for Disputes, Requirements Change, and Communication and Reporting. As with all contract clauses, each representing party will have pros and cons. Substantial Performance has been identified because Span Systems is behind schedule of deliverables and its quality is substandard.

Under the contract clause for Internal Escalation Procedure for Disputes, Citizen Schwarz did not follow the protocol. The clause stipulates, "prior to the filing of any formal proceedings with respect to a dispute, the party believing itself...