Recognizing Contract Risk and Opportunities

Essay by sportsnut72University, Master'sA-, January 2010

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University of PhoenixDate:April 26, 2009Subject:Contract Creation and ManagementTo My Fellow Managers:There have been concerns with our recent contract with Citizen-Schwarz AG (C-S), and you all know by now these proceedings have not proceeded as planned. One of C-S's most influential negotiators, Leon Ther, has threatened the rescission of our contract. Concerns that Mr. Ther has is based on an occurrence of recent schedule slips and an unacceptable quality of deliverables. Fortunately, after much negotiating we were able to finalize some of the contract clauses and came to an agreement. Neither side wanted to settle in court or void the contract voided. I am writing this memo to all of you to; discuss briefly what risks became from this situation, address ways we as managers can avoid these risks and minimize any liabilities for the future.

The most important feature of a contract is when one party makes an offer for services while another accepts the terms which both parties may agree on.

Going forward, contract negotiators and legal personnel members must thoroughly review and revise contract wording so no ambiguous language is found from previous contracts that would carry over to a new contract at signing. Recent events have taught us that clarity of purpose is essential for successful contracts.

The first item addressed was performance. Since there was 50% work completed neither party could cancel the agreement. When Ther threatened rescission, half of the programming was already completed, and this would have been a breach of the contract. Unfortunately, the amount of work previously completed did not satisfy C-S's quality thus, even thought there was a right to complain we decided not to rely on this clause because our position was not adequately defended.

Internal escalation procedure for disputes was another clause discussed. Prior to filing any formal proceedings...