MEMORANDUM: CONTRACT CREATION AND MANAGEMENT
TO: John Sullivan
FROM: Jon Sorrell
DATE: October 27, 2006
SUBJECT: Legal Environment of Business: Contract Creation and Management
In the case of Span Systems of California and Citizen-Schwarz AG of Germany, management is essential in forging the proper attitudes and remedies necessary to maintain the current contract.
The facts of the case is that Span Systems are under a one-year contract worth $6 million to produce a Java-based transaction processing software for Citizen-Schwartz's $20 billion banking interests. Eight months into the contract, Span is currently running behind production schedule due to the many changes ...view middle of the document...
“The doctrine of substantial performance applies in construction contracts, and it means that the constructed building is for practical purposes just as good as the one contracted for” (Business, p. 562).
During the proceeding negotiations, two main issues addressed were project management and the idea of a reasonable time frame for project completion. It was agreed upon by both parties to invite the presence of a C-S project manager to oversee the quality control aspect of the project. This amendment, not only, was very satisfactory for both parties, but will increase the lines of critical communications between C-S and Span.
The second aspect, finding a reasonable time frame, was remedied by scaling up the team of programmers provided by Span to deliver the project on time. The scaling up was to be honored and accepted in good faith as an attempt to remedy the main C-S argument – that the percentage of project complete did not coincide with the time expired in the contract.
Breach of Contract under 'Requirement Change' is possibly, Span's best route to getting C-S back to the bargaining table in a renegotiation effort. The current contract does not allow for any changes that may unfairly require more time and effort to develop the product. During negotiations, it was seen best by both parties to appoint a “change control panel” to review any and all changes to the original contract and to “flag” any resulting changes in project scope. This was agreeable to C-S, even with the additional cost to the company.
Here is a summary of the finalized suggested contract amendment to send to C-S for approval:
1. C-S may terminate the agreement, in whole or in part, for any reason upon seven days. prior to written notice.