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Recognizing Contract Risk And Opportunity Essay

1386 words - 6 pages

|University of Phoenix | |Memo

CC: Recognizing Contract Risk and Opportunities Memo

Date: 12/16/2009

Span Systems and Citizen-Schwartz AG entered into a contract for the delivery of transaction software for Citizen-Schwarz AG. The contract is worth six million with the opportunity to secure the contract to build a bigger program for Citizen-Schwarz AG. When the contract reached the eight million mark, Citizen-Schwarz became dissatisfied with Span Systems performance and delivery and asked for rescission from the contract. Both sides started identifying their needs and risks and negotiations were begun with each side working ...view middle of the document...

If these areas had been addressed prior to the initial contract, no revisions would have been needed. “Contract involves either an exchange of provisions by the parties or promise conditioned on the performance of an act.” (Reed, O. and Shed, P, and Morehead, J, and Corley, R. 2005). Span Systems and Citizen-Schwarz have entered into a contract and now are seeking revisions to the contract.


The first risk that is identified is performance. The doctrine that applies to this is a “legal principle that if a reasonable and sincere attempt to perform a contract is unsuccessful it may be still be considered fully performed if its essential or primary objective has been realized.” (, 2009). Span Systems and Citizen-Schwarz Ag established what was to occur should a breach of contract occur. They stated in the contract “Neither party may cancel this agreement in whole or in part, subsequent to more than fifty percent of the consideration having been tendered by the other” (University of Phoenix, 2009).

The issue raised by Citizen-Schwarz AG, is that Span Systems had failed to deliver its product in a timely manner and quality failed to meet expectations. In the contractual amendment, Span Systems is entitled for payment of services rendered and Citizen-Schwarz Ag is entitled to receive all products in progress or completed as of the date of termination. Citizen-Schwartz AG also has thirty days to review the product that had been received from Span Systems.

Dispute Resolution

The next area addressed was dispute resolution. In the original contract between Span Systems and Citizen-Schwartz AG, the following was the procedure established for disputes. “Prior to the filing of any formal procedures with respect to dispute, the party believing itself aggrieved shall call for progressive management involvement in the dispute negotiation by written notice to the other party” (University of Phoenix,2009). An alternative dispute resolution needed to be added to the original contract.

Span Systems and Citizen-Schwarz AG needed to resolve their conflicts through a neutral party. Mediation-arbitration will be used to resolve any issues currently and in the future. The Mediator will be a neutral third party and any decisions will be binding. The expense will be shared equally by both parties. Arbitration is known for being one of the most cost effective ways of resolving disputes.

Change Control

According to the original contract clause: “In the event of Citizen-Schwarz Ag requires any ordinary change to the user and systems requirements originally agreed upon,, Citizen-Schwarz Ag will notify Span Systems at its earliest and pay Span Systems any accruals at the rate agreed upon” (University of Phoenix, 2009). Citizen-Schwarz was unhappy with Span Systems because they were running behind...

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