Contract Creation and Management Simulation

In today’s business environment companies are choosing to renegotiate contracts rather than go to court to have the contracts enforced. A court remedy breach of contract can be lengthy, costly, and in the end no one wins. Companies such as Span Systems and Citizen-Schwarz (C-S) should have a clear understanding of contract laws, as well renegotiation practices designed to remedy breach of contract. Both parties are obligated to fulfill each part of the agreement, and failure to meet the terms of the contract by law can be consider a breach of contract. This breach can occur when parties such as Span Systems, whom fail to perform within the guidelines of the agreement.

When parties such as Span Systems a leader in banking software and its client Citizen-Schwarz (C-S) enter into a one year legal agreement worth six million this constituted a valid contract. Span System will produced and provide updated banking software to Citizen-Schwarz within the one year contract. As with any project delays issues such as poor performance, project delays, organizational changes, and possible contract violation have arisen within the project. Such elements have led to dissatisfaction from both companies which could lead to a breach of contract if certain contract clauses are not addressed. Span Systems and Citizens-Schwarz must negotiate remedies for breach of contract in order to complete the current project and resolve any contract disputes.

Both Span System and Citizens-Schwarz believe the other to be in breach of contract, each company must evaluate the problems associated with the project development paying attention the project scope, delivery schedule, and technical performance. By developing an acceptable contract by both parties, the software project results should be should be successful. Completion of the project will free Span System and Citizen-Schwarz from contractual obligations.

Span Systems will attempt to resolve its issues with the Citizen-Schwarz by initiating non-litigation tactics such as mediation or other resolution methods. “Mediation is the process by which a third person, called a mediator, attempts to assist disputing parties in resolving their differences.” (Reed, Shedd, Morehead, & Corley, 2005, p.122) It is in the best interest of Span Systems to maintain a good business relationship Citizen-Schwarz because the e-CRM contract is contingent on the successful completion of the Citizen-Schwarz’s software project. By implementing non-litigation tactics such as mediation or other resolution methods, will allow Span Systems to increase its chances to resolve the contractual issues with Citizen-Schwarz AG and prevent costly lawsuits. The contractual amendments agreed upon by Span Systems and Citizen-Schwarz from the negotiations meeting are listed below.

Amendment Contract Terms

Performance of Contract

The contract states, neither party may cancel this agreement, in whole or in part, subsequent to more than 50% of the consideration having been tendered by the other. (UoP Simulation)

Over the last couple of months, the completion of Span System’s deliverables have been behind schedule. Citizen-Schwarz is not happy with the quality of the deliverables. During the user testing phase, several software defects were found. Now Citizen-Schwarz is requesting the transfer of all unfinished codes and has asserted the rescission of the contract. Since Citizen-Schwarz is requesting all of the unfinished codes, the company is in breach of its contract obligations because more than 50% of the deliverables have been completed by Span Systems. However, Citizen-Schwarz disputes this claim because according to their project schedule, only 40% of the project has been completed.

To resolve this issue, both parties have agreed upon performance measures which are outcome oriented. However, due to the high risk nature of the work being performed, a detailed work authorization requiring both parties to follow protocol and specifications. Performance measures will be used to enable the quality assurance plan and schedule payment solution to foster better performance by Span Systems. The parties performance based contract will include the following:

• At the expense and discretion of C-S, a release manager with added specifics to the deployment of software.

• C-S will closely monitor the direct removal efficiency of Span Systems and communicate a benchmark to Span Systems in one month from the date of contract sign off.

• Use of measurable performance standards in terms of quality, timeliness and payment schedule.

• Span Systems will be entitled to payment for the percent of services satisfactorily completed as of the date of termination or cancellation. Beta testing performed 30 days