Contract Creation and Management

Contract Creation and Management

Byron Kooima

LAW/531

January 4, 2012

Lynne Fees

Contract Creation and Management

In the University of Phoenix Contract Creation and Management simulation (2002), a contractual conflict develops between Citizen-Schwartz AG (C-S), a $20 billion German bank and Span Systems, a custom e-banking software developer. C-S is attempting to enter the retail financial services in America and cannot afford delays. A one-year contract worth $6 million was established between the two companies as a precursor to a much larger e-CRM order where Span’s performance from the one-year contract will determine future work. Span and C-S’s conflict surfaces when quality and schedule of deliverables comes into question. In the past few months Span’s deliveries to C-S have been late and the quality of the deliverables has been inadequate with substantial bugs detected in the testing phase. C-S is concerned that Span is not complying with the contract laid out: therefore C-S is asking for a transfer of unfinished code and a rescission of the contract.

A contract “should protect a business from risk, lock in favourable pricing and payment terms with suppliers and customers, define acceptable service levels, and provide enforceable remedies when those terms are breached” (Clarke, 2010, para. 2). Although the contract between C-S and Span had ambiguity issues that needed to be resolved, the contract was legal with the elements essential in making it binding and enforceable. A written agreement was presented from C-S to Span for $6 million in return for a specific promise to develop and deliver software within one year. Span Systems and Citizen Schwartz (C-S) have entered into a bilateral contract, in which both parties exchange promises (Cheeseman, 2010, p. 157). Due to the ambiguity of the terms of the contract, both companies believe a breach of contract has occurred. The legal issues identified in the simulation in relation to a breach of contract...