Span Memo

MEMORANDUM

TO: General Manager – Span Systems

FROM:

DATE: April 19, 2010

SUBJECT: Span Systems-Citizen Schwarz Contract Dispute, Legal Risks and Opportunities

CC: Span Systems Board of Directors

Contracts are a leading cause of business disputes. These disputes can lead to loss of production, severance of business relationships, and expensive legal costs. This memo will examine the legal risks and opportunities in our current situation with Citizen Schwarz, and the measures we can take to avoid risks, optimize opportunities, and present options for solving disputes. Citizen-Schwarz AG contracted Span Systems to create custom e-banking software. In doing so a contract was created outlining the details of the arrangement including timeliness, quality of the deliverables, communication between parties, procedures for changes in the system requirements, intellectual property rights, and dispute management procedures.

According to the terms of our contract between Span Systems and Citizen-Schwarz AG neither party can void the contract once we arrive at 50% completion of contract. The ambiguity as to what constitutes 50% completion leaves both parties at risk. While we may argue that substantial performance is reached once 50% of the project time has elapsed, Citizen Schwarz AG may argue that substantial performance is reached once 50% of the deliverables are completed. This disconnect leaves this contract open for disputes on both sides. Illuminating the clause by specifying the exact measure to be used in determining substantial performance would eliminate the potential for disputes. This contract stipulated an escalation procedure for disputes. In the event of a dispute between the two parties, negotiation would be escalated up the chain of command prior to any legal action. Dispute resolution measures are imperative in contracts. While this clause is a sufficient start, the contract should have stipulated even more detailed...