Legal Risks Contract Creation

Contract Creation and Management Memo

Business Law; Law/531

July 19, 2010

Craige F. Harrison

Memorandum: Contract Creation and Management

To: Employees

From: Span Systems

Date: July 19, 2010

Contracts between Span Systems, a software developing company, and Citizen-Schwartz, a large German bank, are at risk for breach of contract. Span Systems is under obligation to act in good faith in obtaining the objective to the binding contract. Failure to do so could place Span Systems in breach of the implied covenant of good faith and fair dealing (Cheeseman, 2010). Additionally, Span Systems and Citizen-Schwartz are in disputes over quality and timeliness of contract deliverables. The contract between Span Systems and Citizen-Schwartz is worth $6 million with one-year to complete deliverables. Span Systems is making this project a high priority; a bigger e-CRM project is in the pipeline with Citizen-Schwartz and chances of Span Systems receiving this project hinges on the performance of the current contact (University of Phoenix Simulation, 2010).

A contract is an agreement enforceable by a court of law or equity. Although contracts can be entered into voluntarily, its terms can become private law between the parties (Cheeseman, 2010). If Span Systems fails to deliver goods, and perform as outlined in the contract, Citizen-Schwartz can sue to enforce the contract and recover damages.

Eight months into the project Span Systems deliverables are behind and the quality of work has been questionable by Citizen-Schwartz. As a result, Citizen-Schwartz has requested transfer of all unfinished code, and asserted the rescission of the contract. The contract between both organizations states that neither party can cancel in whole or in part subsequent to more than fifty-percent of the consideration having been tendered by the other (University of Phoenix Simulation, 2010). Legal issues by both parties have been identified in this scenario, and remedies need to be put...