MEMORANDUM TO: All Employees FROM: Corporate Office DATE: November 2, 2009 SUBJECT: Contract Creation and Management Simulation CC: Board of Directors Span Systems is a California based custom e-banking software developer that has entered into a $6million contracted with Citizen Schwartz (C-S) to develop banking software in one year.
The companies are eight month into the contract and there has been poor performance, organizational changes, and project delays are the issues that can result a breach of contract.The purpose of this memo is to describe the legal risk, indentify specific measures to avoid risk, describe legal principles, and evaluate the alternatives managers can take . A contract is formed when two parties with the correct mental intent, under correct circumstances within the boundaries of the law, and with detriment to each of them agree to do certain acts in exchange for the other’s acts.
(Jennings, 2006). Span Systems and Citizen Schwartz (C-S) have entered into a bilateral contract. C-S signed a contract for software development for a one year, and Span Systems will deliver software to their clients.
A bilateral contract is one in which both parties promise to perform certain things (Jennings, 2006). Both parties are obligated to perform under the contract, however, but C-S and Span Systems have not performed according to the contract. C-S has demanded the transfer of all unfinished code and termination of the contract. The companies state that each other is in breach of contract. The legal issues identified are performance, change requirements, and communication and reporting. Contract performance is the first legal issue identified in the simulation.
Once Span Systems and Citizen Schwartz have contracted they have the obligation the obligation of performance. C-S finds Span System in breach of contract because 40% of the contract has been completed. Span disagrees with C-S findings and state that 60% of project has been completed; therefore, C-S is in breach of contract for terminating the contract because more than 50% has been completed and delivered. The second legal issue in the simulation is Communications and Reporting. C-S did not communicate the change in project management with Span Systems.The change in project management caused a delay in delivery schedules and the quality of the deliverables.
The requirements change is another legal issued in the business simulation. Because of the new demands, this makes it difficult to meet deadlines already in place. The ordinary requirements changes had been agreed upon in the contract. The metrics dashboard shows the growth of the project from the planned 940 to 1015. The requests are beyond the original changes in the contract, and this makes it difficult to meet the required deadlines stated in the contract.With Span Systems trying to figure out how to proceed to express its concerns with C-S, it has been rumored that C-S has shared the code with another software vendor to complete the transactions of the software project. Under the intellectual property rights clause, C-S is the owner of the transaction software, therefore they have the right to distribute, copy, modify and market the code.
Span Systems and C-S are disputing the performance, requirement changes and communications and reporting.Citizen-Swartz must achieve its business goals and continue the contract with Span System. The following amendments will be sent to C-S in performance, change control, communications and reporting, and project structure. Span System is ready to draft a new contract if C-S decides to renegotiate. The performance clause amendment states that Citizen-Schwartz may terminate the agreement upon seven (7) days prior to written notice, and that Span Systems shall be entitled to payment for the percent of services that have been satisfied and completed as the date of cancellation.This altern Testing the software will be (30) calendar days from the day after the software in installed and is certified that the software is ready for acceptance testing.
The Change Control Board will monitor the users and system requirement, and will decide if the changes will be accepted or rejected. The There will be a project manager at the Span Systems office in California for communicating and reporting. The project manager will attend project meetings and collaborate between C-S and Span Systems, and all cost will be paid by C-S.The project structure will be rebuilt by Span Systems with at least (10) additional programmers to meet the software delivery schedule. Span Systems will pay for the training expenses, and send a new resume to Citizen Schwartz within (5) days before the contract goes into effect.
Managers avoid legal risk by making sure that they agree to terms that will accomplish the purpose, define the terms used in the contract, list all terms of the contract; price, subject matter, and payment terms, answer “what if” questions, and make sure all written agreements is complete (Jennings, 2006).