contract risks - Contract Risk 1 Contract Risk and...

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Contract Risk 1 Contract Risk and Opportunities Memo Fred Johnson University of Phoenix
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Contract Risk 2 To: Staff of Span Systems and Citizen-Schwarz From: Manager Subject: Contract Risks Contract Risk and Opportunities Memo It is important for businesses, particularly during the negotiation stage, to agree and understand each others standards and commitments to avoid ambiguity in contracts. Ongoing disputes concerning the interpretation of ambiguous terminology in a contract can be lengthy and costly to rectify (Tubeno, 1998). The lack of clarity in a business contract can impose serious risks for all parties involved. Jennings stated at the beginning of Chapter 13 that “contracts have been necessary in business since business began” (2006, p. 496). To reduce risks, the parties need to review the contract to ensure that all possible concerns and conditions are addressed before the contract is signed. Several risky clauses in the contract between Span Systems (Span) and Citizen-Schwarz AG (C- S) resulted in a request for rescission by C-S (University of Phoenix, 2006). The risk of disputes between Span and C-S could have been avoided if the terms in the contract were more defined and the contract was comprehensible to both parties. In the Contract Creation and Management simulation, C-S entered a six million dollar contract with Span System for the deliverance of transaction software for C-S. After eight months in contract with Span Systems, C-S has become unhappy with the performance and quality of the deliverables and is requesting a “transfer of all unfinished codes and rescission from the contract” (University of Phoenix, 2006, p. 6). Span is arguing that the delay in software delivery was due to C-S project manager’s turn-around
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Contract Risk 3 time for approvals and is not liable for this possible breach of contract. Fortunately, for various reasons, management of both companies agreed to arbitration in an effort to
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This note was uploaded on 04/14/2011 for the course MGT 521 taught by Professor Klamm during the Spring '10 term at University of Phoenix.

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contract risks - Contract Risk 1 Contract Risk and...

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