Recognizing Contract Risk and Opportunities

The Legal Environment of Business Contract Creation and Management Simulation documents many contractual legal issues and opportunities. Managers follow procedures to help avoid risks and minimize liabilities. Additionally, managers benefit from opportunities that arise from preventing the dangers and problems. The simulation demonstrates legal risks or opportunities that are governed by specific principles.   Managers may take identifiable measures to minimize legal risks or realize legal opportunities. Alternatives are also used to resolve problems.

The simulation’s introduction implies that poorly written contracts are the demise of business operations. The problems between Majestic Hotel and InfoBuild, a software company, began before the contract was signed. The companies could not agree on the terms and conditions of the contract. Although both companies eventually agreed with each other’s demands and signed the contract, problems remained, which were litigated by the court. Regardless of the court’s decision, both companies should have learned one very important lesson: “Businesses cannot expand and grow without being able to rely on commitments; resources are wasted if promises are not fulfilled.”

The simulation proceeds by introducing another software company, Span Systems, which signed a $6 million contract with Citizen-Schwarz AG (C-S), a German bank. This contract was the largest that Span Systems ever concurred. Even though C-S was previously involved with other agreements, this contract was as important to the bank as it was to Span Systems. C-S relied on the software company to complete the tasks efficiently and without delays; so that, the bank would receive a profitable e-CRM order.

After the first eight months, Span Systems’ performance did not meet its contractual obligations.   C-S claimed that the project was behind schedule because of issues within Span Systems. Also, bugs were found in the testing stage of the software.   To refute...