Recognizing Contract Risk and Opportunities

To: Senior Management, Span Systems
From: John Smith
Re: Recognizing Contract Risk and Opportunities
Date: October, 19 2008
This memo is designed to highlight the situation between our company Span Systems and Citizen- Schwartz AG (C-S), German bank.   We are facing some difficulties in our relationship with C-S. As you know, eight months ago we signed a one-year contract of C-S’s e- CRM order. Contract is a binding agreement made and accepted between two or more parties with certain obligations and under specific terms and conditions.   Now the contract is in jeopardy, because Span’s deliverables are two months behind the schedule and major bugs being detected in the deliverables, which is unaccepted.   Leon Ther, the IT Outsourcing Director of C-S, is furious. They cannot afford schedule slips and need to release the quality software in the market on time. Our CEO ordered to settle this dispute immediately before any legal issues may arise, which could lead to litigation, damaged reputation, and financial losses. We are going to look at the contract clauses and figure out is there are any breaches occurred. Breach of contract is a violation of any obligations or terms described in the contract.   By reviewing this contract we are going to highlight any legal risks and opportunities, how to avoid those risks, minimize the liabilities, and benefit from the opportunities.
The original contract has five clauses that would constitute a breach. The first Breach of Contract under substantial performance of contract. By the contract neither of the companies may cancel the contract when 50% of the work is done. Since more than 50% of the project was done, Ther’s threats to rescind the contract are invalid. Definitely, Span Systems still needs to improve the quality of work and deliver the completed work in agreed time frame.
The second Breach of Contract under Internal Escalation Procedure for Disputes. This clause right now is not the biggest issue, since...