Understanding Contract Risks


Understanding Contract Risks and Opportunities
LaBreda L. Gray
University of Phoenix Online Main

Understanding Contract Risks and Opportunities
Contracts are entered into voluntarily by related or non-related parties. The provisions of a contract are then converted to private law between said parties (University of Phoenix, p.2, 2010). “A contract is an enforceable agreement by a court of law or equity. According to the Restatement (Second) of contracts: A contract is a promise or a set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes a duty” (University of Phoenix, 2010). In the business world it is to the detriment of an organization to ensure new or existing contracts avoid risks, minimize liabilities, and benefit from opportunities resulting from any disputes.
      After conducting the Contract Simulation for Span Systems (SS), a California-based custom e-banking software developer and Citizen-Schwartz (AG), a German banking giant it was evident that this contract was created in a hurry and future issues were predicted by both parties. The contract was worth six billion dollars and Span Systems could have landed a bigger job for Citizen-Schwartz contingent upon its performance with this job. The contract was poorly created and worded in a very ambiguous manner. The vague provisions of the contract eventually led to a dispute between the two companies over quality and schedule of deliverables among other things.
      Contractual disputes can prove to be a corporations Achilles heel. They can also deliver a devastating blow to any corporation resulting in damaged reputations, financial losses, and litigation. The need for a contract free of ambiguity was more than obvious in this situation. Poorly defined obligations and commitments in the initial contract put both companies at high risk of conflict and disputes. Because...