Contract Risk and Opportunities
Richard S. Stainback Jr.
LAW/531
June 27, 2011
Ben Waggoner
Contract Risk and Opportunities
Clarity of contract is an essential element to creating a workable and executable agreement. C-S and Span entered into a business contract that was ambiguous from the start. It used words like “ordinary” in terms of production. Terms like this are often up to interpretation and can be the failing point of an agreement.
Legal Issues Present
Breach of Contract under “Internal Escalation Procedure for Dispute”- C-S has failed to follow the agreed upon dispute resolution process in regards to the delays and quality concerns. C-S has tentatively threatened to terminate the contract in light of product delays
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Management Responsibility (Span) – Span should revisit internal processes to see if there is a process that is slowing delivery of products to C-S. After the internal audit of processes the project management team should reach out to C-S and ask the same be done to ensure there are not any procedural delays present.
Management Responsibility (C-S) – They should also internally audit there processes in regards to this project to ensure that the new management is onboard and understands the particulars of their responsibility to this project.
Breach of Contract under substantial performance of contract- This measure allows for neither party to rescind the contract past 50% completion. While at the 60% point in the contract, Span has only delivered on 40% of its responsibility to C-S. It is understood that the delays are caused in part by both companies. This point is not a valid defense for Span and should be avoided in communication with C-S.
Management Responsibility (Span) – Span needs to assign more manpower to this project to keep with the timeline.
Management Responsibility (C-S) – C-S needs to express the concerns more effectively to Span and accept some responsibility due to the amount of changes requested.
Dispute Resolution Methods
Arbitration and Mediation- This method could be used by Span and C-S to resolve the contract dispute. It is less costly than traditional litigation. However this method does not
Issue 3: Some terms of the contract were unfair to customers. Especially, customers cannot pursue disputes with the company through the court or lawsuits.
Enforceable contract Peter v. Don. Peter will have an enforceable contract with Don if he can show that all the required elements of a contract are present. If there is a contract between the two then it will be governed by the common law requirements of an enforceable contract instead of the Uniformed Commercial Code, which would be used if their agreement had involved the sale of goods. In order for a contract to be formed between Peter and Don the two must react mutual consent Mutual consent can generally be formed through the form of an (A) offer and (B) acceptance. An additional requirement for both parties to show (C) consideration is also
Wally, business owner of Windy City Watches is located in downtown Chicago, IL. Business is booming and Wally needs to buy a large quantity of Rolek watches which sell for $50 apiece. He calls Randy Rolek, the wholesaler located in Milwaukee WI. They discuss terms on the phone for a while before coming to an agreement in which Wally offers to buy 100 watches for $25 each. Randy sends over an order form in which Wally states that he is agreeing to purchase watches from Randy for $25 each, but does not include the quantity in which he will buy. Randy sends 50 watches the following week with a note included stating that he has sent 50 watches and will send the other remaining 50 watches within a few days but includes the bill for the full
This issue reflects a problem with Assignment of Authority and Responsibility factor of the internal environment. COSO suggest faster response times can enhance competitiveness and customer satisfaction. This upper management did not take any action means he did not comply with his duty.
Bernie a resident of Richmond, Virginia decides to sale his 2006 Ford Fusion for $13,000.00 and places an ad in his local newspaper on February 1st. After several weeks without any inquiries, Vivian contacts Bernie on March 1st stating she will pay him $12,000.00 for the car. Bernie arranges to meet with Vivian on March 5th to complete the deal. Vivian comes to Bernie’s house on March 10th and says she will give Bernie $12,500.00 for the car; but she needs three additional weeks to come up with the money. Bernie agrees but only if Vivian puts down a deposit. Vivian agrees and Bernie drafts an agreement stated the sale will must take place no later than March 31st. Vivian reads and signs the agreement and
The Performance Contract clause has been amended to state, “Citizen-Swartz AG shall be entitled to receive all work products in progress or completed, as of the date of termination or cancellation, subject to clearance of all payments due to Span Systems at that time.”
Negotiations are something that everyone experiences and does at some level. Even if informal, people negotiate and barter using what they have to offer to get what they want all of the time. However, there are times in life where the negotiations are much more serious and the stakes a lot higher. Whether official or unofficial, there are negotiation tactics and conditions that should be watched out for because they are a sign of potential problems.
Even the contracts are expressly agreed to by the parties, those terms need to be inter-preted and the court must ascertain the terms and meaning of the parties to the con-tract. According to the UCC, the court would look to the relevant course of perfor-mance, course of dealing and usage of trade to determine the meaning of the words of agreement.
In the last few months, Span Systems and C-S have been undergoing negotiations to address the issues brought forth by C-S regarding delivery and quality of goods. The relationship with C-S is beneficial for Span Systems to continue the working relationship with C-S. Below are the legal principles, prevention, resolutions, and management responsibilities of each issue affecting Span Systems and C-S:
Before signing the deal a conflict arose in middle of the conversation which was about the rate of penalties per day and the amount of profits to be paid by NIDO gas. Their technical manager proposed an amount of nearly $10000 per day as penalty if the contract was not completed on expected time duration of 38 weeks. We recommended that the late penalty amount should not be exceeding of $4000. Again they denied to accept this amount and came up with a negotiable amount of $ 7000 per day, which was also a huge amount for us being a contractor. So, finally giving it a second thought we compromised at the amount of $5000 per day for late completion penalty. On the other hand we again had to compromise with the profits as NIDO gas proposed us the profits of $10000 per day would be given if the construction work will be completed under the budgeted amount of 2.5 million dollars otherwise it would be $5000 per day if we were not exceeded the amount of budget above 2 million dollars. So, all in all we used a compromise strategy and concessions of
Span needs to carefully select which items it needs to negotiate fiercely and which ones it needs to concede. There must be balance; Span has to successfully renegotiate the current contract without the perception of being weak.
When it is time to notify the contractor of personnel authorized to represent the contracting officer in administering contract requirements, notices should be completed with name, position, authority in representing the contracting officer, and applicable contract clauses (Acquisition.gov, 1994).
Contract Law Case Study Both the parties in the question have come to a problematic situation
Kerzner (2003, p6) states that the definition of project success has to be modified from the previous constraints of Time, Cost and performance to include Completion:
(Lewicki, 2010, p. 585) Fontaine and Gaudin did not prepared to negotiate the full contract. They did not anticipate nor prepare to resolve additional issues. Due to their inexperience, Fontaine and Gaudin were not the correct pairing to conduct the renegotiation, as well, they did not have decision making authority. They had to contact senior level management in order to reach a final agreement. This delay extended the negotiation timeline. Adding to the already stressful situation, the prospect of losing Reliant as a consistent client prosed a potential major issue, especially relating to supply as it would be difficult to identify another client to fill the former demand level. Also, Pacific senior leaders delayed their decision to expand into PVC products, over a year. This delay created uncertainty with the forecast for VCM and derivate products, which had a negative marketing impact for one of the top essential products. Also, contributing to the list of weaknesses, Fontaine’s definition of a successful negotiation differed from the corporate office, in that, he linked a successful negotiation outcome to keeping Reliant as a client by extending the current terms of the contract, solely. However, just as important, Fontaine neglected to take into account all the other potential issues or points of