In today’s business environment, organizations must ensure contracts entered into avoid risk, minimize liabilities, and provide opportunities for resolution in the event of a dispute. Not taking these considerations into effect, may result in courtroom litigation and the costly aspects of preparing for it (Jennings, 2006). In reviewing the Contract Creation and Management simulation, examples of ambiguously worded provisions were evident and those provisions became a dispute between the two organizations of Span Systems (SS), a software company, and Citizen-Schwarz AG (CS), a bank. CS brought the ambiguity to the surface when demanding immediate transfer of all unfinished code and rescission of the contract; claiming poor quality and schedule slips. SS set out for an amicable resolution by using clauses in the contract that favored their position in negotiation. In the end, the negotiation was successful and amendments to the contract were implemented. Fortunately, for both parties the successful negotiation prevented a potentially expensive and disruptive litigation process (University of Phoenix, 2002).
Managing the Risks of the Contract Creation and Management Simulation
The simulation provided examples of ambiguous language within the SS and CS contract, which became the basis of the dispute. From this poorly written language came numerous risks related to breach of contract, for both parties. The following is a summary of the issues in dispute, and the possible actions that may be taken to improve each parties position.
Substantial Performance of Contract. CS could be held in breach of contract for demanding immediate transfer of all unfinished code and rescission of contract because the project may be more than 50% complete. To eliminate this risk of breach, CS needs to prove that based on poor quality and late delivery, the contract is not 50% complete.
Performance on Delivery. SS could be held in breach of contract for failing to deliver...