Recognizing Contract Risk and Opportunities
MEMO TO: Citizen-Schwarz AG
FROM: Susie Blanco, Span System
DATE: December 8, 2008
SUBJECT: Contract Creation and Management
A contract is an exchange of promises between two or more parties to do or refrain from doing an act, which is enforceable in a court of law. (Wikipedia) It is very important to read and understand a contract before agreeing to its term. During the negotiation process one can make changes or add but once the contract is signed and agreed upon the deal is sealed. The Contract Creation and Management simulation serves to highlight the importance of reviewing on existing or new business contract in order to avoid misunderstanding. It is best to review and study the contract before reaching an agreement to make sure the contract is beneficial for both parties and for the success of the contract.
Citizen-Schwarz AG (C-S) and Span System signed and agreed to a one year contract wroth six million dollars; however, the contract agreement has not been going as expected. Span System has not been delivering as scheduled and their quality is poor. Leon Ther, Citizen-Schwarz AG biggest influential negotiator threatened the rescission of our contract based on what he considered to be unacceptable quality of deliverables and schedule slips. Thankfully, after much negotiating Span System was able to amend some of the contract clauses and come to terms of agreement. Neither Span nor Citizen-Schwarz AG wanted to see rescission of the contract nor did they want to settle the issue in court. Both organizations wanted to avoid the high cost of settling the dispute in court. Therefore, Span’s manager decided to write this memo to Citizen-Schwarz AG in order to discuss the risks that arose from this issue and address ways the issue can be resolved and avoid or minimize liabilities in the future.
The most critical part of a contract is the part where one party...