Green Initiatives

Executive Summary

Span Systems is a leading software development company based in the United States. The company develops banking systems for global organizations. The contract administration plan for the company is concise and terms of the agreement are clearly defined. The clauses address standard and non-standard contractual disputes. The company has been award a sizable contract by a German Bank to implement a banking system. Successful execution of the contract could result in a larger project and a significant revenue increase.

Contractual Agreement

Span Systems has been successful with several small-scale projects for domestic and international organizations. The most recent project is with Citizen-Schwarz AG (C-S), a large German Bank. The project scope is to write programming for a large-scale system. The contract award is $6 million for a period of one year. The Project Director, Kevin Grant is responsible for management of the project, including deliverables, budget, and project communications, modifications, and client satisfaction. The corporate attorney, Harold Smith is charged with executing the contract for Span Systems. Smith reviews modifications, writes contract changes and protects the interests of Span Systems in the execution of contracts.

Early Issues between Span Systems and Citizen-Schwarz

There were several early issues between the companies. C-S's project manager Leon Ther wrote a letter to Kevin Grant because the project was behind schedule, there were quality issues with the product, and major bugs were seen during the testing phase of the project. Mr. Ther demanded the transfer of all unfinished code. In addition, he asserted the rescission of the contract. This issue forced Span Systems to defend the company's position and fortunately the contract terms provided several points to back C-S down.

Clarity in Contractual Agreements

The first rule-of-thumb in contract formation is clarity. The principle of clarity is simple, contract terms should be easy to understand and contain no ambiguity. Convoluted terms will result in a dispute when the one party believes he has been short-changed. According to Hayes (2012) "clear and accurate contract drafting is critical. Careful drafting helps express the true intent of the parties, makes performance of the contract easier, and leads to fewer lawsuits. One simple way to add clarity and precision is by defining the key terms of the contract." In the case of Span Systems the contract was clear and in turn forced Mr. Ther to take a non-confrontational position. The specific clauses that made this happen are related to changes, substantial performance, internal escalation procedure, communication and reporting, and intellectual property rights.

Requirements Changes

The contract required notification from C-S to Span Systems during normal business hours of contractual changes. The changes, however, were anything but ordinary. Span Systems was trying to accommodate the client requests that caused substantial project delays.

Substantial Performance Clause

The substantial performance clause provides that if 50% of the work has been completed neither party can cancel. Span Systems believes that this clause has been satisfied. C-S is alleging quality issues that could jeopardize Span's position. The companies entered into a bi-lateral contract. The rescission by C-S is a unilateral and Span will recover damages if they successfully prove that they fulfilled the terms of the breach of contract clause.

Internal Escalation Procedure

The internal escalation procedure requires that notification be made to certain parties at Span Systems when there is a dispute. Mr. Ther's assertion to rescind the contract is a clear violation of this contract clause. He has unilaterally canceled the contract without giving Span Systems the opportunity to remedy the problem.

Communication and Reporting

The communication and reporting clause of the contract details how information will be conveyed related to project completion. The clause is specific by stating at a minimum bi-weekly meetings will be conducted to discuss the status of the project. After each discussion meeting minutes will be provided to the attendees. There have been substantial project management changes at C-S that caused delays in the project. Reviews or sign-offs were not completed by C-S in a timely manner because of the changes.

Intellectual Property Rights

The software in development is transferrable to the bank once the payment has been made to Span Systems. Invoices are still outstanding for the project therefore, the transfer of ownership has not occurred. C-S could not demand the release of programming code until the outstanding invoice is satisfied.

Salvaging a Business Relationship

The right approach for Span Systems is to notify Mr. Ther in writing about the potential contract violations. The e-mail communicating concerns should take an assertive stand without placing C-S in a defensive position. The three contract clauses that would provide the best argument were: Communication and reporting failures, internal escalation procedures ignored, and the requirements changes caused substantial delays. Prior to communicating with