Recogonizing_Contract_Risk_and_Opportunities

Running Header: Recognizing Contract Risk and Opportunities Memo Date: August 2, 2010 TO: InfoBuild Managers RE: Contractual Conflict with C-S This memo is specifically for all managers of InfoBuild regarding the recent contractual conflicts with C-S. C-S is one of our biggest clients, however recently C-S has disputed the quality of deliverables, schedule adherence for deliveries and end user requirements. Majestic is disputing the quality and delay in the delivery of code and substantial performance of the contract based on time elapsed. In order to combat these issues going forward, we must make sure that we are abiding by the contractual terms and conditions to which we agreed when signing the contract. As an incentive for us to make sure that we are abiding by the terms and conditions of the contract as it pertains to a delay in the delivery of code we have elected two options for each manager to use at their discretion. The first option is to hire a contractor to help assist in making sure that the code is delivered in a timely manner. The whole issue with the delay in the code being delivered is the fact that we do not have enough time to test the code before it is delivered because we have a shortage in staff and available man hours. This shortage has caused us to almost lose our contract; however through the addition of a contractor, we should be able to meet the deadlines set forth in the contract. As well, another option is to mandate overtime for the software/code department. Although this may seem a bit harsh, it does have its benefits as it offers the employee a chance to earn extra income as well as giving the employer a chance to meet their guidelines. We do realize that the offering of overtime and the option of hiring a contractor will increase the expenditures of a department, however the short term expenditures are outweighed by the long-term goal of staying compliant with the terms and conditions of the contract. For our company, the biggest legal principle that we need to make sure that we are not breaking is the breach of contract. Having a breach of contract, as with any legal contract, means that there is a legal agreement between two entities for which one entity has agreed to perform services and the other intends to pay for the services rendered. However, with companies to make sure that each entities needs are adequately met a contract is often agreed upon. Within the contract are the terms and conditions set forth by both entity. For example, within the terms and conditions of the contract with C-S we have agreed that the delivery of our code will be timely and that it will be of quality. C-S, thus far has felt that we have not been upholding our end of the contract because not only have we not been supplying the code in a timely manner, we have also failed to provide the quality that we were sought after to provide. The breach in contract has been directly linked with the shortage in staffing which has led to less than the amount of man hours that we allotted for this contract. However, we feel strongly that if a contractor is brought in to assist with the project, or if we mandate overtime that this problem will be corrected. Simulation: The issues identified in the simulation can all be resolved through contract mediation, negotiation and arbitration. This is the most successful method of making sure that each party is properly and successfully represented in a manner that does not involve the justice system. Once law suit is brought to the justice system, in this case for breach of contract, it can be very expensive for both parties involved. Mediation, negotiation and arbitration is often the method pursued by entities that are disputing over a contract because each entity wants to deliver on their end of the bargain and sometimes something as simple as the verbiage in a contract cause a dispute. I feel strongly, as does the simulation, that negotiation, mediation and arbitration is the best way to settle a dispute over a contract. In most cases, the dispute can be settled after all, each party sought out the services of the other because of what they could do for each other; thus this makes mediation much easier. However, if an organization is clearly taking advantage of another then the best recourse would be to use the justice system to make sure that you recover all of your loses.