Contract Dispute Scenarios
| Week 4: Contracts and IP Issues - D: You Decide | | | | Help | | | |
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| Scenario | |
Scenario Summary |
This group project covers a contract dispute situation. As a group, work through the following questions. Feel free to ask further questions in the thread of your group members, and answer your group members questions as well. The best work will be where all group members work together to get the questions answered. You will be graded on the quality of your posts, but points will be deducted if your answers are duplicates of your group members. Take turns and build on posts. The questions below have more …show more content…
than one part within each of them so work through them together. Have fun with this! The main thing is that you learn from this exercise, along with creating some quality collaboration with your group. Read the Group Project under Course Home or the Assignments page for this week for the full grading rubric for this Group Project. Good luck!
Download and review the Contract Here. Your Role/Assignment |
You are the manager of a large data processing project. Your company, Systems Inc., worked very hard to obtain a contract with Big Bank to do their conversions from their recent acquisition, Small Bank.. The bank met with several companies to discuss who would do the best work on the contract. During your meeting with Big Bank, you told them that you had “never missed a conversion deadline.” At the time, your company had never missed a conversion deadline, but the company had only done three conversions. You also told them that your data processing systems were the fastest around.” After months of negotiation, Big Bank signed the contract. The President of Big Bank said, “We like fast, and you guys are fast. We choose you."
You started work on the data conversion immediately (ahead of contract). According to the contract, your team was responsible for ensuring that the new bank’s data was converted to Big Bank’s data processing system. The contract involved six large conversions. The first involved converting Big Bank’s savings accounts, the second its checking accounts, the third its investment portfolio, the forth its credit card, the fifth its mortgage portfolios and the six its large business loans. Your team completed four of the six conversions without a problem. The fifth task, the largest and most important, has encountered numerous problems. Some problems have been based on personnel issues on your part and other issues have been based on the bank’s failure to provide you with necessary information. One issue resulted when the conversion was delayed for over one week. The data to be converted was formatted differently than the bank’s previously specifications provided. For that reason, the data conversion fields needed to be changed. A provision in the contract required your company to receive four people’s approval before making any changes to the conversion data fields, and one of those four people, Glenda Givealot, was out of the country doing missionary work in an area of the world that did not have cell phone reception. Another issue resulted when the conversion was supposed to occur. Because of the change in the timeline, the conversion schedule had to change. The weekend the conversion was rescheduled to occur, an ice storm struck the state where your data processing computers were housed. Your facility lost electricity for three days and the conversion was delayed again until power could be restored. | K E Y P L A Y E R S | |
Big Bank President | |
| The Bank’s President, who is a known hothead, was furious. He called you after power was restored and yelled,“We are rescinding this contract!!!!” He also threatened to take the case to court to seek damages. | | | |
Systems Inc. President | |
| Your company president wants this situation resolved amicably. He also wants to maintain the contract with the bank, as he sees the potential for a large amount of business with the bank in the future if this contract proves successful. Corporate counsel believes that the bank just needs to be shown that they are out of compliance with the contract just as we are and that both parties are to “blame.” He wants you to start negotiations with the bank to modify certain provisions of the contract to make expectations clearer.
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| Y O U D E C I D E | |
Activity |
Below is the list of questions you should work together to answer in this thread. Feel free to come up with more to answer together if you need them. 1. Can Big Bank’s President rescind the contract? Under what circumstances can a contract be rescinded by either party? What facts have to be alleged and proven? What is the result of a contract that is rescinded? 2. Big Bank’s President also threatens legal action. What potential causes of action could you foresee him bringing in court? Would he be successful? Why or why not? What arguments could Systems Inc. raises in its defense? What are Big Bank’s potential damages? 3. Review the facts provided and the sample contract. What provisions of the contract could you cite to support an argument that it is not in Big Banks best interest to rescind the contract? What facts could you cite to support an argument that Big Bank be responsible for some of these issues and/or not in compliance with the contract? 4. In this situation amicable resolution of problems is greatly preferred by your company. Would this be true in all contract disputes? In what situations and why would you decide to move to litigation over amicable resolution? 5. There are 3 types of contract performance: complete, substantial and material breach. Describe the differences (and similarities) among the three, and explain some of the legal ramifications for one or more of these types of performances. (For example, what happens if one party performs completely but the other party performs only substantially?) Give examples from outside readings or experiences in your career or personal business life. 6. What are the two most important concepts from this exercise that will help you in future contract negotiations? (All students must answer this question for full credit in this project.)
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Top of FormBottom of Form | | Responses | Author | Date & Time | | Harpreet Jodha | 17 Nov 10 11:34 AM MST | | HELLO EVERYONE, has anyone read the case yet? I read the contract, there is lots of information we need to go through. Please response back so we can start on this. thanks ill try to post something more later tonight. | | | David Brakebill | 17 Nov 10 1:23 PM MST | | Hello Harpeet and fellow group members,
I have not read the entire contrat (yet) but from what I've seen so far, in respnse to question 1, I do not think the contract can be rescinded due to the concept of Impossibility. It is physically impossible to complete the conversion on time (in accordance with the contract requirements) due to the loss of electricity. | | | Anthony Escribens | 17 Nov 10 5:51 PM MST | | Question 1 - I'll attempt to address this question.
Q. Can Big Bank’s President rescind the contract?
A. Based on the terms of the contract, Big Bank’s President can rescind the contract, but it must give Systems Inc. a 180 day notice and pay 75% of the estimated remaining service fees to the service being discontinued or the monthly minimum charge, whichever is greater.
Q. Under what circumstances can a contract be rescinded by either party?
A. The contract may be rescinded by either party under any circumstance, but only if a 180 day notice is given. However, according to the contract, if Big Bank rescind the contract, it will have to pay 75% of the estimated remaining service fees to the service being discontinued or the monthly minimum charge, whichever is greater.
Q. What facts have to be alleged and proven?
A. One fact that was proven was the over one week delay due to the missing approval of Glenda Givealot, who was traveling conducting missionary work. Because of this delay, the scheduled conversion had to be moved to a different date, which happened to fall on an ice storm, causing the loss of electricity for three days and delaying the work once again.
Q. What is the result of a contract that is rescinded?
A. The result of the contract being rescinded will depend on the party who rescind on the contract. If Systems, Inc. where to rescind, they would simply give a 180 day notice to Big Bank. However, if Big Bank were to rescind on the contract, they would not only need to give the 180 day notice, but they would also be liable for paying 75% of the estimated remaining service fees to the service being discontinued or the monthly minimum charge, whichever is greater.
Date Modified: 17 Nov 10 6:35 PM MST | | | Taryn King | 18 Nov 10 4:21 PM MST | | When can a contract be resinded?
A contract can be rescinded using the defenses in contract formation which include:
Capacity – both parties must have age and mental capacity
Misrepresentation – misstatement of a material fact or failure to disclose it, reliance on the buyer on that material or omission of, resulting damages to the buyer (Jennings, p432)
Fraud – intentional disclosure of false information, or failure to disclose relevant information
Illegality – violates general public policy or a statue
Duress – coercion into a contact
Undue Influence – one party taking advantage of another party due to a confidential relationship
Also both parties can agree to mutual rescission before a contract is executed with a new contract.
Date Modified: 18 Nov 10 4:22 PM MST | | | David Brakebill | 18 Nov 10 6:37 PM MST | | Anthony, excellent response to the first question. However, I don't think the President of Big Bank can rescind the contract. I base this on Section 8 (a) "Systems Inc. shall not be responsible for any failure in providing the Services, any delays in processing, or any failure or delay in the delivery of any Reports that may be caused, in whole or in part, by strikes, lockouts, riots, epidemics, governmental actions or regulations, natural disaster, fire, inclement weather, acts of God, computer breakdown or failure, communications failure, interruptions in telephone or electrical service, courier's failure to timely deliver, or any other causes beyond its reasonable control. In the event such delays exist without interruption for a period of more than thirty (30) days, Big Bank or Systems Inc. may elect to terminate this Agreement without breach." Accprding to the information given, the project suffered a delay of three days due to a loss of electricity due to a storm (among a host of other delays). In theory, yes, the President of Big Bank can rescind the contract (per the contract) as it is his perogative...but the way I am reading the scenario, he said he was going to rescind it due to delays and that's where I think we should say no, he cannot. | | | Anthony Escribens | 18 Nov 10 9:19 PM MST | | David, very good point, I guess I was getting somewhat of a different interpretation of the same question. Your response makes a lot of sense and based on the contract, Big Bank's President will not be able to rescind the contract without penalty. As I mentioned in my last response, if Big Bank were to rescind on the contract, they would not only need to give the 180 day notice, but they would also be liable for paying 75% of the estimated remaining service fees to the service being discontinued or the monthly minimum charge, whichever is greater. | | | Taryn King | 19 Nov 10 7:48 PM MST | | Yes, I agree that Big Bank cannot rescind the contract. In order to rescind the contract he would have to prove one of the defenses in contract which include : Capacity, Fraud, Illegality, Duress, or Undue Influence. None of these would apply in this case.
I believe the only way the contract could be rescinded is if there was mutual rescission, where both parties agree. If the contract were rescinded, it would be considered void. In the case of Big Bank, it would have the effect of Big Bank walking away as if a contract never existed. | | | Anthony Escribens | 17 Nov 10 6:29 PM MST | | Question 2 - Here are my thoughts.
Q. Big Bank’s President also threatens legal action. What potential causes of action could you foresee him bringing in court? Would he be successful? Why or why not?
A. I believe that Big Bank’s President would claim that System’s, Inc delayed the project causing the project to delay and loosing valuable time, resource utilization and money; so I believe he will attempt to seek monetary compensation for the time his company lost during the project. I don’t believe he will be successful because the reason System’s, Inc was delayed to begin with was due to incorrect specifications provided by Big Bank. Section 3 (Input and Output Data) of the contract clearly states: “The input data shall be transmitted by Big Bank to Systems Inc. in a format acceptable to Systems Inc. via an approved telecommunication method and system. Big Bank is solely responsible for the accuracy and delivery of all information to be provided to Systems Inc. for processing.”
Q. What arguments could Systems Inc. raises in its defense? What are Big Bank’s potential damages?
A. In their defense, System’s, Inc can state that Big Bank failed to provide accurate data as per the contract, which caused the initial delay of the project. I don’t believe that Big Bank should be granted damages; the project was delayed due to incorrect specifications provided by their employees. | | | David Brakebill | 20 Nov 10 7:54 AM MST | | Anthony, excellent response to the question. The only additional point I would make would be in System's Inc. defense would be the unforseen delay caused by the weather which further complicated their already compressed timeline. | | | James Best | 17 Nov 10 8:28 PM MST | | Question #3
3 a. Under section 2c it states: “In the event the conversion process is stopped, cancelled, or suspended by Big Bank, Big Bank agrees to pay Systems Inc. all labor costs, expenses, and charges incurred by Systems Inc. in preparing to perform under this Agreement. Systems Inc. shall submit to Big Bank an itemized statement of all such charges and Big Bank agrees to pay said statement prior to the return to Big Bank of any conversion input information or data provided to Systems Inc. and, in any event, within thirty (30) days after receipt."
Basically Big Bank will be liable for the cost of doing business with us (System Inc.). We also reserve the right to hold their input information until we receive payment. If Big Bank decided to rescind the contract we would have lost some valuable time among both organizations. We have also already done four out of the six conversions correctly and without problems.
Under section 8a: “Systems Inc. shall not be responsible for any failure in providing the Services, any delays in processing, or any failure or delay in the delivery of any Reports that may be caused, in whole or in part, by strikes, lockouts, riots, epidemics, governmental actions or regulations, natural disaster, fire, inclement weather, acts of God, computer breakdown or failure, communications failure, interruptions in telephone or electrical service, courier's failure to timely deliver, or any other causes beyond its reasonable control.”
We obviously want to get this deal done, I believe there are faults at both ends that were in our control and there were some natural occurrence outside of our control. The expectation was that Big Bank provided the necessary resources to make approvals at the appropriate time. We want to finish the work and I believe if Big Bank revisits the contract they will also see it is in their best interest to keep moving forward.
Date Modified: 17 Nov 10 8:53 PM MST | | | David Brakebill | 18 Nov 10 6:42 PM MST | | James you are correct. We could also cite (as part of "part b" of question b for lack of a better term) the following facts as part of an argument that Big Bank is responsible for some of these issues and/or not in compliance with the contract (all from the scenario role/assignments):
"other issues have been based on the bank’s failure to provide you with necessary information;" " A provision in the contract required your company to receive four people’s approval before making any changes to the conversion data fields, and one of those four people, Glenda Givealot, was out of the country doing missionary work in an area of the world that did not have cell phone reception."
And due to this the timeline changed, further delaying the conversion (again, not our fault). | | | Taryn King | 17 Nov 10 10:15 PM MST | | Question #4
Why would you prefer litigation over amicable resolution?
One advantage of litigation is that your case is heard in a courtroom which is neutral ground and the judge by law has to be impartial. Sometimes an arbitrator may be personally affected by the decision made in the case and may not be impartial.
Another advantage of litigation is that you have the ability to appeal if you are unhappy with the court decision. However, in binding arbitration, once a decision is reached you cannot appeal.
The most important reason to litigate is when the stakes are high. If the case means losing your business or losing your Intellectual Property rights you may definitely want to litigate.
In our textbook there is a checklist for when to litigate. (Jennings, p.117)
Date Modified: 18 Nov 10 10:38 AM MST | | | James Best | 18 Nov 10 7:15 PM MST | | Taryn,
These are good points on litigation.
Litigation should be considered once we have exhausted all avenues. However some of the things we have to be aware of with litigation is that the judge may not rule in our favor. Sometimes we may think we have the best case based off the contract and we would expect the ruling to support those findings, but the opposing side probably feels the same way also. One of us will end up losing, based on some precedent we might not have thought of.
Often when we get to the point of needing litigation it can be purely emotional base because we felt that we were wronged. This sort of behavior is pride driven. A pride driven case bent on emotion can end up being very costly in money and time. Which is why for this scenario I think we should seek an amicable decision between both parties. Our company would not benefit from the litigation, in fact it would hurt us since we are fairly new and this was just our 4th and largest job. An organization like ours is built on reputation, how would a dispute like this affect our future earning potential?
Date Modified: 18 Nov 10 7:16 PM MST | …show more content…
| | Harpreet Jodha | 18 Nov 10 10:53 PM MST | | Q#5
There are three types of contract performances: Complete, substantial and material breach.
Complete performance is when all the required work, as it is written in the contract, is done. For some contracts the completion of a contract can be easily determined. For example, a temporary placement agency, their part of the contact is complete when they find you a job. There are different considerations for different types of jobs that require contracts. In businesses, at the end of a complete performance the legal authority is turned over to the owner by the firm hired to perform a task.
Substantial performance is when the asked task is complicated and an exact date of completion can’t be set. For example, a construction business. Many errors and complications can arise before the task is complete. Substantial Performance means that the constructed building is for practical purposes just as good as the one contracted for. The terms are usually set in the contract. In many contracts, substantial completion entitles a contractor to receive most of its payment. Substantial performance also requires the contractor to have, in good faith, intended to comply with the contract, and have substantially done so. This type is similar to complete performance as it entitles a contractor to get the payment. The owner needs to define the intended use of the newly constructed building for substantial performance to work.
Material Breach is a breach that negatively affects the outcome of the agreement. The main requirement for a material breach is that the non-breaching party didi not receive the “substantial benefit” of the contract.
An example would be an electrician hired to install high grade wires for safety but instead installed low grade wires, undermining the safety requirement. In a case of material breach, the non-breaching party may sue immediately for breach of a contract and recover damages. The party may also be excused from performing their part of the contract.
There is also a non-material breach in which the directions weren’t followed exactly as the contract but the work done performs just as well. In such case the non-breaching party may sue for any damages caused by the breach but they must still perform their part of the contract. for example, if the electrician used red color wires instead of black as asked by the owner. | | | Anthony Escribens | 19 Nov 10 10:43 AM MST | | I was recently involved in a small claims dispute with Lackland Storage due to a breach of contract.
I had stored some personal belongings with this company for over two years and was on a monthly storage plan, which renewed on the 1st of every month. Last June I decided to remove my belongings and cancel my monthly contract, the company required me to give them a two week notice and per the contract they had to file the appropriate paperwork to close my account. I visited the storage and removed part of my belongings on June 5th, verbally mentioned to the manager that I would not be needing the storage after June, locked the unit and left. When I returned on June 12th to remove the remaining items, I found a different lock on the unit. I immediately went to the office to find out they had thrown away my remaining belongings and rented the unit to another customer.
I put together an itemized list of the items in question and tried to resolve the matter amicably by asking Lackland to pay me $800 for my loss; they refused and asked me to take them to court, so I did. After everything was set and done, the judge found that Lackland had breached their own contract by not following proper protocol and awarded me $1,300 after calculating the value of each item and their depreciation value at the time of the loss. |
| | Harpreet Jodha | 19 Nov 10 9:11 PM MST | | #6
One concept that i will keep in mind is the differences and similarities between completion and substantial completion. If both conditions are not explained completely in the contract both parties can get into all sorts of problems. Substantial completion should be used as a milestone to reach before the completion of the service.
The second would be the importance of having an attorney present at the time the contract is written.As with all lawyers, contract attorneys advise clients on their legal rights and courses of action in business transactions or personal aggrievements. Contract attorneys represent their clients during court proceedings and use past judicial decisions, client and witness interviews, and current laws to develop compelling cases that support their clients' argument. | | | David Brakebill | 20 Nov 10 8:10 AM MST | | #6. I would have to say that the most important concept from this (for me) would be communication. Many of the issues presented could have been avoided if we (Systems) had communicated them to Big Bank such as: the lack of availability of one key stakeholder from Big Bank (who was out of the country and out of touch); I also think Big Banks Preskident could have communicated his frustrations earlier/better instead of jumping straight to threatening litigation.
Which brings me to my second most important concept, which is dispute resolution. Neither party in this scenario had (so it seems) has any form of dispute resolution team or procedure. This led to the level of frustration reaching the boiling point when it was not necessary.
(edited to correct misspellings from my first post (that I had to do via my phone which was not easy!))
Date Modified: 21 Nov 10 4:10 PM MST | | | Anthony Escribens | 20 Nov 10 12:00 PM MST | | Question 6. One concept I learned was to ensure the contract is unbiased as both parties should have an equal amount to gain and lose. It appeared to me that Big Bank provided little input during the negotiation process of this contract and was hold accountable for most of the losses. | | | James Best | 20 Nov 10 2:49 PM MST | | This is an interesting statement, you are right the contract was written in a method that was not favorable to Big Bank. With a name like Big Bank I would figure their protection would been a little more defined.
Currently I am involved with contract negotiations with an organization whose contract has some similar demands on my organization. We are aggressively trying to change the language of the contract to protect us from unintended costs. They figure we are a large organization and that they could basically charge us any amount they wanted. Most of the charges were around development work, and we realize that there is cost associated with it, but we also know that outsource development work of the nature we need should be priced at a reasonable amount. If not, we would develop it our self. We are in a similar situation with the fact we want to get the develop work done and done as soon as possible.
Our lawyers are heavily involved with the process and to make sure we are protected. To your point both parties have an equal amount to gain and lose. I think this is a very important concept and I am surprised that this contract signed by Big Bank did not provide all the necessary protections. | | | Taryn King | 20 Nov 10 4:52 PM MST | | I agree James, the contract was not at all favorable for Big Bank at all! It almost seemed as though it was a lose-lose situation for them. However, the contract did protect Systems Inc. from every angle. A contract needs to be written so that both parties are equally protected. | | | Taryn King | 20 Nov 10 4:58 PM MST | | The two most important concepts from this exercise are the importance of careful contract negotiation, formation and documentation. It is also important to try to take into account all foreseeable issues that may come up during the performance of the contract and resulting damages. It is better to spend more time negotiating and documenting the contract than trying to deal with issues that were not taken into account later. | | | James Best | 21 Nov 10 4:56 PM MST | | Question #6
The two most important concepts to me would be communication and the importance of negotiations. If Big Bank and System Inc. had better communication tactics they could have discussed their issues prior to them being escalated, as part of a Statement of Work there should be a process to discuss issues and how they need to be addressed.
I also believe there was a lack of negotiations because the contract appears to be one sided. In any type of contract both parties should have some give and take. This helps open the lines the of communication and allow for the basis of expectations.
Date Modified: 21 Nov 10 4:57 PM MST |
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| Scenario | |
Scenario Summary |
This group project covers a contract dispute situation. As a group, work through the following questions. Feel free to ask further questions in the thread of your group members, and answer your group members questions as well. The best work will be where all group members work together to get the questions answered. You will be graded on the quality of your posts, but points will be deducted if your answers are duplicates of your group members. Take turns and build on posts. The questions below have more …show more content…
than one part within each of them so work through them together. Have fun with this! The main thing is that you learn from this exercise, along with creating some quality collaboration with your group. Read the Group Project under Course Home or the Assignments page for this week for the full grading rubric for this Group Project. Good luck!
Download and review the Contract Here. Your Role/Assignment |
You are the manager of a large data processing project. Your company, Systems Inc., worked very hard to obtain a contract with Big Bank to do their conversions from their recent acquisition, Small Bank.. The bank met with several companies to discuss who would do the best work on the contract. During your meeting with Big Bank, you told them that you had “never missed a conversion deadline.” At the time, your company had never missed a conversion deadline, but the company had only done three conversions. You also told them that your data processing systems were the fastest around.” After months of negotiation, Big Bank signed the contract. The President of Big Bank said, “We like fast, and you guys are fast. We choose you."
You started work on the data conversion immediately (ahead of contract). According to the contract, your team was responsible for ensuring that the new bank’s data was converted to Big Bank’s data processing system. The contract involved six large conversions. The first involved converting Big Bank’s savings accounts, the second its checking accounts, the third its investment portfolio, the forth its credit card, the fifth its mortgage portfolios and the six its large business loans. Your team completed four of the six conversions without a problem. The fifth task, the largest and most important, has encountered numerous problems. Some problems have been based on personnel issues on your part and other issues have been based on the bank’s failure to provide you with necessary information. One issue resulted when the conversion was delayed for over one week. The data to be converted was formatted differently than the bank’s previously specifications provided. For that reason, the data conversion fields needed to be changed. A provision in the contract required your company to receive four people’s approval before making any changes to the conversion data fields, and one of those four people, Glenda Givealot, was out of the country doing missionary work in an area of the world that did not have cell phone reception. Another issue resulted when the conversion was supposed to occur. Because of the change in the timeline, the conversion schedule had to change. The weekend the conversion was rescheduled to occur, an ice storm struck the state where your data processing computers were housed. Your facility lost electricity for three days and the conversion was delayed again until power could be restored. | K E Y P L A Y E R S | |
Big Bank President | |
| The Bank’s President, who is a known hothead, was furious. He called you after power was restored and yelled,“We are rescinding this contract!!!!” He also threatened to take the case to court to seek damages. | | | |
Systems Inc. President | |
| Your company president wants this situation resolved amicably. He also wants to maintain the contract with the bank, as he sees the potential for a large amount of business with the bank in the future if this contract proves successful. Corporate counsel believes that the bank just needs to be shown that they are out of compliance with the contract just as we are and that both parties are to “blame.” He wants you to start negotiations with the bank to modify certain provisions of the contract to make expectations clearer.
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| Y O U D E C I D E | |
Activity |
Below is the list of questions you should work together to answer in this thread. Feel free to come up with more to answer together if you need them. 1. Can Big Bank’s President rescind the contract? Under what circumstances can a contract be rescinded by either party? What facts have to be alleged and proven? What is the result of a contract that is rescinded? 2. Big Bank’s President also threatens legal action. What potential causes of action could you foresee him bringing in court? Would he be successful? Why or why not? What arguments could Systems Inc. raises in its defense? What are Big Bank’s potential damages? 3. Review the facts provided and the sample contract. What provisions of the contract could you cite to support an argument that it is not in Big Banks best interest to rescind the contract? What facts could you cite to support an argument that Big Bank be responsible for some of these issues and/or not in compliance with the contract? 4. In this situation amicable resolution of problems is greatly preferred by your company. Would this be true in all contract disputes? In what situations and why would you decide to move to litigation over amicable resolution? 5. There are 3 types of contract performance: complete, substantial and material breach. Describe the differences (and similarities) among the three, and explain some of the legal ramifications for one or more of these types of performances. (For example, what happens if one party performs completely but the other party performs only substantially?) Give examples from outside readings or experiences in your career or personal business life. 6. What are the two most important concepts from this exercise that will help you in future contract negotiations? (All students must answer this question for full credit in this project.)
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Top of FormBottom of Form | | Responses | Author | Date & Time | | Harpreet Jodha | 17 Nov 10 11:34 AM MST | | HELLO EVERYONE, has anyone read the case yet? I read the contract, there is lots of information we need to go through. Please response back so we can start on this. thanks ill try to post something more later tonight. | | | David Brakebill | 17 Nov 10 1:23 PM MST | | Hello Harpeet and fellow group members,
I have not read the entire contrat (yet) but from what I've seen so far, in respnse to question 1, I do not think the contract can be rescinded due to the concept of Impossibility. It is physically impossible to complete the conversion on time (in accordance with the contract requirements) due to the loss of electricity. | | | Anthony Escribens | 17 Nov 10 5:51 PM MST | | Question 1 - I'll attempt to address this question.
Q. Can Big Bank’s President rescind the contract?
A. Based on the terms of the contract, Big Bank’s President can rescind the contract, but it must give Systems Inc. a 180 day notice and pay 75% of the estimated remaining service fees to the service being discontinued or the monthly minimum charge, whichever is greater.
Q. Under what circumstances can a contract be rescinded by either party?
A. The contract may be rescinded by either party under any circumstance, but only if a 180 day notice is given. However, according to the contract, if Big Bank rescind the contract, it will have to pay 75% of the estimated remaining service fees to the service being discontinued or the monthly minimum charge, whichever is greater.
Q. What facts have to be alleged and proven?
A. One fact that was proven was the over one week delay due to the missing approval of Glenda Givealot, who was traveling conducting missionary work. Because of this delay, the scheduled conversion had to be moved to a different date, which happened to fall on an ice storm, causing the loss of electricity for three days and delaying the work once again.
Q. What is the result of a contract that is rescinded?
A. The result of the contract being rescinded will depend on the party who rescind on the contract. If Systems, Inc. where to rescind, they would simply give a 180 day notice to Big Bank. However, if Big Bank were to rescind on the contract, they would not only need to give the 180 day notice, but they would also be liable for paying 75% of the estimated remaining service fees to the service being discontinued or the monthly minimum charge, whichever is greater.
Date Modified: 17 Nov 10 6:35 PM MST | | | Taryn King | 18 Nov 10 4:21 PM MST | | When can a contract be resinded?
A contract can be rescinded using the defenses in contract formation which include:
Capacity – both parties must have age and mental capacity
Misrepresentation – misstatement of a material fact or failure to disclose it, reliance on the buyer on that material or omission of, resulting damages to the buyer (Jennings, p432)
Fraud – intentional disclosure of false information, or failure to disclose relevant information
Illegality – violates general public policy or a statue
Duress – coercion into a contact
Undue Influence – one party taking advantage of another party due to a confidential relationship
Also both parties can agree to mutual rescission before a contract is executed with a new contract.
Date Modified: 18 Nov 10 4:22 PM MST | | | David Brakebill | 18 Nov 10 6:37 PM MST | | Anthony, excellent response to the first question. However, I don't think the President of Big Bank can rescind the contract. I base this on Section 8 (a) "Systems Inc. shall not be responsible for any failure in providing the Services, any delays in processing, or any failure or delay in the delivery of any Reports that may be caused, in whole or in part, by strikes, lockouts, riots, epidemics, governmental actions or regulations, natural disaster, fire, inclement weather, acts of God, computer breakdown or failure, communications failure, interruptions in telephone or electrical service, courier's failure to timely deliver, or any other causes beyond its reasonable control. In the event such delays exist without interruption for a period of more than thirty (30) days, Big Bank or Systems Inc. may elect to terminate this Agreement without breach." Accprding to the information given, the project suffered a delay of three days due to a loss of electricity due to a storm (among a host of other delays). In theory, yes, the President of Big Bank can rescind the contract (per the contract) as it is his perogative...but the way I am reading the scenario, he said he was going to rescind it due to delays and that's where I think we should say no, he cannot. | | | Anthony Escribens | 18 Nov 10 9:19 PM MST | | David, very good point, I guess I was getting somewhat of a different interpretation of the same question. Your response makes a lot of sense and based on the contract, Big Bank's President will not be able to rescind the contract without penalty. As I mentioned in my last response, if Big Bank were to rescind on the contract, they would not only need to give the 180 day notice, but they would also be liable for paying 75% of the estimated remaining service fees to the service being discontinued or the monthly minimum charge, whichever is greater. | | | Taryn King | 19 Nov 10 7:48 PM MST | | Yes, I agree that Big Bank cannot rescind the contract. In order to rescind the contract he would have to prove one of the defenses in contract which include : Capacity, Fraud, Illegality, Duress, or Undue Influence. None of these would apply in this case.
I believe the only way the contract could be rescinded is if there was mutual rescission, where both parties agree. If the contract were rescinded, it would be considered void. In the case of Big Bank, it would have the effect of Big Bank walking away as if a contract never existed. | | | Anthony Escribens | 17 Nov 10 6:29 PM MST | | Question 2 - Here are my thoughts.
Q. Big Bank’s President also threatens legal action. What potential causes of action could you foresee him bringing in court? Would he be successful? Why or why not?
A. I believe that Big Bank’s President would claim that System’s, Inc delayed the project causing the project to delay and loosing valuable time, resource utilization and money; so I believe he will attempt to seek monetary compensation for the time his company lost during the project. I don’t believe he will be successful because the reason System’s, Inc was delayed to begin with was due to incorrect specifications provided by Big Bank. Section 3 (Input and Output Data) of the contract clearly states: “The input data shall be transmitted by Big Bank to Systems Inc. in a format acceptable to Systems Inc. via an approved telecommunication method and system. Big Bank is solely responsible for the accuracy and delivery of all information to be provided to Systems Inc. for processing.”
Q. What arguments could Systems Inc. raises in its defense? What are Big Bank’s potential damages?
A. In their defense, System’s, Inc can state that Big Bank failed to provide accurate data as per the contract, which caused the initial delay of the project. I don’t believe that Big Bank should be granted damages; the project was delayed due to incorrect specifications provided by their employees. | | | David Brakebill | 20 Nov 10 7:54 AM MST | | Anthony, excellent response to the question. The only additional point I would make would be in System's Inc. defense would be the unforseen delay caused by the weather which further complicated their already compressed timeline. | | | James Best | 17 Nov 10 8:28 PM MST | | Question #3
3 a. Under section 2c it states: “In the event the conversion process is stopped, cancelled, or suspended by Big Bank, Big Bank agrees to pay Systems Inc. all labor costs, expenses, and charges incurred by Systems Inc. in preparing to perform under this Agreement. Systems Inc. shall submit to Big Bank an itemized statement of all such charges and Big Bank agrees to pay said statement prior to the return to Big Bank of any conversion input information or data provided to Systems Inc. and, in any event, within thirty (30) days after receipt."
Basically Big Bank will be liable for the cost of doing business with us (System Inc.). We also reserve the right to hold their input information until we receive payment. If Big Bank decided to rescind the contract we would have lost some valuable time among both organizations. We have also already done four out of the six conversions correctly and without problems.
Under section 8a: “Systems Inc. shall not be responsible for any failure in providing the Services, any delays in processing, or any failure or delay in the delivery of any Reports that may be caused, in whole or in part, by strikes, lockouts, riots, epidemics, governmental actions or regulations, natural disaster, fire, inclement weather, acts of God, computer breakdown or failure, communications failure, interruptions in telephone or electrical service, courier's failure to timely deliver, or any other causes beyond its reasonable control.”
We obviously want to get this deal done, I believe there are faults at both ends that were in our control and there were some natural occurrence outside of our control. The expectation was that Big Bank provided the necessary resources to make approvals at the appropriate time. We want to finish the work and I believe if Big Bank revisits the contract they will also see it is in their best interest to keep moving forward.
Date Modified: 17 Nov 10 8:53 PM MST | | | David Brakebill | 18 Nov 10 6:42 PM MST | | James you are correct. We could also cite (as part of "part b" of question b for lack of a better term) the following facts as part of an argument that Big Bank is responsible for some of these issues and/or not in compliance with the contract (all from the scenario role/assignments):
"other issues have been based on the bank’s failure to provide you with necessary information;" " A provision in the contract required your company to receive four people’s approval before making any changes to the conversion data fields, and one of those four people, Glenda Givealot, was out of the country doing missionary work in an area of the world that did not have cell phone reception."
And due to this the timeline changed, further delaying the conversion (again, not our fault). | | | Taryn King | 17 Nov 10 10:15 PM MST | | Question #4
Why would you prefer litigation over amicable resolution?
One advantage of litigation is that your case is heard in a courtroom which is neutral ground and the judge by law has to be impartial. Sometimes an arbitrator may be personally affected by the decision made in the case and may not be impartial.
Another advantage of litigation is that you have the ability to appeal if you are unhappy with the court decision. However, in binding arbitration, once a decision is reached you cannot appeal.
The most important reason to litigate is when the stakes are high. If the case means losing your business or losing your Intellectual Property rights you may definitely want to litigate.
In our textbook there is a checklist for when to litigate. (Jennings, p.117)
Date Modified: 18 Nov 10 10:38 AM MST | | | James Best | 18 Nov 10 7:15 PM MST | | Taryn,
These are good points on litigation.
Litigation should be considered once we have exhausted all avenues. However some of the things we have to be aware of with litigation is that the judge may not rule in our favor. Sometimes we may think we have the best case based off the contract and we would expect the ruling to support those findings, but the opposing side probably feels the same way also. One of us will end up losing, based on some precedent we might not have thought of.
Often when we get to the point of needing litigation it can be purely emotional base because we felt that we were wronged. This sort of behavior is pride driven. A pride driven case bent on emotion can end up being very costly in money and time. Which is why for this scenario I think we should seek an amicable decision between both parties. Our company would not benefit from the litigation, in fact it would hurt us since we are fairly new and this was just our 4th and largest job. An organization like ours is built on reputation, how would a dispute like this affect our future earning potential?
Date Modified: 18 Nov 10 7:16 PM MST | …show more content…
| | Harpreet Jodha | 18 Nov 10 10:53 PM MST | | Q#5
There are three types of contract performances: Complete, substantial and material breach.
Complete performance is when all the required work, as it is written in the contract, is done. For some contracts the completion of a contract can be easily determined. For example, a temporary placement agency, their part of the contact is complete when they find you a job. There are different considerations for different types of jobs that require contracts. In businesses, at the end of a complete performance the legal authority is turned over to the owner by the firm hired to perform a task.
Substantial performance is when the asked task is complicated and an exact date of completion can’t be set. For example, a construction business. Many errors and complications can arise before the task is complete. Substantial Performance means that the constructed building is for practical purposes just as good as the one contracted for. The terms are usually set in the contract. In many contracts, substantial completion entitles a contractor to receive most of its payment. Substantial performance also requires the contractor to have, in good faith, intended to comply with the contract, and have substantially done so. This type is similar to complete performance as it entitles a contractor to get the payment. The owner needs to define the intended use of the newly constructed building for substantial performance to work.
Material Breach is a breach that negatively affects the outcome of the agreement. The main requirement for a material breach is that the non-breaching party didi not receive the “substantial benefit” of the contract.
An example would be an electrician hired to install high grade wires for safety but instead installed low grade wires, undermining the safety requirement. In a case of material breach, the non-breaching party may sue immediately for breach of a contract and recover damages. The party may also be excused from performing their part of the contract.
There is also a non-material breach in which the directions weren’t followed exactly as the contract but the work done performs just as well. In such case the non-breaching party may sue for any damages caused by the breach but they must still perform their part of the contract. for example, if the electrician used red color wires instead of black as asked by the owner. | | | Anthony Escribens | 19 Nov 10 10:43 AM MST | | I was recently involved in a small claims dispute with Lackland Storage due to a breach of contract.
I had stored some personal belongings with this company for over two years and was on a monthly storage plan, which renewed on the 1st of every month. Last June I decided to remove my belongings and cancel my monthly contract, the company required me to give them a two week notice and per the contract they had to file the appropriate paperwork to close my account. I visited the storage and removed part of my belongings on June 5th, verbally mentioned to the manager that I would not be needing the storage after June, locked the unit and left. When I returned on June 12th to remove the remaining items, I found a different lock on the unit. I immediately went to the office to find out they had thrown away my remaining belongings and rented the unit to another customer.
I put together an itemized list of the items in question and tried to resolve the matter amicably by asking Lackland to pay me $800 for my loss; they refused and asked me to take them to court, so I did. After everything was set and done, the judge found that Lackland had breached their own contract by not following proper protocol and awarded me $1,300 after calculating the value of each item and their depreciation value at the time of the loss. |
| | Harpreet Jodha | 19 Nov 10 9:11 PM MST | | #6
One concept that i will keep in mind is the differences and similarities between completion and substantial completion. If both conditions are not explained completely in the contract both parties can get into all sorts of problems. Substantial completion should be used as a milestone to reach before the completion of the service.
The second would be the importance of having an attorney present at the time the contract is written.As with all lawyers, contract attorneys advise clients on their legal rights and courses of action in business transactions or personal aggrievements. Contract attorneys represent their clients during court proceedings and use past judicial decisions, client and witness interviews, and current laws to develop compelling cases that support their clients' argument. | | | David Brakebill | 20 Nov 10 8:10 AM MST | | #6. I would have to say that the most important concept from this (for me) would be communication. Many of the issues presented could have been avoided if we (Systems) had communicated them to Big Bank such as: the lack of availability of one key stakeholder from Big Bank (who was out of the country and out of touch); I also think Big Banks Preskident could have communicated his frustrations earlier/better instead of jumping straight to threatening litigation.
Which brings me to my second most important concept, which is dispute resolution. Neither party in this scenario had (so it seems) has any form of dispute resolution team or procedure. This led to the level of frustration reaching the boiling point when it was not necessary.
(edited to correct misspellings from my first post (that I had to do via my phone which was not easy!))
Date Modified: 21 Nov 10 4:10 PM MST | | | Anthony Escribens | 20 Nov 10 12:00 PM MST | | Question 6. One concept I learned was to ensure the contract is unbiased as both parties should have an equal amount to gain and lose. It appeared to me that Big Bank provided little input during the negotiation process of this contract and was hold accountable for most of the losses. | | | James Best | 20 Nov 10 2:49 PM MST | | This is an interesting statement, you are right the contract was written in a method that was not favorable to Big Bank. With a name like Big Bank I would figure their protection would been a little more defined.
Currently I am involved with contract negotiations with an organization whose contract has some similar demands on my organization. We are aggressively trying to change the language of the contract to protect us from unintended costs. They figure we are a large organization and that they could basically charge us any amount they wanted. Most of the charges were around development work, and we realize that there is cost associated with it, but we also know that outsource development work of the nature we need should be priced at a reasonable amount. If not, we would develop it our self. We are in a similar situation with the fact we want to get the develop work done and done as soon as possible.
Our lawyers are heavily involved with the process and to make sure we are protected. To your point both parties have an equal amount to gain and lose. I think this is a very important concept and I am surprised that this contract signed by Big Bank did not provide all the necessary protections. | | | Taryn King | 20 Nov 10 4:52 PM MST | | I agree James, the contract was not at all favorable for Big Bank at all! It almost seemed as though it was a lose-lose situation for them. However, the contract did protect Systems Inc. from every angle. A contract needs to be written so that both parties are equally protected. | | | Taryn King | 20 Nov 10 4:58 PM MST | | The two most important concepts from this exercise are the importance of careful contract negotiation, formation and documentation. It is also important to try to take into account all foreseeable issues that may come up during the performance of the contract and resulting damages. It is better to spend more time negotiating and documenting the contract than trying to deal with issues that were not taken into account later. | | | James Best | 21 Nov 10 4:56 PM MST | | Question #6
The two most important concepts to me would be communication and the importance of negotiations. If Big Bank and System Inc. had better communication tactics they could have discussed their issues prior to them being escalated, as part of a Statement of Work there should be a process to discuss issues and how they need to be addressed.
I also believe there was a lack of negotiations because the contract appears to be one sided. In any type of contract both parties should have some give and take. This helps open the lines the of communication and allow for the basis of expectations.
Date Modified: 21 Nov 10 4:57 PM MST |
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