Anticipating legal risks in contracts
Running head: ANTICIPATING LEGALS RISKS
Anticipating legal risks in contracts
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Due to the advent of the computer revolution which has been so fast and so dynamic in its growth and development, together with the global fads which are the web and the internet, likewise moving in the same speedy pace, information and data encircle to and fro all over the world sometimes beyond the ordinary access capabilities and expedition of the average human. Owing to these variables, business nowadays has to be swift and accurate in its dealings with customers, suppliers and partners and associates lest the possibility of a litigation which is a time-consuming, money- wasting and energy-draining enterprise.
Anticipating Legal Risks in Contracts
The possible case at bar involves two business outfits, a supplier (Span Systems or Span for short) and an end-user of consumer (Citizen-Schwarz AG or C-S for brevity) which is a large German bank. The controversy, albeit mild at the moment, pertains to certain software materials to be developed by Span and to be tendered unto C-S in accordance with the contract entered into by and between parties.
The dispute arose after Span committed some lapses in the delivery of the current order for a specific program. Aside from the delay, there are allegations of deficiencies in the subject product. Leon Ther, a no-nonsense key figure in C-S, expressed dismay and disappointment. He has asked for the transfer of all unfinished items to C-S at once. He further intimated a rescission or cancellation of the supply covenant with Span.
Admittedly, the shortcomings are attributable to both sides. The requirements of C-S in its system have considerably grown and have therefore become larger than when it was during the negotiations or when the contract was perfected. Although there was a provision for allowances for ordinary changes, the ones introduced after the signing of the contract were not of the ordinary character. Furthermore, the review and approval timeframes of C-S were also not on the dot. At any rate, Span tried its best to be punctual which efforts, however, have sacrificed quality. Thus, in the process of wanting to please and make happy the people of the big bank, desired standards were not met at par.
Before addressing the concerns and conveying to C-S the possible threshing out of the matters at hand, it was learned that C-S is having incipient discussions with an Indian software man in London to possibly cause the completion of the unfinished tasks. Apprehension is ripe though that C-S must have already disclosed the codes of certain modules which are necessary for the start-up of the newly engaged developer.
The legal issues have to be defined. On the part of Span, did it really incur delay in the delivery of the subject items? If so, was the delay unreasonable? Next is the matter of whether or not the product performance of Span was in accordance with the agreed specifications.
In the case of C-S, it must be determined that the changes it introduced were ordinary ones as would not have affected the work schedule of Span. This has bearing on the lateness of Span as charged by C-S. It must be of note, as a matter of fact, that this was later on admitted by Leon Ther. Secondly, and more importantly, did not C-S commit violations against the property rights of C-S if indeed it shared the codes of some modules with the new Indian software developer?
Joining all issues and discuss each in an encompassing manner can be a better presentation of the legal principles involved.
The dynamics appurtenant to delay and poor quality on the part of Span, and unreasonable changes or escalations on the part of C-S are matters within the legal precepts of breach of contract. It must be noted though that all these are dependent on proof and evidence.
As to the disclosure of the codes of the modules, the provisions of statutes pertaining to infringement or violation against intellectual properties are applicable. Just the same, it will likewise be a calisthenics in the presentation of proof and evidence.
A third principle of law has to be entertained here. If none of the parties can prove the liability of one another, the courts will put them in a situation such that they will be on their own. Each will be on its own. This is the Latin maxim of in pari delicto where the court will adjudge both as negligent or equally guilty.
Taking action within the scope of legal remedies does not assure air-tight court victory. Besides, litigations are costly, time-consuming and wastes both mental and physical energies. Justice is a pillar of democracy and business is a component of democracy. Nonetheless, outright resort to the judicial or quasi-judical process may not necessarily bring justice and benefit to the initiating litigant. A plaintiff or complainant has his cards, so does the defendant or respondent. Furthermore, a business engaged in the sale of goods and services must have the wisdom not to earn the ire of the target market by dragging a member into the inconvenience of a hazardous suit where there is no clear winner. In the case of Span here, it must be importantly noted that a bigger project from C-S is in the pipelines. A lighter side may advise: the customer is always right. Even if he or she may actually be wrong.
In sum, the degree of risk and opportunity in legal propositions are the same. In the present case, the violation against intellectual property committed by C-S, if indeed it so committed, may be considered a legal opportunity. It must again be emphasized that it all rests on the quantum of evidence and on how the judge or jury will appreciate what is presented in evidence. For Span, the legal risk is the issue of delay and the poor quality of the delivered products which can all be embraced under the generic coverage of breach of contract. Yes, Span has a ready defense about C-S not doing its part anent the escalation of changes in its requirements. To recapitulate, there is hesitation to suggest a legal battle for Span to commence under the prevailing circumstances. .
From a macro business viewpoint, what is most advisable is for Span’s managers to be careful, prudent and more detailed in the future when negotiation for a similar transaction. In the present situation, for example, the covering contract should have included a clause for progressive accomplishment. Hence, a twenty per cent performance in accordance with the specified particulars must secure a twenty per cent payment. A proviso for unilateral segmented termination may also be incorporated in the agreement. Anyway, if performance levels are impressive, the delighted end-user customer will always for the go or for the continuance of the undertaking.
The best option for Span to take is to go back to Leon Ther, sit down with him and discuss and explore all avenues of settling the matter. Noteworthy is the fact that no less than Kevin Grant of Span is of the confession that the objective of the project and of the company (Span) was, and still is, to help C-S achieve its goals.
It is the business of business to make business. It is not the business of business to engage in the legal business. Save of course the lawyers, the barristers and the advocates.