Group Big Bank vs Systems Inc Contract Dispute WK4
Transcript of Group Big Bank vs Systems Inc Contract Dispute WK4
Group Big Bank vs Systems Inc Contract Dispute
Big Bank’s president also threatens legal action. What potential causes of action could you foresee
him bringing in court?
Possible causes for Big Bank legal action:
Misrepresentation
“Data processing systems were the fastest around” “Systems Inc. never missed a deadline”
When one party to a contract is not given full or accurate information by the other party about the
contract subject matter, misrepresentation occurs. In the case of misrepresentation in the formation
of a contract, the law allows a rescission of the contract. Rescission means the contract is set aside.
Misrepresentation occurs when a seller makes inaccurate statements about its product or fails to
disclose pertinent information about its product that would affect someone’s decision to enter into the
contract. To be a basis for rescission, the misrepresentation must have been one regarding a
material fact. A material fact is the type of information that would affect someone’s decision to enter
into the contract.
Although misrepresentation can result simply because of inaccurate information, fraud is the
knowing and intentional disclosure of false information or the knowing failure to disclose relevant
information. Fraud has the same elements of proof as misrepresentation, with the added element of
knowledge that the information given is false.
Unconscionable
Section 2c of Big Bank, Systems Inc.
“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”
Some contracts are not actually contracts for criminal or illegal activities, but the terms of the
contract are grossly unfair to one party. A contract that gives all the benefits to one side and all the
burdens to the other is an unconscionable contract. The standards for determining whether a
contract is unconscionable are the public policy standards for fairness that cover all types of contract
provisions and negotiations. This contract could be interpreted as being heavily weighted to protect
Systems, Inc. Gross disparity in the values exchanged is an important factor to be considered in
determining whether a contract is unconscionable
Would he be successful? Why or why not?
I believe this contract would be difficult for either party to contest or defend in court due to its unclear
expectations and vague wording.
I am confident a sit down and talk time with the Big Bank president would persuade him that court is
not the best approach to resolving this opportunity for either party. The vague wording of the contract
in Limited Liability section 8a gives Systems Inc. 30 uninterrupted power outage days before the
contract could be considered void. An ice storm could also be considered an act of God, providing
additional support for Systems, Inc. The most Big Bank (aka Participating Bank) could be
reimbursed for would be for service charges received from Systems Inc. for the twelve month period
prior to the alleged damage.
What are Big Bank’s potential damages?
If performance is not excused and there is a valid contract, the nonbreaching party can recover for
damages from the nonperforming party. The purpose of such compensatory damages is to put the
nonbreaching party in the same position he or she would have been in had no breach occurred.
In addition to compensatory damages, nonbreaching parties are entitled to collect the extra
damages or incidental damages involved because of the breach
Some parties agree in their contracts on the amounts they will pay in the case of nonperformance.
Damages agreed upon in advance are liquidated damages, and the contractual clauses containing
them are enforceable as long as they are not excessive and compensatory damages are not
awarded in addition to the liquidated damages.
In some cases, the nonbreaching party may be able to collect consequential damages.
Consequential damages are damages that result because of the breach and generally involve lost
business, lost profit, or late penalties. Big Bank would need to prove there was an actual breach of
contract, which with this contract written in its current state, leaves much to be interpreted.
What facts have to be alleged and proven?
What is the result of a contract that is rescinded?
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?
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. raise in its defense?
Contract Performance
Once parties have contracted, they have the obligation of performance.
Performance Is Due
Section 3 “The input data shall be transmitted by Big Bank to Systems Inc. in a format acceptable to
Systems Inc. Big Bank is solely responsible for the accuracy and delivery of all information to be
provided to Systems Inc. for processing.”
Performance is due according to the times provided in the contract. In some contracts, however,
prescribed events must occur before performance is required. These events are called conditions.
Conditions precedent are events that give rise to performance. Big Bank’s failure to perform their
data transmission responsibility caused Systems Inc. to be unable to perform their part in the
contract.
Standards for Performance
The contract details what the parties are required to do for complete performance.
Systems Inc. was unable to completely perform their portion of the contract requirements due to Big
Bank’s negligence in formatting acceptable data to Systems Inc. and for requiring four approvals
before changes could be made to data fields without those four individuals being available to review
change requests.
Impossibility
Sometimes, all conditions of a valid contract are met but performance of the contract is excused.
Under common law, the parties are excused from performance if performance has become
impossible. Impossibility means that the contract cannot be performed by the parties or anyone else.
Big Bank provided bad data, required data conversion approvals, approval personnel were not
available.
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?
In this situation, amicable resolution of problems is greatly preferred by your company. Would this be
true in all contract disputes?
An amicable resolution is usually the most expedient and cost effective method of remedying
contract disputes. This requires a willingness from both parties to make these arrangements occur.
When parties are unable to work together (contested divorces) such resolutions may not be an
option.
In what situations and why would you decide to move to litigation over amicable resolution?
Divorce, Blatant, dileberate misrepresentation, fraud
There are three 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. (e.g., 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.
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.)
In: Business and ManagementBusiness Law
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 were 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
fourth 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 were formatted differently than the bank’s previous 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 3 days and the
conversion was delayed again until power could be restored.
From system Inc 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.
From big bank: 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.
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. raise 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 three 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. (e.g., 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.)
The only situation I can think of where either party may rescind is where there is a mutual mistake. A
mutual mistake occurs when the parties to a contract are both mistaken about the same material fact
within their contract. They are at cross-purposes. There is a meeting of the minds, but the parties are
mistaken. Hence the contract is voidable. Collateral mistakes will not afford the right of rescission. A
collateral mistake is one that 'does not go to the heart' of the contract. For a mutual mistake to be
void, then the item the parties are mistaken about must be material to the contract.
The classic case of mistake is Sherwood v. Walker. Seller Walker owned breeding cows, worth
between $750.00 and $1,000.00 and barren cows, worth about $80.00. Buyer Sherwood inspected
an apparently barren cow, Rose 2nd of Aberlone, and decided to buy her. A price was agreed on 5.5
cents per pound but before the exchange of money and cow, Walker found Rose was pregnant and
refused to part with her. The court said that if both parties thought the cow was barren (a question
for the jury), the contract was voidable on grounds of mutual mistake.
As to the effect it depends on which party assumed the risk
Restatement of Contracts 154. When a Party Bears the Risk of a Mistake
A party bears the risk of mistake when
1. the risk is allocated to him by agreement of the parties, or
2. he is aware, at the time the contract is made, that he has only limited knowledge with respect to
the facts to which the mistake relates but treats his limited knowledge as sufficient, or
3. the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to
do so.
Read more: Under what circumstances can a contract be rescinded by either - JustAnswer
http://www.justanswer.com/business-law/3tpo4-circumstances-contract-rescinded-
either.html#ixzz1pkbWEYMm
A legal threat is a statement by a party that it intends to take legal action on another party, generally
accompanied by a demand that the other party take an action demanded by the first party or refrain
from taking or continuing actions objected to by the demanding party.
Contents [hide] * 1 Nature of legal threat * 2 Types of legal threat * 2.1 Cease-and-desist * 2.2
Demand letter * 2.3 Effect of legal threat * 3 See also * 4 External links |
[edit] Nature of legal threat
Legal threats take many forms. Common to all is that the party making the threat will take some form
of action of a legal nature. Most common is the threatened initiation of a lawsuit against the second
party. Other threats might include an administrative law action or complaint, referring the other party
to a regulatory body, turning the party into the legal authorities over a crime or civil infraction, or the
like. Legal threats are often veiled or indirect, e.g. a threat that a party "shall be forced to consider its
legal options" or "will refer the matter to legal counsel."
[edit] Types of legal threat
[edit] Cease-and-desist
Main article: Cease and desist
A cease and desist (C&D) letter is a formalized legal demand that a party stop ("cease") and refrain
("desist") from an activity that the demanding party finds objectionable, generally couched in formal
language accusing the activity of violating the law.
The objected-to activity may be most anything, although cease-and-desist letters are particularly
common among certain areas of the law:
* alleged intellectual property infringement (e.g. patent infringement, trademark infringement,
copyright infringement, etc.)
* alleged defamation such as libel and slander
* harassment, nuisance, and other torts
* violation of certain agreements to not engage in certain commercial conduct (e.g. with respect to
competition, territories, etc.)
[edit] Demand letter
Main article: Demand letter
A civil recovery demands letter.
A "demand letter" is a formalized demand by a party that another party pay money or take certain
acts, often accompanied by a claim that the second party has engaged in illegal conduct, with an
implicit or explicit threat that the demanding party will take some form of legal action
[edit] Effect of legal threat
For the most part a legal threat is of no legal significance other than a matter of negotiation tactics;
however, in certain instances a legal threat does have some legal significance. Among other things a
legal threat may do the following:
* Establish notice - the party receiving the threat, and the party making the threat, are "on notice" of
the circumstances and cannot later deny they were unaware.
* Constitute extortion, blackmail, or some other crime or tort involving improper threats of harm: for
example, it is considered unethical, and in some cases a crime, to threaten to report criminal
conduct to the police unless a settlement is reached.
* In some circumstances, a claim (veiled or not) that a party will take action based on alleged
violation of the law gives rise to a right by the receiving party to bring an action for declaratory
judgment that it has not broken the law: for example, if the holder of a trademark claims that a party
is infringing a trademark, that party may bring suit asking a court to declare that there is in fact no
infringement.
In addition to their legal significance, legal threats may create a number of practical results:
* Intimidating a party into acquiescing to the demand, whether or not there is a legal basis for it, out
of fear of litigation expense, negative publicity, loss of entitlement (e.g. losing a business license), or
other negative consequence
* Alerting a party to illegal conduct it was unaware of, or that it did not realize was illegal or
objectionable
* Risking public disclosure of the threat, thereby portraying the party making the threat in a bad light
(see the Streisand effect)
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.
1 Can Big Bank’s President rescind the contract? Yes, based on that there was never a meeting of
the minds on essential terms.
Under what circumstances can a contract be rescinded by either party? A contract can be rescinded
by the parties' mutual agreement or unilaterally by a party upon proper grounds.. In turn, an "action
for rescission" is actually a suit to enforce the rescission by seeking appropriate relief, i.e., a return to
the status quo, based upon rescission.
What facts have to be alleged and proven? 1 – Systems Inc. met the conversions deadlines on their
previous conversions. 2 – Systems Inc. has the fastest data processing, confirmed by the President
of Big Bank. 3 – The mortgage portfolio conversion was delayed 10 days. 4 – That one of the people
who has to sign-off on changes was out of the country and out of contact.
What is the result of a contract that is rescinded? Rescission is a remedy that disaffirms the contract.
The remedy assumes the contract was properly formed, but effectively extinguishes the contract ab
initio as though it never came into existence; and its terms cease to be enforceable.
2 Big Bank’s President also threatens legal action. What potential causes of action could you
foresee him bringing in court? Breach of contract based on performance
Would he be successful? Why or why not? I don’t think he would. Big Bank also did not perform well,
they failed to provide Systems Inc. necessary information, and they did not have a plan in place in
the event a key decision maker was not available to sign-off when a change to the conversion fields
was needed.
What arguments could Systems Inc. raises in its defense? That Big Bank did not provide all the
necessary information and proper planning for changes to conversion fields, and are out of
compliance with the contract.
What are Big Bank’s potential damages? There could be monetary damages as well as a hit on their
reputation.
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? I agree with
Charles on this answer, but to add to the argument that it is not in Big Banks best interest to rescind
the contract, is Paragraph 8a. Limitation Of Liability, where it states: “Big Bank is under no duty to
make any payments to Systems Inc. for any period exceeding five (5) consecutive business days in
which the Services are not performed by Systems Inc. as a result of a natural disaster or other
phenomenon mentioned above.” This includes: inclement weather, interruptions in telephone or
electrical service. As a result of the ice storm, they were shut down for (3) consecutive days,
therefore, Systems Inc. is not responsible for the delay and Big Bank would still have to honor 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? Again, I agree with Charles on this question, and
you can add to it, from paragraph 2b under Conversion Of Big Bank’s Information that: “Systems Inc.
reserves the right to postpone conversion of Big Bank's information files if Big Bank is late in
delivering its conversion input
information or if any other circumstances arise that might jeopardize the successful completion of
Big Bank's information conversion or the processing of the Big Bank's following day's transactions
for any other customers of Systems Inc.”
4. In this situation amicable resolution of problems is greatly preferred by your company. Would this
be true in all contract disputes? No, sometimes the two parties just can’t work things out, or there
may have been gross negligence on the part of one party.
In what situations and why would you decide to move to litigation over amicable resolution? There
are countless reasons why litigation commences. Some of the manageable reasons are:
Stubbornness/Pride, Lack of Knowledge/Understanding, Passion/Emotions, Failure to
Communicate, and Greed. Big bank’s President was angry so he could go to court because of
emotions running high, etc.
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?
A contract is a relationship between, generally, a buyer and seller defined by an agreement about
their respective rights and responsibilities, a contract is also a document that describes such an
agreement about those rights and responsibilities. In Phase I of the Contract Management Process,
the pre-award phase, where the contract begins, the key actions are too: clearly state your
objectives, identify the sources and nature of uncertainties about achieving those objectives, defining
and assessing risks, and making a decision about an appropriate course of action. Therefore, the
most important thing I feel in developing contracts is communication. Listen to you client, listen and
understand their expectations, as the buyer, understand limitation, and follow through on obligations
to make for a successful outcome. There must be clear and concise understanding of the T’s and
C’s by both parties and well as a complete understanding of the deliverables and expectations, who
is responsible for what and when. These actions go a long way in building trust, an important part of
the client/supplier relations.
Negotiations are about shifting risk, who will bear the most risk in a contract. So, it is important to be
prepared, know your strengths and weaknesses as well as you opponents strengths and
weaknesses, understand the objectives, what you hope to get out of the negotiation with minimum
risk.
Can Big Bank's president rescind the contract? Yes, but this is an involved process and both parties
need to agree to modify it. This is because both parties had problems fulfilling their parts of the
contract. Also, an organization (the Big Bank) can cannot eradicate the business contract, because
since their party did something improper (that seems to be them whom input the data incorrectly).
Under what circumstances can a contract be rescinded by either party? This can happen when an
offer to tender is provided by the party that wants to rescind. The offer to tender means the
rescission or needs to make an offer to release back all benefits they got while under the contract
What facts have to be alleged and proven and what is the result of a contract that is rescinded? The
facts needed are to prove that the other group involved did something indecorous. A contract can
also be broken if both groups involved fashioned the same error in making the document.
2. Big Bank's president also threatens legal action. What potential causes of action could you
foresee him bringing in court? He and his company could try to sue for breach of contract.
Would he be successful? No, I don't think he would be.
What arguments could Systems Inc. raise in its defense? That we completed the first four tasks
ahead of schedule, wanted to complete the sixth one to (but haven't yet because of problems with #
5). And, that the original problem with 5 was caused by them and if this hadn't occurred the work
could have been done on time and without the power going out for three days (remember they don't
seem to know about any problems or delays caused by your personal problems.
What are Big Bank's potential damages? The funds lost from the conversion, but I don't think this
would occur.
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? It would cost
them money for what has already been done (about 4/5th of it), and since we have already done the
work and are familiar with its system and its people it would take a lot of time and money for a new
company to take over (not only if they had to re-do the entire process, but also all of the revenue
from both current (they would have to bank elsewhere) and future (same reason) clients. Also, billing
etc., would not be completed in a timely manner (more funds lost).
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? They did not give us the correctly formatted data,
and they could not get the signatory guarantee on time (this was both caused by their organization).
4. In this situation, amicable resolution of problems is greatly preferred by your company. Would this
be true in all contract disputes? No it is not.
In what situations and why would you decide to move to litigation over amicable resolution? If a
contract is not re-written or altered and if there is a lot of money owed but not paid (including profits
lost while not working on other projects while doing this unfunded one).
5. There are three 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. Complete performance of a contract simply means that the contract was
completed. Material breach occurs when a party does not do an obligation of the contract that it
momentous enough that it the other party could sue them for damage. So, like the complete
performance, some of the contract was done, but unlike the first, not all of it.
Substantial performance is a the opposite of material breach. It's used as defense to when another
claims you have substantially or significantly broken as in (material) a contract. So, unlike the
second it is to prevent successful suing or claims by the plaintiff and like the first and second
(Complete, material breach), some of the contract was done but not all. But, it is essentially and
really stating that anything not done was immaterial or irrelevant and what was needed for the
contract was done either exactly how it was supposed to be because whatever changes did happen
they didn't affect the outcome or goals implied in the contract.
6. What are the two most important concepts from this exercise that will help you in future contract
negotiations? One and the most relevant one is that if contracts have time specifications, they need
to have back up clauses, or at least a plan written in place or attached to it, because of unforeseen
circumstances such as the electrical problem or the signature problem. Also, it is important to know
contract law better before initiating or being part of (especially signing) any type of business contract.
1. Can Big Bank's President rescind the contract?
A: No. Rescission requires that the parties must be able to be returned to the position they were in
before the contract was made. Here, one parties has substantially performed 5/6ths of the contract.
Therefore, rescission will not be permitted.
Under what circumstances can a contract be rescinded by either party?
A: Unilateral rescission is affirmatively permitted upon clear and convincing evidence of fraud,
mistake, illegality, coercion, duress, and as a defense upon a preponderance of evidence that the
contract is adhesive or unconscionable.
What facts have to be alleged and proven? What is the result of a contract that is rescinded?
A:
* Fraud: material misrepresentation intended to induce justifiable, detrimental reliance and causing
damages.
* MIstake: material error of fact by one party, where the other party knew or reasonably should have
known of the first party's mistake.
* Illegality: contract violates public policy (constitutional, statute or regulation).
* Coercion: One party removes the other party's voluntary assent though actual or threatened force
or intimidation.
* Duress: One party's voluntary assent is lost due to extrinsic circumstances (e.g., intoxication,
illness, injury).
* Adhesion: contracting circumstances provide no opportunity to negotiate and the only option is to
accept or reject.
* Unconscionableness: Overwhelmingly greater bargaining power combined with unreasonably
favorable terms.
2. Big Bank's President also threatens legal action. What potential causes of action could you
foresee him bringing in court?
A: Breach of contract for failure to perform the express contract terms.
Would he be successful?
A: No, because (1) bank prevented Systems from obtaining a good faith modification necessary to
performance by not having a key person available to approve the change, and (2) Systems suffered
an unforeseeable external delay which discharges or permits a delay in performance under the
theory of Force Majeure, or alternatively commercial impracticability.
Why or why not? What arguments could Systems Inc. raises in its defense?
A: Force Majeure: "Act of God" preventing timely performance; prevention, as explained above.
commercial impracticability, where contract is made practically impossible to perform due to not
reasonably foreseeable event.
What are Big Bank's potential damages?
A: ASsuming Bank has a case (which it doesn't), lost profits due to the delay in Systems' breach.
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?
A: There is no sample 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?
A: Thoroughly explained in my previous answers.
4. In this situation amicable resolution of problems is greatly preferred by your company. Would this
be true in all contract disputes?
A: All contracts imply a covenant of good faith by each party. Parties that fail to negotiate in good
faith cannot recover and can be assessed damages for preventing the other party/ies from obtaining
the benefit of the bargain.
In what situations and why would you decide to move to litigation over amicable resolution?
A: Litigation is necessary where negotiation would be futile, or where the other party's actions
represent a palpable fraud or intentional disablement or prevention making performance or
completion impossible.
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.
A: Complete: Performance to the letter of the contract, results in the parties being satisfied and thus
having no claims against the other. Example: vendor offers hot dog for $2.00. Customer pays
consideration, receives and consumes hot dog -- is satisfied with product consumed.
Substantial performance: performance that satisfies the material provisions of the contract, if not the
exact terms and conditions. Example: homeowner hirescontractor to build room addition. Addition is
constructed according to specifications, but hardwood floor is 1/2" plank with a 1/4" plywood base,
rather than 3/4" on 3/8" plywood base.
Breach: absolute failure to perform material contract term. Same facts as substantial performance,
above, except that floor is wood veneer over 1/4" plywood base.
6. What are the two most important concepts from this exercise that will help you in future contract
negotiations?
A: This question is subjective. I cannot answer, because I haven't learned anything new.
finis.
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D Project Thread