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Project management is a strategic source of profit for organizations (Mir and Pinnington, 2013). Nevertheless, its success depends of the performance of internal factors such as the employees skills (Legault and Chasserio 2012), as well as, other factors linked to its environment as customer’s expectation (Gil et al., 2011). A project cannot be done without contract.
As a consultant for a public sector of the supply of an IT project, the aim is to make the client aware of the law is abide by (Saxena 2008). In the aim to lead this project in proper contractual decisions, several elements involved in contract will be analyzed that report, therefore, will allow a better understanding of contracts under the common law and its potential risks. As the marketing manager in a diversification strategy aim, before getting implanted in new countries, analyses all the possible opportunities and threats that may be presenting by the potential new market, the consultant does the same on seeking and identifying the law the organization is bound by. The public organization will have to understand each words and principle involved in a contract to not be damaged, impacted negatively financially by that project. In this report several areas will be discussed to minimize the risks impacted by a contract and the ones impacted by potential disputes. It will be seen what’s an offer and acceptance, settlement of contracts, as letter of intent; areas of potential disputes, parties’ liabilities in a contract dispute and finally the risks and safety issues, title to property, tort law and the particularity for a project of supply of hardware and software. In addition, will be seen the good business planning regarding scheduling and project planning. The explanation of these principles will be reinforcing by cases law.
II. Hardware and Software
Hardware is all the physical equipments that are connected to a computer. As a matter of fact, they can be seen and touched, for instance a printer. Software is immaterial, can be defined as a computer language. It exist three types of software, system software, for example widows vista; programming software as java. The last one is application software, as word.
Their costs depend of their performance and their finality.
III. Offer, acceptance and consideration
A contract is defined by (Adams, 2010: 63) as an agreement enforceable in law between several parties; which involves sales of goods, service or land. There are three elements that make a contract justifiable: offer, acceptance and consideration (Keenan and Smith, 2006: 85-110).
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An offer is the willingness of a party to enter into business with another party. Thus, the acceptance is the decision of the other party to receiving this offer and entering into contract with that one (Cheshire et al., 2012). The consideration is regarding as the value of this exchange between parties (Andrews 2011). The offer should not be mistaken with an invitation to treat; which can be illustrated by the goods displayed in shops, see from the outside for instance (Peter Marsh, 2003:65). It can be either an offer to a large public or to a specific person (Elliott and Quinn 2007).It has to be clear defined, to not be source of disputes between parties, as it has been the case for Gibson v Manchester City Council 1979.
Thus, in this case law, Mr. Gibson brought the case to the court seeking a specific performance of the agreement that he thought has been made. It’s important to bear in mind the case. Well, in 1979, Manchester city council was selling council houses to its tenants by sending forms to be filled by them. Here an extract of the form: “please inform me of the price of buying my council house. I am interested in obtaining a mortgage from the corporation to buy the house. Please send me the details” (Beale et al., 2008). After filling the form, Gibson sent it back to the council. In response, the latter replied in stating the selling price they were willing to pay to Gibson, which was 2.725 pounds less 20%. Adding that the maximum mortgage that the organization will may grant will be 2.177 due over 20 years (Gibson v Manchester City Council 1979). At the end of that letter, was written “this letter should not be regarded as a firm offer of a mortgage. If you would like to make a formal application to buy your council house, please complete the enclosed application form and return it to me as soon as possible”. Mr. Gibson filled the form and sent it to the council. The latter replied, saying that the selling price will remain unchanged. Finally Gibson re sent the form, without filling the price part writing: “I would be obliged if you will carry on the purchase as per my application already in your possession”. Nevertheless, afterwards the council removed the house from their maintenance list and sorted it in their purchase list (Beale et al., 2008). In effect, Mr. Gibson was told that Manchester city council would not be carrying on business with him (Beale et al., 2008).
The court first gave reason to the plaintiff. Undoubtedly for the court, there was a contract, even if it wasn’t written. Indeed, according to the council there was no need to analyses the contract on the offer and acceptance principles, instead it should be looked at “the correspondence and the conduct of the parties as a whole”. However, this city council made appealed and won the case. One of the reasons is the word written in that letter which didn’t constitute an offer “this letter should not be regarded as a firm offer of a mortgage” (Gibson v Manchester City Council 1979). Basically, it’s important to have a clear negotiation stage, with a clear offer on the supply of IT and both parties supplier and buyer have to show a willingness to contract together, without forgetting to be aware of elements such as the price, quantity, time (Mulchachy, 2008) prevent a misunderstanding ask the other party to commit themselves to the organization. That’s why before the creation of a contract, it’s justifiable to use documents such as letter of intent (Fransson 2004).
IV. Settlement of contract including letter of intent
Indeed a letter of intent is a written document used in the pre contract stage, negotiation period, called also tenders (Dunne et al. 2005). It expresses the will of parties to enter into business together. It will be relevant to use this document for any projects, especially on the supply of hardware and software. It’s relevant because, this project involves large transaction, as intellectual property rights get involve, which are source of huge profit for businesses (Furmston et al., 1998). Nevertheless, it is not a contract yet, and is not considered as a legal binding (Furmston et al., 1998). Inside the UK law it could be used in court but it’s not always considered by the court; as it has been the case for the case study that follow. The case is British Steel Corpn v Cleveland Bridge and Engineering Co Ltd (1984). British Steel Corpn was the plaintiffs and Cleveland Bridge and Engineering Co Ltd the defendant. Both in the pre negotiation stage used a letter of intent. (BSC) was supplying (CBE) of steel nodes for the construction of a steel- framed building. Nevertheless, (CBE) was doing the construction with another contractor. Meanwhile, (BSC) sent the nodes to the other company, unfortunately one delivery was delayed. Follow to that, the buyer didn’t accept to pay and sought damages. The court didn’t recognized contract. Although, despite its “no legal” binding character, it has influenced some courts decisions. Indeed, for Emcor Drake and Scull v Sir Robert McAlpine (2004).
Contracting for the supply of goods or services is source of risks. In the common law, this type of contract finds itself being under “The Sale of Goods Act 1979” (Mark and Mance 2011). Indeed, the purpose of this act is to discuss the terms in contract for the sales of good and protect the purchaser (Keenan Richies 343). Part II of this act underline the implied terms for the supply of services. In other term, the supplier in accepting to provide the goods to the buyer, at the same time, has the responsibility of providing him an associated service. For instance, for this IT project, the supplier will have to install the equipments require by the organization, in a defined time decided by the parties.
V. Areas of potential dispute
In contract, disputes arise when there’s no performance realized (Turner et al. 1999). Indeed, when one of the parties doesn’t respect its obligations it is source of conflicts. Either the buyer doesn’t pay the supplier or the supplier doesn’t provide the goods in time for instance (Furmston 1992). This, constitute a breach of contract, will means the no performance of a party. Additionally repudiation is a potential area of dispute, that could be defined by the not willingness of a party to honor his obligations for a contract to be lead in the future and the expression of the party to not being a part of a contract (Mahoney Jr 2004). In contract, it’s happen that a party decides to end the contract without any reasons.
VI. Health and Safety
In the supply of hardware and software most of the time elements are buying from abroad (Pfannenstein and Tsai 2004). The health and safety act at work of 1974 protects the buyer. Generally, the supplier has to inform the buyer of the product composition, as well as the risks it could be exposed at using it (Humphreys 2007). This practice is called “General duty” (Chen-Wishart 2005). Besides, measures will also have to be implemented to protect in one hand the workers of the supply company and in the other hand the users. Organizations should refer to the health and safety at work act of 1974 which protect professionals. Looking at the workplace, hardware and software which are the mix of physical components and immaterial elements exposed the users to various hazards (Turner and Callaghan 2006). Some of them are linked to the electrocution risk or could be in term of the worker’s position to the computer. It’s necessary for the organization deliver training to the employees of the public organization. They have to be aware of the behaviors to adopt in case of computer oxidation for instance. The key word is “protection”. It’s important to be working in a proper, comfortable environment. It has been argued that the environment influence the performance, as well as the quality on the customer (Griffin and Neal 2000). Some measures have to be implemented to protect the buyer, the supplier and the final client to avoid a negative impact on both organizations. It’s clear that a physical protection is needed. Nevertheless, an immaterial protection is required to protect the rights of the supply organization (Smith 2003).
VII. Title to property
As said earlier, IT elements are a large source of profit for organizations. Therefore having rights on it, is a commercial activity. First, it’s relevant to know the meaning of the word ‘right’ in intellectual property. Intellectual property is the right of a person’s property to protect his good. Therefore it’s source of huge profit, especially when it comes to software and hardware, which is a part of a powerful industry (Richies and Allen, 2013: 435). Indeed using this material is costly for the organization that decides to use it. The supplier in entering into business with the purchaser for the supply of this product will give licenses to the latter. Through the licenses the owner of a property gives the right to a tiers person to use its property and to make a profit (Smith 2003). Nevertheless, the receive party of these rights; will have to pay some royalties to the proprietary of the product or service. It’s compulsory for the organization to find out either if she can be able to benefit of the owner’s rights or no. At that, to always be updated regarding these rights as it’s not the same in every country (Chissick, 2012: 139). A patent is one of the protection uses by an owner of an invention. This creation has to be original and new to be protected by law. It is under the patent Act 1977 (amended by the Patent Act 2004). The supplier may have a specific design for its equipments and as well as a given them a brand. The latter is called in intellectual property trade mark. It is under the design patent Act of 1988 and trademarks act of 1994. The life cycle of the patent is 20 years and the design 4 year.
VIII. Tort of law, liability of each party in a contract dispute
For the common law a tort in business, tort means the breach of duty of a party which is imposed by the law (Keenans and Richies). Though, if victim of tort, the victim party has to prove that the defendant had committed a wrongful act (Kee and R). There are two circumstances where tortuous liability may be forced in spite of the litigant not being at fault: Tort of strict risk and vicarious obligation. Tort of strict liability implies that the clamant can get payment for misfortune or harm without to demonstrate having blamed or plan to the piece of the litigant. Part 1 of the consumer protection act 1987 provides that a manufacturer is strictly liable for injuries caused by defective products. The rule in Rylands v Fletcher, breach of statutory duty and conversion is a case law of tort imposing strict liability. Vicarious liability, one person may be held by the tort caused by another. Liability is brought about by the individual best capable fiscally to meet any honor of harm (normally on the grounds that the danger is secured by the protection). The inquirer is given an alternate respondent to sue who is more inclined to have the capacity to fulfill any judgment. Damage may be anticipated by forcing liability on the individual in control of the action.
Proof to damage, causation has to be proved.
The Barnett v Chelsea & Kensinghton Hospital Management committee (1998) is an illustration of the former notion. A night watchman was complaining of vomiting and seeks care at Chelsea & Kensighton hospital. Unfortunately one of the doctors of the hospital denied to look after Barnett and advised hi to see his GP the morning if he didn’t feel better. 5 hours later Mr. Barnett died from arsenic poisoning. The court didn’t condemn the hospital because, even if Mr. Barnett would have been looked after by the hospital, he would have passed away.
Having guarantees and warrantees is essential to protect both parties in case of tort.
IX. Good Business Planning, scheduling and project planning
A project is high source of revenue for an organization. The success of the project depends of the realization of the project in time with in optimizing the resources. Firstly, a scope of work has to be clear defined and some processes need to be lead. In the aim of deadline respect, and mastering the scheduling phase, the society has to follow few steps as, Planning, scheduling, monitoring and controlling. Managers can use several organizational tools, mostly informatics software as ‘Gant Chatt’ which helps to the realization of the project on time. A marketing analysis tool called ‘SMART’ is useful. Basically, if the project matches the SMART criteria as, specific, measurable, achievable, realization and time object it means that it’s a pertinent project and hopefully successful (Nelson 2007). To motivate the supplier to achieve this project either before a deadline or on time, incentives are generally used. Penalties can be used as well but is not in favor in business partnership relationship. Internal analysis as financial or human has to be done. The key in all projects is the communication between every members of the project, intern to the organization or extern.
However there are some events causes by neither supplier nor buyer which can delay or in the more unfortunate case end the project (Keenan and Smith, 2006). It could be because of ‘act of God’ or natural disasters or changing country economic situation. To overcome these events, some clauses should be included in the contract to be protected in case of force majeure or act of God (Keenan and Smith, 2006). Force majeure is an event that happens independently of the parties. One example that can illustrate this notion is if a war occurs. Act of God is, events as well that is not liable to the parties, such as natural disaster.
In contracting, businesses should keep updated of the law they are under in, to be aware of their rights, obligations and law implication for their activities. Going to the court to resolve contract disputes involve many resources, financial, humans and it is time consuming. Opting for alternative resolutions method can avoid this disadvantage links to the resolution of problem in court. Courts themselves have encouraged companies to use this method (Mulcachy, 2008: 226). For the case Dunett v Railtrack plc (2002), the court has expected Railtrack to pay the costs of bringing the action to court, because he hasn’t considered to resolve his issues with Dunett with an alternative dispute resolution (Dunett v Railtrack).
The aim of organizations is to stay competitive and survive in the market. It can be done without knowing the environment they are in. Contract is an important area to not be avoided while doing projects. A contract has to be valid. Offer and acceptance as well as consideration have to be clear defined in the contract. The pre negotiation phase has to be followed by the parties by the parties to enter into business and create a business relationship. Disputes will arise between the organizations, but, to resolve them, methods less costly that going before the court could be use (Mulcahy 2008). The warranties, guarantees and clauses are known minimize risks in case of litigation and aim protect the buyer, supplier or the final customer. A health and safety awareness is a more practical protection as well, to anticipate hazards. In the frame of IT, hardware and software, intellectual property defends the owner and sometimes gives rights to a third party. A success of a project depends of the managerial skills of the team members and the actors involve in that project (Frey 2005).
Buyer and supplier shouldn’t forget their main goal which is the survival in that competitive world.
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