YD

Scenario Summary: This scenario covers a contract dispute situation. The contract in question is an agreement between Systems Inc. and Big Bank. Please review the contract located in Scenario Summary of the “You Decide” page to familiarize yourself with the specifics of the contract.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 the data 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 fourth,  its credit card operations;  the fifth,  its mortgage portfolios;  and the sixth,  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 previous specifications provided.  For that reason, the data conversion fields needed to be changed.  A provision in the contract required your company to receive the approval of four individuals  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 arose 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, causing the conversion to be delayed once again.  Questions:1. Question: (17 points) 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?Solution:2. Question: (16 points) 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?Solution:3. Question: (17 points) 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 Bank’s 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?Solution:4. Question: (16 points) In this situation amicable resolution of problems is greatly preferred by your company.   Would this be true in all contract disputes? In what situations would you decide to  litigate?  Why would you decide to move to litigation rather than attempt to reach an  amicable resolution?Solution:5. Question: (17 points) There are 3 types of contract performance: 1)complete performance;  2)  substantial performance;  and 3)  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.Solution:6. Question: (16 points) What are the two most important concepts from this exercise that will help you in future contract negotiations?Solution:Solution answers must be at least one half page each.  Show each question on a separate page. 

SYSTEMS, INC, INC.

DATA PROCESSING AGREEMENT

This DATA PROCESSING AGREEMENT is made and entered into as of the 1st day of
August 2008 by and between Big Bank and Systems, Inc.

In consideration of the mutual promises and covenants contained herein, the
parties hereto agree as follows:

1. DATA PROCESSING SERVICES.

————————
Systems Inc. agrees to render to Big Bank the data
processing services described on Exhibit “A”
(the “Services”) for the term of this Agreement, and Big Bank
agrees to purchase the Services. This Agreement describes the general
nature of the Services and the terms under which the Systems Inc. is to
provide or make the Services available to the Big Bank. In the
event of any conflict between the language of this Agreement and any
brochures, verbal representations, or other materials describing the
Services, the language of this Agreement shall control.

2. CONVERSION OF BIG BANK’S INFORMATION.
———————————————-

a. Within a reasonable time following execution of this Agreement,
Systems Inc. will undertake the programming required to convert
Big Bank’s information files into a format compatible with
Systems Inc.’s systems.. Big Bank agrees to cooperate
with Systems Inc. in this endeavor and to provide all information
and assistance required for Systems Inc. to successfully convert
Big Bank’s information files to a form compatible with
Systems Inc.’s systems and equipment so that Systems Inc. can
provide the Services. Among other things, Big Bank shall
deliver conversion input information, in its entirety, in a mutually
acceptable medium, within one week of request of the information.

b. Systems Inc. shall determine, in accordance with its normal
acceptance procedures, when Big Bank’s information files
have been successfully converted and when the Services to be provided
by Systems Inc. to Big Bank are operational and available
for Big Bank’s use. Big Bank agrees to review and
check the information converted by Systems Inc. within ten (10)
days after notice to Big Bank of Systems Inc.’s
completion of conversion. 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.

c. 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.

d. Systems Inc. shall provide to Big Bank training for a
maximum of five (5) working days so that Big Bank may fully
utilize the Services provided by Systems Inc. at the time of
conversion of Big Bank’s information.

3. INPUT AND OUTPUT DATA. Big Bank shall be responsible for providing to Systems Inc. all
input data and other information necessary for Systems Inc. to perform the Services and to
prepare those reports described on attached Exhibit “C” (the “Reports”). 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. Systems Inc. agrees to
provide Big Bank with Reports at such times as are described on Exhibit “C”, provided,
however, that in any event Systems Inc. shall have a reasonable amount of time after receipt of
the input data from Big Bank to process such data. All Reports shall be delivered by Systems
Inc. to Big Bank by telecommunications to a remote printer designated by Big Bank. The design
and format of any Reports or forms to be prepared by Systems Inc. must be approved by
Systems Inc. Before making changes to data conversion fields, Systems Inc. must obtain the
approval of Glenda Givealot, Brian Banker, Paris Changemaker, and Phil Profit.

4. TERM. This Agreement shall begin on the date hereof and shall remain in effect for a period

of three (3) years (the “Term”) following the first
full calendar month in which any Services commonly known as processing
services are provided by Systems Inc. to Big Bank, as
evidenced by the billing records of Systems Inc.. This Agreement shall
automatically renew for the same Term unless written notice of termination
is delivered by either party to the other at least one hundred eighty (180)
days prior to the original expiration date or subsequent renewal expiration
dates of the Agreement.

5. ASSISTANCE FROM BIG BANK. In addition to the input data to be
delivered by Big Bank pursuant to paragraph 3 above, Computer
Center’s performance of the Services may, from time to time, require data,
documents, descriptions or acts to be furnished by, or to be qualified or
processed in part by, the Big Bank or its personnel. Computer
Center agrees to give prompt notice of such requirements to Participating
Bank, and Big Bank agrees to furnish such data, documents,
descriptions or acts and to make such personnel, records and facilities
available within such time or times after its receipt of such notice and in
such manner as shall be reasonably necessary to enable the Systems Inc.

to perform the Services.

6. COMMUNICATIONS. Big Bank shall bear all risk of loss or damage

to items, records, other input data, or Reports and other output data
during communication or delivery of such data between the Participating
Bank’s office and the Systems Inc.. Big Bank shall be
responsible for and shall pay all charges related to communications between
Big Bank and Systems Inc.

7. EQUIPMENT.
———

a. Big Bank agrees that it is responsible for all
communications between Big Bank and Systems Inc.. When
communicating with, or transferring data to, or receiving data from,
Systems Inc., Big Bank shall, at its own cost and
expense, use and maintain only such terminals, modems and other
hardware, firmware and software (hereinafter collectively referred to
as the “Equipment”) as may be compatible with the systems and
communications networks of Systems Inc.. The Big Bank’s
Equipment must be completely compatible with the systems and
communications networks of Systems Inc. and, if requested by
Systems Inc., Big Bank shall be responsible for providing
sufficient information about the Equipment to Systems Inc. and for
performing adequate tests to demonstrate that the Equipment is in good
working order and completely compatible with the systems and
communications networks of Systems Inc.. In the event Computer
Center believes it is in its and its clients’ best interest to upgrade
Systems Inc.’s systems to more efficient and capable equipment or
to keep Systems Inc. competitive, Big Bank agrees to acquire any Equipment necessary
to keep Participating Bank and Systems Inc. fully compatible.

b. Unless otherwise agreed by the parties, Systems Inc. shall schedule
and arrange for the communications services, including communications
equipment installation, with the communication provider.
Big Bank shall be responsible for paying all charges imposed
by the provider of the communications equipment, such as the telephone
company, for the Equipment installation, as well as for any charges
for additional connections or changes to locations or future services.
Systems Inc. shall not be responsible for the reliability or
continued availability of the telephone lines, communications
facilities, or electrical power used by Big Bank in
utilizing the Services provided by Systems Inc. hereunder.
Systems Inc. will cooperate with communications vendors as
appropriate so that communications between Big Bank and
Systems Inc. facilities function properly.

8. LIMITATION OF LIABILITY.
———————–

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. 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.

b. Systems Inc.’s obligation to Big Bank hereunder in
performing the Services is to exercise the same degree of care and
diligence used in processing information and compiling reports for its
own use. Systems Inc.’s sole responsibility to Big Bank
or any third party for any claims, notwithstanding the form of such
claims (e.g., contract, negligence or otherwise), arising out of
errors or omissions in the Services or Reports provided or to be
provided hereunder and caused by Systems Inc. (provided that
Big Bank shall have promptly notified Systems Inc. of any
such errors or omissions), shall be to furnish at Systems Inc.’s
costs the correct Services or Report and/or to correct the applicable
Big Bank files.

c. Systems Inc. will make every reasonable effort to be available to
provide services during office hours of the Eastern Time Zone. Accordingly, Systems
Inc.’s liability to Big Bank or any third party for claims, notwithstanding the form of such
claims (e.g., contract, negligence or otherwise) arising out of the unavailability
or inaccessibility of Systems Inc.’s system, or the interruption in
or delay of Services provided or to be provided by Systems Inc.
hereunder, shall be to use reasonable efforts to resume the Services
as promptly as practicable, provided, however, that Systems Inc.
shall not be responsible for communication failures caused, in whole
or in part, by the incompatibility or failure of Big Bank’s
Equipment or by third party telecommunication or electric lines or
equipment.

d. Systems Inc. shall not be liable to Big Bank for errors
resulting from defects in, or malfunctions of, the mechanical or
electronic equipment used by Big Bank or Systems Inc. in
performing the duties and obligations contemplated in and covered by
this Agreement.

e. Systems Inc. shall not be liable for damages arising under this
Agreement, regardless of the claim, unless such damages result from
gross negligence or willful misconduct on the part of Computer

Center’s officers or employees, in which case Systems Inc.’s
liability will be limited to actual damages directly resulting from
such gross negligence or willful misconduct. In any event, any
damages for which Systems Inc. may be liable shall be limited to
the service charges received by Systems Inc. from Participating
Bank for Services during the twelve (12) months prior to the alleged
damage. If Big Bank desires to obtain insurance protection
against any such losses, or to cover fidelity losses through an
endorsement to its own blanket bond coverage, Systems Inc. agrees
to cooperate with Big Bank in obtaining such insurance. In
the event Big Bank recovers insurance proceeds pursuant to
such insurance, such proceeds shall constitute a set off against
actual damages claimed by Big Bank that directly result from
gross negligence or willful misconduct of Systems Inc.. It is
understood that all costs and expenses of such insurance shall be paid
by Big Bank. Systems Inc. agrees to maintain, with
coverage amounts determined by Systems Inc., fidelity bond coverage
with respect to any dishonest acts which may be committed by Computer
Center personnel, and insurance in policy amounts and types determined
by Systems Inc., with respect to hazards, including losses by
Systems Inc. from fire, disaster, and other events which may
interrupt normal service.

f. IN NO EVENT WILL SYSTEMS INC. BE RESPONSIBLE FOR SPECIAL, RELIANCE,
INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES ARISING OUT OF ANY
ACT OR OMISSION BY SYSTEMS INC. IN CONNECTION WITH THIS AGREEMENT,
EVEN IF SYSTEMS INC. HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES, WHETHER SUCH DAMAGES ARISE IN AN ACTION AT LAW OR IN
EQUITY, FOR BREACH OF CONTRACT, BREACH OF WARRANTY, PRODUCT
LIABILITY, BREACH OF UCC PROVISIONS, NEGLIGENCE OR INTENTIONAL TORT.
FURTHERMORE, SYSTEMS INC. SHALL NOT BE LIABLE FOR PARTICIPATING
BANK’S LOST PROFITS, LOSS OF BUSINESS OPPORTUNITIES, OR FOR
EXEMPLARY DAMAGES. THE PROVISIONS HEREOF ARE IN LIEU OF ALL
WARRANTIES, EXPRESS OR IMPLIED, WHETHER OF MERCHANTABILITY,
FITNESS OR OTHERWISE.

21. TERMINATION BY BIG BANK. The parties further agree and
acknowledge that there may be certain circumstances in which Participating
Bank desires to discontinue Systems Inc.’s provision of one or more of
the Services prior to the expiration date of this Agreement. In such
event, Systems Inc. will suffer substantial loss or injury that is
difficult or impossible to accurately estimate. Accordingly, in an effort
to liquidate in advance the sum that should represent the loss or damages
which would be actually sustained by Systems Inc. as a result of such
early termination by Big Bank of any Services provided hereunder,
the parties have agreed on the amount specified below as a reasonable pre-
estimate of Systems Inc.’s probable loss. If Big Bank desires
to discontinue any Services hereunder, Big Bank shall give
Systems Inc. one hundred eighty (180) days advance written notice and
shall pay Systems Inc. an amount equal to 75% of the “estimated

remaining service fees” with respect to the Services being discontinued or
the monthly “minimum charge”, whichever is greater, for the remainder of
the Term beginning on the effective date of termination. The “estimated
remaining service fees” for the Services being discontinued shall be
calculated by multiplying the average monthly service fees billed for the
Services being discontinued for the six (6) months immediately preceding
notice of early termination by the number of months remaining under the
Term of this Agreement. The “minimum charge” will be determined by Exhibit
“B” of this Agreement. This amount is due per the provisions of paragraph
15(b).

22. TERMINATION BY SYSTEMS INC.

——————————
In the event that Systems Inc. desires to cancel this Agreement or discontinue Services

hereunder, it shall give Big Bank one hundred eighty (180) days advance written notice and
this Agreement or any Service hereunder shall be cancelled in full.

23. ENTIRE AGREEMENT. This instrument, along with the appendices and schedules

incorporated herein by reference, constitutes the entire agreement and
understanding between the parties with respect to the subject matter
hereof. Representations and agreements not expressly contained or
incorporated by reference herein shall not be binding upon either party as
warranties or otherwise. Modifications of this Agreement must be in
writing and signed by duly authorized representative of the parties.

25. APPLICABLE LAW.
————–
Agreement is made and entered into in Norcross, Georgia, and shall be governed by the
laws of the State of Georgia.

SYSTEMS INC.: BIG BANK:

SYSTEMS, INC, INC. CLIENT’S NAME

By:____________________________ By:_______________________________
(Signature) (Signature)

Name:__________________________ Name:_____________________________
(Please Print or Type) (Please Print or Type)

Title:_________________________ Title:____________________________

Date:__________________________ Date:_____________________________