Contract dispute resolution and legal frameworks

¶ … 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 Under what circumstances can a contract be rescinded by either party?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 What is the result of a contract that is rescinded?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 probably may not rescind the contract because it has been substantially performed, because some of the delays on System's part were excusable under the provision of the contract referring to "inclement weather," and because, arguably, Big Bank contributed to the delays on System's part by deviating from the confirmed specifications in data formatting. Generally, either party can rescind a contract where performance becomes impossible, where the value of the contract is destroyed because its purpose is frustrated by situations such as acts of God, legislation that outlaws an essential purpose of the product or service, and other non-commercial situations that provide a legal justification to allow what would ordinarily be a breach of contract. Big Bank would have to prove that the conversion delayed was so critical to the contract that the delay substantially destroyed the value of the contract. Systems would have to prove that the delay was attributable substantially to Big Bank and not to personnel issues. If the contract is rescinded, Systems would retain the fair value of services already rendered less the value of the bargain lost by Big Bank in procuring the remaining services from another provider.

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?

The only reasonable cause of action would be breach of contract by non-performance. He would argue that the part of the project delayed was the most critical part and that its delay by Systems was a material breach of the contract. He could be successful if the evidence establishes that the delay caused by weather and by Big Bank's deviation from specs were significantly less responsible for the delay that the personnel issues at Systems. He will probably not be successful unless the unavailability of Glenda Givealot was much more of a contributing factor to the delay than the spec deviation. Big Bank's damages are limited by contract to a maximum of 12 months of fees paid to Systems and no other economic 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?