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Contract dispute over Panama Canal project causes delay

The Panama Canal is an iconic and extremely important series of shipping lanes that allow ships to cross from the Atlantic to the Pacific (and vice versa), and the canal will celebrate a century of use this summer. As you can imagine, during those 100 years of operation, the canal has undergone numerous construction and renovation projects to improve the shipping lanes.

At the same time, a lot has changed in the world over those 100 years. Technology has vastly improved; the demands of people, companies and countries have dramatically altered as the population has swelled; and the very ships that travel the Panama Canal have also been modernized. They are bigger and more powerful than ever before -- and that has become a bit of a problem for the canal, one that they hoped to have fixed by Dec. 2015.

However, a massive construction project for the Panama Canal which would build a new shipping lane for larger vessels has turned south because of a contract dispute. The country of Panama and the construction team are at odds over $1.6 billion in cost overruns, and the project has been delayed for two weeks now. The delays somehow threaten to push the project back three years, which would prove devastating for the shipping industry and the many businesses associated with it.

Though this is on a grand scale, this story shows that whether you are renovating the Panama Canal or trying to reach a shareholder agreement, the details of business contracts are extremely important. When the two sides don't see eye-to-eye after a contract is drafted, disputes can arise that threaten the project and could jeopardize the wellbeing of the companies involved.

Source: Wall Street Journal, "Ports, Shipping Companies Retool for Bigger Panama Canal," Dan Molinski, Feb. 17, 2014

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