Commercial Transaction Law and Practice - Essay Example

Commercial Transaction Law And Practice By Presented to Due EMA 01 Part A The issue of this case regards whether BB, who is the buyer of pipes should compensate PSL a total amount of 3,000 dollars after the goods that the letter sent out to the buyer failed to arrive. First of all, BB has no obligation to do this. The reason is that the contract that they entered into with the supplier regarded the delivery of pipes for its construction. Therefore, the seller is the one who should have taken charge of the delivery of the products and made sure that they arrived safely as per the contract and what they did, it is the seller who took charge of delivery. The company should have been also the one who did the vetting of the delivered to make sure that he was believable and trustworthy enough to run such errands. Instead, the company hired someone who would later be identified as a gang member after BB failed to receive the goods. When entering into a contract regarding the selling and buying of a product, there should be certain terms that are to be reached by the two parties that are involved. There are two major ways through which this issue can be resolved. First of all, the two parties are supposed to agree on the time range that will be given for the delivery of the goods. There should also be an agreement about the prices of the products that are being traded. Finally, and just as important, the two parties should agree about who of them is supposed to be responsible for the delivery of the goods. If the supplier is the one to deliver the goods, he is supposed to take charge of the entire process up until the time that the recipient will be able to acknowledge, in signing that he has received the goods from the supplier and that now he takes full responsibility for them. Should anything happen to the goods at this point, then the recipient is the one who is to suffer the damages. The second option that is present in such agreements is that once the goods are ready, it is the consumer who is supposed to take charge of the delivery of the goods to where he wants them. In this case, he may either come for them or organize for how the goods will reach him. Therefore, in this case, once the goods leave the premises of the supplier, they are supposed to sign and agree that now the consumer is taking liability for all the goods and that if anything should occur to them, he will be entirely responsible (Hyland and Patterson, 1999). In the case that is present, the supplier, PSL is the one that is in charge of making sure that the products have reached his client. This means that unless the consumer, BB, receives the goods and acknowledges in writing that he has, the products will continue to remain the responsibility of PSL. It is PSL who hired the person to transport the goods, the one who eventually took off and was discovered to have been a criminal. Therefore, the company is the one who was charged with the responsibility for ensuring that the goods are safely delivered to the recipient, a requirement that they failed to fulfill. Therefore, in this matter, it is PSL that is supposed to bear the responsibility for the missing goods, and as such, should fully compensate the consumer, BB, for the damages that it has had to incur. The issue is made worse by the fact that the supplier was not in communication with the recipient regarding the transportation and delivery of goods. The recipient did not even have information that the gods had been released to him until he called to ask about it only to be told that they had already been dispatched. The exception to his kind of rule is, however, when the two parties that are involved had a signing of any kind that stated that the recipient was to pay for the goods if they failed to be delivered (Hyland and Patterson, 1999). Therefore, in this case, if the consumer had paid for the goods, he should be fully compensated for the amount of money that he spent on this venture, he should also be compensated for any other damages that may have taken place due to the fact that the goods he was expecting never reached him. Part B The second issue is regarding whether BB deserves to be compensated for all the damages that are has experienced since entering into a a contract with the Ambleside company. The latter was supposed to carry out plastering work for the former in a given specified time, which it failed to deliver, causing BB to suffer losses as a result. The company went ahead and did a shoddy work that also brought in more damages to the company in terms of having to shut down for a while and hiring an anther contractor for the job. First of all, BB ought to be compensated by Ambleside for the damages regarding the grand opening event. The reason for this is that the two had entered into a contract where Ambleside was expected to complete the job by a date that was specified and agreed upon by both parties. The contract did not give provisions for what would happen if the failure of completion were due to a fault of a third party that is connected to either of them. As a result, it was the sole responsibility of Ambleside to make sure that they can complete the job. They are also the ones who should have come up with methods of dealing with situations that were unpredictable, such as the fact that they had been let down by their supplier. These are issues that are not of concern to BB, whose only involvement in the issue is that his work be done on time and in the proper manner. Ambleside claims that it was not informed that the work was supposed to be finished at that time because BB had an event, in which case they would have done their best to finish the work. The fact that Ambleside had agreed to finish the work in that time is the part that matters, not why BB wanted the work completed by then. So they should still be compensated. The second issue is regarding the fact that once the job was completed, the company was still making losses due to the fact that the materials that were used for the plastering were not conducive to the environment of the business. This led to the area having to be shut down for a while, and BB has to seek the services of another company. In this matter, BB should still be compensated. The reason for this is that, as stated in the letter that Ambleside has written to BB stating that the contract has said that in the event that the job is not done according to the specifications and the perfection of the consumer, then they will be compensated. The argument that is being represented in this case by Ambleside is that the damage that was caused was not direct, and thus they should not pay for it. This is not true. It is a direct damage because the only reason for the company having to shut down is that the materials caused a mess. If it had been properly, the company would not have had the need to shut down. The third issue is that in the letter that has been written to BB, it is claimed that the business s cannot carry out the compensation because it has been shut down, and the two owners have separated and moved on to various things. This should however not be an issue because BB entered into the contract with the two of them under the name of the business. Charles Carson has written the letter. In his letter, he also claims that the shoddy job that was carried out by the company was only done by the part of the company that belonged to Martin Knopf. This cannot take place. The reason for this is that at the time of the signing of the contract, BB knew that it was entering into a contract with an entire company and not an individual. Hence, there is no way that Barnabas can ask for compensation from one individual company because she has no way of proving that indeed it was Martin’s side that committed the offense. If she does this, then Martin can easily also pass the buck to Charles. Therefore, the two of them, having been joint proprietors of the company should find a way of paying back the money. After they have done this then, they can find a way of sorting the issue of cash amongst themselves, without the involvement of any of their previous and current clients. There is one way in which the matter regarding Donatella can be resolved. This can be done through the company comparing the prices of Donatella against those of the other companies around that offer the same services. After this is done, this amount should be averaged with that which they had initially intended to charge BB. The average is the amount that should be paid to BB. Therefore, in this matter only, BB should accept to suffer a bit of a loss. In future, BB should make sure that they enter into agreements with companies that are stable and that have a potential of staying in business for a long time to avoid cases such as this one. EMA 02 A forward contract can be explained as a customized contract that is signed by two individual parties with the intention of selling a certain asset at a certain price on a future date that is agreed upon by the parties. A forward contract is important because it often helps in stemming out speculation and disagreements. This type of contract can be made regarding any product, any price, and date of sale (Hyland and Patterson, 1999). Sometimes the contract can take place on a ‘cash on delivery’ basis. This means that the two parties agree that the product will be paid for once it arrives. The main issue about the forward contracts is that they take place for a specific purpose. Because of this, they do not have clearing houses that are centralized and, therefore, may not be available to retail investors in the future. This article describes a forward contract, its uses, advantages, and disadvantages. It also focuses on the differences between forward contracts and future currencies as forms of payment and tries to find the one that would be most favorable for business. In forward contracts, there are possibilities that are covered to ensure that both the parties that are in agreement stand at gaining at the end of the future time frame that has been given. For instance, if person A is selling a certain product whose current market value is 90 thousand dollars to person B. The sale is expected to take place in the next one year. The two of them are likely to agree to selling the product at 85. Here, the buyer is likely to make a profit of 5 thousand. The first advantage of forward contracts is that both parties are prevented from suffering from the risks that are as a result of the fluctuations in the value of various currencies. This is because the prices are agreed upon well in advance. It is also a beneficiary in the case of those who are transacting in different currencies. The contracts are also quite beneficial in helping the people who enter into them from suffering losses that may result from fluctuations in commodities that may take place during the time between the signing of the contracts and the time for selling. The contracts are, therefore, mostly preferred by people who are in the business of products whose prices are in the habit of facing fluctuations. One of these is farming. When a farmer feels that there is a likelihood that the prices of his commodity will have gone down by the time that he is set to harvest, he will agree with a buyer using a price that is favorable to him and that may be close to being relevant when the time comes. Unfortunately, he must also be willing to live with the fact that by that time, the prices may have also gone up, and thus he will not make a similar profit as the one the rest of the farmers are making. This type of contract is also a beneficiary and preferable because the parties are in a position to come to agreeable terms regarding the prices of the commodities and other issues such as delivery and contingency. This, therefore, means that the chances of any of the parties being aggrieved in the agreement are minimal. It is also an open contract. This is because; the fact that there is no real exchange that takes place at the time that the agreement is being signed. Therefore, the two parties are still in a good position to change the terms of the agreement should they feel that the terms that they had previously agreed upon are no longer favorable to them. Disadvantages The first disadvantage of his type of contract is that the parties are likely to make losses as much as they stand to benefit. Although one of its advantages is that it protects against risks that may take place in the future, it also prevents the parties from gaining from any positive occurrences in the future. For instance, the parties enter an agreement thinking that the price of a commodity may go down in the future, and the seller is likely to make a loss. However, there are equal chances that the price of the product may go up and thus if he would have sold in the same fashion as any other person; he would have probably made more profit (International Law Association International Commercial Arbitration Committees Report and Recommendations on Ascertaining the Contents of the Applicable Law in International Commercial Arbitration, 2010). Another disadvantage of the type of contract is almost similar to the first point given. Sellers and buyers enter the contract in order to protect themselves from the fluctuating exchange rates. However, there are chances that the change in exchange rates may act in the favor of one of them. Investing in future business may also be quite risky because nobody ever knows what is likely to happen in the future. There are all kinds of risks that are likely to occur, and thus the parties must make sure that they comprehend the terms of the agreement and the risks involved before they get into the contract. Take the farmer, for example. He may have agreed to a certain amount of his farm produce before the harvest time comes. However, when this period approaches, he finds that his produce has not done as well as he thought. The plants may have been swept away by floods, or attacked by diseases. This, therefore, means he will not be able to make any sale. The buyer on the other side will also suffer, especially if the product is the only one that he depended on. The most favorable type of hedging that a company should take part is one known as currency futures. Some of the features of this kind of hedging are very similar to those of the forward contract. This is in the sense that the parties that are in the transaction can come to an agreement about the selling of some commodity at some set price on a future date that is to be agreed upon by both parties. There are, however, some differences between these two types of contracts, especially in the application. The main difference that makes this kind of contract more favorable than the forward contracts is that there are standardized prices upon which the parties can agree upon. In the forward contract, the parties are at liberty to set any price as long as both of them are satisfied with the conclusions that they come to. As much as this type of contract increases the amount of profit that one is likely to get should the market act in his favor when the time of purchase comes, it is also disadvantageous because there is a risk of an even higher loss should things not work well for them. However, in the future currencies, there is a limit to the amount that specific commodities can be sold. Though this may seem to limit the amount of profit that is made, it is advantageous as well because it protects against greater risks. Another difference between them that makes this kind of hedging much safer is that in a a forward contract, the exchange of money and commodity will only take place at the time that the contract was stipulated to expire. However, in the future currencies, whenever there are changes in the prices of the commodity, the seller can receive money for the product, and the seller receives the goods. This helps in preventing any risks that may come about due to the fluctuation of the markets. Forward contract dates are often set according to the preferences of the parties that are getting into the agreement. This is different from the future currencies where the trading period has been set already, thus leaving the parties to agree to the terms of service. The set date for the future currencies often falls in the months of March, June, September, and December. The many rules that have already been set by the system help also in avoiding exploitation from one party or the general bad luck that the market is capable of running into. EMA 03 Part A In this case, there are two companies that have entered into a contract together. The first company KBL is a manufacturer of cleaning materials. The company has sought the services of another company known as Glassclean to help in the marketing of their goods. The way that this will take place is that the latter company is to resell the products of the former, and also to use it for their personal business as a way of marketing it. The first issue that goes against the laws that have been given in the competition act is reading the reselling of the product. The contract states that Glassclean will be ordering for the products from KBL and reselling them. This is against the law because in this case they will be using the products of another company for marketing themselves. Therefore, in the end, it is not the brand name of the manufacturer that will be known to the market, but that of the company that will be doing the reselling. In this case, the glass clean company was only supposed to help in the marketing of the product by using it for their day to day door to door activities of cleaning. Therefore, should there be an agreement of reselling that is entered into by the two companies, it should be stated and ensured that the branding that is done on those products is in such a way that the consumers can identify that it is KBL that is doing the manufacture and not glass clean. The latter company should also be able to state whenever they are reselling the products that they are doing so on behalf of the real producer. The second issue in this case is about the fact that Glassclean is not supposed to use the products of any other company. This is in a way restricting the movement and operations of the company. The reason for this is that Glassclean is not a company that deals in promotions of other people’s products exclusively. The company is also involved in cleaning and as such their priority is to make sure that they maintain their brand name as far as their ability to provide perfect cleaning service is concerned. Therefore, if at any time they feel that the products of KBL are not helping in the delivery of service, they should be at liberty to choose those of any other company that they can use for better service delivery. Still on this issue, stating that the company should not use any product belonging to their competition is still unfair because it is restrictive. If they agree to these terms, it means that even in the event that KBL is not able to deliver the goods that Glassclean needs for the delivery of their usual services, their job will be at a standstill until the supply resumes. This will mean that if KBL is making losses, and then Glassclean will have to go into losses together with them. The third issue is regarding the fact that Glassclean is not supposed to expand its territory for the purpose of selling the products of KBL. This is not in order because they are being restricted by this company and thus they too will not be able to conduct their business in the proper manner. The only issue of the KBL Company should stop at the fact that they have asked the latter company to market their products. The way that this is done should not be their concern and neither should they try to dictate the actions of the other company. The only thing that should be done, in this case, is maybe to stipulate a certain amount of sales or profits that Glassclean is supposed to deliver. If this fails, then the other nitty gritty details can be looked at. The period that has been stipulated in the contract is also too long for this kind of contract. The reason for this is that at that time, there was a possibility that one of the companies will have left the business, and they will still be required to keep their end of the deal. The right thing that can be done is that the two can enter into contracts of about two years and renew after that period if the need for this arises. It is advisable that when entering these types of contracts where there are many other entities apart from the two parties, they should make sure that all spaces are filled. This is to say that the contract should contain all the types of unfortunate occurrences that may take place. The two parties should then agree on what the forward action would be so as to avoid this kind of situation where both parties feel that they are aggrieved. The most amicable agreement that can be included in the contract is that in the event of a loss that is caused by a third party, the two of them should share the loss (International Law Association International Commercial Arbitration Committees Report and Recommendations on Ascertaining the Contents of the Applicable Law in International Commercial Arbitration, 2010). Part B Commercial agents can be defined as those people who are involved in the purchase and sale of goods that belong to another individual. These people are often self-employed and as such there are certain laws that have been put in place for their protection. The first law states that the agents have the right to receive compensation for the same amount that they have been earning in the past as commission, should their contracts be terminated. This is an unfair law for the person that will be doing the compensation. The reason for this is that although the person may have rightfully earned this amount of money in that period, there is not guarantee that if the contract were not terminated, they would have continued to make as much money. Therefore the company that hires the agent will be making losses. The second law that protects the agents is regarding the fact that they have a right to be compensated if the orders are not completed out of a reason that is to be blamed on the person that has contracted them. This is not in order because sometimes there may be reasons that are beyond the control of the contractor, and if they still have to compensate the agent, then they will be making further losses. For example, a company may fail to provide the orders to the agent because their supplier delayed with delivery thus preventing them from manufacturing. This means that they are not entire to blame for the mishap despite the fact that this may seem to be the case for the agent. In this sense, the compensation that is done with the agent can only be done up to a certain percentage (International Law Association International Commercial Arbitration Committees Report and Recommendations on Ascertaining the Contents of the Applicable Law in International Commercial Arbitration, 2010). This is so that both of them can share the loss rather than one party being the one to carry the burden alone, since none of them had anticipated that this unfortunate event would take place. References Hyland, R. and Patterson, D. (1999). An introduction to commercial law. St. Paul, Minn.: West Group. International Law Association International Commercial Arbitration Committees Report and Recommendations on Ascertaining the Contents of the Applicable Law in International Commercial Arbitration. (2010). Arbitration International, 26(2), pp.193-220. Read More