International Contract Law and United Nations Convention - Assignment Example

INTERNATIONAL CONTRACT LAW Name Institution Date International Contract Law Introduction The contracts involved in this paper contain the material regulations for intercontinental transaction contracts, i.e key privileges and requirements of those involved, the general rules that apply for both the parties involved and the “boilerplate” clauses that are applicable to both parties as well as those that are acceptable in worldwide business contracts. The contracts are greatly influenced by the “United Nations Convention on contracts for the International sale of Goods” (CISG), which are extensively acknowledged by lawyers of diverse conventions as well as settings. It expresses realistic requisites occuring from within business performances with the universal laws of CISG. Where specific requirements of the applicable law are applicable to the contract, the parties involved are required to adapt it in accordance with the nature of contract (LexisNexis Capsule 2004). “In contracts ruled over by the CISG, a minor disparity of terms in a reception from those set forth in the offer never thwarts the arrangement of an agreement unless the offeror objects. [CISG art. 19]” (LexisNexis Capsule 2004). Question 1 The key sources of contract law that are used in this paper are; “United Nations Convention on contracts for the International Sale of Goods (CISG), UNIDROIT Principles of International Commercial Contracts; [UNIDROIT art. 2.11] (UNIDROIT 1994), Uniform Law on the International Sale of Goods (ULIS) and ICC Model International transaction agreement – Manufactured commodities meant for sale”. Salazar Steel Sale Contract 1) Parties Involved This is an agreement for the purpose of sale of goods between Juan Salazar, the CEO of Salazar Steel (SS), a manufacturer of steel based in Sao Paulo Brazil (Seller) and the Company of Michael Matson, an entrepreneur based in New York (Buyer). Contract made on the 30th of July 2012. Herein after: “Buyer and Seller” or “the parties” 2) Sale of Goods and Services As per the terms contained herein, the supplier will send 5,000 metric tons of # 41 steel ingots with a warranty of for purity (no more than 1.6% carbon) (hereinafter “the goods”) to the buyer. The goods will be shipped from Brazil through Bigman Carriers on the 1st of August 2012 and arrive in New York by the 10th of August 2012. 3) Delivery 3.1 Relevant “International Chamber of Commerce” (as per this paper: ICC) Incoterms (via indication of the most recent version of the “Incoterms” at the date of the close of the agreement). The goods will be loaded by the seller on to a ship (operated by Bigman Carriers) that would leave port on the 8th of August and shall be be transported to the Buyer in Brazil on the 10th of August 2012. 4) Price 4.1 The full price of the said supplies is $ 10 million which should be paid no later than the 8th of August 2012 by the buyer as payment for the goods. 4.2 The parties will choose between the following means of payments; cash, bank draft, cheque or transfer to the seller’s bank. The time of the payment shall also be specified at the time of signing of this contract between the parties. The payment arrangement from the options set out below and if this be the case, they shall be required herein to specify the arrangement chosen and provide the corresponding details: (a) advance imbursement (b) through “documentary collection”, (c) by “irrevocable documentary credit”, (d) “Payment backed by Bank guarantee”, (e) Any other arrangement (the details for the chosen method should be specified) 5) Documents The seller is to make available all the documents related to the sale to the buyer (or to Citibank New York, which is the bank that the buyer specifies) the subsequent: Commercial invoice, shipment documents for the goods, any documents pertaining to packing of the goods, all documents of insurance of the goods, a certificate of origin for the goods, an official document of examination, certificates of custom and whichever additional papers as shall be agreed upon by the parties. On top of this, the seller should avail to the buyer all the required documents as stipulated under the ICC Incoterms that the two shall choose a stipulated under article 2 of this contract. 6) Failure of the buyer to pay the cost of goods at time settled upon 6.1 in case of the buyer failing to pay the price of the goods by the 8th of August 2012, the time that the seller has fixed for the buyer, an additional time (to be specified) for the performance of payment. If the buyer falls short of paying the price when the added period ends, the seller has a right to announce the agreement as shunned in harmony with section 10 of this contract. 6.2 In case the buyer does not pay the agreed cost of the goods at the time that is agreed herein between him and the seller, the seller is at liberty devoid of restricting any other privileges that may be had have the right to claim an interest on any cash that is remaining (both before and after any judgment) at a rate of interest to be said together with whichever additional rates the parties shall agree upon in relation to late payment). (Comment: the two should be aware that in some lawful structures, the charging of such interests has a limit that is set by the system and in some the charging of such interests is termed illegal) 7) The seller’s failure to supply the goods within the time settled 7.1 In the case where the seller does not supply the goods at the time settled upon in this contract, the buyer will be required to give an optional or supplementary period for the seller to do so. Failure of delivery at the expiration of the additional time will warrant a declaration of the contract null and void as stipulated in object 10 in this agreement (Option: In case the seller does not fail to deliver the goods but instead delays to do so which is termed a late delivery as specified in this agreement, the buyer shall have a privilege to solicit for settlement payments of up to 0.5% or any other percentage of the price of the goods agreed upon by the parties for every day that passes after 8th of August 2012 which is the agreed date of delivery. In case of any delays, the seller should gives a notice to the buyer of the delay concerning the delivery. In the case where the seller has notified the buyer, within a specific period from the date of the delivery that was agreed upon by both parties, or on the last day of the delivery that the two had agreed upon, the payment for damages will start counting from the last date of the delivery that the two had agreed upon. In the case where there is a set date of notification, them the counting for the payment of damages will begin on the day of the notification that was agreed upon by the parties. Any payments for damages settled when it comes to delay nevertheless do not eliminate avert the avoidance of agreement as per section 10 of this contract. 8) Refusal to of comply The buyer is expected to inspect the supplies on receiving them or have them checked in as short a period as is practicably applicable and inform the supplier of whichever shortcomings in terms of compliance to the specified quality or quantity or otherwise in a specific time subsequent to the discovery. In any event, the buyer shall be unable to claim any rights or be unable to rely on the deficiency in compliance in the case where he falls short of notifying the supplier at the latest within a about 2 years from the delivery date 8.2. In the case where the buyer takes the liberty and gives a claim of non-compliance to the seller, the buyer may; 8.2.1 Demand that the seller should supply any remaining quantity in the delivery. This should be without any additional costs on the part of the buyer. 8.2.2 Demand that the seller should reinstate the goods with compliant goods. This without any additional costs on the part of the buyer 8.2.3 Demand that the seller should repair the supplies. This without any additional costs on the part of the buyer 8.2.4 Decrease the cost of the goods in percentage of the worth of non-compliant goods 8.2.5 Declare this contract avoided The buyer shall also be in any occurrence be allowed to allege or claim for payment for damages 9.0 Transfer of property The transmission of the goods to the buyer by the seller should be devoid of any ownership claim by any other party (Option: Custody of ownership. The goods that the seller shall deliver to the buyer must be devoid of any claim from any other party. Unless full payment for the goods is done, the goods will not be shipped to the buyer, unless the full payment for the goods has been made, and the buyer shall keep the goods separate from those of his own and those of any other parties and appropriately stored up, sheltered and assured and acknowledged as the possessions of the seller) 10) Evasion of agreement 10.1 A breach of contract occurs when either of the parties does not meet up to their requirement as stipulated in this agreement inclusive of the responsibilities pertaining to malfunctioning, fractional presentation or being behind schedule in performing ones obligations. (Option: Specifically, the breach of contract constitutes; being behind schedule in making payments, non-compliance when it comes to the expected standard in the goods and being behind schedule in delivering the goods) 11) Any alterations to this contract shall be made through writing upon the agreement of both parties. Any notices shall also be by means of writing (this may be inclusive of sending e-mails). The notice should also be delivered in a manner that guarantees delivery of the notice can be verified either through mailing them to each other’s addresses or hand delivery. 12) Dispute Resolution Any dispute, claim or controversy related to this contract inclusive of the way it is interpreted, performed, concluded, terminated, breached or invalidated shall be in conclusion established within the regulations of an organization of law i.e a court of law with not less than three arbitrators appointed according to the said rules under the laws of the country where this contract shall be signed and the institution shall boast inclusive authority over the case. 13) Legitimacy and channels of guidance 13.1 Any queries involving this agreement which shall not be resolved inside of the requirements stated within the agreement shall be presided over by the CISG (Vienna conference of 1980) (LexisNexis Capsule 2004). Any other issues that are not dealt with within CISG shall be presided over by the UNIDROIT codes of intercontinental agreements (UNIDROIT 1994). If those matters are further not sheltered by UNIDROIT code, the following options shall be adopted; The law that is applicable to the country premise of business of the Or The law that is valid in the nation of the premise of the seller’s business Or The law that is valid in any third party state that the parties shall agree upon 13.2 This agreement will be carried out in “a spirit of good faith and fair dealing” 14) Day and signature of the parties Seller (Salazar Steel) Buyer (Michael Matson) Date ............................................................ .................................................. Name........................................................... ................................................... Signature..................................................... Signature....................................... Considerations that Michael Matson should make in his deal with BB Considering the capital of $ 100,000 which Michael Matson puts into the deal out of which $ 80, 000 will go into the transportation of the goods, and Insurance cover, MM should ensure that the contract is configured in such a way that he cannot incur a loss (Contractor & Lorange 1988). The considerations that MM should put in place should include the deference of taxes in order to maximize the price of purchase of $ 11 million that shall be offered by BB. MM has the power to determine the price of his stock as well as the terms f sales since he is the middle man. The determination of the price of the goods and the terms of purchase are what will ensure that he gets the most out of the deal. To this effect, MM must therefore put the following into consideration; The most suitable tax situation that would enable him to avoid major losses; He should therefore know how much duty is to be affected on the goods and thereafter as the middle man distribute the liability of such taxes to both BB and SS eventually managing to remain with just a little percentage of the total cost and hence maximize his profits. Alternatively, MM could demand a down payment from BB in order to finance any transactions related to the transfer of the goods to him after receiving them from SS. These expenses include duty taxes and shipping costs. This would ensure that he delivers the good on time hence circumventing the expected duty of up to 50% on Brazilian steel expected to take effect on the 9th of August by the US Government. MM should also consider making the terms as efficient enough as possible considering that he is transacting the deal as a sole proprietor hence ensuring that he gets the immediate cash and profits as well. He has the autonomy of structuring the deal in a manner that ensures he gets the most out of the transaction. MM should also consider future prospects of doing business with both SS and BB and hence distribute the cost burdens fairly in order to avoid overburdening both of his prospective buyer and seller (Cushman 1989). Question 2 Introduction When a client wishes to give another manufacturer the rights to design manufacture and deliver or sell its own line of goods or any other goods which they may wish to incorporate into their final goods or services, there are certain specific needs that should be met. This part of the paper gives a sequence or “set of options” with specific reference to the backdrop and the character of invention. This part of the paper provides a basic scheme and options considering that the party involved has a prior agreement of how to deal with issues of equipments and the necessary expertise needed in the production of compliant commodities considering its place as the mainly dedicated partner. The alternatives contained herein and which are not devoid of the fundamental plan although basically likely to be considered as jointed to the basic plan or merged with it, are customized to this case in the following manner (i) the client is to provide the partner producing company with definite gear and /or tools (ii) the client is supposed to reassign some components of its own expertise or machinery to the partnering manufacturing company to make sure that it finalizes the required production (ITC 2010). This paper also covers the situation/option of requirements in such a contract which include an agreement for the submission of sample products before the launch of the manufacturing process. These options are encouraged for the purposes of ensuring that quality and maintaining the niche of the parties in the market as well as ensure continuous profitability. Issues of Intellectual property rights are also covered herein. It is the assumption of this paper that the right related to intellectual property shall be appropriately confined by suitable inventory. Furthermore, in relation to the duty of confidentiality for the parties involved including matters of provision of additional protection specifically because the expertise is to be exchanged from one party to the other and the Intellectual property rights relating to such should be taken care of. This part of the paper suggests that there should be some sort of verification in the regime that is set out in for the purposes of improvements that are suitable in any area appropriate “anti-trust /competition law”. The collaboration of those involved could be an agreement of a certain length of period. The need shall therefore arise that the duration of the alliance should be established if that is the case or although not an option in this case a certain period with succeeding restitution entailing joint concord should be set up. When it comes to the law applicable to the contract, an express reminder is included to the effect that CISG is not in any way related to that kind of agreement “in which preponderant part of obligations of the party which furnishes the goods consists in the supply of labor or other services” (CISG). Plan No. 1: authorization of manufacture and vending to DK and NCF. Parties The parties involved in this agreement are; Manufacturer: Kitchen Maid (KM), one of the largest dishwasher manufacturers in the United States and “the partner manufacturers”; Nouvelle Cuisine de France (NCF) and DeutschlandKitchenland (DK), both of whom are also manufacturers based in Southern Europe and Northern Europe respectively. Collectively “the parties” Background A. The client manufacturer (KM) does its business in the line of the manufacture and delivering of dishwashers B. KM also carries out as a constituent part of its dealings the production and supply of function-specific integrated circuits that are the "brain chips" of dishwasher production appliances C. KM is experienced and is an expert in the designing, production and assembling of dishwashers and wishes to involve both DK and NCF to produce and deliver to clients its own line of dishwashers in relation to KM’s business and KM is keen to produce and deliver specific commodities for the client, on the agreements indicated herein. D. To the degree necessary for the carrying out of the agreement, the parties are to trade know-how on their individual expertise and gear in the sense that KM would allow DK and NCF to produce its line of dishwashers. KM would supply all the technological stipulations and intellectual property essential for such manufacture, “except for the function-specific integrated circuits that are the "brain chips" of each appliance”. KM would continue the production of those chips and sell them to DK and NCF. Some of the chips resemble those that are used to aid the maximizing the competence of motors of military tanks. In the course of the execution of the contract, any innovation when it comes to dishwasher technology by DK or NCF would be given completely to KM. Operative Provisions Manufacture and supply of goods Concerns about the plan and suggestions on how to deal with them In relation to the provisions settled upon by the parties, DK and NCF shall manufacture dish washers (hereinafter “the goods”) for KM and supply them to clients. KM would completely license DK to vend the dishwashers with KM’s trademark manufactured by DK only to 13 member states of the Southern-most part of Europe. KM will also completely license NCF to vend the dishwashers manufactured only in the 12 states based in the southern-most area of Europe as well as the "Mediterranean countries which include Libya and Israel. KM will also institute the comprehensive cost to be charged for the dishwashers. The agreement would also prevent the partner companies from selling their own dishwashers in the European Union and the regions of the Mediterranean. A 25% of the gross profit would be the value that KM would gain from the sale of the in addition to a 25% from the chips. KM shall at its own cost disclose its technology at its own cost to DK and NCF as shall be deemed essential to give the two the power to produce the commodities in harmony with the requirements set out in the first part above. According to Beckman, contract manufacturing is sought after for reasons of competence or because the expertise cannot or is not due to be applied in-house (Beckmann 2009). The disclosure of technology in this case must be subject to provisions of confidentiality or KM risks the loss of autonomy to such technology to its competitors and eventually a total loss of the market that it sought to protect in the first instance considering that nothing shall require DK and NCF to specially put in order in the least any technoology at all or to take on any exploration or expansion on for the sake of KM (Osland & Cavusgil 1996). There is a potential disadvantage of KM turning its own partners in the first handwho were its competitors before th eventure into even stronger competitors (Stewart & Ehrlich 2006) Technology must be accompanied by expertise and KM needs to establish whether both DK and NCF have the appropriately qualified staff to use its kind of technology. In the case where DK and NCF do not have employees with the right expertise, there is a danger of KM incurring extra expenses to train these employees, a factor that could further complicate issues due to matters of indemnification, safety and security (Garcia-Canal & Llaneza 1998). The advantages of a manufacturing contractual agreement for KM cannot be overlooked. There are gains such as faster access to the market it aims at reaching, the access to more profitability (Wolf 2000) due to the reduced rates of taxes that NCF enjoys in France, an ease in distribution, access of local knowledge and it could also be a legal prerequisite considering that to some extend it lessens the barriers that are involved in starting out on one’s own in a foreign country but the legal requirements for embarking on such a venture could also prove to be very costly (Greenwood & Lauer 2005). Issues of financing the venture are also a disadvantage. According to Brotman and Reeves, it my turn out to be extremely complicated to get hold of any investments related financing and specifically debt financing considering the finite duration and lack of permanence involved in such agreements (Brotman & Reeves 2005). For KM to be able to ameliorate these problems, there is a need to categorically specify the duration of the contractual agreement for the manufacture of its line of goods with DK and NCF. KM also faces a danger of dilution of future profits because though the contracts may enhance production and lead to the reduction of taxes, the profits that are gotten from the venture are shared among the contributing partners. The contractual agreement could lead to further issues of diluted equity. Dangers of opportnity costs are also likely to occur leading to a foreclosure of other opportunities for entry into the Northern and Southern European markets which could prove to be quite detimental to KM. To overcome the above problems, KM should try and capitalize the entity adequately from the beginning in order to guarantee future security in terms of finances in case anything goes wrong (Anderson 1990). The dangers of turning its potential partners into even stronger competitors can be avoided by nonsolicitation, noncompetition and confidentiality provisions in the contractual agreement which should clearly stipulate that both DK and NCF cannot use KM’s equipment for other purposes other than the production of KM’s line of products (Buckley & Casson 1996). KM must also strictly insist on a clause stating the need to always use its trademarks on all the goods that are produced under this undertaking to avoid any infringements of of intellectual properties both when it comes to the goods produced as well as the "brain chips" of each appliances of KM as well as any other infringements involving third parties. In order to cushion itself against such infringements in future, KM should also come up with a specification of the penalties that might occur and how they should be handled. Plan No. 2: Acquire DK. Background The second Plan is that of an acquisition of DK by KM and a halt in the manufacture of some of the products from DK’s product line in the factories of DK, with a continuing production of other as well as the production of KM products. The new merger would be called KMD and will sell the products of DK under its own trademark while those of KM will be sold under KM’s trademark. KMD products will be sold in Northern Europe under channels established by DK. In the other parts of Europe, the products they will be sold the KMD dishwashers will be sold at an introductory price of about 50% of the initial price of those sold in northern Europe and the US. KMD is also expected to buy all its brain chips from KM at 500 dollars per chip. Concerns about the plan and suggestions of dealing with them The contract for the acquisition of a company for the manufacture and distribution of goods between KM and DK is projected to be for long terms exploits. The main reason for this acquisition is intended at enhancing the supply channels of KM due to reasons such as the unwillingness of KM to spend on the supply channels necessary to do so. KM here wishes to be guaranteed that the distributions related to its products that are manufactured under KMD in this acquisition are done in an efficient and vigorous manner. KM would also wish to seek assurance that the endeavors that it puts into this acquisition be they monetary or otherwise will be cosseted to some extend probably through the use of well-developed DK distribution channels which are the distribution channels of the acquisition in the territory where DK is well established in the area of dishwasher supply. This would be further enhanced by a new subsidiary, KMD though maintaining the sole entities of the companies in the form of trademarks. This is a noble plan in an effort to secure a market niche in a new market territory for KM however; there is no assurance that KMD will have exclusivity in that particular market. Protective restrictions related to territory on whichever party may have costs considering the respectable laws and those are some of the questions that must be circumspectly put into consideration. The rising significance of e-exchange is another feature in the merger and especially when it comes to channels of supply that needs to be addressed when it comes to the agreement. Requirements related with the agreement when it comes to supply procedures as well as pricing to ensure that undue competition within KMD must also be dealt with in the contractual agreement. Other factors which could prove difficult to deal with if not properly executed in the contract include matters of payment of production costs, costs related to the supply of those goods. Warranties related to both manufacture and distribution of the goods as well as other terms of supply. The central issue is that of the supply channels to be followed and the intensity of efforts that may be necessary on the part of both parties because there is need for support and training when it comes to personnel. In most cases, the goods are likely to be cosseted by a variety of forms of rights relating to intellectual property and specifically trademarks (Datta 1988). In this case, when the goods are sold with their respective trademarks namely; KM and DK, undue challenges of competition might emerge (Datta 1988). It is therefore important that KM which is the acquirer and which is likely to finance the acquisition, should use its bearing as such to influence a decision that tilts towards selling of all the goods under one trademark, specifically “KMD trademark”. This should be embedded in the contract with specification on how profits should be shared. KM should also seek to find means of dealing with future innovations and how they should be handled. The issue of dealing with consequences of termination as well as an exit strategy must be categorically stated in order to ensure a successful contractual partnership. List of References Anderson, E, 1990, Two Firms One Frontier: On Assessing Joint Venture Performance Vol. 31 (1), Sloan Management Review , 19-29. Beckmann, G, 2009, Back too Basics: Contract manufacturing, GMP Review , 1-8. Brotman, M, & Reeves, T, 2005, The EU’s 26-Headed Hydra: The New European Competition Regime Enforcement. ACC Docket Vol. 23 (6) , 28-45. Buckley, P, & Casson, M, 1996, An Economic Model of International Joint Venture Strategy, Int'l Bus. Studies , 849-903. Contractor, F, & Lorange, P, 1988, Why should Firms Co-operate? The Starategy and Economics basis foor Co-Operative ventures, In F. Contractor, & P. Lorange, Co-operative Strategies in International Business—Joint Ventures and Technology Partnerships between firms (pp. 3-28). London: Lexington Books . Cushman, R, 1989, The Handbook of Joint Venturing, New York: McGraw-Hill Professional Publishing. Datta, D, 1988, International Ventures: A framework for Analysis. Journal of General Management Vol. 14 (2) , 78-90. Garcia-Canal, E., & Llaneza, A. (1998). Distinctive features of Domestic and International Joint Ventures, Mgmt Int'l Review Vol.38 (1) , 49-66. Greenwood, A, & Lauer, S, 2005, The Global Compliance Llandscape: A resource File, ACC Docket Vol. 23 (9) , 32-48. ITC, 2010, Model contracts for Small Firms: Legal Guidance for doing International Business, New York: ITC. LexisNexis Capsule, 2004, Contract, New York: Reed Elsevier Inc. Osland, G, & Cavusgil, S, 1996, Performance Issues in US-China Ventures, Cal. Mgmt. Review Vol. 38 (2) , 106-130. Stewart, M, & Ehrlich, P, 2006, International Joint Ventures: CA Practicum. ACC Docket , 52-67. UNIDROIT, 1994, Principles of International Commercial Contracts, Rome: UNIDROIT. Wolf, R, 2000, Effective International Joint Venture Management, New York: Sharpe. Read More