International Business Law - Essay Example

Dear Mr. Wally, I have reviewed the document you have given me as directed. Although there are provisions thereof which are still relevant and useful, I would like to make some comments and suggestion which would make such document more relevant to your present situation. The following are my comments and suggestion; Parties to the Contract. There is a need to clearly state in your contract of agreement the roles of the parties involved, that is the principal and the agent, as well as the laws on which such organizations were incorporated and registered. Thus I would suggest we modify the very first part of the agreement to read as follows: “Agreement made on _____(date) by and between: Wally Solar Manufacturer hereinafter referred to as “Principal”; a corporation organized and registered in accordance with the laws of _________, having a registered address at ____________ and herein represented by ___________. And Japan Sun Power Ltd., herein after referred to as “Agent”; a corporation organized and registered under the laws of Japan, having a registered address at ____________ and herein represented by ______________; The whereas portion are still useful and may stand as is subject to styling later on. For purposes of document styling purposes, I would suggest that we should adopt the method of setting the provisions in sections instead of mere paragraphs. The rest of my comments and suggestions will now follow this format. Section 1. Statement of Purpose. As can be observed, your draft agreement has no statement of purpose. At the very start, the purpose of this agreement should be defined in order to set the mode. Thus, a section should be added right after the naming of parties as follows: Statement of Purpose. This agreement is entered into by the parties for the purpose of executing an agency to sell the product of WALLY SOLAR MANUFACTURER by Japan Sun Power ltd. within the Japanese territory. Section 2 Definitions of Terms. There is no definition of terms in your draft agreement. I believe that this should be included in your agreement to gain common understanding and limitations of terms used. We must seek to do away with ambiguities of terms right from the start since these ambiguities may later on cause misunderstandings and eventual legal disputes. Terms which should be defined may include words used in the agreement such as but not limited to the following: (a) products; (b) territory; (c) order; (d) day(s); (e) date of receipt of the product (f) advertising and promotion. Section 3 Appointments. A provision for the appointment of the agent should be clearly highlighted in the agreement. In order to do this, a section should be established as follows: WALLY SOLAR MANUFACTURER hereby appoints Agent as its exclusive sales agent and representative in Japan. Agent hereby accepts such appointment and shall act as sales agent and otherwise represent the interests of WALLY SOLAR MANUFACTURER in accordance with the terms of this agreement. Note that in your instruction, you said that the company Japan Sun Power ltd is just a small company and could only handle business transaction in Japan. However, in the draft agreement you sent, you mentioned Korea and Vietnam as part of its territory. I must remind you that Japan Sun Power may not have the capability to execute this agreement in other areas outside Japan; therefore, such inclusion of other areas should be deleted. Termination/Expiration. Although the draft provided for term of 10 years, there are no qualifying provisions for pre-termination of agreement in cases of disputes, disagreements or other reasons which will warrant for the early termination of the agreement. Therefore, such provisions should be included in the agreement. This provision should read as follows: Section 4. Term of Agreement. This agreement shall be in full force and effect for a period of ten (10) years from date hereof, provided that in case of disagreements, disputes or upon agreements of the parties, shall opt for pre-termination thereof. In the event of pre-termination, the party requesting for such should give a written notice to the other party 90 days prior to the date of pre-termination of this agreement. Section 5. General Duties and Obligations of the Agent. To give teeth to this provision, there should be some legal basis mentioned. Thus for this purpose, the provisions f this section should read as follows: “Pursuant to Japanese Commercial Agency Regulations, the agent shall represent the principal in business transactions undertaken within its territorial jurisdiction. The agent shall have the following general duties and obligations: ” Under this section, the provisions of paragraph 2 of the draft agreement shall form part of this section except for provisions under letter d thereof, which should be modified. Section d thereof is rather out of tune and should be edited properly. The product described in not what is subject to this agreement. The portion “in advertising media addressed to men with no chest-hair” should be deleted and instead the sentence should read “in advertising media addressed to people who loved the outdoors but could not give up their electronic gadgets such as cell phones, Ipods, PDAs and the likes.” Section 6. Specific Duties and Obligations of the Agent. Under this section, the provisions in the old agreement under paragraph 3 can be adopted herein except for provisions under letter d thereof. The portion “particularly information on the wine, cognac, and liqueur market in the United States of America” is irrelevant to the agreement as the products mentions are totally different from the products of WALLY SOLAR MANUFACTURER. A good substitute for this portion should be “information pertaining to prices of electronic gadgets particularly battery chargers and the likes”. Section 7. Duties and Responsibilities of the Principal. For purposes of clarity, the duties and obligations of the principal should be defined. In the draft agreement, these provisions are rather sketchy. My proposal is to create a whole new section, which should be referred to as section 6 and shall read as follows: Duties and Responsibilities of the Principal. The Principal agrees to provide the following support to the agent in the performance of its duties and responsibilities: (a). Provide the agent with technical support through product orientation and training in the installation and operation of the product; (b) WALLY SOLAR MANUFACTURER shall furnish Agent a reasonable supply of samples to be used by Agent in the performance of his duties under this agreement. (c). Furnish the agent with necessary information and promotion materials such as pamphlets, brochures, posters, catalogues, booklets and the likes in the language of it choice which is (specify whether it will be Japanese or English) and grant agent the right to translate such materials into a language which will be more useful in its territory, provided that such translation shall be published only upon approval by the Principal; (d) Furnish agent will copies of inquiries and other correspondence on maters, which are related to the sale of the WALLY SOLAR MANUFACTURER product “Ijuice” in its territory. (e) Ship products on a FOB or CIF to the buyer thereof as the case may be. Quantity/Inventory Report. Under the draft agreement, there is no provision for quantity and quality report which is important in the contract of agency to sell. Although it is provided in the agreement herein that the Agent is merely to sell the products and that the principal shall be the one responsible for delivery and billing of the customer, the Agent should be provided with the right to inspect the quality of the goods when so deemed proper. This is also provide security for the Agent not to over sell the products which could happen when the agent would tell the client that the product is available when in fact it is not. Thus, Section 6 hereof should be added outlining the communication process as follows: “Section 8. Quantity/Inventory Report. The Principal shall undertake to provide the Agent with details as to the availability of the products on a weekly basis or upon demand by the agent. Furthermore, where there is a sudden fluctuation of supply, the Principal should notify the Agent immediately.” Warrantees. Under the draft agreement, there is provision for warrantees. This is very important as we are dealing with electronic gadgets. Therefore, a section should be added containing provisions for warrantees, which shall read as follows: Section 9. Warrantees and Servicing. The Principal warrants the good quality of the products in accordance with the warrantee provided to the customers. It shall undertake to provide replacements for defective units and shall detail a technician to handle such servicing and parts replacement, as it deem necessary. Section 10. Compensation. The provisions on compensation stated in the draft agreement are sound and feasible therefore, we shall adopt it there subject to style. Revised provision will therefore read as follows: “Principal shall pay Agent, as compensation for his services performed under Section 4 (A.1) General Duties and Responsibilities, a commission of 12 percent. For services defined under Section 4(A.2) Specific Duties and obligations, Principal agreed to pay Agent the additional amount of $800 a month. All compensation due hereunder shall be payable on the 15th day of each month during the term of the agreement.” Limitations and Prohibitions. For purposes of clarity, it is highly desirable to classify under one section the limitations of the agreement. Therefore, we shall lump the provisions on claims and collections and terms of sale in the draft agreement under this section. Now therefore, this section shall read as follows; Section 11. Limitations and Prohibitions. The Parties under this Agency Agreement agrees to the following limitations and prohibitions in the execution of this agreement: a. Pricing. Agent shall have no authority to change the prices of products. Price quotations and discounts shall strictly adhere to the Principal’s pricing manual. All prices shall be CIF Tokyo, Japan, and shall be payable in currency of the United States of America. Title shall only pass to the customer upon delivery to the customer’s location. b. Billing. Agent is not authorized to bill the client. The Principal shall bill all customers directly. c. Returns and Allowances. Agent may not, on behalf of the Principal, accept the return of, or make any allowance with respect to, any Products of the Principal, without prior written consent from the Principal. d. Claims and Collections. The Agent may only prosecute or defend third parties for claims and collection, upon written authority from the principal. All collections made under this express authority shall be promptly transmitted to the Principal and shall not be commingled with the funds of the Agent. In the event where the Agent is authorized to defend or prosecute third parties in behalf of the principal, all expenses thereof shall for the account of the Principal. e. Service of Summons. The Agent is not authorized to receive summons in behalf of the Principal. Section 12. Penalties. Under the old agreement, penalties was not defined. This should be included in the agreement as it is essential part thereof. This provision should read as follows:“In the event of breach of agreement or non-performance of duties and responsibilities, parties thereto agree to impose penalties in the amount of 1% of the total amount involved for the first offense, 5% of the total amount involved for the second offense and 10% of the total amount involved with option to pre-terminate the agreement on the 3rd offense.” The provisions for Assignment and Arbitration as acceptable and should be adopted herein as Section 13 and 14 respectively. Note that in a contract, the parties may choose the venue upon whose jurisdiction they would choose to submit. In this case the choice of a third country where arbitration may be sought is acceptable. Section 15. Miscellaneous. It is highly desirable that this should also be included in the agreement. Under this section, the date upon which the agreement shall take effect will be defined as well as the number of copies of agreement and to whom it will be furnished. This portion should read “This effect shall take effect on date of signing and shall stay in full force until the date of expiration or until revoked by the parties. Copies duly notarized in accordance with governing laws should be distributed to the parties thereof.” It is therefore highly recommended that such comments and suggestions made be incorporated into the draft agreement. Yours truly, _________________ Letter of Intent The Board of Directors Taiwan Red Sun Rising Ltd Taiwan Gentlemen: Greetings! As you already know, our Company, WALLY SOLAR MANUFACTURER, has developed an innovated product called the “Ijuice”, a backpack that includes a solar panel which generates enough energy to charge Ipods, cell phones, PDAs and the likes. Recently, it has come to our attention that your company is interested in our product, the “Ijuice” and the “MiniJuice.” Your offer for an equity joint venture is highly appreciated. As a strategic alliance between our companies for purposes of economic activities, we are bound to contribute resources, revenues, expenses and control of the enterprise. In the light of this, I have some issues and concerns that must be addressed before we proceed. Financial Terms We at WALLY SOLAR MANUFACTURER have spent a considerable time and resources in terms of research and development to come up with the “IJuice” and the “MinIJuice”. As software profitability often decline quickly, it is therefore in our best interest to receive to an amount of money initially. As up front payment for licenses on the technology, we would like to ask the amount of ____________ and _______ % of the total sales revenue each year. Furthermore, in order to continually upgrade the product and maintain its competitive edge in the market, we would like to request that Taiwan Red Sun Rising Ltd reinvest ____% of its sales for R & D each year. Creative Control As the original source of the product, we would like to retain creative control in the development process. We would like to make it clear from the very start that production standards should be in consonance with our company’s standards. We feel that this very important as this is primarily our product and our technology. However, this does not mean that your company will have limited access in terms of R & D. We recognize that the fact that as our partner, you are as much entitled to any information regarding the production process. Furthermore, we would like to have the logo of our company to appear side by side with your logo, on the product label and in any communications, materials, promotions etc. involving the “IJuice” and the “MinIJuice”. Distribution and Pricing Since we are a technical company, we would be happy to allow your company to handle most of the marketing, distribution and pricing processes. The only thing we would like to emphasize in this area is that there should be provisions for proper progress reporting. We hope to hear from you soon regarding our counter offer. Thank you very much! Read More