Professional International Business Law - Wally Solar Manufacturer - Essay Example

Dear Mr. Wally, As per your instructions, I reviewed the draft agreement you have given me. I find it most appropriate to revise most of its contents, although there are certain provisions thereof, which are still sound and therefore applicable.Below are my comments and suggestions: Parties to the Contract. The statement of the parties is rather vague and should be made clear, as it is the primary source of authority in this agreement. A pro-forma statement of parties should be followed. Below is my proposed revision of this part of the agreement: “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 ______________;” There are many ways of arranging the sections of an agreement to make in understandable and coherent. I propose that this agreement will be divided into sections with headings and subtitles for easy references. Statement of Purpose. The draft agreement you provided me has no statement of purpose. This provision is important as it will define the whole document and will guide the reader as what purpose it will serve. This should appear as section 1 in the agreement. Subject of the Contract. The subject of the contract should be clearly stated to exclude all other items not mentioned thereof. This should done in Section 2. Definition of Terms. In an agreement, as well as any other contracts, it is highly desirable to define the terms we use in the provisions thereof. There are words, which may have dual meanings or connotes a deferent interpretation when conjunct with another word or phrase. My recommendation is that we include a definition of terms in the agreement and put it as Section 3. Appointment and Territorial Coverage. A clear provision appointing the Agent and defining the territory upon which the agent shall have authority to operate should be included. This should be included as Section 4. I would like to suggest that provisions for this section should read as follows: The Principal hereby appoints the Agent to serve as its exclusive sales agent and representative in Japan and shall act in accordance with the terms of this agreement. The appointment should limit the coverage of the Agent within the Japanese territory as you already mentioned that the Agent is a small company with no capability of handling transactions outside Japan. Non-Transferability Clause. This should be included as Section 5 with the following provisions “This agreement is personal in nature between the Agent and the Principal and is non-transferable without the written consent of the party concerned.” Confidentiality. This should be clearly stated in Section 6 hereof as follows: “Parties agree to abide the rules of confidentiality of information and transactions.” Trademarks, Tradenames and Packaging. This provision should be included as Section 7 to read as follows: “The agreement is an agreement to sell and nothing herein should be construed so as to confer the Agent any rights over the trademarks and tradenames of the Principal. Any alterations in the trademarks, tradenames and packaging of the product are strictly prohibited.” Taxes and Licenses. As a foreign corporation, there is a need for our company to define this, thus this should be included as Section 8 hereof to read as follows: “Parties agree to maintain separate systems for payment of business taxes and licenses, subject to the rules and regulations enforced by the country of jurisdiction.” Duties and Obligations of the Agent. This should be included in the agreement as Section 9. The duties and responsibilities of the Agent may be divided into two groups namely, the general and specific. Provisions of the draft agreement, paragraph 2 on sales and promotions would qualify as the general obligations of the agent. Provisions a, b and c thereof are good and should be retained. However, provision d needs to be changed as the product being referred to do not seem to jive with the product involved in this agreement. There is a line there which say ““in advertising media addressed to men with no chest-hair”. Clearly, this does not pertain to the “IJuice” and the “MinIJuice” and should therefore be changed accordingly. The product we are selling should be promoted “to people who are techno savvy but love the outdoors.” Paragraph 3 of the draft agreement can be converted into specific duties and obligations of the agent as it talks of very specific matters like keeping office, putting the name of the company in the building directory and the likes. This therefore can be adopted in the revised agreement as Section 6. Again there is an anomalous statement in provision d thereof where it talks of “information on the wine, cognac, and liqueur market in the United States of America.” This information is irrelevant in the technology business and does not have any bearing at all in the agreement. This should be deleted and substituted with the appropriate provision such as “information on technology and its market in the United States of America.” The rest of the provisions in paragraph 3 is acceptable and should be retained. These provisions will now comprise Section 10 of the revised agreement. Duties and Responsibilities of the Principal. The draft agreement has many provisions, which are pertinent to the duties, and responsibilities of the principal but are rather scattered all over the document. In other to achieve coherence in the presentation thereof, we will therefore lump these provisions together and create Section 11. We can pick up the scattered provisions in the draft agreement, add some other relevant statements and organized them as follows: (a). It is the duty of the Principal to provide the agent with technical support in the installation and operation of the product; (b) The Principal shall supply the Agent with product samples to be used in the marketing and promotions activities of the Agent; (c). The Principal shall furnish the agent with the necessary materials to carry-out its tasks of marketing and promoting the products of the Principal. These materials may be but not limited to the following, pamphlets, brochures, posters, catalogues, booklets and the likes. In cases where it would require that these materials be translated to another language, which is more useful in the promotion of the products, the principal agree to give the Agent the right to translate the contents thereof provided that such outputs of translation shall be submitted to the principal for verification of data and approval for publication. (d) The Principal agree to furnish the Agent with copies of inquiries and other correspondence related to the sale of the WALLY SOLAR MANUFACTURER product “IJuice” and the “MinIJuice” within the Agent’s territory. Warrantees and Inspections. My recommendation is that this should be included as Section 12 in the agreement. Under this provision, the responsibilities of the Agent and the Principal should be stated as follows: “The principal shall provide warrantees on the good condition of the product sold to the customer for a period of 6 months. In the event where factory defects are found in the product, the Principal agree to provide for a replacement thereof. All products should be subjected to rigid quality inspection by the Principal.” Commissions and Compensation. In the draft agreement, this is well provided for. However, since we already revised the format of the agreement to include sections instead of the old paragraph form only, we should therefore modify the wordings of this section to conform to our new format. This should therefore be included as Section 13. The Sales Transaction. The agreement is an agency of sales therefore, pertinent rights and obligations should be included as Section 14 with specific provisions as follows: 1. Pricing. The principal shall set the prices of the products and shall provide the Agent will a pricing manual. All prices shall be CIF Tokyo, Japan, and shall be payable in currency of the United States of America. 2. Delivery. Delivery of products should be made at the location of the buyer FOB destination. Title shall only pass to the customer upon delivery to the customer’s location. 3. Billing. The Principal shall bill all customers directly. 4. 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. Liabilities and Limitations. This should be included as Section 15 and should have the following provisions: 1. Goods in Transit. Principal shall be liable for delivery of the product to the customer and shall be held liable to any loss or damages of goods in transit. 2. Claims against Warrantee. The Principal shall extend full warrantee on the good conditions of the product and shall not hold the Agent solidarily liable under the law in cases of claims against warrantee. 3. Collections. Agent shall have no right to represent the Principal on claims and collections for sum of money from the client or to prosecute in behalf of the Principal without proper written authority. In the event where the Principal issued a Power Of Attorney to the Agent to represent it in any legal and administrative concerns, all expenses thereof shall be for the account of the principal. 4. Remittances. Agent, upon collection of sum of money through written instructions of the Principal shall immediately remit the same to the Principal within 7 working days from collection thereof. 5. Service of Summons. The Agent is not authorized to receive summons for an in behalf of the Principal. Performance Bond. In instances where the parties enter into an agreement for the first time and thee is no tract record to base the transactions upon, a performance bond may be a good idea to include in the agreement. Thus, since this is new agreement, it would be good to include this as Section 16 with the following provisions “Parties agree that as guarantee for performance of duties in good faith in the promotion and solicitation of clients for and in behalf of the Principal, the Agent shall put up a bond to serve as performance collateral. In any event of fraud, misrepresentation and other forms of breach of agreement, the bond shall be forfeited in favor of the Principal, subject to rules and regulations governing forfeitures.” Penalties. A provision for penalties should be included in the agreement as Section 17 and should read as follows: “Parties agree to impose penalties for misfeasance and malfeasance in the execution of this agreement as follows: 1. Forfeiture of performance in accordance with the provisions of Section 15 hereof; 2. Payment of penalties in the amount of __% of the amount due in case of delay of payment of commissions and other obligations on the part of the Principal, plus interest; 3. Payment of penalties and cancellation and pre-termination of the agreement in the event of fraud, negligence and others subject to provisions on torts and damages governing the parties” Termination/Expiration. The provision on term of the agreement only said ten years without qualifications. This should be revised to include a pre-termination clause. Therefore, Section 18 of the agreement should read in part “that in case of disagreements, disputes or upon agreements of the parties, anyone of them may opt for pre-termination thereof provided that a written notice be served to the other party 90 days prior to the date of pre-termination of this agreement.” Venue for Arbitration. Section 19 should clearly define this as follows: “Any controversy rising from his agreement should be settled according to the rules and regulations of the jurisdiction of choice of the Parties which is London provided that there should be three (3) arbiters appointed one coming from the US, one from Japan and one from London.” 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. 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! We are happy to receive your offer for an equity joint venture. However, there are issues that we feel we must first discuss before we proceed. 1. Financial Terms Part of the considerations for a joint venture is to pool resources and technology to gain better access to capital and spread risk. We understand fully that in entering into a joint venture, we bind ourselves to contribute equity, resources and technology. However, you must understand that we at WALLY SOLAR MANUFACTURER have spent quite a lot of resources already in terms of research and development for the “IJuice” and the “MinIJuice”. Our concern now is cost recovery. As software profitability often decline quickly, it is therefore in our best interest to receive to an amount of money initially. As part of our conditions in entering into a joint venture, we would like to receive an up front payment for licenses on the technology pursuant to the licensing laws applicable in the United States. Another financial concern is in the sharing of revenues. Since we are asking for upfront payment on the technology, we would like to discuss with you fully and in person the terms of contribution as well as sharing of revenues. Production and Management As a consequence of a joint venture, the companies involved will now have joint management control over the new company, which will be created under the joint venture agreement. However, we would like to make it clear to you gentlemen that as the original owners of the technology, we would like to retain creative control over the products and its innovations. Furthermore, in order to continually upgrade the product and maintain its competitive edge in the market, we would like to include in the agreement that Taiwan Red Sun Rising Ltd reinvest ____% of its sales for R & D each year. 2. Branding and Packaging Since this a joint venture, 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”. As to branding, we would be glad to leave this to you subject to rules and regulations governing in your locality. 3. Distribution and Pricing WALLY SOLAR MANUFACTURER is a technical company and has no tract record when it comes to marketing and promotions. Therefore, we would like to concentrate on the technology production and would be happy to leave the marketing, distribution and pricing processes to your company subject to provisions for proper progress reporting, local taxation rules and other pertinent regulations. We are looking forward to haring from you soon with comments on our counter offer. Thank you very much! Read More