Global Business Law, Local Agents, Distributors and Franchises - Assignment Example

Question 1 MEMORANDUM OF LAW I. Questions Presented 1. Under the CISG, did DY violate its agreement with TBC by refusing to accept the remaining quantities of CarC on the ground that the word ‘consignment’ was be taken to mean in accordance with common usage, which implied that it had no obligation to accept and pay for them until it has actually used them? II. Short Answer TBC is entitled to sue DY for the balance of the goods that it had to sell at a lower price on the ground that “consignment” should be given the meaning that the parties has accorded to it in the course of their dealings with each other and that, therefore, DY breached the agreements by refusing to accept the remaining quantities of CarC. III. Facts TBC, an Austrian vendor, and DY, a Utah corporation, entered into two agreements for delivery to consignment of specified quantities of CarC by TBC to DY. After receiving some of the quantities of the agreed CarC, DY refused to receive the rest of the materials on the ground that it had no obligation to do so. Without the knowledge of TBC, DY brought from another vendor the rest of the quantities it needed at a lower price. On the other hand, TBC sold the balance of unsold CarC at a lower price to another. It then sued DY for the balance of the price. IV. Discussion DY cannot refuse TBC’s claim on the ground that “consignment” should be interpreted to mean in accordance to its usage in the metal industry. The more important consideration is what meaning the parties accord to the term in the course of its dealings. Under Article 9 (1) of the CISG, “The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves.” Since by practice of the parties, DY is expected to pay all the specified amounts of CarC it ordered and reflected in the agreements and billed by TBC only after it had used all the materials, there is no reason for the parties to depart from this meaning. This position is supported by Treibacher Industrie, A.G. v Allegheny Technologies, USCA, 11th Cir. 464 F.3d 1235 (2006), a case with parallel facts to the present case, where the Court held that a finding that the meaning the parties attribute to a contractual term during the course of their business relationship establishes the meaning of that term as to those specific parties. V. Conclusion TBC can successfully sue DY for the remaining amount representing the difference between the original price of the CarC as agreed to between TBC and DY and the price of the CarC that was refused receipt by DY and sold TBC to another at a lower price. Question 2 MEMORANDUM OF LAW I. Questions Presented 1. Under the UCP and NY state law, did ABank commit wrongful honor and conversion on the ground that the missing word “Jeans” on both bill of lading and insurance, the missing name of beneficiary on the packing list and the absence of inspection document constitute discrepancies? II. Short Answer No, the issuer cannot be held for wrongful honor and conversion because the Plaintiff had effectively waived the discrepancy on the missing inspection certificate while the other two missing words on certain documents are not regarded as discrepancies under the UPC. III. Facts RAM, SA, a Netherland corporation, engaged Plaintiff to broker the purchase of Levis Jeans from Shady-USA, Inc. For this purpose, the Plaintiff applied for a letter of credit from ABank. The L/C required Shady to present certain documents before payment is released, but on three separate occasions it presented documents with discrepancies. BBank, ABank’s affiliate, rejected the first and second sets of documents and forwarded the third set to ABank. ABank observed the lack of the following on the set of documents: the word “Jeans” on the bills of lading and insurance; the name of beneficiary on the packing list, and; the inspection certificate. Nonetheless, it paid Shady after purportedly given the go signal by Plaintiff. Plaintiff eventually demanded refund from the bank. The shipments from Shady arrived, but were confiscated by the authorities for being counterfeit. Plaintiff sued ABank for wrongful honor and conversion. IV. Discussion In order to determine whether the ABank committed wrongful error and conversion, resort must be made to UCP600, which is the latest revised issue applicable to the present case. NY law on the matter was also indicated to be applicable to the case, but only of it does not conflict with UCP600. The implication is that UCP must prevail. There are three purported discrepancies on the various documents, but a reading of Articles 20 and 28 of UCP600 does not indicate that omissions of a word in the label of the goods should be of significance to the issuer bank in determining discrepancies. Moreover, Art. 14 (e) on Standard for the Examination of Documents provides that description of goods and services or performance may be stated in general terms so long as they are not in conflict with other documents with the exception of commercial invoices. Similarly, the missing beneficiary in the packing list is not also considered a discrepancy because Art. 14(f) of UCP600 states that documents that do not state to whom they are issued may be accepted by the bank so long as they are not a commercial invoice, transport document or insurance documents. Anent the missing inspection certificate, there was a valid waiver by Plaintiff of the same because he had been properly advised of its absence by ABank. Considering that there were no real discrepancies and there was a proper waiver of the inspection certificate, ABank cannot be held liable for wrongful honor and conversion. The case of OEI v. Citibank, N.A. 872 F.Supp. 67 (S.D.N.Y. 1995) have factual similarities to the present case. There, the issuing bank was held liable for wrongful honor and conversion, but only because there were real discrepancies that were not made known to Plaintiff. There is however, one principle enunciated in the case that is applicable here and this is the dictum that the agreement between buyer and seller is distinct from that of the Application Agreement and therefore, the issuing bank cannot be held liable for anything related to it. Conclusion There is a slim chance for client Plaintiff to succeed in an action against issuer bank if he pursues a case against it in court. All the other discrepancies committed by the Shady on the first two sets of documents have no bearing against ABank as they did not form basis of payment. Question 3 Discussion A. Local Agents, Distributors and Franchises In Mexico, establishing legal presence is advisable for foreign entities or creating Permanent Establishing (PE) through the conduct of taxable activities. Mexico and the US have entered into an extensive agreement on PE. On the other hand, in Venezuela, an agent or representative of a foreign entity is required to be authorized through a special power of attorney. B. Intellectual Property Protection Mexico has IP laws governing patents, copyrights and trademarks. Venezuela, on the other hand, is governed by Decision 344 of The Andean Community and the New Venezuelan Copyright Law, which allows patentability to all fields of technology except, amongst others, those relating to pharmaceutical products shown on the list of basic medications of the WHO. C. Taxation System In Mexico, the following taxes are imposed on corporations: 30% federal corporate tax; 17.5% corporate flat tax on cash flows; 16% VAT on every transaction; custom duties for goods entering the country, but Mexico and the US are subject to NAFTA, where preferential treatment to customs is given to goods originating from either and entering the other. On the other hand, the Business Assets Tax Law (­BATL­) in Venezuela levies taxes on assets, tangible or intangible. D. Currency Exchange Regime Mexican currency is peso, foreign exchange control is non-existing and there are no limitations on repatriation of profits. On the other hand, all foreign investments are registered with the Venezuelan SIEX, but does not guarantee repatriation of original capital at the same rate although 100% repatriation of a foreign investor’s net profit is allowed. E. Labor Unlike the US, Mexico does not follow the at-will employment system, but provides just causes for any termination. It also imposes mandatory profit sharing of 10% of the income among employees as well as Christmas bonus and additional 25% for work done on a Sunday. In Venezuela, labor is governed by Ley Organica de Trabajo, which provides: limits on maximum hours work; indemnity wages; advance notice to employee in termination cases; freedom to unionize and conduct strikes if conflict is not resolved through legal procedure; that 90% of workers must be Venezuelans. Question 4 Discussion A syndicated loan market is one where loan is issued to a single borrower by a joint team of lenders, usually banks although financial institutions can also compose the team. It is the lead bank that promotes the financing of a specific project being undertaken by a borrower to other banks or financial institutions as well as provide information specific to the borrower. The participants usually fund the loan in identical manner and are not liable for each other’s loan. Thus, although loan effort is coordinated, each lender has a separate claim against a debtor. A common stipulation is that payments made by the borrower will be shared in proportion of the loans granted by each lender (Pretorius et al 80-81). A syndicated loan involves two phases: the first is the negotiation and agreement to terms, syndication of risks and execution of documents, and; the second is charting the life of the loan from the closing of the negotiation to final repayment, including the following: loan administration; monitoring of the project, and; transfer of claims among lenders. In the event of financial distress precluding prompt payment by the borrower, a renegotiation of terms may ensue. Moreover, syndicated loans are floating rate transactions allowing the resetting of interest rates to reflect the market, which lessens the risks of mismatches between duration and costs of loans and deposits. Interests are paid periodically, accruing at new rates for every period (Pretorius et al 81-82). In syndicated loans, a special purpose vehicle (SPV) is established to secure loans to be managed by an Originator. The functions of the Originator include the identification of loans/claims that can serve as collaterals and transfer them to the SPV. These loans/claims are often secured by mortgages (Cumming 248). A finance-syndicated loan, just like other loans are exposed to several risks, such as entity risks, transaction risks, mitigating and managing risks, security risks and insurance issues (Pretorius et al 84). Works Cited Altunbas, Yener and Alper Kara, and David Marquez-Ibanez. Large Debt Financing: Syndicated Loans versus Corporate Bonds. World Bank. March 2009. ‘Business in Venezuela.’ Trade with America. 2006. Accessed on 25 April 2012. Cummings, Douglas. The Oxford handbook of Private Equity. Oxford University Press, 2012. OEI v. Citibank, N.A. 872 F.Supp. 67 (S.D.N.Y. 1995). Pretorius, Frederik and Berry-Fong Chung-Hsu, Arthur McInnes, Paul Lejot, Douglas Arner. Project Finance for Constructions and Infrastructure: Principles and Case Studies. John Wiley & Sons, 2008. Print. Thornton, Grant. Doing Business in Mexico. http://www.ssgt.com.mx/pdf/DBinMexico.pdf Treibacher Industrie, A.G. v Allegheny Technologies, USCA, 11th Cir. 464 F.3d 1235 (2006). Uniform Customs and Practice for Documentary Credits 600 (UPC). United Nations Convention on Contracts for the International Sale of Goods (CISG). Read More