Monday, December 12, 2005

Contemporary Business and Online Commerce Law - Chapter 16

Remedies for Breach of Sales and Lease Contracts


Sellers and Lessors Performance


Tender of Delivery -- requires the seller or lessor to:



  • put and hold conforming goods at the buyers or lessee's disposition

  • give the buyer or lessee any notification reasonably necessary to enable the buyer or lessee to take delivery of the goods


Place of Delivery



  • agreement -- the parties may agree in the sales or lease contract as to the place a delivery

  • no agreement -- if there is no agreement in the contract as to the place of delivery, the following UCC rules apply:

    • noncarrier cases -- the place of delivery is the sellers or lessor's place of business, unless the seller or lessor has no place of business, in which case the place of delivery of the sellers or lessor's residence

    • carrier cases:

      • shipment contracts -- the sales contract requires the seller to send goods to the buyer by carrier. Delivery occurs when the seller puts the goods in the carrier's possession

      • destination contracts -- the sales contract requires the seller to deliver the goods to the buyers place of business or other destination. Delivery it occurs when the goods reach this destination






Perfect Tender Rule


Best seller or lessor is under a duty to deliver conforming goods to the buyer or leasee. If the goods or tender of delivery fails in any respect to conform to the contract, the buyer or leasee may opt to:



  • reject the whole shipment

  • accept the whole shipment

  • reject part and accept part of the shipment


Exceptions to the perfect tender rule:



  • agreement of the parties -- the parties may agree to limit the effect of the perfect tender rule

  • substitution of carriers -- a seller must use a commercially reasonable substitute if the agreed-upon manner of delivery failes or the agreed-upon type of carrier becomes unavailable

  • cure -- a seller or lessor who delivers nonconforming goods has the opportunity to cure the nonconformity by repairing or replacing defective or nonconforming goods at the time for performance has not expired and the seller or lessor notifies the buyer will leasee of his or her intention to make a conforming delivery within the contract time

  • installment contracts -- the buyer or lessee may reject any nonconforming installment if the value of the installment is in payer in the defect cannot be cured. The buyer Alessi may reject the entire contract upon the tender of a nonconforming installment only if the nonconformity substantially impairs the value of the entire contract

  • destruction of goods -- if goods identified in the contract are totally destroyed without full of either party before the risk of loss passes to the buyer or lessee, the seller or lessor is excused from performance


General Obligations


The UCC has adopted the following broad principles that govern the performance of sales and lease contracts:



  • good faith -- parties to a sales or lease contract must perform their contract obligations in good faith

  • reasonableness -- many UCC provisions require parties to take reasonable steps or to act reasonably in performing contract obligations

  • commercial reasonableness -- some provisions of the UCC require merchants to use commercial reasonableness in the performance of their contract obligations


Buyers and Lessee's Performance


right of inspection -- unless otherwise agreed, the buyer or lessee has the right to inspect goods that are tendered, delivered, or identified in the sales or lease contract prior to accepting or paying for them


payment -- duty to pay. Goods that are excepted by the buyer or lessee must be paid for in accordance with the terms of the sales or lease contract. Unless otherwise agreed, payment or rent is due when and where the goods are delivered


acceptance -- occurs when the buyer or lessee takes one of the following actions:



  • signifies in words or by conduct that the goods are conforming or that the goods will be taken or retained despite their nonconformity

  • fails to reject the goods within a reasonable time after their delivery by the seller or lessor

  • packs inconsistently with the seller's ownership rights in the goods


Buyers and lessees may only accept delivery of a commercial unit.


Seller's and Lessor's Remedies


Right to withhold delivery -- delivery of goods may be withheld if the seller or lessor discovers that the buyer or leasee is insolvent before the goods are delivered.


Demand payment in cash. -- if the seller or lessor discovers that the buyer or leasee is insolvent, he or she may refuse to deliver the goods unless payment is rendered in cash.


right to stop delivery of goods in transit -- if the goods are in transit or in the bailee's possession, the seller or lessor may stop delivery of a car load, a truckload, or a planeload of goods if the buyer or lessee repudiates the contract, fails to make payment when due, or otherwise breaches the contract war of any size shipment if the buyer or lessee becomes insolvent


right to reclaim goods -- a seller or lessor may reclaim goods in the possession of the buyer or lessee if:



  • the goods are delivered in a credit sale and the seller then discovers that the buyer was insolvent

  • the buyer misrepresented his or her solvency in writing within three months before delivery or paid for goods in a cash sale with a check that bounces


right to dispose of goods -- if a buyer or lessee breaches or repudiates the sales or lease contract before the seller or lessor has delivered the goods, the seller or lessor may resell or release the goods and recover damages from the buyer or leasee. Damages are calculated as the difference between the disposition price or rent and the original contract price or rent


right to recover the purchase price or rent -- if the buyer or lessee accepts the goods but fails to pay for them when the contract price or rent is due, the seller or lessor may sue to recover the contracted for purchase price or rent from the buyer or leasee


right to recover damages for breach of contract -- if a buyer or lessee repudiates a sales or lease contract, the seller or lessor may sue to recover the damages caused by the breach. Damages are calculated as the difference between the original contract price or rent in the market price or rent of the goods at the time and place the goods were to be delivered, or lost profits


right to cancel the contract -- the seller or lessor may cancel the sales or lease contract if the buyer or lessee breaches the contract. The seller or lessor is discharged of any further obligations under the canceled contract


Buyer's and Lessee's Remedies


seller or lessor refuses to deliver the goods or delivers nonconforming goods leasee does not want



  • reject nonconforming goods -- if the goods or the sellers were Lester's tender of delivery fails to conform to a sales or lease contract in any way, the buyer or lessee may:

    • reject the whole

    • accept the whole

    • accept any commercial unit and reject the rest



  • revoke acceptance of nonconforming goods -- a buyer or leasee who has accepted goods may subsequently revoke his or her except instead if:

    • the goods are nonconforming

    • the nonconformity substantially impairs the value of the goods to the buyer or lessee

    • and one of the following factors are shown:

      • the sellers or Luster's promise to reasonably cure the nonconformity is not met

      • the goods were excepted before the nonconformity was discovered in the nonconformity was difficult to discover

      • the goods were excepted before the nonconformity was discovered and the seller or lessor assured the buyer or leasee at the goods were conforming





  • cover -- if the seller or lessor fails to make delivery of goods or repudiates a sales or lease contract or if the buyer or leasee rightfully rejects the goods or justifiably revoked acceptance, the buyer or leasee may cover the purchasing or renting substitute goods from another party. The buyer or leasee may recover from the seller or lesser damages calculated as the difference between the costs of cover and the original contract price or rent

  • sue for breach of contract and recover damages -- if a seller or lessor fails to deliver the goods or repudiates a sales or lease contract, the buyer or lessee may recover damages from the seller or lessor. The images are calculated as the difference between the contract price or original rent and the market price or rent at the time the buyer or lessee learned of the breach

  • canceled the contract -- a buyer or lessee may cancel a sales or lease contract if the seller or lesser fails to deliver conforming goods or repudiates the contractor if the buyer or leasee rightfully rejects the goods are justifiably revokes acceptance of the goods. The buyer or leasee is discharged from any further obligations under the canceled contract


seller or lessor tenders nonconforming goods and buyer or lessee accepts them



  • sue for damages -- if a buyer or lessee except nonconforming goods from the seller or lessor, the buyer or leasee may recover as damages any loss resulting from the sellers or lessors breach

  • deduct damages from unpaid purchase price or rent -- if a seller or lessor breaches the sales or lease contract and the buyer or leasee accepts nonconforming goods, the buyer or leasee may deduct all or any part of the damages resulting from the breach from any part of the price or rent still due under the sales or lease contract


seller or lessor refuses to deliver the goods and buyer or leasee wants them



  • specific performance -- if the goods are unique or the remedy at law in inadequate, a buyer or lessee may obtain a decree of specific performance that orders the seller or lessor to perform the sales or lease contract

  • replevy the goods -- a buyer or lessee may replevy (recover) scarce goods from a seller or lessor who was wrongfully withholding them

  • recover the goods from an insolvent seller or lessor -- if the buyer or lessee makes partial or full payment for the goods before they are received and the seller or lessor becomes insolvent within 10 days after receiving the first payment, the buyer or lessee may recover the goods from the seller or lesser


unconscionable sales and lease contracts


If a sales or lease contract or any clause and it is unconscionable, the court may either refuse to enforce the contract or limit the application of the unconscionable clause.


Additional Issues Affecting Performance and Breach


assurance of performance -- if one party to a sales or lease contract has reasonable grounds to believe that the other party either will not work cannot perform his or her contractual obligations, he or she may demand in writing an adequate assurance of performance from the other party. The party making the demand may suspend his or her performance until adequate assurance of performance is received.


anticipatory repudiation -- occurs when a party to a sales or lease contract repudiates the contract before his or her performances do. The aggrieved party can await performance when do war treat the contract as having been breached at the time of the anticipatory repudiation.


statute of limitations -- the UCC provides that an action for breach of any written or world sales or lease contract must commence within four years after the clause of action accrues. The parties may agree to reduce the limitations period to one year, but they cannot extend it beyond four years


agreements affecting remedies



  • limitations on remedies -- the parties to a sales or lease contract may agree on remedies in addition to war in substitution for the remedies provided by article 2 or 2A of the UCC

  • unconscionable limitations -- any agreement concerning the limitation or exclusion of damages that is found to be unconscionable is unenforceable. With respect to consumer goods, a limitation of consequential damages for personal injuries is prima facie unconscionable

  • liquidated damages -- the parties to a sales or lease contract may establish an advance the damages that will be paid upon a breach of the contract

Sunday, December 11, 2005

Contemporary Business and Online Commerce Law - Chapter 15

Performance of Sales and Lease Contracts


Identification and Passage of Title


identification -- distinguishes the goods named in the contract from the seller's or lessor's other goods


Passage of Title



  • passage of title by agreement -- title to goods of a sales contract passes from the seller to the buyer in any manner and on any conditions explicitly agreed upon by the parties

  • passage of title where there is no agreement -- if the parties have new agreement as to the passage of title, title passes according to the following UCC rules

    • shipment contract -- requires the seller to ship the goods to the buyer via a common carrier. Title passes to the buyer at the time and place of shipment

    • destination contract -- requires the seller to deliver the goods to the buyer's place of business or other designated destination. Title passes to the buyer when the seller tenders delivery of the goods at the specified destination

    • goods that do not move -- and a sales contract authorizes the goods to be delivered without requiring the seller to move them, title passes at the time and place of contracting, unless a document of title is required, in which case title passes when the seller delivers the document of title to the buyer



  • passage of title in lease contracts -- goods remain with the lessor were a third party. Title does not pass to the lessee.


Article 6 -- bulk sales



  • bulk sales -- occur when an owner/debtor transfers and major part of a business is material, merchandise, inventory, or equipment not in the ordinary course of business

  • article 6 (bulk sales) -- establishes rules that require the buyer to notify the creditors of the seller of the proposed sale of assets. If such notice is given, the buyer receives title to the goods, free of all claims of the seller's creditors. If the notice is not given, the goods in the buyer's possession are subject to the claims of the seller's creditors for six months after the date of possession

  • amendment -- in 1988, the National Conference of Commissioners on Uniform State Laws (NCCUSL) and the American Law Institute (ALI) recommended that states repeal Article 6. As an alternative, the NCCUSL issued a revised version of article 6.


Risk of loss


Agreement Regarding Risk of Loss



  • agreement -- the parties to a sales contract may agree among themselves as to who will bear the risk of loss of goods if they are lost or destroyed

  • no agreement -- if the parties to a sales contract do not have a specified agreement concerning the assessment of risk of loss, the UCC mandates who will bear the risk


Carrier Cases: Movement of Goods



  • shipment contract -- the risk of loss passes to the buyer and seller delivers conforming goods to a carrier. The buyer bears the risk of loss during transportation.

  • destination contract -- the risk of loss does not pass to the buyer until the goods are tendered to the buyer at the designated destination. The seller bears the risk of loss during transportation


Shipping Terms


sales contracts often contain the following shipping terms:



  • F.O.B. -- free on board/point of shipment

  • F.A.S. -- free alongside or port of shipment

  • C.I.F. -- crossed, insurance, and freight

  • Ex-ship -- from the carrying vessel

  • No-arrival, no sale contract


Noncarrier Cases: No Movement of Goods


If the buyer is to pick up the goods from the seller's place of business or other specified location, the following UCC rules apply:



  • merchant-seller -- if the seller is a merchant, the risk of loss does not pass to the buyer until the goods are received by the buyer. The merchant-seller bears the risk of loss between the time of contracting in the time the buyer picks up the goods.

  • nonmerchant-seller -- if the seller is a nonmerchant, risk of loss passes to the buyer upon tender of delivery of the goods by the seller.


Risk of loss: Conditional sales


The entrustment of goods by a seller to a buyer on a trial basis. The following UCC rules for risk of loss apply:



  • sale on approval -- occurs when a merchant allows a customer to take the bids for a specified period of time to try the goods. There is no sale unless and until the buyer accepts the goods. The risk of loss remains with the seller and does not transfer to the buyer until acceptance.

  • sale or return -- occurs when a seller delivers goods to a buyer with the understanding that the buyer may return them if they are not used or resold during a stated period of time. The risk of loss passes to the buyer when the buyer takes possessions of the goods

  • confinement -- occurs when a seller/consignor delivers goods to a buyer/consignee to sell. The risk of loss passes to the consignee when the consignee takes possessions of the goods


Risk of Loss: Breach of Sales Contract


If there has been a breach of a sales contract, the UCC rules concerning risk of loss apply


Seller in breach -- if a seller breaches a sales contract by tendering or delivering nonconforming goods, the risk of loss to the goods remains of the seller until the defect or nonconformity is cured or the buyer accepts the nonconforming goods.


Buyer in breach -- if a buyer breaches a sales contract by refusing to take delivery of conforming goods or repudiating the contract before the risk of loss would normally transferred to him or her, the buyer bears the risk of loss of any goods identified in the contract for a reasonable commercial time.


Risk of Loss: Lease Contracts



  • agreement -- the parties to a lease contract may agree as to who will bear the risk of loss of the goods as they are lost or destroyed

  • no agreement -- if the parties do not have an agreement concerning the assessment of risk of loss, the following UCC rules for risk of loss apply:

    • ordinary lease -- the risk of loss is retained by the lessor

    • finance lease -- the risk of loss passes to the lessee

    • breach of contract -- if a tender of delivery of goods fails to confirm to the lease contract, the risk of loss remains with the lessor or supplier on till acceptance or cure




Sales by Nonowners


If a person sells goods that he or she does not hold valid title to, the buyer acquires rights in the goods under the UCC


Void title and lease: Stolen goods -- a thief acquirers no title to goods he or she steals. A person who purchases stolen goods does not acquire title to the goods. Any such title is called void title. The real owner can reclaim the goods from the purchaser. The purchasers recourse is to recover from the thief.


Voidable Title: Sale or Lease of goods to good-faith purchaser for value -- if goods are obtained by fraud, with a check that is later dishonored, or through impersonation of another person, the perpetrator acquirers voidable title to the goods. If the perpetrator sells for leases the goods to a good-faith purchaser or leasee for value -- a person who pays sufficient consideration or rent for the goods and honestly believes that the seller or lessor has good title to the goods -- the buyer or leasee acquirers did title to the goods. The real owners recourse is against the perpetrator who acquired the goods from him or her.


Entrustment Rule -- if an owner entrusts possession of his or her goods to a merchant who deals in goods of that kind (example. For repair) and the merchant sells those goods to a buyer in ordinary course of business (for example. A customer of the merchant), the buyer acquires title to the goods. The real owners recourse is against the merchant who sold his or her goods. This rule is called the entrustment rule.


Contemporary Business and Online Commerce Law - Chapter 14

Formation of Sales and Lease Contracts


Article 2


Article 2 of the UCC applies to transactions in goods = UCC 2-102



  • goods -- tangible things that are movable at the time of their identification in a sales contract

  • scope of articles 2 -- applies to all sales contracts, whether they involve merchants or not


Scope of articles 2A


Article 2A of the UCC applies to personal property leases of goods



  • lease -- a transfer of the right to the possession and use of the main goods for a set term in return for certain considerations

  • parties to a lease:

    • lessor -- person who transfers the right of possession and use of a good

    • lessee -- person who acquires the right to possession and use of goods



  • finance lease -- a three party transaction of the lessor, the lessee, and the supplier of the leased goods. The parties to a finance lease are:

    • lessor -- acquirers title to the goods from the supplier and leases the goods to the lessee. often a bank or another creditor.

    • lessee -- the person who acquires the right to possession and use of the goods

    • supplier -- third party who supplies the goods. The supplier usually sells the goods to the lessor




Formation of Sales and Lease Contracts


Offer


Open terms. If the parties leave open a major term and a sales or lease contract, the UCC permits the following terms to be read into the contract:



  • price term

  • payment term

  • delivery term

  • time term

  • assortment term


This is commonly called the gap filling rule.


Firm Offer Rule -- UCC rule which says that a merchant who makes an offer to buy, sell, or lease goods and assures the other party in a separate writing that the offeror will be held open can not revoke the offeror for the time stated, or if no time is stated, for a reasonable time.


Acceptance -- Accommodation shipment. This is the shipment that is offered to the buyer by the seller as a replacement for the original shipment when the original shipment cannot be filled. The buyer may either accept or reject the shipment.


Additional Terms Permitted


The UCC permits an acceptance of a sales contract to contain additional terms and still to act as an acceptance rather than a counteroffer in certain circumstances. The following UCC rules apply:



  • one or both parties are not merchants.-- The additional terms are considered proposed additions to the contract. If the offeree's proposed terms are excepted by the offeror, they become part of the contract. If they are not accepted, the sales contract is formed on the basis of the terms of the original offer.

  • both parties or merchants. -- That additional terms contained in the acceptance become part of the sales contract unless

    • the offer expressly limits the excepted to the terms of the offer

    • the additional terms materially alter the original contract

    • the offeror notifies the offeree that he or she objects to the additional terms within a reasonable time after receiving the offeree's modified acceptance. There is no contract if the additional terms so materially alter the terms of the original offer that the parties cannot agree on the contract.




Statute of Frauds


The UCC Statute of Frauds requires contracts for the sale of goods costing I've hundred dollars or more the end lease contracts involving payments of $1000 or more to be in writing.


Exceptions to the Statute of Frauds -- The UCC recognizes the following exceptions to the Statute of Frauds where a sale or lease contract that is required to be in writing is enforceable even though it is not in writing:



  • specially manufactured goods -- in these contracts, the goods are not suitable for sale or lease to others in the ordinary course of business and the seller or lessor has made either a substantial beginning of manufacture of the goods or commitments for their procurement

  • admissions in pleadings or court -- a party admits in pleadings, testimony, or otherwise in court that he or she has entered into a contract

  • part acceptance -- an oral sales or lease contract is enforceable to the extent to which the goods have been received and accepted by the buyer or lessee


Written Confirmation Rule


If both parties to a quarrel sales or lease contract are merchants, the Statue of Frauds requirements are satisfied if:



  • one of the parties send a written confirmation of the sale to the other within a reasonable time after contracting

  • the other merchant does not give written notice of an objection to the contract within 10 days after receiving confirmation

Friday, December 09, 2005

International Business Chapter 12 - analyzing international opportunities - summary

Steps in the market and site screening process

The screening process can be approached in a systematic four-step manner.

  1. Step one involves identifying basic appeal for potential markets (e.g., basic product demand) and/or as assessing the availability of resources for production (e.g., raw materials, labor, capital).
  2. Stepped two of the screening process is to assess the national business environment of the market or site. This involves examining the local culture, political and legal forces (e.g., government bureaucracy, political stability), and economic variables (e.g., fiscal and monetary policies)
  3. step three of the screening process is to measure the potential of each market (e.g., market size and growth, market potential indicator) and/or suitability of a site for operations (e.g., availability of workers, managers, raw materials, infrastructure).
  4. In step four of the screening process, managers normally visit each remaining location to make a final decision (e.g., competitor analysis, and financial valuation).

Three primary difficulties of conducting international market research

The collection and analysis of information in order to assist managers in making informed decisions is called market research. Unique conditions and circumstances present three main difficulties that often force adjustments in the way. Research is performed in different nations.

  1. First, managers can face problems with regard to the availability of data. It can be difficult to obtain high quality, reliable information. In addition to deliberate misrepresentation, tainted information can also result from in proper local collection methods in analysis techniques.
  2. Second, the comparability of data across markets can be difficult because terms such as poverty, consumption, and literacy can differ from a nation to another. Different ways of measuring statistics also affect the comparability of data.
  3. Third, managers can face problems rooted in cultural differences. Companies entering unfamiliar markets often hire local agencies to perform their market research for them. Local researchers know the cultural train: they understand, which practices are acceptable; which types of questions can be asked; and how to interpret information gathered and its reliability.

Secondary international data

The process of obtaining information that already exist within the company or that can be obtained from outside sources is called secondary market research.

International organizations are excellent sources of free and inexpensive information about demand for product in a particular country. International development agencies, such as the World Bank and the International Monetary Fund, also provide valuable secondary data. Government agencies -- commerce departments in international trade agencies of most countries -- often have information on import export regulations, quality standards, and the size of the markets. Commercial agencies of many state and provinces often have offices in other countries to promote trade and investment.

Companies often join industry and trade associations composed of firms within their own industries or trades. The publications of these organizations help members to keep abreast of important issues and opportunities. Many international service organizations in fields such as banking, insurance, management consulting, an accounting offer information to their clients on cultural, regulatory, and financial conditions and the market.

Main methods to conduct primary international research

Process of collecting and analyzing original data and applying the results to current research needs is called primary market research. However, primary research data are often more expensive to obtain and secondary research data because studies must be conducted in their entirety. Exhibitions at which members of an industry or group of industries showcase their latest products, see what rivals are doing, and learn about recent trends and opportunities are called trade shows. A trade mission is an international trip by government officials and business people. That is organized by agencies of national and provincial governments for the purpose of exploring international business opportunities.


Companies can use interviews to assess potential buyers emissions, attitudes, and cultural beliefs. And unobstructed but in-depth interview of a small group of individuals by a moderator to learn. The group's attitudes about a company or its product is called a focus group. In surveys, interviewers obtain facts, opinions, were attitudes by asking current or potential buyers to answer written or verbal questions. An ongoing process of gathering, analyzing, and dispensing information for tactical or strategic purposes is called environmental scanning.

International Business Chapter 12 - analyzing international opportunities - terms

Logistics -- management of the physical flow of products from the point of origin as raw materials to end-users as finished products
market research -- collection and analysis of information in order to assist managers in making informed decisions.
Secondary market research -- process of obtaining information that already exists within the company or that can be obtained from outside sources
primary market research -- process of collecting and analyzing original data and applying the results to current research needs.
Trade show -- exhibition at which members of the industry or group of industry showcase their latest products, see what rivals are doing, and learn about recent trends and opportunities.
Trade mission -- international trip by government officials and business people, that is organized by agencies of national or provincial governments for the purpose of exploring international business opportunities.
Focus group -- on structure, but in-depth interview of a small group of individuals (eight to 12 people) by a moderator to learn the group's attitudes about a company or its product.
Consumer panel -- research in which people record in personal diaries, information on their attitudes, behaviors, or purchasing habits.
Survey -- research in which an interviewer asked current or potential buyers to answer written or verbal questions. To obtain facts, opinions, or attitudes.
Environmental scanning -- ongoing process of gathering, analyzing, and dispensing information for tactical or strategic purposes

International Business Chapter 11 - international strategy - summary

Stages of identification and analysis

Process of identifying in selecting organizations objectives in deciding how the organization will achieve those objectives is called planning. In turn, strategy is the set of plant actions taken by managers to help a company meet its objectives.

As part of the strategy formulation process, managers must undertake to important steps -- identification and analysis. First, they identify the company's mission and goals. A mission statement is a written statement of why a company exists and what it plans to accomplish. Second, they identify the company's core competency in value creating activities. A core competency is a special ability of a company that competitors find extremely difficult or impossible to equal.

Managers can analyze and identify their company's unique abilities that create value for customers by conducting a value chain analysis -- a procedure that divides a company's activities into primary activities in support activities that are central to creating value for customers. Primary activities include inbound and outbound logistics, manufacturing or operations, marketing and sales, and customer service. Support activities include for infrastructure, human resource Management, technology development, and procurement. Finally, managers must analyze the cultural, political, legal, and economic environments.

International strategies, and the corporate level strategies companies use

some companies choose to follow a multinational strategy -- and adapting products and their marketing strategies in each national market to suit local preferences. Other companies decide that what suits their operations is a global strategy -- offering the same products using the same marketing strategy. In all national markets.

Companies involved in more than one line of businesses must formulate a corporate level strategy that encompasses all of the company's different business units. A growth strategy is designed to increase the scale or scope of the Corporation's operations. The exact opposite of a growth strategy is a retrenchment strategy, which is designed to reduce the scale or scope of corporations businesses. A stability strategy is designed to guard against change and is often used by corporations that are trying to avoid either prove or retrenchment. The purpose of a combination strategy is to mix growth, retrenchment, and stability strategies across a corporation's business units.

Business level strategies of companies and the role department level strategies.

Managers formulate separate business level strategies for each business unit. Most companies use one of the three generic business level strategies for competing in an industry. A strategy in which a company exploits economies of scale to have the lowest cost structure of any competitor in its industry is called a low-cost leadership strategy. Eight differentiation strategy is one in which a company designs its products to be perceived as unique by buyers throughout its industry. A focus strategy is one in which a company focuses on serving the needs of a narrowly defined market segment by being a low-cost leader, but differ aiding its product, or both. Achieving corporate and business level objectives, depends on effective department level strategies that focus on the specific activities that transform resources into products. Each department is instrumental in creating customer by you through lower costs or differentiated products. This is true of departments that conduct either primary activities or support activities.

Important issues influence the choice of organizational structure.

Organizational structure is the way in which a company divides its activities among separate units and coordinates activities between his units. Important to organizational structure is the degree to which decision-making in organization will be centralized

were decentralized. Centralized decisionmaking helps to coordinate the operations of international subsidiaries. The centralized decision-making is beneficial in fast-changing national business environments put a premium on local responsiveness.

When designing organizational structure, managers must consider the issues of coordination and flexibility. Every international company must design an organizational structure that clearly defined areas of responsibility and chains of command -- the lines of authority that run from top management to individual employees and specify internal reporting relationships.

International organizational structure.

An international division structure separates domestic from international business activities. I creating a separate division with its a manager. An international area structure organizes a company's entire global operations into countries or geographic regions, whereby each geographic division operates as a self-contained unit. A global product structure divides worldwide operations into product divisions, which are then divided into domestic and international units. A global matrix structure splits the chain of command between products and area divisions. Each product in employee reports to two bosses -- the general manager of the product division and the general manager of the geographic area.

Work teams are assigned the task of coordinating their efforts to arrive at solutions and implement corrective action. A self managed team is one in which the employees from a single department take on the responsibilities of the former supervisors. A cross functional team is composed of employees who work at similar levels in different functional departments. A global team is composed of top managers from both headquarters in international subsidiaries who meet to develop solutions to companywide problems.

International Business Chapter 11 - international strategy - terms

Planning -- process of identifying and selecting an organization's objectives and deciding how the organization will achieve those objectives.
Strategy -- such of planned actions taken by managers to help a company meet its objectives.
Mission statement -- written statement of why a company exists and what it plans to accomplish.
Stakeholders -- all parties, ranging from suppliers and employees to stockholders and consumers, who are affected by a company's activities.
Core competency -- special ability of the company that competitors find it extremely difficult or impossible to equal.
Value chain analysis -- process of dividing a company's activities in two primary and support activities and identifying those that create value for customers.
Multinational (multidomestic) strategy -- adapting products and their marketing strategies. In each national market to suit local preferences
global strategy -- offering the same products using the same marketing strategy and all national markets.
Growth strategy -- strategy designed to increase the scale or scope of a corporation's operations.
Retrenchment strategy -- strategy designed to reduce the scale or scope of a corporation's businesses.
Stability strategy -- strategy designed to guard against change in use by corporations to avoid either growth were retrenchment.
Combination strategy -- strategy designed to mix growth, retrenchment, and stability strategies across a corporation's business units.
Low-cost leadership strategy -- strategy in which a company exploits economies of scale to have the lowest cost structure of any competitor in its industry
differentiation strategy -- strategy in which a company designs. Its products to be perceived as unique by buyers throughout its industry.
Focus strategy -- strategy in which a company focuses on serving the needs of a narrowly defined market segment by being the low-cost leader, by differentiating its product, or both.
Organizational structure -- way in which a company divides its activities among separate units and coordinates activities between his units.
Chains of command -- lines of authority that run from top management to individual employees and specify internal recording relationships.
International division structure -- organizational structure that separates domestic from international business activities by creating a separate international division with its own manager.
International area structure -- organizational structure that organizes a company's entire global operations into countries or geographic regions.
Global product structure -- organizational structure that divides worldwide operations, according to a company's product areas.
Global matrix structure -- organizational structure that splits the chain of command between product and area divisions.
Self managed team -- team in which the employees from a single department take on the responsibilities of their former supervisors.
Cross functional team -- team that is composed of employees who work at similar levels and different functional departments.
Global team -- team of top managers from both headquarters and international subsidiaries who need to develop solutions to companywide problems

International Business Chapter 10 - international monetary system - summary

Exchange rates influence activities of domestic and international companies.

Exchange rates influence many aspects of the firm's activities. For one thing, they affect demand for a company's products in the global marketplace. When the country's currency is weak (valued low relative to other currencies), the price of its exports on world markets declines and the price of imports increases. Lower prices make the country's exports more peeling on world markets. Furthermore, a company that sells in a country with a strong currency (one that is valued high relative to other currencies), while paying workers at home at its own weak currency improves its profits.

The intentional lowering of the value of the currency by the nation's government is called devaluation. The reverse, the intentional raising of its value by the nation's government, is called revaluation. Devaluation lowers the price of a country's exports on world markets and increases the price of imports, because the country's currency is now worth less on world markets. Revaluation has the opposite effects: it increases the price of exports and reduces the price of imports.

Exchange rates also affect the amount of profit, a company earns from its international subsidiaries. Translating subsidiary earnings from a weak host country currency into a strong home currency reduces the amount of these earnings when stated in the home currency.

Exchange rate factors

Two concepts are used to determine the level of which an exchange rate should be. The wall of one prize stipulates that when prices expressed in a common denominator currency, an identical product must have an identical price in all countries. For this principle to apply, products must be identical in quality and content in all countries and must be entirely produced within each particular country. The concept of purchasing power party (PPP) helps determine the relative ability of two countries currencies to buy the same "basket" of goods in those two countries. Last, although the law of one prize holds for single products, PPP is meaningful only when applied to a basket of goods.

Two phenomenon influence both exchange rates in PPP: inflation and interest rates. When additional money is injected into an economy that is not producing greater output, prices rise, because more money is available to buy the same amount of products. When unemployment is low, employers pay higher wages to attract or retain employees. Employers then typically raise prices to offset the additional labor cost to maintain profits.

In turn, interest rates affect inflation because they affect the cost of borrowing money. Low rates encourage people and businesses to increase spending by taking on debt. On the other hand, high rates prompt them to reduce the debt because higher rates mean greater debt payments. Because real interest rates -- rates that do not account for inflation -- are theoretically equal across countries, any difference in the rates of two countries must be due to different expected rate of inflation. A country that is experiencing inflation higher than that of another country should see the relative value of its currency fall.

Forecasting exchange rates

There are two distinct views regarding how accurately future exchange rates can be predicted by forward exchange rates -- that is, by the rate agreed upon for foreign exchange payments at a future date. The efficient market view holds that prices of financial instruments reflect all publicly available information at any given time. As applied to exchange rates, this means that forward exchange rates are accurate forecasts of future exchange rates. The inefficient market view holds that prices of financial instruments do not reflect all publicly available information. Proponents of this view believe that forecasts can be improved by information not reflected in forward exchange rates.

Two main forecasting techniques are based on this belief in the value of added information. Fundamental analysis uses statistical models based on fundamental economic indicators to forecast exchange rates. Technical analysis employs a technique using charts of past trends in currency prices and other factors to forecast exchange rates. Many forecasters combine the techniques of fundamental and technical analysis to arrive at potentially more accurate forecasts.

Evolution of the current international monetary system

The Bretton Woods Agreement (1944) was an accord among nations to create an international monetary system based on the value of the US dollar. The system was designed to balance the strict discipline of the gold standard, which linked paper currencies to specific values of gold, with the flexibility that countries needed to deal with temporary domestic monetary difficulties. The most important features of the system or fixed exchange rates, built in flexibility, funds for economic development, and an enforcement mechanism.

Bretton Woods created the World Bank, which funds poor nations economic development projects such as the development of transportation networks, power facilities, in agricultural education programs. It also established the International Monetary Fund (IMF) to regulate fixed exchange rates and enforce the rules of international monetary system.

Ultimately, the Bretton Woods Agreement collapsed because it depended so heavily on the stability of the dollar. As long as the dollar remained strong, it worked well. But when the dollar weakened, it failed to perform properly. The Jamaica Agreement (1976) endorsed a managed float system of exchange rates -- a system in which currencies float against one another, with limited government intervention to stabilize currencies at a particular target exchange rate. This system differs from a free float in which currencies float freely against one another without governments intervening in currency markets. It within the system, some countries try to maintain more stable exchange rates by tying their currencies to another currency stronger currency. The European monetary system (EMS) was a complex system designed by the European Union (EU) to stabilize exchange rates, promote trade, and control inflation through monetary discipline.

International Business Chapter 10 - international monetary system - terms

Devaluation -- intentional lowering of the value of the nation's currency
revaluation -- intentional raising of the value of the nation's currency.
Law of one price -- principle that an identical item must have an identical price in all countries when the price is expressed in a common currency
Fisher effect -- printable that the nominal interest rate is the sum of the real interest rate and the expected rate of inflation over a specific period.
International Fisher effect -- principle that a difference in nominal interest rates supported by two countries currency will cause an equal but opposite change in their spot exchange rates.
Efficient market view -- view that prices of financial instruments reflect all publicly available information at any given time.
Inefficient market view -- view that prices are financial instruments do not reflect all publicly available information.
Fundamental analysis -- technique using statistical models based on fundamental economic indicators to forecast exchange rates.
Technical analysis -- technique using charts of past trends in currency prices and other factors to forecast exchange rates.
International monetary system -- collection of agreements and institutions governing exchange rates.
Gold standard -- international monetary system in which nations linked the value of their paper currencies to specific values of gold.
Fixed exchange- rate system -- system in which the exchange rate for converting one currency into another is fixed by international agreement.
Bretton Woods agreement -- agreement (1944) among nations to create a new international monetary system based on the value of the US dollar.
Fundamental disequilibrium -- economic condition in which a trade deficit causes a permanent negative shift in the country's balance of payments.
Special drawing right (SDR) -- international monetary fund asset whose value is based on a "weighted basket." Of the currencies of five industrialized countries.
Smithsonian agreement -- agreement (1971) among international monetary fund Members to restructure and strengthen the international monetary system created at Bretton Woods.
Jamaica agreement -- agreement (1976) among international monetary fund members to formalize the existing system of floating exchange rates as the new international monetary system.
Managed float system -- exchange-rate system in which currencies float against one another, with governments intervening to stabilize their currencies at particular target exchange rates.
Free float system -- exchange-rate system in which currencies float freely against one another, without governments intervening in currency markets.
Currency board -- monetary regime that is based on a explicit commitment to exchange domestic currency for specified foreign currency at a fixed exchange rate

Monday, December 05, 2005

Contemporary Business and Online Commerce Law - Chapter 17

e-commerce, domain names, and Internet law


The Internet



  • Internet -- the Internet is a collection of millions of computers that provide a network of electronic connections between computers

  • World Wide Web -- the Web is an a lot from a collection of computers that support a standard set of rules for the exchange of information called hypertext transfer protocol HTTP

  • electronic-mail/e-mail -- e-mail is electronic written communication between individuals using computers connect to the Internet


e-mail and web contracts


contracts may be formed electronically over the Internet using e-mail and World Wide Web


Electronic Signatures


The Electronic Signature and Global and National Commerce Act (e-sign act). This federal statute recognizes and gives electronic signatures. The same force and effect as a pen inscribed signatures on paper. The act is technology neutral, and that the law does not define or decide which technology should be used to create a legally binding signature of cyberspace.


Electronic Privacy


Electronic Communications Privacy Act -- this federal statute makes it a crime to intercept on electronic communication at the point of transmission, while in transit, once the word by a router or server, or after receipt by the intended recipient.


Domain Name



  • domain name -- a domain name is a unique name that identifies and individuals or a company's web site

  • domain registration -- domain names are registered by filing the appropriate form with the domain name registration service and paying the appropriate fees


Anti-cyber squatting Act


Anti-cyber squatting Consumer Protection Act -- this federal statute permits a court to issue cease and desist orders and injunctions and to award monetary damages against anyone who has registered domain name of a famous name, namebrand, or in bad faith


e-commerce and licensing



  • license -- a contract that transfers limited rights and intellectual property and informational rights

  • licensor -- owner of intellectual property or informational rights who transfers rights in the property were information to the licensee is called a licensor

  • licensee -- party who is granted limited rights or access to intellectual property or informational rights and by the licensor is called a licensee

  • licensing agreement -- a detailed and comprehensive written agreement between the licensor and the licensee that sets forth the express terms of their agreement

  • access contract -- a type of license that grants the licensee access to the licensed information for an agreed-upon time, a number of uses


The UCITA


The Uniform Computer Information Transactions Act -- this model act issued by the National Conference of Commissioners on Uniform State Laws establishes a uniform and comprehensive set of rules that govern the creation, performance, and enforcement of computer information transactions.



  • adoption of UCITA by states -- the UCITA does not become law until a state's legislature enacts it as a state statute


Special Provisions of the UCITA



  • counteroffer rule -- counteroffers are not effective against electronic agents. This is because most electronic agents do not have the ability to evaluate and except counteroffers or make counteroffers

  • electronic errors -- the UCITA provides that a consumer is not bound by their unilateral electronic errors if the consumer:

    • promptly upon learning of the error notifies the other party of the error

    • does not use or receive any benefit from the information, or make the information or benefit available to a third-party

    • delivers all copies of the information to the third-party or destroys all copy of the information pursuant to reasonable instructions from the other party

    • pays all shipping, reshipping, and processing costs of the other party



  • electronic self-help -- if an electronic license has been breached by a licensee, the licensor can resort to electronic self-help such as activating disabling bugs in time bombs that have been embedded in the software or information that will prevent the licensee from further using the software or information.

  • A licensor is entitled to use electronic self-help only if the following requirements are met:

    • the licensee must specifically agree to the inclusion in the license of self-help as a remedy

    • the licensor must give the licensee at least 15 days notice prior to the disabling action

    • the licensor may not use self-help, if it would cause a breach of the peace, risk personal injury, cause significant damage or injury to information other than the licensee's information, result in injury to the public health or safety, or cause great harm to national security




Warranties


Express warranty -- licensors are not required to do so, but they often make express warranties concerning the quality of their software or information. An express warranty is any affirmation of fact were promised by the licensor about the quality of its software or information.

Contemporary Business and Online Commerce Law - Chapter 10

Capacity and Legality


Minors



  • infancy doctrine -- minors under the age of majority may disaffirm (cancel). Most contracts, they have entered into with adults. Such a contract is voidable by the minor, but not by the adult.

  • disaffirmance -- disaffirmance must occur before were within a reasonable time after the minor reaches the age of majority.

  • competent parties duty of restitution -- if a minor in this affirms a contract, the adult must place the minor and status quo by returning the value of the consideration that the minor paid.

  • miners duty upon disaffirmance

    • miners duty of restoration -- generally, upon disaffirmance of the contract, a minor owes a duty to return the consideration to the adult and whatever condition it is in at the time of the conference

    • miners duty of restitution -- a miners duty is to place the adult in status quo by returning a value of the consideration paid by the adult at the time of contracting if the minor:

      • misrepresented his or her age

      • intentionally or with gross negligence caused the loss of the adults property





  • ratification -- if a minor does not disaffirm a contract during the period of minority or within a reasonable time after reaching the age of majority, the contract is ratified. "Accepted"

  • necessaries of life -- miners are obligated to pay the reasonable value for the necessaries of life (e.g., food, clothing, shelter)

  • special contracts -- many states have enacted statutes that make miners liable on certain types of contracts, such as for medical care, health and life insurance, educational loan agreements, and the like

  • emancipation -- occurs when a minor voluntarily leaves home and lives apart from his or her parents. The parent's duty to support the minor terminates upon emancipation


Mentally incompetent persons



  • adjudged insane -- contracts by person who have been adjudged insane are void. That is, such a contract cannot be enforced by either the sane or insane party

  • insane, but not adjudged insane -- contracts by person who are insane, but have not been adjudged insane are voidable by the insane person, but not by the competent party to the contract

  • duty of restitution -- a person who has dealt with an insane person must place the insane person and status quo by returning the value of the consideration paid by the insane person at the time of contracting. Most states placed the same duty on insane persons when they void the contract.

  • necessaries of life -- insane persons are obligated to pay the reasonable value for the necessaries of life


Intoxicated persons



  • intoxicated persons -- contracts by intoxicated persons are voidable by the intoxicated person, but not by the competent party to the contract

  • duty of restitution -- both parties know a duty to place the other party in status quo by returning the value of the consideration paid by the other party at the time of contracting

  • necessaries of life -- intoxicated persons are obligated to pay the reasonable value for necessaries of life


Illegality


Contracts contrary to statutes

Contracts that violate statutes are illegal, void, and unenforceable.



  • usury laws -- he set the upper limit on the annual interest rate can be charged on certain types of loans by certain lenders

  • gambling statutes -- these make certain types of gambling illegal

  • Sabbath laws -- these prohibit or limit the carrying on a certain secular activities on Sundays. Also called Sunday laws or blue laws

  • criminal statutes -- contracts to commit crimes are illegal

  • licensing statutes

    • regulatory statutes -- these are licensing statutes enacted to protect the public. Unlicensed persons cannot recover payment for providing services that a licensed person is required to provide.

    • revenue-raising statutes -- these are the licensing statutes enacted to raise money for the government. Unlicensed persons can enforce contracts and recover for rendering services.




Contracts contrary to public policy


Contracts that violate public policy are legal, void, and unenforceable



  • immoral contracts -- a contract, whose objective is the commission of an act that is considered immoral by society is illegal

  • contracts in restraint of trade -- contracts that unreasonably restrain trade or illegal

  • exculpatory clauses -- contract clauses that relieve one or both of the parties to the contract from tort liability for ordinary negligence are called exculpatory clauses. Exculpatory clauses that affect public interest, that result from superior bargaining power, or that attempt to relieve one of liability for intentional torts,fraud, recklessness, or gross negligence are legal. Reasonable exculpatory clauses between parties of equal bargaining power are legal.

  • covenants not to compete -- these are contracts that provide a seller of a business or an employee will not engage in a similar business or occupation within a specified geographical area for specified time following the sale of the business or termination of employment. Also called noncompete clauses. They are illegal if they are unreasonable in mind of business, geographic area, wartime. Reasonable noncompete clauses are legal and enforceable.


Effect of illegality



  • General rule -- an illegal contract is void. Therefore, the parties cannot sue for nonperformance. If the contract has been executed, the court will leave the parties where it finds them.

  • exceptions to the general rule -- an innocent party can use the courts to recover consideration paid or damages under an illegal contract where the person:

    • was justifiably ignorant of the law or fact that made the contract illegal

    • was induced to enter into the illegal contract by fraud, or undue influence

    • withdrew from the illegal contract before it was performed

    • was less at fault than the other party to the illegal contract




Unconscionable contracts


Contracts or oppressively on fairer on just are called unconscionable contracts, or contracts of adhesion.



  • elements of unconscionable contracts:

    • the parties possessed severely unequal bargaining power

    • the dominant party unreasonably used its power to obtain oppressive or manifestly unfair contract terms

    • the adhering party had no reasonable alternative



  • remedies for unconscionability: where a contract or contract clause is found to be unconscionable, the court may be one of the following:

    • refuse to enforce the contract

    • refused to enforce the unconscionable clause, but enforce the remainder of the contract

    • limit the applicability of any unconscionable clause. So as to avoid any unconscionable result



Sunday, December 04, 2005

Contemporary Business and Online Commerce Law - Chapter 9

Agreement and Consideration



  • offer -- an offer is a manifestation by one party of a willingness to enter into a contract

  • offeror -- the party, who makes an offer

  • offeree -- the party to whom an offer is made. This party has the power to create an agreement by accepting the terms of the offer.


Requirements of an offer



  • objective intent -- the intent to enter into a contract is determined by the objective theory of contract -- that is, whether a reasonable person viewing the circumstances would conclude that the parties intended to be legally bound

  • definite terms -- the terms of an offer must be definite. So that the agreement between the parties can be determined. Reasonable terms (ex. price, time for performance) may be implied.

  • communication -- the offer must be communicated to the offeree by the offeror


Special offer situations



  • advertisement

    • general rule -- generally, an advertisement is an invitation to make an offer

    • exception -- an advertisement is an offer if it is the definite and specific as to show that the advertiser's intent is to be bound to the terms of the advertisement



  • reward -- a reward is an offer to create a unilateral contract

  • auction

    • auction with reserve -- an auction with reserve is an invitation to make an offer. The seller retains the right to refuse the highest bid and withdrawal the good from sale

    • auction without reserve -- an option without reserve is an offer. The seller must accept the highest bid above the minimum bid. This type of auction, must be stipulated.




Termination of an offer by action of the parties



  • revocation -- the offeror may revoke an offer any time prior to its acceptance by the offeree

  • rejection -- an offer is terminated if the offeree rejects the offer by his or her words or conduct

  • counteroffer -- a counteroffer by the offeree terminates the offeror's offer and create a new offer


Termination of an offer by operation of law



  • distraction of the subject matter -- an offer terminates if the subject matter of the offeror is destroyed prior to acceptance through no fault of either party

  • death or incompetency -- the death or incompetency of either the offer or the offeree prior to the acceptance terminates the offer

  • supervening illegality -- if prior to the acceptance of an offer the object of the offer is made illegal by statute, regulation, court decision, were other mall, the offer terminates

  • lapse of time -- an offer terminates upon the expiration of a stated time in the offer. If necktie misstated, the offer terminates after a "reasonable on."


Option contract


if an offer repays the offeror compensation to keep them offer open for an agreed upon period of time, an option contract is created. The offeror cannot sell the property to anyone else during the option peroid.


Acceptance


acceptance is manifestation of asset by the offeree to the terms of the offeror. Acceptance of the offer by the offeree creates a contract.


Rules for acceptance



  • mirror image rule -- under the common wall of contracts, and offeree must accept the terms offered by the offeror to create a contract. Any change in terms by the offeree constitutes a counteroffer, not an acceptance.

  • acceptance-upon-dispatch rule -- unless otherwise provided in the offer, acceptance is effective when it is dispatched by the offeree. this rule is often called the mailbox rule.

  • proper dispatch rule -- an acceptance must be properly addressed, packaged, and have prepaid postage or delivery charges to be effective when dispatched. Generally, improperly dispatched acceptances are not effective until actually received by the offeror.

  • mode of acceptance -- acceptance must be by the express means of communication stipulated in the offer, or, if no means is stipulated, then by reasonable means in the circumstances


Consideration


Consideration involves a thing of value being given in exchange for a promise. It may be tangible or intangible property, performance of a service, forbearance of a legal right, or another thing of value.


Requirements of consideration



  1. legal value -- something of legal value must be given as consideration. Either the promise he suffers a legal detriment or the promisor receives a legal benefit

  2. bargained-for-exchange -- a contract must arise from a bargained-for-exchange. Gift promises gratuitous promises are unenforceable because they lacked considerationshe


Special contracts



  1. requirements contracts -- contracts where the buyer agrees to purchase all the requirements for the item from a single seller are enforceable if the parties act in good faith

  2. output contracts -- contracts where the seller agrees to sell all its production to a single buyer are enforceable. If the parties acting good-faith

  3. best efforts contracts -- contracts that require a party to use its best efforts to accomplish the objective of the contract are enforceable


Contracts lacking consideration


The following contracts are unenforceable because they lacked consideration:



  1. illegal consideration -- promised to retain from doing an illegal act

  2. illusory promise -- if one were both parties to a contract can choose not to perform their contract will duties

  3. moral obligation -- promise made out of a sense of moral obligation, honor, love, or affection

  4. pre-existing duty -- promise to perform an act or do something that a person is already under an obligation to do

  5. past consideration -- promise based on a party's past consideration


Settlement of claims


Award and satisfaction. This is a compromise agreement were the parties agree to settle a contract dispute and do so.



  1. unliquidated debt -- this is a debt in which reasonable persons would disagree as to the amount owed. It can be compromised without the payment of new consideration.

  2. liquidated debt -- this is a debt that is due and certain. It cannot be compromised unless new consideration is paid


Commissary estoppel


Commissary estoppel is a policy-based equitable doctrine that prevents a promise or from revoking his or her promise even though the promise lacks consideration. The requirements are:



  • the promise made a promise

  • the promise or should have reasonably expected to induce the promised to rely on the promise

  • the promisee actually relied on the promise and engaged in an action or forbearance of a right of a definite and substantial nature

  • injustice would because the promise were not enforced

Contemporary Business and Online Commerce Law - Chapter 8

Nature of traditional and online contracts

Definition of contract


A contract is "a promise or a set of promises for the breach of which the law gives a remedy or the performance of which the wall in some way recognizes a duty."


Parties to a contract


Offeror -- the party and makes an offer to enter into a contract is the offeror

Offeree -- the party to whom the offer is made is the offeree


Elements of a contract



  1. agreement

  2. consideration

  3. contractual capacity

  4. lawful object


Defenses to the enforcement of a contract



  1. genuineness of asset

  2. writing and form


Sources of contract law



  1. common law of contracts

  2. uniform commercial code

  3. reinstatement of contracts


Theories of contract law



  1. class law of contracts -- according to this theory; parties were free to negotiate contract terms without government interference

  2. modern law of contracts -- according to this theory; parties may negotiate contract terms subject to government regulations


Classifications of contracts


Formation



  1. bilateral contract -- this is a promise for a promised

  2. unilateral contract -- this is a promise for an act

  3. express contract -- this is a contract expressed in oral or written words

  4. implied-in-fact contract -- this is a contract employed from the conduct of the parties

  5. quasi- contract-- this is a contract implied by law to prevent unjust enrichment and unjust detriment

  6. formal contract -- this is a contract that requires a special form or method for creation

  7. informal contract -- this is a contract that requires no special form or method for creation


Enforceability



  1. valid contract -- a valid contract meets all the essential elements to establish a contract

  2. void contract -- no contract exists

  3. voidable contract -- a voidable contract is one, where one or both parties have the option of avoiding or enforcing the contract

  4. unenforceable contract -- an unenforceable contract is a contract that could not be enforced because of a legal defense


Performance



  1. executed contract -- a contract that is fully performed on both sides is called an executed contract

  2. executory contract -- a contract that is not fully performed by one or both parties is called executory contract


Equity


Equity is a doctrine that permits judges to make decisions based on fairness, equality, moral rights, and natural law.

Friday, December 02, 2005

International Business Chapter 9 - international financial markets - summary

International Capital Market

The international capital market has three main purposes.

  • First, it provides an expanded supply of capital for borrowers because it joins together borrowers and lenders in different nations.
  • Second, it lowers the cost of money for borrowers because a greater supply of money lowers the cost of borrowing (interest rates).
  • Third, it lowers risk for lenders because it makes available a greater number of investments.

Growth in the international capital market is due mainly to three factors.

  • First, advances in information technology allow borrowers and lenders to do business more quickly and cheaply.
  • Second, the deregulation of capital markets is a fitting the international capital market to increased competition.
  • Third, innovation and financial instruments is increasing the appeal of international capital market.

The world's most important financial centers are London, New York, Tokyo. These cities conduct a large number of financial transactions daily. Other applications, called offshore financial centers, handle less business but have few regulations and few, if any, taxes.

International bonds, equity, and Eurocurrency markets

The international bond market consists of all bonds sold by issuers outside their own countries. It is experiencing growth primarily because investors in developed markets are searching for higher rates from borrowers in emerging markets and vice versa. The international equity market consists of all stocks bought and sold outside the country of the issuing company.

The four factors primarily responsible for the growth of international equity are: privatization. Greater issuance of stock by companies in newly industrialized and developing nations greater international reach of investment banks, global electronic trading

The eurocurrency market consists of all the world currencies that are banked outside their countries of origin. The appeal of the euro currency market is its lack of government regulation hand, therefore, lower cost of borrowing.

Primary functions of the foreign exchange market

The foreign-exchange market is the market in which currencies are bought and sold and in which currency prices are determined.

It has four primary functions:

  • First, individuals, companies, and governments use it, directly or indirectly, to convert one currency to another.
  • Second, it offers tools with which investors can insure against adverse changes in exchange-rates.
  • Third, it is used to earn a profit from the instantaneous purchase and sale of a currency, or other interest paying security, in different markets.
  • Finally, it is used to speculate about a change in the value of currency.

Quoted currencies and different rates

Currencies are quoted in a number of different ways. An exchange rate quote between currency A and currency B (a/b) of 10/1 means that it takes 10 units of currency A to buy one unit of currency B. The exchange rate in this example is calculated using their actual values. We can also calculate an exchange rate between two currencies by using their respective exchange rates with a common currency; the resulting rate is called a cross rate.

A spot rate is an exchange rate that requires delivery of the traded currency within two business days. This rate is normally obtainable only by large banks and foreign exchange brokers. The forward rate is the rate at which two parties agree to exchange currencies on a specified future date. Forward exchange rates represent the markets expectation of what the value of the currency will be at some point in the future.

Instruments and institutions of foreign exchange market

Companies involved in international business make extensive use of certain financial instruments in order to reduce exchange-rate risk. A forward contract requires the exchange of an agreed-upon amount of the currency on an agreed upon eight at a specific exchange rate. A currency swap is the simultaneous purchase and sale of foreign exchange for two different dates. A currency option is the right to a stage a specific amount of a currency on a specific day at a specific rate. It is sometimes used to acquire the needed currency. Finally, a currency futures contract requires the exchange of a specific amount of currency on a specific date at a specific exchange rate. It is similar to a forward contract except that none of the terms are negotiable.

The world's largest banks exchange currencies in the interbank market. These banks locate an exchange currencies for companies and sometimes provide additional services. Securities exchanges are physical locations at which currency futures and options are bought and sold (in small amounts of those traded in the interbank market). The over-the-counter (OTC) market is an exchange that exists as a global computer network linking traders to one another.

Governments restrict currency convertibility

There are four main goals of currency restriction:

  • First, a government may be attempting to preserve the countries hard-currency reserves for repaying debts and to other nations.
  • The second, convertibility might be restricted to preserve hard currency to pay for needed imports or to finance the trade deficit.
  • Third, restrictions might be used to protect the currency from speculators.
  • Finally, such restrictions can be an attempt to keep badly needed currency from being invested abroad.

Policies used to enforce currency restrictions include government approval for currency exchange, imposed import licenses, a system of multiple exchange rates, and the imposed quantity restrictions.

International Business Chapter 9 - international financial markets - terms

Capital market -- system that allocates financial resources in the form of debt and equity according to their most efficient uses
debt -- loans in which the borrower promises to repay the borrowed amount (the principal), plus a predetermined rate of interest
Bond -- debt instrument that specifies the timing of principal and interest payments.
Equity -- part ownership of a company in which the equity holder participates with other partners in the company's financial gains and losses.
stock -- shares of ownership in the company's assets that give shareholders a claim on the company's future cash flows.
Liquidity -- ease with which bondholders and shareholders may convert their investments into cash.
International capital market -- network of individuals, companies, financial institutions, and governments that invest in borough across national boundaries
securitization -- unbundling and repackaging of hard to trade financial assets into more liquid, negotiable, and marketable financial instruments (or securities).
Offshore financial center -- country or territory, whose financial sector features very few regulations and few, if any, taxes.
International bond market -- market consisting of all bonds sold by issuing companies, governments, or other organizations outside their own countries.
Eurobond -- bond issued outside the country and whose currency it is denominated the line. Foreign bond -- bond sold outside the borrower's country in denominated in the current state of the country in which it is sold.
International equity market -- market consisting of all stocks bought and sold outside the issuers country.
Eurocurrency market -- market consisting of all the world's currencies that the current referred to as Eurocurrency) that are banked outside their countries of origin
Interbank interest rates -- interest rates that the world's largest banks charge one another for loans.
Foreign exchange market -- market in which currencies are bought and sold in their price is determined.
Exchange rate -- rate at which one currency is exchanged for another.
Currency hedging -- practice of insuring against potential losses that result from adverse changes in exchange rates.
Currency arbitrage -- instantaneous purchase and sale of the currency in different markets for profit.
Interest arbitrage -- profit motivated purchase and sale of interest paying securities denominated in different currencies.
Currency speculation -- purchase or sale of a currency with the expectation that its value will change and generate a profit
quoted currency -- and a quoted exchange rate, the currency with which another currency is to be purchased
base currency -- in a quoted exchange rate, the currency that is to be purchased with another currency
exchange rate risk (foreign exchange risk) -- risk of adverse changes in exchange-rate
cross rate -- exchange rate calculated using two other exchange rates
spot rate -- exchange-rate requiring delivery of the traded currency within two business days.
Spot market -- market for currency transactions at spot rates
foreword rate -- exchange-rate at which two parties agree to exchange currencies on a specified future date.
Forward market -- market for currency transactions at forward rates.
Forward contract -- contract that requires the exchange of an agreed upon amount of a currency on an agreed-upon date at a specific exchange-rate.
Derivative -- financial instrument whose value derives from other commodities or financial instruments.
Currency swap -- simultaneous purchase and sale of foreign exchange for two different dates.
Currency option -- right, or option, to exchange a specific amount of a currency on a specific date at a specific rate.
Currency futures contract -- contract requiring the exchange of a specific amount of currency on a specific date at a specific exchange-rate, with all conditions fixed and not adjustable.
Vehicle currency -- currency used as an intermediary to convert funds between two other currencies.
Interbank market -- market in which the world's largest banks exchange currencies at spot and forward rates.
Clearing -- process of aggregating the currencies that one bank owes another and then carrying out the transaction.
Security exchange -- exchange specializing in currency futures and options transactions.
Over-the-counter (OTC) market -- exchange consisting of a global computer network of foreign exchange traders and other market participants.
Convertible (hard) currency -- currency that trades freely in the foreign-exchange market, with its price determined by the forces of supply and demand.
Countertrade -- practice of selling goods or services that are paid for, in whole or part, with other goods and services

Thursday, December 01, 2005

International Business Chapter 8 - regional economic integration - summary

Regional economic integration

The process whereby countries in a geographic region, cooperate with one another to reduce or eliminate barriers to the international flow of products, people, or capital is called regional economic integration.

A group of nations in a geographic region undergoing economic integration is called a regional trading bloc.

There are five potential levels (or degrees) of integration for regional trading blocs. Each level of integration incorporates the properties of those preceding it.

  • A free-trade area is then economic integration and which countries seek to remove all barriers to trade between themselves, but each country determines its own barriers against nonmembers
  • a customs union is an economic integration and which countries remove all barriers to trade between themselves but erect against nonmembers against nonmembers
  • a common market is an economic integration and which countries remove all barriers to trade and the movement of labor and capital between themselves but erect trade policy against nonmembers, trade policy against nonmembers
  • an economic union is a economic integration in which countries remove barriers to trade and the movement of labor and capital, erect a common trade policy against nonmembers, and coordinate their economic policies
  • a political union is an economic and political integration in which countries coordinate aspects of their economic and political systems

The resulting increase in the level of trade between nations as a result of regional economic integration is called trade creation. One result of trade creation is that consumers and industrial buyers and members nations are faced with a wider selection of goods and services that were not available before. Also, buyers can acquire goods and services at lower cost. Following the lowering of trade barriers such as tariffs. A political benefit is that a smaller, regional group of nations can find easier to reduce trade barriers and can larger groups of nations. Nations can also have more say when negotiating with other countries were organizations, reduce the potential for military conflict, and expand employment opportunities.

The flip side of trade creation is trade diversion -- the diversion of trade away from nations not belonging to a trading bloc in toward member nations. Trade diversion can actually result in increased trade with a less efficient producer within the trading bloc. Regional integration also forces, some people out of work. Finally, political union requires nations to give up a high degree of sovereignty and foreign policy.

The pattern of enlargement of regional integration in Europe

The European Coal and Steel Community was formed in 1951 to remove trade barriers for coal, iron, steel, and scrap metal. Among the member nations. Following several ways of expansion, brought it means of its scope, and name changes, the Community is now mannered as the European Union (EU). Today, the EU consists of 25 nations after a 2004 expansion added 10 new members from Central, Eastern, and Southern Europe. For more nations will enter as soon as they meet the so-called Copenhagen Criteria that relate to their political, legal, economic systems. Five institutions that form the main institutional framework of the EU are the European Parliament, European Commission, Council of the European Union, Court of Justice, and Court of Auditors. The EU established a single currency in January 1999 through a plant called the European monetary union. The main benefit of a single currency, the euro, is the complete elimination of both exchange-rate risk and currency conversion costs within the euro zone.

Other European nations created the European Free Trade Association (EFTA) to focus on trade and industrial, not consumer, goods. Today, EFTA has just four members. The EFTA and EU created the European economic area (EEA) to cooperate on trade matters and other areas, including the environment, social policy, and education.

Regional integration in the Americas

The North American Free Trade Agreement (NAFTA), between Canada, Mexico, in the United States became effective in January 1994. As a free-trade agreement, NAFTA seeks to eliminate most tariffs and non-tariff trade barriers on most goods originating from within North America by 2008.

The Andean Community was formed in 1969 and calls for tariff reduction for trade among member nations, a common external tariff, and common policies in transportation in certain industries. The Latin American Integration Association (ALADI), formed in 1980 between Mexico and 10 South American nations has had little impact on cross-border trade. The Southern Common Market (MERCOSUR) was established in 1988. Today MERCOSUR asked as a customs union and is emerging with the most powerful trading bloc and all of Latin America.

The Caribbean Community and Comment Market (CARICOM) trading bloc was formed in 1973. The main difficulty CARICOM faces is that most members trade war with nonmembers than they do with each other. The Central American Common Market (CACM) was formed in 1961, but protracted conflicts have hampered progress for the CACM.

The objective of the Free Trade Area of the Americas (FTAA) is to create the trading block income passing all of Central, North, and South America (excluding Cuba). The goal of the Transatlantic Economic Partnership (TEP) between the United States in the European Union is to contribute to stability, democracy, and development worldwide, in addition to forging closer economic ties between the two.

Regional integration in Asia

The Association of Southeast Asian Nations (ASEAN), formed in 1967, has three main objectives:

  • to promote economic, cultural, and social development in the region
  • to safeguard the region's economic and political stability
  • to serve as a forum in which differences can be resolved fairly and peacefully

Today, ASEAN has 10 members, but China, Japan, and South Korea may join in the future.

The organization for Asia Pacific Economic Cooperation (APEC) was formed in 1989. Begun as an informal forum among 12 trading partners, APEC now has 21 members. Together, the APEC nations account for more than half of world trade and combined GDP of more than $16 trillion. The stated aim of APEC is not to build another trading bloc. Instead, it desires to strengthen the multilateral trading system and expand the global economy by simplifying and liberalizing trade and investment procedures among member nations. In the long term, APEC hopes to have free trade and investment throughout the region by 2010 for developed nations in 2020 for developing ones.

Regional integration in the Middle East and Africa

Several Middle Eastern nations formed the Gulf Cooperation Council (GCC). In 1980. Members of the GCC are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. The primary purpose of the GCC at its formation was to cooperate with the increasingly powerful trading blocs in Europe at the time -- the EU and the EFTA. Today. Its drive is to allow citizens of member countries to travel freely without visas, and to permit assistance of member nations to own property, and another member nation without the need for local sponsors were partners.

The Economic Community of West African States (ECOWAS) was formed in 1975 but relaunched its efforts at economic integration in 1992 because of lack of early progress. One of the most important goals of ECOWAS is the formation of a customs union and eventual common market. The group's lack of progress on economic integration. Largely reflects each nations lack of economic development.

International Business Chapter 8 - regional economic integration - terms

Regional economic integration (regionalism) -- process whereby countries in a geographic region cooperate with one another to reduce or eliminate barriers to the international flow of products, people, or capital.
Free trade area -- economic integration, whereby countries seek treatment of all barriers to trade between themselves, but each country determines its own barriers against nonmembers.
Customs union -- economic integration, whereby countries remove all barriers to trade between themselves but erect a common trade policy against nonmembers.
Common market -- economic integration, whereby countries remove all barriers to trade in the movement of labor and capital between themselves. But erect a common trade policy against nonmembers.
Economic union -- economic integration, whereby countries remove barriers to trade in the movement of labor and capital, erect a common trade policy against nonmembers, and coordinate their economic policies.
Political union -- economic and political integration, whereby countries coordinate aspects of their economic and political systems.
Trade creation -- increase in the level of trade between nations that results from regional economic integration.
Trade diversion -- the version of trade away from nations not belonging to a trading bloc and toward member nations
European monetary union -- the European Union plan that established its own Central Bank and currency.

International Business Chapter 7 - Foreign Direct Investment - summary

Patterns of foreign direct investment (FDI)

Foreign direct investment (FDI) expanded rapidly throughout the 1990s. After growing about 20% per year in the first half 1990s, FDI inflows grew by about 40% per year in the second half of the decade. FDI also continues to grow faster than the world production and trade. Developed countries account for about 70% of global FDI inflows. In comparison, developing countries share of world FDI flows is 30%.

Among developed countries, European Union nations, the United States, and Japan account for the majority of world inflows. The EU was the world's largest FDI recipient (more than 57% of the world total), with inflows of more than $374 billion in 2002. FDI inflows to developing Asian nations were just over $95 billion in 2002, with China, attracting nearly $53 billion, and India attracting nearly $3.5 billion. FDI inflows to all of Africa accounted for 1.7% of total world FDI inflows in 2002.

Globalization and a growing number of mergers and acquisitions account for the rising tide of FDI flows over the past decade or so, and will continue to propel it in the future.

Foreign direct investment theories

the international product lifecycle states, a company will begin by exporting its product, and later undertake foreign direct investment as a product used its life cycle. A product passes through three stages: new-product stage, maturing product stage, and standardized product stage.

Market imperfections theory states when an imperfection in the market makes a transaction less efficient than it could be, a company will undertake foreign direct investment to internalize the transaction and thereby remove the imperfection.

The eclectic theory states firms undertake foreign direct investment. When the features of a particular location, combined with ownership and internationalization advantages to make a location appealing for investment. The market power theory states that a firm tries to establish a dominant market presence in an industry by undertaking foreign direct investment.

Foreign direct investment management issues

companies investing abroad are often concerned with controlling activities in the local market. The local governments might require a company to hire local managers were require that all goods produced locally be exported.

A key concern is whether to purchase an existing business or to build an international subsidiary from the ground up. Acquisition generally provide an investor with of existing plant and equipment and personnel. Factors reducing the appeal of purchasing of existing facilities include obsolete equipment, poor relations with workers, and an unsuitable location. Adequate facilities are sometimes simply unavailable in the company must go ahead with a Greenfield investment.

Labor regulations can increase the hourly cost of production several times. An approach companies may use to contain production costs is rationalize production -- in which a product's components are produced in the lowest-cost location.

A local market presence might help companies gained valuable knowledge about the behavior of buyers that it could not obtain from the home market. Firms commonly engage in foreign direct investment. When doing so puts them close to both client firms and rival firms.

Government intervention in the free flow of foreign direct investment

Both host and home countries interfere with the free flow of FDI for a variety of reasons. One reason that governments of host countries intervene in foreign direct investment flows is to protect their balance of payments. Allowing FDI to come in is a nation a balance of payments boost. Countries also improve their balance of payments position from the exports of local production operations created by FDI. But when direct investors sent profits made locally back to the parent company and the home country, the balance of payments decreases. Local investment in technology also tends to increase the productivity and competitiveness of the nation. Encouraging FDI also brings in people with management skills who can't train locals and improve the competitiveness of local firms. Furthermore, many local jobs are also created as a result of incoming FDI.

Home countries also intervene in FDI flows. For one thing, investing and other nations, sends resources out of the home country -- lowering the balance of payments. Yet profits on assets abroad that are returned home increases a home country's balance of payments. Also, outgoing FBI may ultimately damage a nation's balance of payments by taking the place of its exports. And jobs that result from outgoing investments may replace jobs at home that were based on exports to the country.

Policy instruments that governments used to promote and restrict foreign direct investments

Host country governments can impose ownership restrictions that prohibit not domestic companies from investing in businesses and cultural industries and that is vital to national security. They can also create performance demand that influence how international companies operate in the host nation.

They can also grant companies tax incentives such as lower tax rates or offer to waive taxes on local profits for a period of time. A country may also offer low interest loans to investors. Some governments prefer to lower investment by making local infrastructure improvements -- that are seaport suitable for containerized shipping, improve roads, and increased telecommunications systems.

To limit the effects of outbound FDI on the national economy, home governments may impose differential tax rates that charge income from earnings abroad at a higher rate than domestic on a. Or they can't impose outright sanctions that prohibit domestic firms for making investments in certain nations. But to encourage outbound FDI home country, governments can offer insurance to cover investment risks abroad. They can also grant lends to firms that wish to increase their investments abroad. A home country government may guarantee loans that a company takes from financial institutions. They might also offer tax breaks on profits earned abroad or negotiate special tax treaties. Finally, it may have apply political pressure on other nations to get them to relax restrictions on inbound investments.