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LAW 724 (53)

Chapter 10 - Foreign Market Strategy.docx

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Law and Business
LAW 724
Alyssa Brierley

Chapter 10 Notes Legal Aspects of Different Foreign Market Entry Strategies Outsourcing: Practice of companies sending service functions abroad, where they can be done more cheaply and efficiently. Two major Considerations: • Intellectual property rights of the outsourcer. o Within the process out outsourcing, it requires for the outsourcer to provide supplier access to legally protected rights such as copyright, patents, trademarks, trade secrets, and industrial designs. o Outsourcer must pay particular attention to how the supplier will handle the rights that it is given access to. o Contractual provisions obligating the employees of the supplier must be included, and, if any subcontracting is to be done by third parties or by affiliates of the supplier, there must be an obligation that they also be covered by agreements protecting the intellectual property rights of the outsourcer. • Protection of Personal Information (PIPEDA) o Personal Information Protection and Electronic Documents Act (PIPEDA), federal legislation, restricts the collection, use, and disclosure of personal information. o Canadian companies must honor this legislative requirement even when data is being processed out of the country. Process of Establishing an Outsourcing Arrangement. • The Request for Information o Outsourcer requests information from outsource-supplier. • The Request for Proposal o RFP (Request for Proposal), technical document that describes what a company wants to outsource and what it is seeking from the supplier. o Terms of the RFP are the final terms, RFP cannot be substantially altered after the response has come in. (view it as a ‘invitation to treat’) • The non-disclosure Statement o Parties to the negotiation must agree on a non-disclosure statement, that obliges the possible outsource supplier to protect the confidential information of the company. • The Contracts o Contracts should include various terms for risk-managing. Pg. 304. Agency. Agency is a relationship between one person who is a supplier of services or a manufacturer of goods (principal) and another person who carries out a specific task on the principal’s behalf. • the agent does not buy or sell for his or her account • the agent takes orders on behalf of the principal (supplier) but submit these orders to the principal for approval or rejection. • The agent is unable to bind suppliers unless he or she has express or implied authority to do so. • The economic risk of failure of delivery of the goods or service and the risk of non-payment remains with the principal. • The principal retains ownership of the product until it is sold to the end user. • There is no transfer of technology from the principal to the agent. Actual authority vs. apparent authority. • Actual Authority – The agency agreement will describe and find this authority given to the agent • Apparent Authority – Authority the agent appears to have. Apparent authority is part of the legal relationship between the third party and the principal and is created by the representation made by the principal to the third party that the agent is representing the principal. o Principal will be bound by acts done by the agent that are within his or her apparent authority. Termination of the Agency Agreement – • automatically terminated on the death, dissolution, or bankruptcy of the principal, or by notice, or as otherwise provided in the agreement. • Upon termination, the principal must be sure to give notice to third parties. “Utmost Good Faith” • Parties have a high standard of duty toward each other, requiring them to reveal all relevant information and to always put the interest of the other party first. • The agent may not act for both the principal and the third party in a transaction without express permission from each. • Principal is entitled to recover any secret profit made by the agent. • If the agent obtains a commission or benefit from the third party without disclosing this to the principal, the agent is not entitled to a commission on the sale. Preparing the Agency Contract (not relevant to the exam, Pg. 309) Special Protection for Agents in other countries. • In Canada, US, other common law, agency relationship can be set up however the parties wish to. • In German, Swiss and Dutch & French law, allows for agent to collect grant if the agreement is terminated for reasons other than a default. • EU – ‘EU Directive on Self-Employed Commercial Agent’ o Economic Conditions Alarm is to be included within the agreement which states that the principal must notify agent if it expects the volume of business to decrease significantly. o Payment of commission is required not only on contracts negotiated by the agent but also on contracts concluded between the principal and a party that the agent had previously acquired as a customer. o Payment of commission is required whenever the principal makes a sale in the territory designated for the agent even if the agent has not participated in the sale. • ICC – International Chambers of Commerce on Agent Agreements. o Provisions for indemnity on termination o International arbitration Checklist for Negotiating an Agency Agreement ( Pg. 311) Distributorship. Another substitute for an agent is Distributorships. Distributorship are more common in the case of standardized goods such as cars. Distributor usually purchases goods on its own account from the foreign supplier for resale to customers in its own market. • Some countries have protective legislation Affecting Distributorships, i) minimum notice requirements, ii) compensation for termination. Licensing. • License agreements is the grant of the right o use intellectual
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