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
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
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
• 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 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
• 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
• 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
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.