Business Law Final Exam. Kellogg Business School Assignment

Business Law Final Exam. Kellogg Business School Assignment Words: 1892

Law and Corporate Managers ??? Prof. Larry Franklin Question Two A. (i) For refusal In order to honor the LC, the Seller has to comply exactly with the terms of the letter of credit. There are numerous typo errors in the LC and misspellings of the destination port and the Seller name, hence only a waiver of the discrepancies from JFTC will enable Bank of China to pay the Seller. As long as the waiver is not received, the BOC cannot make any payments. BOC has to state why it is not going to pay. The seller reviewed the LC before the shipment of goods, so it is his mistake that he didn’t point out the discrepancies. ii) Against refusal Since the LC is irrevocable, then JFTC can’t make any modifications or cancellation without the consent of Voest-Alpine. The LC is a binding document and any change should be subject to the consent of the seller. Although there are typo errors in the LC, the negotiating bank should convince the BOC that these errors are not material, and therefore they should prevent the payment. In addition, JFTC objection for the waiver is not in good faith. (iii) My conclusion BOC refusal is justifiable; it can’t take the responsibility for inconsistency between the LC and the payment terms.

However, Voest-Alpine has the right to sue JFTC in ICC arbitration committee, according to the UCP rules that applies on the LC. B. (i) For JFTC has sent the seller the LC before the shipment. It was the seller mistake not to point out the discrepancies. On the contrary, the seller didn’t act in bona fide, and therefore JFTC decision is ethically right. (ii) Against JFTC is aware of the fact that the discrepancies in the LC are technical, and its real intention behind the insistence not to provide the waiver is its will to reduce the agreed price of the goods in a non-ethical way. iii) My conclusion It is unequivocal that pacta sunt servanda, and if the seller doesn’t agree to amend the contract, the buyer can use any legal instrument to convince the seller to amend the contract. JFTC cannot rely on technical errors in the LC in order to avoid his commitments under the LC. This is an non-ethical behavior. C. (i) For It will be easier and more efficient to accept JFTC request to reduce the price. This way the seller will avoid legal disputes, and will not lose time in waiting for a result. (ii) Against

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Accepting the JFTC to reduce the price is considered underrating of the pacta sunt servanda doctrine, and this will allow JFTC and other futuristic customers in China to feel free in asking Voest-Alpine to change any terms of contracts that were previously agreed. This could be a bad precedent. (iii) My conclusion A smart manager of Voest-Alpine would have checked the LC before declining the JFTC request to reduce the price in light of the market conditions. While doing so, he will be aware of the fact that a problem might arise when the BOC will be asked to transfer the payment due to the errors in the LC.

In order to save money and prolonged disputes, he will negotiate the reduction of the price with JFTC and try to reach a settlement. Question Three A. (i) Jameson If the business will be established as a limited partnership, then Jameson will probably be a general partner, since he is not willing to invest any amount of money. Only investors could act as a limited partner. Therefore, his liability will be unlimited, and in the following two years the business will be exposed to a big risk since it is a development period, and there is no income.

If the business will be incorporated as a corporate then Jameson could be a shareholder, with a limited liability, even though he didn’t invest any amount of money in the corporation. His ownership of the shares could be Inter Alia in consideration of the IP of the ECHO that he designed. However, the IP rights will be owned by the corporation and not by Jameson anymore. The corporation will also enable him to nominate Bernie as a CEO to manage the company, and he can act as a director with intra vires to direct the management and the activity of the corporation. ii) The five subsequent investors IF the venture will be established as a LP, then the investors could limit their liability up to the amount of their investment, therefore they will have one level of tax (they will not pay corporate tax). However, the return on their investment is subject to the performance of the LP and the profits that derive from it. In case of corporation, the investors could invest their investment as shareholders with limited liability. But they will have to pay two levels of taxes.

In re the fixed return on the investment, they could provide a loan to the corporation with a fixed rate of interest that will be guaranteed by the company. (iii) The CEO manager Bernie will prefer to act as a CEO in a Corporation with a board of directors that will direct him and will borne the direct responsibility for the acts of the corporation. He will also have the responsibility for the acts of the corporation. In order to attract Bernie to join the business, it is likely to offer him shares or options to purchase the shares of the corporation. This is not possible under a LP. B.

I will recommend Jameson to choose Corporation for the following reasons: 1. He is not investing money and he wants to be owner and involved in the business. The best for him is to be a shareholder of the company and a director. His tax considerations in this case are not relevant. So there is no advantage in LP. 2. He wants to nominate a CEO, in a corporation it is the right modus operandi for CEO and board of directors. 3. As an incentive to Bernie to attract him to act as a CEO of the corporation he can offer him ownership of shares. This is not possible in LP. Question Four 1.

The memo is legal according the local law. Nonetheless, a legal action may be unethical. The question is what is ethical, and if publishing the memo is an ethical action. In order to value the ethical aspect of the action we have to answer the following questions: 2. 1. Is it legal? Yes, under the Singapore law, members of investment banking firm are allowed to subscribe to shares in an IPO. The worldwide policy of the firm doesn’t make the memo illegal, rather than a violation of the organizational discipline. 2. 2. Does it maximize the shareholder value? The answer is not unequivocal.

It is clear that the directors’ obligation is to manage the corporation “for the best interest of the corporation”. The board may legitimately consider not only the effect on shareholders, but also the effect on employees. The memo has a big effect on the employees, and in return the employees can be more devoted or committed to the firm. Therefore, this action has a potential to maximize the shareholders value, and the employees. 2. 3. Is the action ethical? Allowing the employees of the underwriter to own shares of the company they lead its IPC could be considered as a major conflict of interest issue.

This decision may affect negatively the IPO, due to the fact the lead underwriter has a direct interest in increasing the price of the shares. This is a conflict of interest. Therefore, even if the action is legal, this action will probably affect the firm customer. Thus, it is non-ethical. 2. The lawyer preferred his own interest upon the corporation interest. This is against the rule (confirmed by the law ant courts) that the directors’ obligation is to manage the corporation “for the best interest of the corporation”. At first, the lawyer tried to implement the firm’s worldwide policy on the company.

On a later stage, when he was offered personally to own shares in the IPO he waived his request, although as a lawyer he know the rules. This could be considered as a bribe. Therefore, I believe that the lawyer should be fired. 3. The managing director is in a different situation. He took the decision out of a good intention to support his employees that are working a lot. He knew that it is a legal action too. He also has made the memo/promise to the employees which it is difficult to revoke it. He violated the firm’s policy, and therefore he should be scolded. 4.

Breaking the promise to allow the employees to apply for shares in the IPO after they were already applied could be considered unethical too. The Bank should explain that this memo doesn’t maximize the shareholders value, and therefore it will not be ethical to revoke the memo for the employees that have already applied. I would suggest to the bank to keep the actions of the employees that have already acted, however, I will revoke the memo to the others, and will disclose the effect of this action to shareholders. Bonus Question 1. No. Amy’s statement is not an effective offer, since she doesn’t has the intention to be bound. . A. No. Able’s will to help Jerk didn’t have intention to be bound, there for it is not an offer nor a promise to Jerk. Yet, in Jerk statement there is an intention to be bound, and hence it is an offer. Nonetheless, there is no consideration, since the offer is made for a past consideration (appreciation for the help made). B. Yes. This time the consideration is not for an act in the past, and Jerk’s offer is unilateral. Therefore there is a binding agreement, quid pro quo. 3. No. It seems that both offers of A and B are effective (intention to be bound, definite terms, and communicated to the offeree).

As long as there is no acceptance from the offeree, the offeror can revoke the offer. Yet, is the offer of B considered an acceptance to A offer and there for creates a binding agreement? Is there a “meeting of minds”? There is no doubt that if B was aware of the offer of A there is a binding contract. However, the fact that B wasn’t aware of the offer of A doesn’t make his offer an acceptance to the offer of A, and hence there is no binding contract. 4. No. After the death of Bill, George can recover his loan only from Bill’s estate.

Yet, Bill’s father agreed to repay Bill’s debt. Is Bill’s father promise to repay the debt in consideration for clearing his son’s good name considered a binding contract? This is not a typical “consideration”, therefore George may claim Promissory Estoppel as an alternative to consideration if he can prove that there was a promise, a justifiable reliance that was foreseeable and resulted in injustice. There is a promise on behalf of Bill’s father, however George cannot claim that he relied on it in a justifiable and foreseeable way as well as this there is no injustice.

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