LAW896 International Business Transactions Assessment 2: Problem Question 30 Marks

Problem-Question Scenario:
Assume SMART Invention (SI), a US based company, gained significant trans-border reputation for it two distinctive brands: Paddy and Monda. In 2012, it decided to expand its market in Australia via two different modes of business such as franchising and licensing. Accordingly, SI entered into a franchise agreement with SOMA Pty Ltd in Sydney on 24 March 2012 for a period of four years. The agreement entitled SOMA to produce and sell Paddy across the nation by requiring it (SOMA) to inter alia, open two outlets in different locations of NSW subject to the approval and limited operational support of SI. On 11 April 2012, SI signed another licence agreement with High-Tech, a Melbourne based Australian company. SI while granting the power to manufacture Monda for a period of three years in return for a royalty accepted an undertaking from High-Tech that ‘the agreement does not intend to create a franchise relationship but requires High-Tech to follow a specific system of manufacturing plan approved by SI based on its financial and operational support.’

In March 2014, just after two years, SI realised that it could not afford any operational support to SOMA due to its huge financial loss incurred from several businesses with Elite, a UK based company, of which SOMA was not informed. Consequently, SI terminated the agreement. SOMA wishes to go for a legal battle. SI’s financial hardship with its various franchisees including SOMA eventually affected its (SI) ability to continue the licence agreement with High-Tech. Consequently, SI failed to provide High-Tech with the required operational support that led to the demise of Monda production in Melbourne. High-Tech is planning to go for a legal battle as it has already invested AUS$ 5 million in this project.

Frustrated and in despair, SI would like to proceed now with other modes of operating business overseas such as agency and distributorship but is worried about the start-up and operating cost and risk factors involved in those modes. Meanwhile, a number of companies from China and India have expressed their interest in using its brand name Paddy. SI, however, is unsure of what to do as it is yet to study the relevant factors.

Answer the following: (10+7.5+7.5+5)

1.What are the possible legal issues raised in the above scenario from the perspective of International Business Transactions? Identify and examine briefly statutory and judicial authorities in Australia that could be relevant to adequately deal with those issues. (10 Marks)

2.Advise SI and SOMA as to:

2.1. Whether SI has breached any statutory or common law duties to SOMA by:
(i)terminating the agreement;
(ii)not disclosing its business engagement with Elite and

Analyse the above issues with special reference to Competition and Consumer Act 2010 and leading judicial decisions in Australia. (7.5 Marks)

3.Whether High-Tech has a strong case against SI. What grounds does High-Tech need to establish in order to obtain favourable remedies? What are other issues that may also arise in determining the ‘nature’ of the deed and the obligations of SI towards High-Tech? Support your argument by relying on relevant laws and judicial decisions. (7.5 Marks )

4.What policy and legal consideration should be taken into account in expanding business abroad through agency and distributorship? Would you advise SI to negotiate separate agreements with those foreign companies for manufacturing and distributing Paddy? Why or why not? (5 Marks)

Assessment Criteria
This task aims to assess your skill and analytical ability to examine issues involved in the problem scenario with adequate support and acknowledgement. Marks will be awarded based on the following assessment criteria:
Originality of the work devoid of plagiarism
A well structured response based on issues raised in the problem scenario
Understanding and accurate identification of issues
Application of the relevant legal principles to those issues
Critical evaluation and efficient use of information
Concise and logical approach to address relevant aspects
Adequate substantiation of arguments by referring to relevant legislation and case law
Clear/coherent demonstration of knowledge and correct written expression
The degree of persuasion/depth of research evidenced from your argument
Appropriate referencing and acknowledgement of sources

Some Relevant Resources:
The Text Chaps 9-10

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Blockbuster Australia Pty Ltd v Karioi Pty Ltd [2009] NSWSC 1089 (16 October 2009)
Burger King Corporation v Hungry Jack’s Pty Limited [2001] NSWCA 187 (21 June 2001)
A Terry & C Dilernia, ‘Franchising and the Quest for the Holy Grail: Good Faith or Good Intentions’ (2009) 19 Melbourne University Law Review
Philip F Zeidman (ed), Franchise in 32 jurisdictions worldwide (2011) at 5-12 (available at http://www.franchise.org/uploadedFiles/Franchise_Industry/International_Development/Introduction.pdf)

It is highly recommended that you should use other scholarly resources with appropriate acknowledgement to explore various legal issues.

You must not provide a copy of your paper to your classmate/or friend in any circumstances.
•Due Date: 7 October Tuesday 2014 by 5:00pm (Week 8)
•Length: 2500 words (excluding footnotes, but footnotes must not include any substantive content. The actual word length of a paper must be stated on the cover sheet)

•Submission: Online via ‘TURNITIN ASSIGNMENT’ on iLearn under ‘Unit Information’ ‘IBT Assessment: Problem Question 30%’
•Assignment must be typed, double spaced and referenced and should conform to the Australian Guide to Legal Citation (can be downloaded at http://www.law.unimelb.edu.au/go/aglc)
•Return of Assignment: Week 11 27 October in the seminars

Written paper Submission

‘Format
The following requirements as to presentation of written papers must be complied with:
 All written assignments must be typed on A4 paper, in 12 point Times New Roman font and must be double-spaced and referenced. You may print on both sides of the paper if your inclinations towards conservation are threatened by the double-spacing requirement.

 All word limits, as specified above, must be strictly adhered to. The word limit does not include footnotes, although footnotes must not include any substantive content. The actual word length of a paper must be stated on the cover sheet.
…
 You are not required to include a bibliography, as your footnotes should indicate what sources you have used in your research.’

This Assessment Task relates to the following Learning Outcomes:
Comprehend the regulatory framework and standards that govern international business transactions and relationships.
Demonstrate a sophisticated knowledge and understanding of relevant international agreements and principles that influence international business, domestic legal regime and parties involved in cross-border dealings, and develop an analytical ability to critically assess their application.
Evaluate the role of different institutions and organisations in guiding responsible business.
Investigate the relationship between international and domestic regulations and the way in which Australia has endorsed those international standards.
Identify legal issues, problems and risk factors that a business entity may encounter in operating cross-border transactions, and apply appropriate strategies to overcome these.
Recognise the importance of different approaches to and methods of resolving disputes and address the strengths and weaknesses of the different procedures.
Analyse the hypothetical international legal problem scenario via constructing and defending arguments in a well structured, reasoned, coherent and logical manner.

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