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International Business Transaction 1
Heading: International Business Transaction
Your name:
Course name:
Professors’ name:
Date
Introduction
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International Business Transaction 2
In this highly competitive, corporate world, businesses are striving to achieve the widest markets
compared to others. Some businesses like Nova, Smart Electronic, and Hi-Tech Electronics do
this through global business transactions. Among the strategies used in this case are franchise
agreements and license deeds. The success of these contracts largely rely on the contracting
parties ability to comply with agreement conditions, have fair terms, avoid unconscionable
conduct, and avoid false or misleading conduct. In terms foreign investment, its success is
dependent on government control, local currency strength, available infrastructure, property
protection, and labor costs among others.
Question 1
Unfair contract terms
In the international business transactions involving High-Tech Electronic (HTE) versus Nova
and HTE versus Smart Electronic (SE) have various legal issues as per the Australian statutes
and judiciary system. To start with, Nova’s threat to take a legal action is based on the fact that
HTE announced a desire to terminate the license agreement before the expiry date, as it was
agreed in the contract. HTE’s intention to terminate the license deed is considered unfair by the
Australian judicial and statutory systems as it violates consumer rights. According to the
Australian Competition and Consumer Act 2010, there is a provision that unfair terms in
consumer agreements are invalid.
1
In this case, a consumer contract entails a standard-form of contract for supply of services or
goods that are predominantly or wholly domestic, personal, consumption or household. A
business contract is said to be unfair if it leads to substantial imbalance in the obligations and
1
Commonwealth of Australia. ‘The Australian Consumer Law, A guide to provisions’ (2010) 1-
57.http://www.consumerlaw.gov.au/content/the_acl/downloads/ACL_guide_to_provisions_November_2010.pdf
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International Business Transaction 3
rights of the parties resulting from an agreement. Besides, a contract can also be termed unfair if
it is unreasonably indispensable to safeguard suppliers’ legitimate interests. Moreover, a business
agreement terms can be unfair if it results in non-financial or financial detriment to the involved
party of an agreement.
2
The Australian consumer law (ACL) is one of the statutes that govern
business unfair agreement terms. Victorian Fair Trading Act (FTA)’s Part B presently controls
unfair agreement terms in the country, although the ACL has replaced these provisions. Other
available remedies in this case include compensation orders, injunctions, and non-parties’ redress
provision orders. In this case, HTE is said to committed a legal issue regarding the unfair
contract conditions and terms with Nova and SE. This is because it sets strict measures on the
two companies that compromise with their performance.
3
In order to determine whether a contract is unfair, there are various considerations that courts
ought to make. These include: if one of the contracting parties possesses most of or all the
bargaining power; whether one party prepared the contract prior to discussions with the other on
the transaction; if one party was needed to either reject or accept the agreement on the presented
conditions; if the other party got a chance to bargain the contractual terms; and if the conditions
consider the other party’s features.
4
Some of the examples of unfair conditions include those that
allow only one party to limit or avoid contract performance; those that fines only one party for
infringing or terminating the agreement; those that allow only one party to contrast contract
2
Commonwealth of Australia. ‘The Australian Consumer Law, A guide to provisions’ (2010) 1-
57.http://www.consumerlaw.gov.au/content/the_acl/downloads/ACL_guide_to_provisions_November_2010.pdf
3
Ibid.
4
Blockbuster Australia Pty Ltd v Karioi Pty Ltd [2009] NSWSC 1089 (16
October 2009)
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International Business Transaction 4
terms; those that allow only one party to revamp or not revamp the agreement; those that allow
one party to change services’ and goods’ features; those that permit one party to establish if the
agreement has been violated or give its meaning; those that restricts one party’s vivid legal
responsibility for its agents; those that restrict one party’s proof in proceedings concerning the
agreement; and those that impose evidential responsibility on only one party in contractual
proceedings.
5
Australian Competition and Consumer Commission (ACCC) and Australian
Securities and Investments Commission (ASIC) are among the relevant judicial authorities that
handle the case of unfair contractual terms.
Unconscionable conduct
Another legal issue involving the parties here is the unconscionable conduct by the main party,
which is HTE Company. According to ACL’s section 20, there is a provision against any
unconscionable conduct in the context of unwritten law. This law forbids the unconscionable
practice involved in the supply of services and goods to a company or a person. It also bars the
unconscionable conduct in the acquisition or supply of services and goods in business practices.
In terms of its remedies and enforcement, some of the available options include damages,
injunctions, and compensatory orders. Some include adverse publicity, and non-punitive orders.
Additionally, there are civil financial fines of $1.1milion for a corporate, and $220,000 for an
individual; non-pates’ redress, warning notices, and disqualification orders.
6
With respect to the
this case, Hi-Tech Electronics has committed an unconscionable against Nova and SE in that its
5
Australian Competition & Consumer Commission v CC (NSW) Pty Ltd [1999] FCA 954 (14 July 1999)
6
Commonwealth of Australia. ‘The Australian Consumer Law, A guide to provisions’ (2010) 1-
57.http://www.consumerlaw.gov.au/content/the_acl/downloads/ACL_guide_to_provisions_November_2010.pdf
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International Business Transaction 5
conditions in the agreements made only favor itself, and breaches on the other firms’ consumer
rights.
In order to determine the legal issue of unconscionable conduct, ACL’s section 22 outlines some
considerations that courts will have regard. These include the parties’ respective bargaining
strengths; whether consumer was needed to comply with the terms not sensibly essential in the
other party’s protection; if the consumer fully understood all documents associated with the
transaction; if there was unfair tactics or unnecessary influence applied against consumer; and if
the supplier’s behavior was in line with the same practices with other consumers. Other
considerations include the conditions of relevant industry code, or other codes, whether the
consumer sensibly believed it was appropriate; if there was supplier’s failure to disclose risks or
conduct that might influence consumer; if there existed a contract between parties; if the two
parties conformed to the terms; if the conditions were negotiable; and the degree of the parties’
act in good faith.
7
In terms of the license deed, HTE’s announcement concerning the untimely termination of the
agreement is unfair, and unconstitutional. The two companies in question ought to have
complied with the terms and conditions set in the agreement before entering it. Nova is justified
to take legal action against Hi-Tech Electronics for displaying an intention to end the contract
before its due time. Even though HTE feels that it is on the right by trying to save its product
from Nova’s dominant competition, it is still unlawful to terminate the contract before its expiry
date.
8
One of the appropriate judicial authorities to deal with this matter is the TPA.
7
Burger King Corporation v Hungry Jack"s Pty Limited [2001] NSWCA 187 (21 June 2001)
8
Commonwealth of Australia. ‘The Australian Consumer Law, A guide to provisions’ (2010) 1-
57.http://www.consumerlaw.gov.au/content/the_acl/downloads/ACL_guide_to_provisions_November_2010.pdf
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International Business Transaction 6
Misleading or deceptive conduct
On the other hand, SE is threatening to take a legal action against HTE because of the failure of
the latter to comply with the terms and conditions of the consent. One of the conditions in the
agreements involved the establishment of at least three branches every year in Melbourne’s
suburbs on the basis of financial endorsements and operational aid by HTE. There was also a
consent that future renewals might occur based on HTE’s approval. Nevertheless, the Hi-Tech
Electronics breached the conditions of the consent by announcing that it would not renew the
contract upon its expiry. Its reasons for this decision included unaffordable operational aid
because of heavy financial losses caused by numerous business agreements with a USA
company, Elegance. Nonetheless, HTE had not disclosed this vital information on other business
agreements to SE. In addition, HTE asserts that its decision is not designed to mislead SE, but
that was an act of omission. In this case, it is unfair of HTE to withhold such information from
SE during the formation of the agreement. According to the Australian Consumer Law (ACL),
section 18, HTE’s conduct on SE is misleading and deceptive. ACL bars a person in commerce
or trade, from undertaking a deceptive and misleading practice on others. This prevention is not
restricted to the supply of services and goods, and forms a wide, economy-broad standard of
conduct. ACL has retained the general ban on deceptive and misleading conduct, which was in
TPA’s section 52, and entire territory and state FTAs. The drafting the ACL’s section 18 is in a
similar form as TPA’s section 52, except that ACL refers to persons, while FTA refers to
corporations.
9
One of the governing judicial authorities of the misleading conduct is the TPAs.
9
Commonwealth of Australia. ‘The Australian Consumer Law, A guide to provisions’ (2010) 1-
57.http://www.consumerlaw.gov.au/content/the_acl/downloads/ACL_guide_to_provisions_November_2010.pdf
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International Business Transaction 7
In terms of remedies and implementations, ACL’s Chapter 5 demonstrates that breach of the ban
on misleading conduct has remedies that include compensatory orders, injunctions, and
damages.
10
Criminal sanctions and civil fines are inapplicable to section 18 due to its wide scope.
Instead, section 18 forms a business conduct standard, and permits people to search for remedies
for any harm resulting from infringements of the standard, instead of providing contravention,
which encourage punitive sanctions. Other bans against particular types of misleading or false
conduct can be applicable to situations of misleading conduct, and have certain criminal
sanctions and penalties.
11
Therefore, it is justified to say that infringed on the business standards
created by ACL by withholding information regarding its other business agreements from SE
prior to entering the franchise agreement. Its argument that the act was not misleading, but
omission is false, since it should have let the other party know about its numerous contracts with
other companies.
12
Question 2
In this case, HTE is not legally justified to terminate the license deed that it shares with Nova.
This is because by doing so, the company will be violating the terms and conditions of the
agreement between it and Nova. Nova has certain legal provisions that are applicable in fighting
HTE’s decision to terminate the license deed. First, Nova can challenge HTE’s decision on the
basis of unfair terms of agreement. Clearly, as per ACL, this contract allows only HTE to limit
the contract’s performance. Secondly, it allows HTE to change the contractual terms.
Additionally, Nova can take a legal action against HTE on grounds of unconscionable conduct.
10
Ibid.
11
Ibid.
12
Philip F Zeidman (ed), Franchise in 32 jurisdictions worldwide (2011) at 5-12.
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International Business Transaction 8
ACL’s section 20 has a provision against any unconscionable conduct in the situation of
unwritten laws. In this case, HTE has committed an unconscionable conduct as evidenced by
unequal negotiation balance between the two parties; HTE’s unfair plans against Nova; HTE’s
failure to act in good faith, non-negotiable and unfair contractual terms.
13
Other considerations
used in the determination of the license deed’s nature include HTE’s failure to disclose potential
risks or conduct that might impact Nova. Moreover, HTE wanted Nova to comply with some of
its conditions that included quality control, and particular marketing system that it could only
endorse. Notably, these conditions were not negotiated between two parties; hence, the parties
lacked unequal bargaining powers.
What is more, HTE has violated common law duty to SE by failing to disclose its business
involvement with USA company; Elegance. This violation is costly to SE in that it will affect its
business performance. According to Competition and Consumer Act 2010, it is wrong for a firm
to mislead or deceive another party in a contract. HTE’s action is termed as an infringement of
common law to SE through a deceptive conduct. For instance, HTE and SE agreed after
negotiations that renewals would be made in future. Additionally, HTE promised to endorse
financial and operational aid to SE concerning the establishment of at least three branches in
Melbourne’s key suburbs. The Competition and Consumer Act 2010 advocates against anti-
competitive behavior by businesses or consumers. According to the Act, any contractual party
that violates acts in such a manner is legally liable for damages or harm caused to the other
party.
14
Therefore, failure of HTE to disclose information regarding to its involvement in other
13
Commonwealth of Australia. ‘The Australian Consumer Law, A guide to provisions’ (2010) 1-
57.http://www.consumerlaw.gov.au/content/the_acl/downloads/ACL_guide_to_provisions_November_2010.pdf
14
Ibid.
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International Business Transaction 9
several agreements including that with Elegance company in USA amounts to false or deceptive
conduct.
HTE’s arguments in an attempt to justify its actions on SE are weak. Its excuse about heavy
losses caused many agreements that were initially undisclosed to SE is fake. The Act strongly
states that members of a contract should disclose such vital information prior to making final
deals. In the case of HTE, this is a show of the company’s failure to act in good faith. Moreover,
its failure to provide financial approval and operational aid, as per the terms of agree,
demonstrates HTE’s failure to comply with the conditions of the franchise agreement.
15
Therefore, the HTE is liable for the damages caused on Smart Electronic (SE).
Foreign investment factors
With respect to HTE’s desire to engage in foreign investment, there are certain factors that
influence its success in such a business practice. To begin with, the company must consider the
country’s GDP before embarking on foreign investment. This is because a country’s GDP is
likely to have a positive impact on the Foreign Investment, for directly serving a market is more
effective than exporting. Additionally, economic growth is highly influential in the successful
operation of a foreign investment. Nevertheless, in case of a vertical foreign investment, market
size is among the least determinants.
16
Apart from economic growth and GDP, a successful foreign investment is determined by cost of
labor in the country. Notably, higher costs of labor are likely to have a negative influence on
foreign investment. Nonetheless, high salaries and wages are known to depict high skill levels
15
A Terry & C Dilernia, Franchising and the Quest for the Holy Grail: Good Faith or Good Intentions’ (2009) 19
Melbourne University Law Review
16
Wong Hock Tsen. ‘The determinants of foreign direct investment in the manufacturing industry of Malaysia.’
(2005) 26 Journal of economic cooperation 9-110 http://www.sesric.org/jecd/jecd_articles/ART05010101-2.pdf
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International Business Transaction 10
that result firms substituting capital for taskforce in their process of production. Likewise, high
unemployment rates have positive impact on foreign investment because search process and
labor is cheap. Moreover, the company’s decision to engage in foreign investment must also be
determined by a stable, and foreseeable macroeconomic plan, as well as honest and effective
government. It should also consider the market since a wide and developing market positively
affect foreign investment. There is also significant need to consider the country’s government
regulation. There ought to be minimum government control on such investments in order to
achieve success.
17
The nature of infrastructure in the country also greatly affects the company’s decision to engage
in foreign investment. Additionally, the strength of the country’s local currency plays a key role
in the success of the company’s involvement in foreign investment. The nature of the tax climate
and high quality production factors in the country also affects the company’s foreign investment
practices. What is more, it is imperative to consider the company’s ability to accrue profits,
interests and dividends, as well as the protection of property rights before engaging in foreign
investment. Lastly, the company’s prosperity in foreign investment venture is dependent on the
amount of freedom that the country allows it to function in the markets.
18
Conclusion
Hi-Tech Electronics, Nova and SE are involved in business contracts that end up creating
conflicts among them. Some of the legal issues that the Nova has against HTE include
17
Wong Hock Tsen. ‘The determinants of foreign direct investment in the manufacturing industry of Malaysia.’
(2005) 26 Journal of economic cooperation 9-110 http://www.sesric.org/jecd/jecd_articles/ART05010101-2.pdf
18
Ibid.
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International Business Transaction 11
misleading or deceptive conduct, unconscionable conduct, and unfair contract conditions. Nova
can challenge HTE through the provisions of ACL, ACCC and ASIC. Likewise, SE can file a
legal action against HTE on grounds of deceptive and misleading behavior, unfair terms of
agreement and unconscionable conduct. Some of the judicial authorities in charge of these issues
are ACCC, FTAs, and ASIC. In terms of HTE’s decision to engage in foreign investment, some
of the factors to consider include local currency strength; labor costs; economic growth;
infrastructure availability; ability to accrue profits, interests, and dividends; market freedom; and
government regulation.
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International Business Transaction 12
Bibliography
Journals
Commonwealth of Australia. ‘The Australian Consumer Law, A guide to provisions’ (2010) 1-
57.http://www.consumerlaw.gov.au/content/the_acl/downloads/ACL_guide_to_provisions_Nove
mber_2010.pdf
Cristina Cecere, Australia-section 51AC of the trade Practices Act: Impact on Franchising
Sector’ (2003) 1 International Journal of Franchising Law 8-24
Wong Hock Tsen. ‘The determinants of foreign direct investment in the manufacturing industry
of Malaysia.’ (2005) 26 Journal of economic cooperation 9-110
http://www.sesric.org/jecd/jecd_articles/ART05010101-2.pdf
Books
Philip F Zeidman (ed), Franchise in 32 jurisdictions worldwide (2011) at 5-12.
Cases
Australian Competition & Consumer Commission v CC (NSW) Pty Ltd [1999] FCA 954 (14 July
1999)
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)

Unformatted Attachment Preview

International Business Transaction Heading: International Business Transaction Your name: Course name: Professors’ name: Date Introduction 1 International Business Transaction 2 In this highly competitive, corporate world, businesses are striving to achieve the widest markets compared to others. Some businesses like Nova, Smart Electronic, and Hi-Tech Electronics do this through global business transactions. Among the strategies used in this case are franchise agreements and license deeds. The success of these contracts largely rely on the contracting parties’ ability to comply with agreement conditions, have fair terms, avoid unconscionable conduct, and avoid false or misleading conduct. In terms foreign investment, its success is dependent on government control, local currency strength, available infrastructure, property protection, and labor costs among others. Question 1 Unfair contract terms In the international business transactions involving High-Tech Electronic (HTE) versus Nova and HTE versus Smart Electronic (SE) have various legal issues as per the Australian statutes and judiciary system. To start with, Nova’s threat to take a legal action is based on the fact that HTE announced a desire to terminate the license agreement before the expiry date, as it was agreed in the contract. HTE’s intention to terminate the license deed is considered unfair by the Australian judicial and statutory systems as it violates consumer rights. According to the Australian Competition and Consumer Act 2010, there is a provision that unfair terms in consumer agreements are invalid.1 In this case, a consumer contract entails a standard-form of contract for supply of services or goods that are predominantly or wholly domestic, personal, consumption or household. A business contract is said to be unfair if it leads to substantial imbalance in the obligations and Commonwealth of Australia. ‘The Australian Consumer Law, A guide to provisions’ (2010) 157.http://www.consumerlaw.gov.au/content/the_acl/downloads/ACL_guide_to_provisions_November_2010.pdf 1 International Business Transaction 3 rights of the parties resulting from an agreement. Besides, a contract can also be termed unfair if it is unreasonably indispensable to safeguard suppliers’ legitimate interests. Moreover, a business agreement terms can be unfair if it results in non-financial or financial detriment to the involved party of an agreement.2 The Australian consumer law (ACL) is one of the statutes that govern business unfair agreement terms. Victorian Fair Trading Act (FTA)’s Part B presently controls unfair agreement terms in the country, although the ACL has replaced these provisions. Other available remedies in this case include compensation orders, injunctions, and non-parties’ redress provision orders. In this case, HTE is said to committed a legal issue regarding the unfair contract conditions and terms with Nova and SE. This is because it sets strict measures on the two companies that compromise with their performance.3 In order to determine whether a contract is unfair, there are various considerations that courts ought to make. These include: if one of the contracting parties possesses most of or all the bargaining power; whether one party prepared the contract prior to discussions with the other on the transaction; if one party was needed to either reject or accept the agreement on the presented conditions; if the other party got a chance to bargain the contractual terms; and if the conditions consider the other party’s features.4 Some of the examples of unfair conditions include those that allow only one party to limit or avoid contract performance; those that fines only one party for infringing or terminating the agreement; those that allow only one party to contrast contract Commonwealth of Australia. ‘The Australian Consumer Law, A guide to provisions’ (2010) 157.http://www.consumerlaw.gov.au/content/the_acl/downloads/ACL_guide_to_provisions_November_2010.pdf 2 3 Ibid. 4 Blockbuster Australia Pty Ltd v Karioi Pty Ltd [2009] NSWSC 1089 (16 October 2009) International Business Transaction terms; those that allow only one party to revamp or not revamp the agreement; those that allow one party to change services’ and goods’ features; those that permit one party to establish if the agreement has been violated or give its meaning; those that restricts one party’s vivid legal responsibility for its agents; those that restrict one party’s proof in proceedings concerning the agreement; and those that impose evidential responsibility on only one party in contractual proceedings.5 Australian Competition and Consumer Commission (ACCC) and Australian Securities and Investments Commission (ASIC) are among the relevant judicial authorities that handle the case of unfair contractual terms. Unconscionable conduct Another legal issue involving the parties here is the unconscionable conduct by the main party, which is HTE Company. According to ACL’s section 20, there is a provision against any unconscionable conduct in the context of unwritten law. This law forbids the unconscionable practice involved in the supply of services and goods to a company or a person. It also bars the unconscionable conduct in the acquisition or supply of services and goods in business practices. In terms of its remedies and enforcement, some of the available options include damages, injunctions, and compensatory orders. Some include adverse publicity, and non-punitive orders. Additionally, there are civil financial fines of $1.1milion for a corporate, and $220,000 for an individual; non-pates’ redress, warning notices, and disqualification orders.6 With respect to the this case, Hi-Tech Electronics has committed an unconscionable against Nova and SE in that its 5 Australian Competition & Consumer Commission v CC (NSW) Pty Ltd [1999] FCA 954 (14 July 1999) Commonwealth of Australia. ‘The Australian Consumer Law, A guide to provisions’ (2010) 157.http://www.consumerlaw.gov.au/content/the_acl/downloads/ACL_guide_to_provisions_November_2010.pdf 6 4 International Business Transaction 5 conditions in the agreements made only favor itself, and breaches on the other firms’ consumer rights. In order to determine the legal issue of unconscionable conduct, ACL’s section 22 outlines some considerations that courts will have regard. These include the parties’ respective bargaining strengths; whether consumer was needed to comply with the terms not sensibly essential in the other party’s protection; if the consumer fully understood all documents associated with the transaction; if there was unfair tactics or unnecessary influence applied against consumer; and if the supplier’s behavior was in line with the same practices with other consumers. Other considerations include the conditions of relevant industry code, or other codes, whether the consumer sensibly believed it was appropriate; if there was supplier’s failure to disclose risks or conduct that might influence consumer; if there existed a contract between parties; if the two parties conformed to the terms; if the conditions were negotiable; and the degree of the parties’ act in good faith.7 In terms of the license deed, HTE’s announcement concerning the untimely termination of the agreement is unfair, and unconstitutional. The two companies in question ought to have complied with the terms and conditions set in the agreement before entering it. Nova is justified to take legal action against Hi-Tech Electronics for displaying an intention to end the contract before its due time. Even though HTE feels that it is on the right by trying to save its product from Nova’s dominant competition, it is still unlawful to terminate the contract before its expiry date.8 One of the appropriate judicial authorities to deal with this matter is the TPA. 7 Burger King Corporation v Hungry Jack"s Pty Limited [2001] NSWCA 187 (21 June 2001) Commonwealth of Australia. ‘The Australian Consumer Law, A guide to provisions’ (2010) 157.http://www.consumerlaw.gov.au/content/the_acl/downloads/ACL_guide_to_provisions_November_2010.pdf 8 International Business Transaction 6 Misleading or deceptive conduct On the other hand, SE is threatening to take a legal action against HTE because of the failure of the latter to comply with the terms and conditions of the consent. One of the conditions in the agreements involved the establishment of at least three branches every year in Melbourne’s suburbs on the basis of financial endorsements and operational aid by HTE. There was also a consent that future renewals might occur based on HTE’s approval. Nevertheless, the Hi-Tech Electronics breached the conditions of the consent by announcing that it would not renew the contract upon its expiry. Its reasons for this decision included unaffordable operational aid because of heavy financial losses caused by numerous business agreements with a USA company, Elegance. Nonetheless, HTE had not disclosed this vital information on other business agreements to SE. In addition, HTE asserts that its decision is not designed to mislead SE, but that was an act of omission. In this case, it is unfair of HTE to withhold such information from SE during the formation of the agreement. According to the Australian Consumer Law (ACL), section 18, HTE’s conduct on SE is misleading and deceptive. ACL bars a person in commerce or trade, from undertaking a deceptive and misleading practice on others. This prevention is not restricted to the supply of services and goods, and forms a wide, economy-broad standard of conduct. ACL has retained the general ban on deceptive and misleading conduct, which was in TPA’s section 52, and entire territory and state FTAs. The drafting the ACL’s section 18 is in a similar form as TPA’s section 52, except that ACL refers to persons, while FTA refers to corporations.9 One of the governing judicial authorities of the misleading conduct is the TPAs. Commonwealth of Australia. ‘The Australian Consumer Law, A guide to provisions’ (2010) 157.http://www.consumerlaw.gov.au/content/the_acl/downloads/ACL_guide_to_provisions_November_2010.pdf 9 International Business Transaction 7 In terms of remedies and implementations, ACL’s Chapter 5 demonstrates that breach of the ban on misleading conduct has remedies that include compensatory orders, injunctions, and damages.10 Criminal sanctions and civil fines are inapplicable to section 18 due to its wide scope. Instead, section 18 forms a business conduct standard, and permits people to search for remedies for any harm resulting from infringements of the standard, instead of providing contravention, which encourage punitive sanctions. Other bans against particular types of misleading or false conduct can be applicable to situations of misleading conduct, and have certain criminal sanctions and penalties.11 Therefore, it is justified to say that infringed on the business standards created by ACL by withholding information regarding its other business agreements from SE prior to entering the franchise agreement. Its argument that the act was not misleading, but omission is false, since it should have let the other party know about its numerous contracts with other companies.12 Question 2 In this case, HTE is not legally justified to terminate the license deed that it shares with Nova. This is because by doing so, the company will be violating the terms and conditions of the agreement between it and Nova. Nova has certain legal provisions that are applicable in fighting HTE’s decision to terminate the license deed. First, Nova can challenge HTE’s decision on the basis of unfair terms of agreement. Clearly, as per ACL, this contract allows only HTE to limit the contract’s performance. Secondly, it allows HTE to change the contractual terms. Additionally, Nova can take a legal action against HTE on grounds of unconscionable conduct. 10 Ibid. 11 Ibid. 12 Philip F Zeidman (ed), Franchise in 32 jurisdictions worldwide (2011) at 5-12. International Business Transaction 8 ACL’s section 20 has a provision against any unconscionable conduct in the situation of unwritten laws. In this case, HTE has committed an unconscionable conduct as evidenced by unequal negotiation balance between the two parties; HTE’s unfair plans against Nova; HTE’s failure to act in good faith, non-negotiable and unfair contractual terms.13 Other considerations used in the determination of the license deed’s nature include HTE’s failure to disclose potential risks or conduct that might impact Nova. Moreover, HTE wanted Nova to comply with some of its conditions that included quality control, and particular marketing system that it could only endorse. Notably, these conditions were not negotiated between two parties; hence, the parties lacked unequal bargaining powers. What is more, HTE has violated common law duty to SE by failing to disclose its business involvement with USA company; Elegance. This violation is costly to SE in that it will affect its business performance. According to Competition and Consumer Act 2010, it is wrong for a firm to mislead or deceive another party in a contract. HTE’s action is termed as an infringement of common law to SE through a deceptive conduct. For instance, HTE and SE agreed after negotiations that renewals would be made in future. Additionally, HTE promised to endorse financial and operational aid to SE concerning the establishment of at least three branches in Melbourne’s key suburbs. The Competition and Consumer Act 2010 advocates against anticompetitive behavior by businesses or consumers. According to the Act, any contractual party that violates acts in such a manner is legally liable for damages or harm caused to the other party.14 Therefore, failure of HTE to disclose information regarding to its involvement in other Commonwealth of Australia. ‘The Australian Consumer Law, A guide to provisions’ (2010) 157.http://www.consumerlaw.gov.au/content/the_acl/downloads/ACL_guide_to_provisions_November_2010.pdf 13 14 Ibid. International Business Transaction 9 several agreements including that with Elegance company in USA amounts to false or deceptive conduct. HTE’s arguments in an attempt to justify its actions on SE are weak. Its excuse about heavy losses caused many agreements that were initially undisclosed to SE is fake. The Act strongly states that members of a contract should disclose such vital information prior to making final deals. In the case of HTE, this is a show of the company’s failure to act in good faith. Moreover, its failure to provide financial approval and operational aid, as per the terms of agree, demonstrates HTE’s failure to comply with the conditions of the franchise agreement.15 Therefore, the HTE is liable for the damages caused on Smart Electronic (SE). Foreign investment factors With respect to HTE’s desire to engage in foreign investment, there are certain factors that influence its success in such a business practice. To begin with, the company must consider the country’s GDP before embarking on foreign investment. This is because a country’s GDP is likely to have a positive impact on the Foreign Investment, for directly serving a market is more effective than exporting. Additionally, economic growth is highly influential in the successful operation of a foreign investment. Nevertheless, in case of a vertical foreign investment, market size is among the least determinants.16 Apart from economic growth and GDP, a successful foreign investment is determined by cost of labor in the country. Notably, higher costs of labor are likely to have a negative influence on foreign investment. Nonetheless, high salaries and wages are known to depict high skill levels A Terry & C Dilernia, Franchising and the Quest for the Holy Grail: Good Faith or Good Intentions’ (2009) 19 Melbourne University Law Review 15 Wong Hock Tsen. ‘The determinants of foreign direct investment in the manufacturing industry of Malaysia.’ (2005) 26 Journal of economic cooperation 9-110 http://www.sesric.org/jecd/jecd_articles/ART05010101-2.pdf 16 International Business Transaction 10 that result firms substituting capital for taskforce in their process of production. Likewise, high unemployment rates have positive impact on foreign investment because search process and labor is cheap. Moreover, the company’s decision to engage in foreign investment must also be determined by a stable, and foreseeable macroeconomic plan, as well as honest and effective government. It should also consider the market since a wide and developing market positively affect foreign investment. There is also significant need to consider the country’s government regulation. There ought to be minimum government control on such investments in order to achieve success.17 The nature of infrastructure in the country also greatly affects the company’s decision to engage in foreign investment. Additionally, the strength of the country’s local currency plays a key role in the success of the company’s involvement in foreign investment. The nature of the tax climate and high quality production factors in the country also affects the company’s foreign investment practices. What is more, it is imperative to consider the company’s ability to accrue profits, interests and dividends, as well as the protection of property rights before engaging in foreign investment. Lastly, the company’s prosperity in foreign investment venture is dependent on the amount of freedom that the country allows it to function in the markets.18 Conclusion Hi-Tech Electronics, Nova and SE are involved in business contracts that end up creating conflicts among them. Some of the legal issues that the Nova has against HTE include Wong Hock Tsen. ‘The determinants of foreign direct investment in the manufacturing industry of Malaysia.’ (2005) 26 Journal of economic cooperation 9-110 http://www.sesric.org/jecd/jecd_articles/ART05010101-2.pdf 17 18 Ibid. International Business Transaction 11 misleading or deceptive conduct, unconscionable conduct, and unfair contract conditions. Nova can challenge HTE through the provisions of ACL, ACCC and ASIC. Likewise, SE can file a legal action against HTE on grounds of deceptive and misleading behavior, unfair terms of agreement and unconscionable conduct. Some of the judicial authorities in charge of these issues are ACCC, FTAs, and ASIC. In terms of HTE’s decision to engage in foreign investment, some of the factors to consider include local currency strength; labor costs; economic growth; infrastructure availability; ability to accrue profits, interests, and dividends; market freedom; and government regulation. International Business Transaction 12 Bibliography Journals Commonwealth of Australia. ‘The Australian Consumer Law, A guide to provisions’ (2010) 157.http://www.consumerlaw.gov.au/content/the_acl/downloads/ACL_guide_to_provisions_Nove mber_2010.pdf Cristina Cecere, Australia-section 51AC of the trade Practices Act: Impact on Franchising Sector’ (2003) 1 International Journal of Franchising Law 8-24 Wong Hock Tsen. ‘The determinants of foreign direct investment in the manufacturing industry of Malaysia.’ (2005) 26 Journal of economic cooperation 9-110 http://www.sesric.org/jecd/jecd_articles/ART05010101-2.pdf Books Philip F Zeidman (ed), Franchise in 32 jurisdictions worldwide (2011) at 5-12. Cases Australian Competition & Consumer Commission v CC (NSW) Pty Ltd [1999] FCA 954 (14 July 1999) 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) Name: Description: ...
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