B.COM Unit – 4 ( CORPORATE SOCIAL RESPONSIBILITY ( CSR ).pptx
Transatlantic business brief march 2014
1. 1 |
European Companies
Starting-Up Operations
In The Us Should Review
Terms And Conditions Of
Their Sales Contracts.
Most foreign companies that
establish operations in the US have
usually been operating in their
home countries for an extended
period and have established terms
and conditions on which they
sell their products and services to
customers. When those companies
commence operations in the US
(or start selling into the US market
through a distributor or agent),
they should review those terms and
conditions to insure that they are
suitable for the US. In particular, a
number of amendments are usually
recommended to make sure that
the company enjoys all of the rights
and protections it may need under
US law.
LIMITING LIABILITY: First, most
suppliers of goods and services
will want to limit the warranties
that they are making with respect
to those products. While express
warranties cannot be limited, there
are provisions that are generally
inserted into terms and conditions
of sale that can limit the operation
of certain implied warranties.
Perhaps more importantly, most
suppliers will want to limit the
remedies available to customers
or end users in the event that the
products are defective or simply
don’t perform as expected.
In addition to limiting the remedies
available to customers, certain
producers may wish to establish an
overall cap on their potential liability
to customers. Besides establishing
an overall cap on liability, producers
will also want to insure that they
exclude the possible application of
certain types of damages, such as
consequential, indirect or punitive
damages.
Each of the above limitations or
exclusions must be expressed in
the terms and conditions of sale
in prescribed ways in order to be
effective and enforceable. As a
related matter, the supplier will
need to determine whether it has
the personnel and capabilities to
perform any remedy that is offered.
This is critical since the failure to
provide a remedy may entitle the
customer or end user to exercise
other remedies that may be more
expensive.
Another issue that most producers
wish to address is to make sure
that the terms and conditions of
the manufacturer are the exclusive
terms as between the supplier
and the customer or end user. In
particular, this means making
Transatlantic Business Law Brief • March 2014
WILLIAMS MULLEN
INTERNATIONAL PRACTICE
UPCOMING
EVENTS:
Foreign Direct Investment
Into the USA:
Speakers: Eliot Norman and Robert
C. Dewar
Munich, Germany – April 7
A Soft Landing for Aerospace
Companies: contact Silke.Schmidt
@STMWI.BAYERN.DE.
Toulouse, France – April 10
Les Développements Récents
Concernant Les Visas à l’entrée du
Territoire Américain; Le Droit Social
Américain Applicable Aux Expatriés
Travaillant Aux Etats-Unis: contact
afje.midi.pyrenees@gmail.com
Bordeaux, France – June 17, 18, 19
U.S. Market Access: Sponsored by
CCI- Aquitaine: contact international
@aqui-cci-international.com
2. 2 |
sure that there are no alternative,
different or additional terms that are
incorporated into that contract. As
with the limitations and exceptions
described above, there are certain
prescribed methods of incorporating
language to insure that such
terms from the customer do not
unexpectedly become part of the
contract. Where a manufacturer
is selling into the US through a
distributor, the manufacturer should
insure that under the distribution
agreement the distributor is only
going to pass the manufacturer’s
terms and conditions on to end
users and that the distributor will
not include any additional terms of
the distributor.
DISPUTE RESOLUTION. Suppliers of
goods will also want to control the
location of any litigation that may
arise with respect to the products
and will usually want to include a
provision specifying an exclusive
jurisdiction where claims may be
brought. Usually that will be the
state in which the manufacturer
or its U.S. based subsidiary has
its principal place of business so
that the manufacturer is litigating
in its “home” court. Many times,
we see the U.S. subsidiary of
a foreign supplier that fails to
change the terms and conditions
from those used by the parent
company in their home country,
which usually specify the courts
of that home country as the
location for any litigation. In many
circumstances, such a provision will
be unenforceable because neither
the seller of the goods (the US
subsidiary or a US distributor) nor
the customer has any nexus with
that foreign jurisdiction. In those
circumstances, the foreign supplier
may be forced to litigate in any
jurisdiction reasonably connected
with the customer. Finally, we
have found that federal courts are
an excellent choice for resolving
disputes. The federal courts often
require mediation of the dispute
(at no cost to the parties) and set
quick trial dates, which encourages
settlements.
LIQUIDATED DAMAGES. Liquidated
damages (for example, a fixed sum
per day for damages for delay),
are another area of concern for
European suppliers. Liquidated
damages (“LD” ) do have several
advantages. For sellers, a LD
provision reduces uncertainty by
capping the seller’s liability, even if
the cap turns out to be greater than
actual damages to the buyer. For
the buyer, a LD paragraph reduces
uncertainty by fixing at least an
acceptable level of compensation in
the event of a breach. If there is a
dispute, an LD provision eliminates
the need for the non-breaching
party to prove its actual damages,
and streamlines and reduces the
costs of dispute resolution because
the buyer need only prove the
amount of delay.
However, you should negotiate
these clauses carefully. U.S. courts
usually will not intervene under what
is known as the “blue pencil rule”
to modify a “liquidated damages”
paragraph so that the buyer can
only enforce a lesser amount than
that called for in the liquidated
damages provision of the contract.
The judge will usually either declare
the “liquidated damages” provision
to be enforceable or strike the
paragraph as excessive and an
unenforceable “penalty.” Further,
recent cases have upheld liquidated
damages against the sellers even
where the amount exceeds the
original value of the contract.
One other point. Some buyers
introduce uncertainty in the
contracts by not making LD the
exclusive remedy for damages for
delay, reserving the right to sue
for actual damages if they exceed
the the LD amount. This creates
problems for the buyer and the
seller. Some courts will view the LD
clause to be unenforceable and a
“penalty”, increasing the litigation
costs and risks for both parties. It is
far better to make LD the “exclusive”
remedy for the breach of contract,
negotiate the amount, and make
sure that other provisions in the
contract do not open the door to
expensive litigation.
RETENTION OF TITLE. Finally,
many terms and conditions from
European based companies include
a retention of title clause. Such a
clause enables the seller to retain
title to the goods until the purchase
price is fully paid and to trace the
proceeds of sale. Such clauses only
have limited applicability in the US.
Generally speaking, such clauses are
best supplemented by a security
interest in the goods that should be
perfected in accordance with law.
This means an extra step: usually
filing a UCC-1 Form with the State
where the buyer does business. If
that happens, the supplier of the
goods will be able to establish
priority over competing creditors of
its customer.
TRANSATLANTIC BUSINESS LAW BRIEF CONT.
3. 3 |
U.S. Department of Justice
and Homeland Security
Send Strong Message
about Visa Abuse
The US Departments of Justice and
Homeland Security recently settled
an action against Infosys, a large
Indian outsourcer, for improper
use of business travel documents
for $35 million. The settlement
was reached after a two year
investigation of Infosys’ practice
of sending employees into the
US on B-1 visas for assignments
that involved taking long term
employment in the US. The
settlement sends a strong message
to international businesses that
visa fraud is clearly on the radar for
these government agencies and
that foreign businesses will not
be entitled to take short cuts in
obtaining proper travel documents,
no matter how big they are. The
main temptation to avoid is using
the Visa Waiver (ESTA) for 90 day
visits that end up requiring local
productive work by the “visitor”.
For more information on narrow
exceptions that do allow productive
work while on ESTA or a B-1
visa, please contact enorman@
williamsmullen.com.
Virginia ranked Best State
in America for Business
Virginia was just recognized by
Forbes as the Best State for
Business in its 2013 review. Forbes
study examined each state in six
categories: costs, labor supply,
regulatory environment, current
economic climate, growth prospects
and quality of life. Virginia ranked in
the top five states in four of those
areas. Other rounding out the Top
10: North Dakota, North Carolina,
Utah, Colorado, Nebraska, Texas,
Minnesota, Washington State and
Georgia. See forbes.com/best-
states-for-business
Please note: This newsletter contains
general, condensed summaries fo actual
legal mattes, statutes and opinions for
information purposes. It is not meant to
be and should not be construed as legal
advice. Readers with particular needs on
specific issues should retain the services of
competent counsel.
TRANSATLANTIC BUSINESS LAW BRIEF CONT.
Eliot Norman
Partner-International
P: 001.804.420.6482
enorman@williamsmullen.com
Robert C. Dewar
Partner
P: 001.804.420.6935
rdewar@williamsmullen.com
For more information,
please visit our website
williamsmullen.com
or contact us: