This is a three-hour (180 minutes) examination. Any student whose native language is not English is entitled to an extra hour.
You should answer both questions. Note that the two questions are given different weights (40% and 60% respectively) and allocate your time accordingly.
This is an open book examination. During the examination you may consult any written materials except materials checked out of the law library.
Read each question carefully. Follow directions. Think before you write. If you find an ambiguity that affects your answer to a question, make reasonable assumptions and state these clearly in your answer. Be concise. Be clear.
When you turn in your blue books, please enclose this examination paper with your examination number filled in on the upper right hand corner of this page.
Your client, a manufacturer of oil and gas drilling equipment here in Texas, is negotiating a contract for the sale of its equipment to a French energy company. The business terms of the transaction have been agreed upon.
(a) Your client and the French purchaser have been unable to agree, however, upon a choice of law clause for the contract. Your client has suggested that Texas law be specified as the governing law because the client uses Texas law in all of its sales contracts. The French purchaser has argued for French law because the equipment will be delivered to it in France and be used in operations based in France. What advice would you give to your client as to whether to accept French law as the governing law? Should the law of a third country be selected as a compromise? If the parties do not choose a governing law will the U.N. Convention on Contracts for the International Sale of Goods apply? If so, how would the parties ensure that the U.N. Convention will be accepted as the governing law?
(b) Your client and the French purchaser have also disagreed over the method for resolving disputes under the contract. Your client would like to resolve any disputes in federal or state court in Texas and has asked the French purchaser to agree to a clause whereby it consents to the personal jurisdiction of such courts. The French purchaser has countered by insisting upon arbitration. How would you advise your client as to the acceptability of an arbitration clause in an international sales contract? What are the advantages and disadvantages of an arbitration clause as compared with resolving disputes in a court of law? If the parties were to agree to an arbitration clause, which arbitration rules should your client agree to? Does the choice of governing law affect your decision as to whether to arbitrate and, if so, does the choice affect which arbitration rules your client should select?
Olympiad Sports Conglomerate ("Olympiad") is a multinational company that manufactures and distributes sportswear and sports equipment. The parent company is incorporated in Delaware and has its headquarters in Dallas, Texas. You are employed in the legal department of the parent company.
Four years ago Olympiad entered into a joint venture in Islandia, a less-developed country off the coast of Latin America. Olympiad holds 49% of the shares in the joint venture while its partner, an enterprise wholly owned by the Islandia government, holds the remaining 51%. Olympiad has, however, a ten-year management contract with the joint venture which provides that Olympiad will have exclusive authority to designate managers, whether or not they are citizens of Islandia, for that period of time.
The Islandia joint venture was established to manufacture and distribute sportswear and sports shoes. Distribution initially was to be within Islandia but in the long run Olympiad hoped to use the Islandia venture for distribution throughout Latin America. The sportswear and most of the shoes to be manufactured by the venture are simple and stylish. Olympiad has agreed to permit the venture to use the Olympiad logo (a peacock) and to market its product as part of the Olympiad "Hi-life" line. In addition, Olympiad has authorized the venture to manufacture and market a high-tech shoe developed by Olympiad's research and development center in Houston. The shoe incorporates a computer chip that allows the shoe to maintain constant ankle and arch support.
To implement the joint venture agreement, Olympiad and the venture enter into a licensing agreement that authorizes the joint venture to use Olympiad's logo and "Hi-life" trademarks on the venture's products, Olympiad's manufacturing know-how, and Olympiad's right to acquire and exploit patents on the high-tech shoe in all countries in the western hemisphere other than the United States. Olympiad retained U.S. patent rights on the high-tech shoes in order to manufacture them in the United States for distribution there.
By a separate agreement between the joint venture and the Islandia government, the venture was to be given relief from property, income, and value-added taxes for a period of five years from the time production starts. This tax relief was granted by the Islandia Minister of Development pursuant to legislation that provides in relevant part:
Less than six months after it was established, the joint venture began production. During its first two years of operation the venture distributed its products primarily in Islandia at prices protected by a 100% customs tariff on imported sports clothing and footwear. During the last year the joint venture began expanding production and distribution.
The latest semi-annual report prepared by the joint venture has just reached the head office of Olympiad in Dallas. After reading the report, a vice president asks your advice on the following problems. Advise her. You should answer not only her specific questions but you should also suggest steps Olympiad might take to protect its interests.
(a) Six months ago, at the suggestion of the Islandia Minister of Commerce & Industry, the joint venture sold at cost [i.e., average cost of manufacture] 50,000 pair of the high-tech shoes to an Islandia private enterprise owned by the Minister's spouse. This private enterprise, in turn, began to export the shoes to wholesalers in the southeastern United States at prices lower than those charged by Olympiad for the same shoes when manufactured in the United States. These prices are one-half of the retail price charged by the venture for the shoes in Islandia. One reason for the lower charge is that the shoes are sold without the limited (one year) warranty as to the computer chip, while the U.S. shoes are sold that way. It is often difficult, however, to determine whether the defective chips were in shoes produced in Islandia so that, as a business matter, Olympiad may have to replace chips in all shoes unless it can otherwise have the import of the Islandia shoes enjoined. Can Olympiad limit the importation of these shoes?
(b) Four months ago, a manager of the Islandia joint venture paid, in the name of the venture, U.S. $ 25,000 to the favorite charity of the Minister of Commerce & Industry. (The Honorary President of the charity is the Minister's sister-in-law.) Anticipating this generosity, the week before the gift the Minister granted the venture relief from the payment of official inspection charges levied by customs officials upon the import or export of raw materials or finished goods. Six weeks ago the manager's supervisor discovered the "gift" and Ministerial grant. Upon investigation, the supervisor also learned that the venture continues -- as it apparently has been doing since it began production -- to pay unofficial "rush money" to customs officials in order to expedite inspections. (These payments are illegal under Islandia law but the government has not enforced the law in the last two decades.) Both the manager and his supervisor are U.S. citizens. Does Olympiad, the manager, or the supervisor have potential liability for either the "gift" or the "rush money" payments under the Foreign Corrupt Practices Act?
(c) Two months ago, the Minister of Development delivered a speech calling upon all Islandia enterprises to employ and train more Islandia citizens. In subsequent talks with foreign investors, the Minister suggested that he would penalize existing enterprises that did not employ at least ten percent more Islandia citizens by the end of the year. After study, managers of the Olympiad joint venture have concluded that to employ so many new and untrained workers would make the venture unprofitable for the foreseeable future. Fearing that the 51% partner in the joint venture would support the Minister, the managers recommend that Olympiad put pressure on the Islandia government by use of Olympiad's political influence in Washington, D.C. Hearing of this recommendation, the Minister now threatens to terminate immediately the five-year tax relief he had granted three and one-half years ago. What relief, if any, might be available to Olympiad if the venture either hires the additional employees or loses its tax holiday?
| IBT Index Page |
| Final Exam Index |