Legal Aspects of Business Decisions Unit 2 DB SA first week last submission


For several decades, MBI, a multi-national corporation, has manufactured military tanks at several of its branches around the world. One of those branches in Country C sells its tanks both to the army of Country C and the army of Country D. MBI does not have a branch in Country D. After delivering several hundred tanks to Country D, that country has refused to pay for them, complaining that they were defective. (It has nonetheless deployed them as its frontline battle tanks.) MBI sued Country D in the courts of Country D. The courts of Country D dismissed a breach of contract action brought by the MBI several months ago. The rationale for the Court’s decision is that that the army is immune from suit in its courts. Can MBI bring suit in a Country C court? Is legally and ethically prudent for MBI to do so? There are numerous problems in dealing with the military establishment of foreign countries. Describe in detail what some of the problems that US businesses encounter when they manufacture and sell military equipment to foreign military agents?

Read each assessment listed below. Your response should address each assessment separately in order to move the conversation forward. Ensure the mastery of the concept as well as critical thinking. In your opinion, do not simply state that it is a good or bad idea; elaborate on your reasons and argument. Include enough detail to substantiate your thinking as well as your position.

Assessment One

Since MBI has a branch in Country C it can bring suit in a country C court. If MBI brings a suit in country C the court will apply the legal system with the closest link or relationship to the contract or the subject of the dispute. If MBI can establish in the court at country C that it has supplied the tanks to country D and even though they were defective have been deployed as a frontline battle tanks, the court in country C may award a remedy to MBI. One remedy can be that as specific performance, MBI should rectify the defect in the tank and then receive payment from the Government of D. Another remedy is that the court in country C may decide is that Country D should make a deduction for the defects and pay MBI the rest of the money. Therefore, the court in country C can apply the law of country D and hold that since the army is immune from suits in its courts, the case be dismissed.

It is lawfully and morally sensible for MBI to do so. Since MBI has a branch in country C it can approach the courts in that country. From an ethical perspective it is the duty of MBI to realize its payment from country D through available legal means. If the court in country C has jurisdiction over international contracts, the case will be admitted for hearing. Also from consequential ethics, if MBI does not file a suit in country C and it loses its money on several hundred tanks it has sold to country D, the consequences can be disastrous. The financial loss may be so high that MBI may have to close down its operations. Legally, if the choice of law and choice of forum has not been mentioned in the contract between MBI and country D, MBI can choose the law and forum that it feels will be favorable to it. In this context if MBI feels that country C will be a favorable forum to it, it may decide to file a suit in country C court.

There are several problems in dealing with military establishments of foreign countries. The first problem is that the terms and conditions of supply are different in each country. For example, if the supply does not conform to a standard no payment will be made for the supplies. The second problem is that every country has different standard for military supplies. These standards are confusing to foreign suppliers and lead to conflicts and delays in payments. For example, a military buyer may deduct 20% of the payment for not confirming with one standard. Such a deduction can mean a severe financial loss to the foreign supplier (American Law in a Global Context). Fourth, there are requirements that the supplies have to be delivered to specific locations. These locations are difficult to access for foreigners. Finally, there are laws and regulations that favor the military; this makes it very difficult to enforce contracts or agreements.

There are many troubles that US companies come across or run into when they produce or make and put up for sale military equipment. One thing to consider is the fact that specifications are different to foreign military agents. The final customer has a different understanding of the specifications that the US businesses have. The goods supplied by US businesses are rejected on grounds of specifications. The second problem is that of realizing payments from military agents. These agents do not open irrevocable confirmed letter of credits in favor of US businessmen. The US businesses have to send invoices and wait for payment. The third problem is that a “defect” which may simply mean a slight difference in specifications may lead to drastic cuts in payments made to US businesses. The fourth problem is that a foreign military agent may give false credentials and can actually be representing an enemy country or even a terrorist organization.