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2018

CASE STUDY #3

Submitted by: MOHAMMED ANWAR


IQBAL & KSHITIJ PRASHAR

3/25/2018
1. Both Australia and Singapore are common law countries. Singatron and
Semicontronics conclude their first round of negotiations with a Letter of Intent
(LOI). If the deal falls through, will either party be bound to their commitments
as detailed in the LOI? What can the parties do to limit the obligations to the
terms of the LOI?

A LOI is a critical document that contains various terms and conditions, what can and
what can’t be talked about during the negotiations of a contract or a deal. It a
preliminary term sheet that becomes a road map for future negotiations and finalizing
a deal. (Ross, 2015) If the deal falls through then depending on the type of LOI
further actions are taken. If the LOI was binding or any term mentioned in the LOI
makes a contract it becomes obligation which the parties has to follow or move to
court to settle the breachment. In case of non – binding LOI if any party incurs a loss,
the loss is with no recourse and the breaching party is considered to be working with
no good faith. (Letter of Intent - LOI, n.d.)
To ensure that an LOI is non – binding it is necessary to draft it by using proper
wordings. A simple word can change the meaning of the whole draft and can make it
into a contract.
Parties should avoid using the term “contract”, “agreement”; instead can use term
sheet or draft. It should refer the deal as “potential deal” or “proposed deal.”
An additional clause at the end can highlight that it is a non – binding letter. The
parties should avoid signing the document which would otherwise legalize it.
(UNDERSTANDING ACQUISITIONS: THE LETTER OF INTENT (LOI), n.d.)

2. List ten areas of consideration Semicontronics should include in their contract to


have Singatron manufacture computer chips.

The following are the considerations Semielectronics should include in their contract
before allowing Singarton to manufacture their computer chips:
1. Unit price
2. Material cost
3. Intellectual Property - clauses such as ownership or licensing of IP for the purposes
of manufacturing.
4. Design of the product
5. Forecast demand
6. Volumes that would be produced
7. Build standards
8. Quality Control standards
9. Inventory Management
10. Mode of payment
(Sharp, 2015) (What should I include in my Manufacturing Agreement?, n.d.)
3. Because Semicontronics’s manufacturing plant in Brazil is not suitable to fulfill
the Phoneson contract for computer chips, a new contract must be arranged for
the transportation of computer chips from Singapore to Phoneson’s assembly
plant in Japan. Which of the three parties is responsible for the transportation?
In addition to contractual issues such as timelines, payments and packaging, list
at least two issues Singatron lawyers should consider to reduce risks associated
with transportation delays or losses when contracting a third party for
transportation.

Phoneson has contracted Semicontronic’s to become their supplier so it is the


responsibility of Semicontonics to bear the transportation cost and provide Phoneson
the computer chip. The new contract is between Singatron and Semicontronics as the
latter’s plant in Brazil was not suitable enough to fulfil demand by Phoneson.

Singatron can have a supply chain visibility which will highlight the issue of any
disruptions between supply and demand. This will ensure that certain levels of extra
stock are maintained if there is product deficit.
Another way to reduce risk, cost and time is consolidated shipments. Singatron can
combine with other suppliers of the same destination into one consolidated shipment.
Along with this insuring the shipment also reduces the burden from Singatron.
(Strategies for Reducing Logistics and Supply Chain Costs, n.d.)

4. What are some IP areas that can be at risk for infringement for Phoneson and
Singatron if not properly mitigated?
The most important infringement of Intellectual Property is due to the intangibility of
it. In the case of Phoneson and Singatron the design of the product, can be infringed
by Singatron. Whereas, Phoneson can infringed the method of production of
singatron.

References
Letter of Intent - LOI. (n.d.). Retrieved from Investopedia:
https://www.investopedia.com/terms/l/letterofintent.asp

Ross, S. (2015, February 15). How legally binding is a letter of intent? Retrieved from Investopedia:
https://www.investopedia.com/ask/answers/042315/how-legally-binding-letter-intent.asp

Sharp, N. (2015, September 3). 7 points to include in your RFQ to a contract electronics
manufacturer. Retrieved from jjsmanufacturing: http://blog.jjsmanufacturing.com/7-points-
to-include-in-your-rfq-to-a-contract-electronics-manufacturer

Strategies for Reducing Logistics and Supply Chain Costs. (n.d.). Retrieved from aacb:
https://www.aacb.com/reducing-logistics-costs-supply-chain-costs/
UNDERSTANDING ACQUISITIONS: THE LETTER OF INTENT (LOI). (n.d.). Retrieved from
adventuresinacre: https://www.adventuresincre.com/understanding-acquisitions-the-loi/

What should I include in my Manufacturing Agreement? (n.d.). Retrieved from legalvision:


https://legalvision.com.au/what-should-i-include-in-my-manufacturing-agreement/