Scenario/Summary: In this assignment, you will evaluate the requirements for a valid contract and contract clause considerations.
Your Role/Assignment
You are a business planner and accountant. Part of your expertise is in helping prospective business owners evaluate the various manufacturing and supplier options available based on the product they manufacture. You have a long history of working with widget manufacturers, which is why Gloria is meeting with you. Additionally, you are an expert in global business issues and can help Gloria review foreign supply options, including the applicable laws, customs regulations, and tax implications of using a foreign supplier versus a domestic supplier. Gloria has come to you to get some advice on which supplier will best meet her needs and objectives.
Activity
Gloria Smithson
Gloria's business is doing well. She has been manufacturing widgets in the United States, however, the costs for the raw materials have increased 200% with her current supplier. She has found a new U.S. supplier-Greenleaf Manufacturing-that is willing to negotiate costs with her. Gloria has scheduled an appointment with its CEO, Richard Franklin. She is also considering manufacturing her widgets overseas. She traveled to China and met with Jun Chin, who is interested in the contract. She also went to Brazil and met with Mateo Bonilla, who also discussed production with her. Currently, Gloria has been selling approximately 12,000,000 widgets per year, but she recently got a purchase order from a large retailer for 8,000,000 widgets and a guarantee for a minimum of 13,000,000 widgets over the next 24 months. The purchase order states that continued business is dependent on paying no more than $7.34 per widget. Gloria's current cost to manufacture widgets is $6.22 and she has been selling them for $9.18. Doing business with this large retailer will take Gloria's business to the next level, but she has to get her costs down.
Richard Franklin
He is the CEO of Greenleaf Manufacturing, which is a company located in the same state as Gloria's business. He has submitted the following proposal to Gloria Smithson: He will manufacture up to 6,000,000 widgets per year at a cost of $6.37; another 6,000,000 widgets per year at $5.41; and a final 6,000,000 widgets per year at a cost of $5.01 each. However, Greenleaf's proposal contains a clause that requires Gloria's acceptance by 5:00 p.m. on March 3, 2014.
Jun Chin
She is the CEO of Sunrise Ltd. in Quanzhou, China. Her company has recently begun doing business with American companies. Ms. Chin is able to manufacture 100% of the widgets Gloria Smithson needs annually at a cost of $4.01 each.
Mateo Bonilla
He operates Groupo Embraco. Groupo Embarco has never done business with an American company, but like Gloria Smithson, he wants to expand his business. Presently, it can supply Gloria with 10,000,000 widgets annually at a cost of $3.83. Bonilla is willing to expand his operations in order to manufacture more widgets.
Assignment
You are a business planner and accountant. Gloria has come to you to get some advice on which supplier will best meet her needs and objectives. Prepare a paper that addresses the following.
What elements are necessary for a valid contract to exist? Define what constitutes a "valid offer." Evaluate each proposal and discuss whether each of the offers constitutes a valid offer. Why or why not?
Each proposal involves a different country. What are the particular concerns for Gloria in doing business in other countries? What contract provisions does she need to include in any business contract in order to protect her business?
How can Gloria continue to protect herself and her family from personal liability if she obtains her widgets from a foreign manufacturer?
Use your textbook and library references to answer these questions. Evaluate each proposal. Does it constitute an offer?