General terms and conditions of trade for the repair and overhaul business

Assessment Topic

 

The assessment topic is as follows:

 

1.         Flight Engines Limited (FEL) repair and overhaul aircraft engines. They also supply        lease engines to customers while their engines are in for repair. The company is based         in Scotland.

 

            The engines they work on do not employ US technology.

 

Action:

 

Draft general terms and conditions of trade for the repair and overhaul business. These terms and conditions should be for use in the supply of these services anywhere in the world. Note that such services will necessarily involve the supply of new or re-used parts in an overhauled or repaired engine.

 

You should also consider what issues might require to be dealt with in the terms and conditions in respect of overseas business.

 

You should pay particular attention to clauses limiting the liability of FEL and to the warranty terms.

 

Please justify and explain your drafting on the warranty terms and the clauses limiting risk and liabilities by explaining the risks you have recognised and how you have tried to limit or cap these.

 

2.         FEL have traditionally carried out work for the Indian Air Force. It has been      suggested to them that it would be advantageous for them to open a shop in India. They already have an active agent there however. This agent has been working for       FEL for 5 years and has been very active, contributing to the growth of their business     in India. There is a written agency contract in place vaguely covering “India and south         east Asia” which seems to have no date of termination.

 

            FEL decide to terminate their existing agency relationship however and to go into a        joint      venture with an Indian engineering company, Component Repairs Limited,         who have carried out some local servicing and preparation work on engines up       until now. This involves checking performance levels and reporting and working with      the team decommissioning the engine to prepare it for removal and being sent away         for overhaul or repair.

 

            The basis of the joint venture with CRL is as follows: broadly, FEL will supply   tooling and expertise, CRL will supply the premises and the workforce. The      companies will work together to develop the business of the joint venture. There is no       clear plan on funding the shareholdings other than that FEL wish to control the JV.         FEL envisage that their capital investment in the JV will be represented by the        equipment, tooling and expertise. CRL expect to invest by way of cash. However,             there are a number of ways in which FEL could bring equipment into the JV some          of which are more advantageous to them and the JV than others.

 

            FEL have no tooling in India – the engines have always been sent to them in Scotland     for overhaul or servicing.

 

            CRL are expecting FEL will supply technical support to the JV and will also train up      local staff to be able to carry out an increasing amount of work locally.

 

           

Action:

 

1.         Discuss the options for FEL for termination of the agency. What are the potential           risks for FEL in this?

 

2.         What are your recommendations to the board of FEL for terminating the agency with     the least exposure to claims?

 

3.         Can you suggest a strategy to work with the agent as well as setting up the joint             venture? What documents and contracts will this involve. Suggest amendments to   existing agreements if you consider this necessary.

 

4.         Draft a joint venture agreement with notes to management to explain the main risk          management clauses.

 

5.         Advise the management of FEL on how they could best maintain control in the JV          and how they can most effectively take their profits out. Also consider how the capital   of the parties should be treated and who this will be reflected in the structure of the   JV. Consider and list the various ways in which FEL’s investment in the JV can be             carried out and the merits of these. What is your recommendation?

 

6.         Draw up a matrix of contracts which will be required in completing the structure of        the joint venture in order to create it, populate it and to allow FEL to take their profit           out.

 

 

Your course work should be 4000 to 5000 words in length

 

Important Note:

 

Features of assessments that will attract high marks are clarity, innovation, lateral analysis, a broad research base and practicality. Assistance and feedback from the module leader is available and is recommended. Further, students should seek out information and advice from disparate persons and sources involved in doing business overseas. 

 

Credit:ivythesis.typepad.com