2014 Chinese year of the horse - stability and ability signal the year of the horse

China seems to demonstrate stability – stability of diminished growth, no longer double digit, but steady at 7.7% p.a. Experts talk of 2 significant problems. The first is loss of export markets with Europe continuing in the economic doldrums, and US slowly recovering. The second is the consequent need for China to stimulate home grown consumption to make up for export losses, which stimulation brings with it dangers of inflation.

Crumbling BRICS

China was perceived to be leader of the BRICS – with Brazil, Russia, India and South Africa emerging economies set to overtake the fading powers of the West. Three of the BRICS are commodity exporters, and all, including India and China, the commodity importers, are facing slow downs.

Out of the MIST

The new favourites are Mexico, Indonesia, South Korea, and Turkey – all promising efficient and competitive manufacturing bases close to their export markets. Mexico previously pitied for being "so close to the USA and so far from God" has turned the curse into a blessing.

Ability of Australia

Chocolate, peaches and cars show us where manufacturing is going. The slow down of China and India and the competition of other commodity producers seem to presage a drop in commodity prices. Australia may have to dig less and think more.

Start ups

Australia may find its salvation in services – to profit from its educated population and access to technology. Start ups are showing the way with innovative cost cutting and expedition of delivery – IT reliant. Applied at home the benefits are now evident, exported to the neighbours, may be even more so.

Start ups and the law

Start ups are often started up by bright, young (sometimes) things who sometimes view the legal side of their operations as necessary evils that can be delayed until success.

We deal a lot with start ups and share their enthusiasm, while tempering it with legal issues to be addressed, including:

"Would I lie to you?" – agreements
Annie Lennox and David A. Stewart

Where the agreement is verbal, entirely or partly, it is necessary to have the parties agree on what the terms of the agreement previously concluded. This may be difficult or impossible where persons responsible for conclusion of the agreement have a different interpretation of the agreement or have ceased to be involved through:

  • change of employment;
  • death;
  • sale of interest;
  • bankruptcy.

For certainty and interpretation by others, such as courts, the agreement should be in writing.

"All for one and one for all" - shareholders' agreements
Alexandre Dumas père – The Three Musketeers

Shareholders' agreements are contracts that govern the relations between shareholders on acquisition of interest in companies by shareholders.

"I didn't say you could do that" - agency agreements

An agent has ostensible authority to make representations that may bind the principal in agreements with third parties.

"Of course I trust you" - distribution agreements

These arrangements are simply sale (exclusive or otherwise) to local businesses to purchase and sell goods and services.

Again, there is considerable freedom to negotiate and agree on terms, including territory, sale price (but not retail price maintenance), delivery, risk, and passing of title.

And again, care must be taken about ostensible authority to engage on the part of the supplier.

"You are going to love the product, and it works!" - franchise agreements

Australia has some of the most complex and strict laws governing franchises operating in Australia for both the franchisor and the franchisee – the Franchising Code of Conduct - supervised by the Australian Competition and Consumer Commission (ACCC).

"The first thing we do, let's kill all the lawyers"
(Henry VI Pt2, Act 4, Sc2- William Shakespeare)

Not yet! There will be more in the next issue.

Brian Hillman

Brian Hillman

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