Білет № 23 The Contract of Sale

A contract - in the most general sense of the word - is a legally binding agreement between two or more persons to do (or abstain from doing) something in return for something else. Generally, there are no formalities, and a contract may be written or oral. For example, if you call a taxi by phone you expect it to arrive on time, and if it doesn't you have reason to complain. At the Stock Exchange contracts involving large sums of money are made orally, and only later confirmed in writing.

The contract must be of such a kind that both parties should reasonably suppose that the agreement is legally binding. Thus, acceptance of an invitation to a dinner is an agreement but not a contract.

In most cases, however, writing is necessary to make a contract, as once it is made in writing neither party can change it or interpret it in different ways. In foreign trade, agreements made by telephone should be confirmed either by telex or by letter (telefax).

A sales contract must be written clearly and precisely. It must state who buys what (quantity and quality of the goods), from whom, for how much (price) and under what conditions (payment, delivery, special terms, etc.).

A sales contract usually contains the following points:

1. The description of the goods. With certain types of goods (machinery, instruments, etc.) detailed specification is necessary, sometimes even blueprints and technical documentation. In some cases (chemicals, cosmetics, etc.) samples may be required. It is also usual to stipulate that the goods should be offair average quality (f.a.q.) or good ordinary brand (G. О.B.).

2. The qmntity of the goods. Certain goods are sold by piece, pair, dozen or score. Other goods are sold by weight. If the weight is given in tons, you must bear in mind that there is a difference between the metric ton (1,000 kilos), the long ton (1,016 kilos) used in Britain and the short ton (907 kilos) used in the U.S.A. Liquids are sometimes measured in gallons (in Bii?ain 4.54, in America 3.78 litres).

3. - Price and payn.ent. The contract must state in what currency payment should be made and on what conditions.

4. Delivery terms, vhich define who bears the risks and costs of the delivery.

5. The delivery date (i,e. when the goods must be dispatched).

6. The packing of the gx>ds.

Білет № 24 Transnational Corporations

One of the most important features of the modem world is the evolution of the global economy. The leaders in this process are the transnational corporations. They operate in a world-wide marketplace from which they buy raw materials, borrow money, manufacture their products and to which they sell their products.

A simple working definition of a transnational corporation is a firm that owns and manages economic units in two or more countries. Most frequently it involves foreign direct investment by a corporation and the ownership of economic units (services, extractive industries or manufacturing plants) in several countries. Many transnational corporations (TNCs) are extremely powerful institutions and possess resources far in excess of the most member-states of the United Nations. The scope of operations and the territory over which some TNCs range are more expansive geographically than any empire that has ever existed. They transferred global economic interdependence from the spheres of trade and money into the area of industrial production.

What are the distinguishing features of a transnational corporation? A TNC tends to be an oligopolistic corporation in which ownership, management, production and sales activities are performed under several national jurisdictions. It is comprised of a head office in one country (home country) with subsidiaries in other countries (host countries). The principal objective of the corporation is to provide the least costly production of goods for world markets. This goal may be achieved through acquiring the most efficient locations for production facilities or obtaining taxation concessions from host governments.

TNCs are located in economic sectors where they can take advantage of economies of scale, low transportation costs, their priority in research and development. They operate most effectively in the OECD (Organization for Economic Cooperation and Development) countries because of the existence of relatively standardized markets and generally low barriers to trade and foreign investment. Their importance is growing because of their presence in particular sensitive and strategic high technology industries.

TNCs have a large pool of managerial talent, financial assets and technical resources and they run their gigantic operations with a coordinated global strategy. A global strategy uses a standardized product and marketing strategy worldwide that is the same product is sold in essentially the same manner throughout the world. Another way to reach and operate in a foreign market is to apply a multinational strategy and thus treat each national market differently. In this case product and marketing strategies differ according to the customs, tastes and buying habits of particular national market. Whatever the strategy the principal goal of a TNC is to expand and secure its market position.

Another feature of a TNC is vertical integration and centralization of corporate decision making. IBM, EXXON, General Motors, Mitsui, Toyota, Fiat and Nestle are typical examples of vertically integrated TNCs. The strategy of a vertically integrated TNC is to place the various stages of production in different locations throughout the globe. Such fragmentation of the production process aims at taking advantage of cost differences of different locations and using favourable government tariff policies that provide for duty-free entry of semi-finished products or of goods assembled abroad from components produced at home. The result of this internationalization of the production process has been .the rapid expansion of intrafirm trade. A substantial share of world trade has become the export and import of components and intermediate goods rather than the trade of final products.

To be present in the three major markets of the world -the United States, Western Europe and Japan is a necessity for TNCs. Such global operations need huge capital. For this reason alliances between TNCs have become more frequent. The New United Motor Manufacturing Company, established by two powerful rivals General Motors and Toyota to produce subcompact cars in the United States is the most evident example of such cooperation.

Interfirm cooperation, arrangements promoted by national governments, joint ventures, off-shore production of components are new practices applied by TNCs to strengthen their position in the world production and trade.