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CHAPTER 1
INTRODUCTION TO INTERNATIONAL BUSINESS
CASES IN THIS CHAPTER
Tarbert Trading Ltd. V. Cometals, Inc.
Russian Entertainment Wholesale, Inc. v. Close-Up International, Inc.
Dayan v. McDonald’s Corp.
In re Union Carbide Corporation Gas Plant Disaster at Bhopal
Transatlantic Financing Corp. v. United States
Gaskin v. Stumm Handel GMBH
Bernina Distributors v. Bernina Sewing Machine Co.
DIP SpA v. Commune di Bassano del Grappa
TEACHING SUMMARY
The three basic forms of international business—trade, licensing of technology and intellectual
property and foreign direct investment—are methods of entering foreign markets, but they are
not mutually exclusive. They are not mutually exclusive and are often combined. The savvy
manager of an international business will seek to create joint ventures and business
opportunities to invest, or manufacture, trade via export and imports for goods and services and
license its products where appropriate and protectable. However, international business
opportunities are fraught with risk, selecting the appropriate methods of entering a foreign market
or country must be consider the culture, politics, and economics of the host country. Through the
study of international law, one can better identify and manage potential legal risks.
1. Import/export transactions usually require much more documentation than domestic
transactions. These include detailed invoices, packing lists, shipping and insurance
documents, and specialized certificates. Here, a “certificate of origin” was required by the
government of Columbia before the goods could be imported. Does it refer to the country
from which the goods were shipped or where they were grown or made? Why do you
think Columbia required a “CO”? What is its purpose?
2. Suppose that the beans had arrived in Columbia and were then stopped by Columbian
customs authorities because of a fraudulent certificate. What do you think might have
happened to the beans? What would the risk have been to Cometals and Tarbert? What
if the Columbian buyer had already paid for the beans?
3. Evaluate and discuss the conduct of Cometals and Tarbert. Fraudulent documentation is
not uncommon in international trade, especially when parties do not have a history of
business together. What are the lessons to be learned by all parties?
Answer: Their conduct was illegal and unethical. You need to know the party you are
dealing with. If that is difficult or impossible, the risk is greater and may lead to not doing
business with them. Agreements protecting yourself are very important in international
business.
Russian Entertainment Wholesale, Inc. v. Close-Up International, Inc.
1. What are the “limited exclusive” rights granted to the licensees in this case?
2. What is the difference between the rights granted to the plaintiff and those granted to the
defendants?
3. Do you agree or disagree with the court’s interpretation of the license agreements?
4. What does this case tell you about negotiating and drafting a licensing agreement?
1. What social or cultural factors affected McDonald's marketing in Paris?
2. How could McDonald's have exercised greater control over its franchisee?
3. What types of products and/or services are most suitable for foreign licensing?
1. India gained independence from Great Britain in 1947. Like many developing countries
with agrarian economies, independent India embarked on a long period of socialist and
protectionist policies. What types of controls do you think developing countries placed on
foreign investors? How do you think this defined the relationship between UCC and the
Indian government prior to 1984?
2. Why do you think UCC might have chosen to produce agricultural pesticides in India
rather than export those products to India from plants in developed countries?
3. Why did India require local management and control? Do you think this is still a problem
for multinational companies today? What are the advantages and disadvantages of local
management, and what problem does it present to the multinational?
4. Had the legal requirements in India concerning the handling of hazardous chemicals
been less than that required in the United States, should Union Carbide have ethically
followed the higher U.S. standard?
5. Do you think that a parent corporation , like UCC in this case, should be financially liable
for torts committed by its foreign subsidiary? Should the parent be protected by the
limited liability of its corporate veil, or should a multinational firm with a “global purpose”
be responsible under some theory of “single-enterprise” liability? How would this affect
the attitude toward investment world-wide?
Transatlantic Financing Corporation v. United States
1. Did the parties agree on what would happen if the Suez Canal had closed? In other
words, did they allocate the risk of closure? Would that have changed the result?
2. What is Transatlantic’s argument? If admiralty law implies that a ship’s journey will be by
the “usual and customary” route, why did the court not hold that the contract had become
impossible to perform? How does the court define “impossible?”
3. Did Transatlantic’s performance become impracticable? How difficult was it for
Transatlantic to take the alternate route around Africa?
4. Suppose it had been bad weather instead of a blocked canal? Would the case outcome
have been different? How about a tsunami? What if a government order had prohibited
the ship from departing Texas?
Gaskin v. Stumm Handel, GMBH
1. Why did Gaskin claim that he was not bound by the forum selection clause included in
the contract to which he agreed?
Chapter 1: Introduction to International Business
2. Is a party to contract negotiations obligated to provide translation services to other
parties?
3. If the parties to a contract execute two copies of a contract, one in each language, which
is the operable and effective document?
Bernina Distributors v. Bernina Sewing Machine Co.
1. What were the importer’s two arguments in this case? How did the court address each?
2. What is the effect of the fact that just prior to executing the contract, the dollar had fallen
by 7 percent against the Swiss franc?
3. In any international business transaction, which party assumes the exchange rate risk?
DIP SpA v. Commune di Bassano del Grappa
1. What was the ostensible purpose of the Italian law?
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Chapter 1: Introduction to International Business
2. Do you think the law creates a climate ripe for corruption?
3. Why was the law not found to be discriminatory?
4. Assume that a municipality in a foreign country passes a law limiting the size of retail
stores in the city. How might this affect U.S. firms wanting to open stores there?
ANSWERS TO QUESTIONS AND CASE PROBLEMS
1 Answer : Both cases involve the question of what risky situations make a contract
“commercially impracticable to perform”. Such impracticability is a legal excuse for
2. Answer: Distance and differences in time, language, currency, culture, religion
and political and legal systems increase the risks of doing business internationally.
Trade represents the least involvement, and thus the least political, economic,
3. Answer: Building trust can occur through meeting with people over meals,
