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Team Code: __



In the matter of
American Phones2Go

BrilliantIndustries (hereinafter referred to as B) are currently far ahead of the schedule
with regards to completion of the project as sub-contracted to them by American
Phones2Go (hereinafter referred to as A). This is supported by the fact that 60% of the
required construction has been completed by B, while only half (50%) of the allocated
time to complete the project has elapsed. Completion of the project ahead of schedule
would make B eligible for the bonus amount stipulated in the sub-contract (5
There is reason enough to believe that the Force Majeure clause, as defined in the sub-
contract would be applicable to the current situation, especially in light of the fact that
the newly-formed Freedonian navy is incapable of providing any protection
whatsoever to the ships involved in the transportation of material and equipment.
Another relevant factor in determining the applicability of Force Majeure is the fact
that the only feasible method of transportation of material and equipment is via sea.
The road and rail infrastructure remains in a dismal state of affairs and will not be
operational for another five years at the very least. Further, transportation by air is
again not an option due to the cost of air freight being prohibitively high.
Bs reputation and stature as an experienced infrastructure-development company in
developing countries has led to them being offered a similar project in a different
continent, by another major telecommunications company, MobilesRUs.
In light of the recent allegations of fraud made against As CFO, A have given
reassurances to their business partners (including B), that a complete and transparent
investigation into the matter would be launched by them. This measure may help to
prevent B incurring any reputational damage that might be suffered by them as a
result of being associated with a company accused of fraudulent practices.
The allegations of fraud made against As CFO have marginally affected the prestige
gained by B of working with A, in a negative manner. If these allegations are proved,
this could be heavily damaging for Bs reputation, solely by being associated with A.
Although the project appears to be proceeding ahead of schedule, concerns have been
raised regarding the quality of some of the work done by B (25% of the completed
masts). Furthermore, a few of the masts do not seem to meet the correct specifications
as prescribed by A.
The cost of shipping new materials has spiked sharply and unexpectedly, on account
of rampant piracy in and around the Freedonian waters, along with the dismal state of
other forms of freight transportation in Freedonia. The increase in shipping costs has
led to a 15% increase in the overall cost of completing the project, translating into an
additional cost of 54 million. These additional costs have led to the project turning
into a loss-making operation for B, to the tune of 14 million.
There is enough reason to believe that the current situation regarding transport shows
no sign of abating in the near future. This has been substantiated by a U.N report
predicting an escalation of piracy in the foreseeable future, as well as the widely
accepted fact that transportation by road and rail would not be viable for another five
years at least.
There is ambiguity regarding the interpretation of the Force Majeure clause by the
Tradedonian courts, and thus it is possible that the courts could hold the Force
Majeure clause to be inapplicable. Such a decision would lead to serious financial
ramifications for B.

The increase in interest rates on the loan taken by B to upgrade its equipment (before
the signing of the sub-contract) has caused constraints on Bs cash flow. B could thus
face major financial problems if the value of the sub-contract is not substantially
B is further apprehensive about backing out of the contract, due to the fact that such a
move would damage its reputation as a company specializing in operations in
developing countries. This damage in reputation could also jeopardize the current
offer made to them by MobilesRUs.
B are dependent on the revenue streams generated by the sub-contract between them
and A. Thus, it would be ideal for them to reach an agreement wherein such a
relationship continues to exist.
It is also of crucial importance to B that the existing value of the sub-contract is
revised and the financial consideration received by B is further increased, owing to
the sharp and unexpected increases in expenses.
Another crucial interest for B is to ensure that their reputation remains untarnished,
especially with regard to their integrity in financial operations as well as those of their
business partners. Thus, B would seek the insertion of an indemnification clause (in
the range of 5- 8 million), in case the allegations of fraud are substantiated. If this is
not possible, B would at the very least seek a guarantee of a public statement
absolving them of any role in the fraud.
B are also heavily committed to quality control and thus they are not appreciative of
As recent inspection of the masts, as they feel this has been disruptive and
unwarranted. They would like to maintain the degree of autonomy in quality control
that was previously enjoyed by them.
In case the parties fail to reach a suitable agreement at the negotiation settlement, the best
alternative for B would be to attempt to secure the prospective deal with MobilesRUs as soon
as possible, so as to diversify operations and increase the available revenue streams which
would help in mitigating the losses incurred by B in the Freedonia operations.
The value of the sub-contract has been stated as being 400 million. Due to the
additional costs incurred, this figure has increased to 454 million. Thus, the initial
estimate of a 40 million profit has been overturned, and B would in fact end up
making a loss of 14 million. Thus, B would be looking for a revised deal for a total
value of 454 million, so as to maintain parity with the deal originally agreed to.
The loan taken by B prior to the signing of the sub-contract has seen the applicable
interest rates rise, and has caused a tightening of cash-flow. This has made it difficult
for B to meet the increased costs of the sub-contract that have arisen due to piracy.
Thus, B would be expecting remuneration for the difference in the rates of interest
from A.
Contingent to A receiving a clean chit with regards to the allegations of fraud, B
would want to maintain their partnership with A, so as to benefit from other such
projects that A would undertake in the future.
B would want to ensure that they are not restrained from entering into agreements
with any other third-party either at present or in the future, unless there are significant
financial incentives to do so.