Law
Trading Memo
Re: Trading Agreement with Mohammed Reda and Khalid Reda
The should be a trading agreement that you should enter with Mohammed Reda and Khalid Reda, who will become your business partners in Saudi Arabia. It is advised that the agreement should be signed in Italy, where your business is located in order to protect your interest. Since you are the owner of a company called JM Italian Coffee Inc., which is a well-known company in Italy engaged in buying and selling of coffee beans and other coffee equipment all over the world, it is best that your business partners to sign trading agreement to be the sole distributor for the purchase, sell and distribute coffee and other coffee products across Saudi Arabia.
The trading agreement will define the respective roles and responsibilities and to be able to successfully satisfy the objectives of the business. As the President and owner of the company engaged in coffee business, you will appoint your business partners the exclusive and non-assignable right to purchase, sell and distribute coffee beans including Arabic beans and the Robusta beans, and other coffee equipment such as coffee vending machine, drip maker, espresso machine, percolators and coffee brewers. The prices of the coffee beans and coffee equipment shall be based on the current “Price List” included in this agreement. The distribution right shall be limited to customers who have places of business in Jeddah and other geographic areas in Saudi Arabia;
The price of the coffee beans shall be dependent on the prevailing market value of the coffee beans which is at $700 per one sack of Robusta coffee beans and $900 per one sack of Arabica beans. The cost of coffee equipment shall be based on the price list below:
Coffee vending machine $4,000 per unit
Drip maker $3,500 per unit
Espresso machine $5,000 per unit
Percolators $4,000 per unit
Coffee brewers $3,500 per unit
The price of the equipment does not include transportation costs which shall be for the account of your business partners. At the same time, the prices do not include federal, state or local taxes and shall be included in the invoice paid by your business partners. As the owner of the coffee company, you will have the legal obligation to collect such taxes from your business partners unless they can provide a valid tax exemption certificate authorized by the designated taxing authority in Saudi Arabia.
It is advised that the duration of this agreement shall commence on the 4th day of June 2013 and shall end on the 3rd day of June 2014, or for a period of one which is renewable upon the discretion of both parties. The terms of payment should be net cash upon delivery of the goods, merchandise and equipment unless there is a satisfactory credit established by the parties or a minimum period of thirty (30) days from date of delivery. For failure of your business partner to pay within the period specified in the invoice date, interest should be incurred or a finance charge of at least 2 percent which shall be computed against the unpaid balance that is reflected in the invoice until the date of actual payment by the business partners.
As the owner of the business, you must reserve a purchase money security interest for each unit of coffee equipment sold or to be sold based on your trading agreement. In the event that your business partners sold or leased the unit to another party before they have actually paid, the purchase price for such unit shall be increased to an additional $2,000 per unit. This will represent interest and has to be satisfied by full payment. The title to the coffee equipment shall pass to your business partners upon receipt of full payment due for each unit of equipment ordered by your business partners.
At the same time, the trading agreement with your business partners must contain a provision that they should not to represent or sell other products which are deemed to be competitive to your coffee business. Hence, they cannot sell coffee beans and coffee equipment unless you allowed them by written notice.
In terms of the sale of the coffee beans and coffee equipment, your business shall use their best efforts to promote the sale and distribution of the goods, merchandise and equipment by establishing suitable, striking, eye-catching and accessible premises and facilities to showcase and demonstrate the goods and coffee equipment. Your business partners should assign and train sales and technical staff that will help in the advertisement and sale of the coffee beans and coffee equipment. The business partners should undertake promotional campaigns to be able to encourage prospective client to increase the sales of coffee beans and coffee equipment.
The delivery process shall require that your business partners to order coffee beans and coffee equipment by written notice by specifying the number of units to be shipped, the type of units to be shipped based on the model of the coffee equipment and to include other added features and the desired method of shipment. You must agree to ship units to your business partners based on the delivery schedule indicated in each order. The criterion for acceptance of coffee beans and coffee equipment by your business partners shall be the successful operation of the equipment using your standard test procedures applicable to the equipment involved.
You shall be responsible for the shipments of goods, merchandise and equipment and will be liable for any loss or damage in transit. The liability shall pass to your business partners after the delivery of goods, merchandise and equipment to a common carrier for shipment. The shipping dates will be based on the timely receipt of the goods and merchandise by your business partners. Your business partners shall shoulder all the costs of transportation and insurance and will have the obligation to reimburse you the amount if you have paid for such expenses in advance. You will not be considered in default by reason of any failure on the delivery under the trading agreement if the non-delivery was caused directly or indirectly by fortuitous events such as fire, explosion, strike, war, act of the government, freight embargo, act of God or of the public enemy during a civil disturbance, catastrophes or other causes that are beyond the control your control. Hence, you shall not be held liable for cost for damages, whether incidental, special or consequential.
In the event that your business partners delay their payments, they will be given a grace period of one month or thirty (30) days upon giving you a written ample notice at least fifteen (15) days before the scheduled delivery date. If they will fail to pay more than thirty (30) days despite the written notification, they will have to pay a service charge that is equivalent to (25%) of the purchase price for one day of delay which will be computed from the first day of the delay until the expiration of such delay.
As the owner of the business, you must guarantee your business partners that they will acquire the goods, merchandise and equipment that they have purchased to be free and clear of all liens and encumbrances. You are obligated under the law to warrant that all goods, merchandise and equipment are free from defects in material or workmanship under normal usage and service for a period of 3 months from the date of delivery to your business partners.
It must be clear to your business partners that any tampering, misuse or negligence in handling or use of coffee equipment renders the warranty void. The warranty shall be considered void if your business partners will attempt to make any internal changes to any of the components of the coffee equipment or merchandise.
In addition, in the event that there will be a dispute that may arise from the trading agreement with your business partners, it should be made clear to them that the laws of Rome Italy should be applied since it is the principal place of business of your company. Furthermore, all payments made by your partners should be deposited in the bank account in Rome Italy or payable in check with the company as payee. The advantage of choosing Rome, Italy as the venue for any potential court case is to protect your interest in the event that your business partners will fail to comply with their obligations based on the contract. Additionally, they will have to attend the court hearings in Italy in the event that a legal action will prosper. It will be a disadvantage if the venue for the legal cases will be set in Saudi Arabia because it will be inconvenient on your part to travel and attend the hearings in the event that a legal action will ensue.
