Negotiating a deal

SITUATION

Nicole Vernay is a French dress designer who also runs a chain of small boutiques in Paris. She has come to Seoul, in South Korea, to negotiate two deals with Park Kyu Hun, who runs a clothing factory called Fashionpark. Nicole wants to buy his factory's ready-made clothes for resale in France and Park wants to buy the exclusive manufacturing rights to her dress designs. They have a lot of negotiating to do!

CHARACTERS

Nicole Vernay is a dress designer. She is French.
Park Kyu Hun is the owner of Fashionpark Corporation. He is Korean.

LANGUAGE

Vocabulary Terms of business; licensing agreements; contracts and legal documents.
Skills Negotiating the terms of a deal; countering an unacceptable suggestion; being firm, but flexible; understanding legal language.
Documents A draft licensing agreement; letters; a spreadsheet.

Opening negotiations

17.1 Listen and read

Park Kyu Hun and Nicole Vernay are negotiating two deals: he wants to manufacture the dresses that she designs, and she wants to buy the made-up dresses from him for sale in her shops. They are travelling in a car from her hotel to the Fashionpark offices, to start their second session of talks. Listen to what they say. Why is Nicole surprised?

NICOLE I thought we should begin today by going over again the main points we agreed yesterday. Then this afternoon I can telephone my lawyer in Paris.
PARK I can save you the trouble, Miss Vernay. see the meaning I talked to my lawyers last night, and we drafted the agreement. It was faxed to Paris immediately.
NICOLE Ah! You certainly don't waste any time. see the meaning Did you include what we said about exclusive rights to the Nicole Vernay label?
PARK I've got the document here. There. Clause 14. see the meaning
Key

17.2 Document study - 1

The agreement is a very formal document. Clause 14 is shown below. Listen to Nicole read it. Notice how she breaks up the long sentences into short word groups to help her understand and check the document. Put a slash / to mark where each word group begins and ends.

Clause 14
The licensee see the meaning shall be entitled see the meaning to attach to each garment see the meaning manufactured under the terms of this agreement a label supplied by the licensor see the meaning and bearing the name and trade mark of the licensor. The licensor shall not use nor permit any other individual or company to use a similar label or to attach a similar label to any garment whatsoever see the meaning during the term of this agreement. see the meaning
Key

17.3 Document study - 2

Nicole reads Clauses 17 and 18 of the agreement. Listen to her, and put a slash / to mark where she breaks up the document.

Clause 17
see the meaning In consideration of the aforesaid licence see the meaning, the licensee shall make the following payments to the licensor:
(a) in advance see the meaning on the first day of each month a licence fee of US$100,000 or the equivalent thereof see the meaning in French francs at the current rate of exchange.
(b) at the end of each quarter and in arrears see the meaning a royalty see the meaning of 5% (five per cent) calculated in US dollars on the f.o.b. value of all goods invoiced under the terms of this agreement during the quarter.

Clause 18
see the meaning In the event of any payment being due from the licensor to the licensee, the licensee shall be entitled to deduct from the licence fee a sum of money in full or partial payment of the amount owed by the licensor to the licensee.
Key

17.4 Listen and read

Park and Nicole continue their journey. Listen to what they say. Why does Park think that Nicole would accept Clause 18? Why does Nicole object to Clause 18?

NICOLE Er - what’s going on here? Mr Park see the meaning, I think you are trying to get one jump ahead of me here. see the meaning
PARK Oh, you are looking at Clause 18 - setting off your debts against our fee payments. I mentioned it in my letter. see the meaning
NICOLE I'm sorry, Mr Park, this point is just not negotiable. see the meaning There is no way I could consent to linking the two agreements together like this. see the meaning They are two quite separate deals.
PARK I think we would find my proposal well worth considering. We'd save time and bank charges. Not so many transfers see the meaning and letters of credit see the meaning - a simple entry each month in the account books. Then we settle up at the end of the period. see the meaning What's wrong with that?
NICOLE see the meaning Nice try, Mr Park, but you know very well what's wrong with it - you're asking me to give you a big slice of free credit. You don't even allow me the normal terms of trade see the meaning, payment at ninety days. see the meaning Just when I need cash - for advertising, trade shows see the meaning - I get nothing! I must have more money up front. see the meaning
PARK I'm sure we can find a way round this. Look - we have already found a way through the traffic. Let's go up to my office and talk there.
Key

17.5 Find the word: licensing agreements

Read the text below on licensing agreements. Write a word from the box to fill each of the gaps.

advance clauses fee licensee period term trade
arrears exclusive licence licensor royalty terms

A company may want to use another company's ideas, designs, or just its name. Every country has laws protecting these things through the registration of patents or copyrights. A a to use another company's b mark can be bought just as its products can be bought, and the price is negotiable, though the process is often complicated; each side is anxious to protect its rights. Business people and their lawyers spend much time and care in negotiating and drafting the c of licensing agreements; even a simple agreement may contain many d . The owner of the idea or design is the e ; the company that wants to use it is the f .
Mr Park will be entitled to use Nicole Vernay's designs only for a limited g - the h of the agreement - and under certain conditions. For example, the licensee must pay 'consideration'; without this, no contract is valid. This will be in the form of a fixed amount, a license i , payable in j at the beginning of each quarter, and a k , payable in l , based on the quantity of Nicole Vernay clothes he has sold during the quarter. The agreement is m ; Nicole cannot allow any other manufacturer to produce clothes to her designs while the contract is in force.

Key

17.6 Writing practice: dictation

Listen again to Nicole reading the clauses from the contract in 17.2 and 17.3. As you listen, write what she says. When you have finished, compare what you have written with the printed clauses in 17.2 and 17.3. You might like to cover up 17.2 and 17.3 while you do this exercise.

Being firm

17.7 Listen and read

Nicole and Park are now in the Fashionpark office. Listen to what they say. What arguments does Park use to try to persuade Nicole to accept Clause 18?

PARK Surely the way to fix this is for me to give you a discount on the shipments that I send you. see the meaning I appreciate that if I don't pay you cash on the first of the month, that may increase your overdraft. To compensate you for that see the meaning, I'll give you a discount on the price of the clothes. Your accountant will tell you it's the same in the end, either way.
NICOLE In theory, maybe, but it's too complicated. This is the real reason why I don't want the two agreements to be linked. Both of us will spend time and energy worrying about exchange rates and discounts when we should be selling clothes. see the meaning
PARK I'm sure you have an accountant, and your accountant has a computer - they will do the work for you!
NICOLE It's the thin end of the wedge. see the meaning We shall end up, each of us, convinced that the other is cheating. Neither of us will be happy.
PARK Oh, really, Miss Vernay - I think you exaggerate the difficulties. As I told you, in order to pay you, I have to purchase foreign currency through my bank, and I must do this when the exchange rate is favourable.
NICOLE Oh come on, Mr Park! see the meaning You're not trying to tell me that your company doesn't have a US bank account?
PARK Ah! But we must also consider Korean tax laws, which are very strict.
Key

17.8 Listen and read

Nicole and Park continue their discussion. Listen to what they say. What words and phrases does Nicole use here and in 17.7 to show that she thinks Park is simply trying to trick or mislead her?

PARK There are many problems in doing foreign currency deals overseas if one is importing.
NICOLE But you're not importing, you're paying a licence fee!
PARK I would have to discuss the matter in detail with my financial advisers.
NICOLE Now you're just playing for time. see the meaning
PARK I assure you ...
NICOLE Mr Park, I simply do not understand why you are creating obstacles to a perfectly simple agreement. see the meaning I'm very sorry, but we don't appear to be on the same wavelength here at all. see the meaning I'm going to have lunch. No, thank you - I will take a taxi and have lunch by myself. I'll come back at three o'clock and I hope that we can sort it all out then.
Key

17.9 Speaking practice: being firm

Listen to this conversation. Then listen again, and speak the part of the man.


WOMAN This deal's too complicated. We shall each end up thinking that the other is cheating.
MAN Oh really! I think you exaggerate the difficulties. As I told you, I have to purchase foreign currency.
WOMAN Oh come on! You're not trying to tell me that your company doesn't have a US bank account?
MAN Well, I would have to discuss the matter with my financial advisers.
WOMAN Now you're just playing for time! I'm sorry, but we don't appear to be on the same wavelength here at all. I'm going to have lunch. I'll come back at three o'clock and I hope we can sort it all out then.

17.10 Document study

Park decides to read through the file of his correspondence with Nicole. Read the letters. How did Nicole first contact Park?

11th February 1991

Dear Mr Park

Your name has been given to me by the Commercial Attaché of the Korean Embassy in Paris. I am a dress designer and I am also building up a chain of in-store boutiques selling Nicole Vernay-branded ready-made dresses. see the meaning

04/03/91

Dear Miss Vernay

Thank you for your telephone call confirming our appointment to meet at your salon on the occasion of the presentation of your autumn collection. see the meaning I look forward to seeing you in Paris.

24th August 1991

Dear Mr Park

I am glad to be able to tell you that the first consignment see the meaning of Fashionpark suits and accessories see the meaning arrived safely on Tuesday, and the reaction to samples rushed to our boutiques has been extremely favourable. Our pilot scheme seems to have been entirely successful. see the meaning I look forward to visiting you in Seoul to negotiate the licensing and purchase agreements for the spring collection.

31/08/91

Dear Hiss Vernay

Thank you for your letter of 24 August. Hy colleagues and I will be vary pleased to welcome you on your first visit to Seoul and to our company. Before we meet, you may like to consider the possibility of payments between us being set off against each other so that we reduce the actual transfer of cash to a minimum. This would reduce bank charges and simplify accounting for both parties. I am aware that it may have implication with regard to discounts and credit see the meaning, but I am confident we can reach agreement on such matters during your visit.

I intend to meet you at the airport myself, provided no urgent business arises at short notice, and to escort you to your hotel. I trust your stay in Seoul will be a pleasant and productive one.

Yours sincerely

Key

17.11 Writing practice

Suppose that, instead of speaking to Park in Seoul, Nicole had to write to him in reply to his letter of 31 August. Write the letter for her, using her arguments from 17.4, 17.7 and 17.8.

Key

Drawing closer to an agreement

17.12 Listen and read

Nicole and Park meet again after lunch. What is Park's latest offer? How does he 'extend' his offer?

PARK Hello again. Miss Vernay. I hope you had a good lunch. I've been thinking about things, and I believe I have come up with a solution.
NICOLE That is good news!
PARK This is what I suggest. On the day the agreement comes into force, see the meaning I will open an irrevocable letter of credit at your bank in Paris and I will accept your sight bill for an advance payment against royalties. see the meaning
NICOLE How large an advance?
PARK A hundred thousand dollars.
NICOLE I'm sorry - a hundred thousand is no use to me as a one-off payment. see the meaning I must have a decent cash flow every month, in case the bank decides to call in my overdraft see the meaning - which will be more like half a million!
PARK Well, in case of emergency, I'm sure we could stretch a point. see the meaning
NICOLE Mr Park, over lunch, I've been looking again at the cash-flow figures I worked out before I came here. These figures are for the six months of the agreement and then three months afterwards. The printed figures show how I want to do it. On the right of each column I've put in the figures for what you want to do - setting off my debts against yours each month.
Key

17.13 Figure practice

When Nicole is back in Paris, one of her colleagues questions her about the figures. Read the spreadsheet carefully, and then answer these questions for Nicole.


(click to enlarge)

shortfall the amount needed to make up the full amount; here, the difference in Nicole's balance if she accepts Park's proposals.

1 These amounts look very small. Is he really only going to pay a hundred dollars a month?
2 Why has somebody written different figures on the spreadsheet?
3 Why didn't he want to pay you anything as a fee?
4 If you stop ordering goods in March, why do you go on paying until June?
5 What percentage profit do you make on the clothes you import from Park to sell in France?
6 If Fashionpark pays you a 5% royalty, what's their total annual turnover expected to be?
Key

17.14 Document study

Look at the spreadsheet again. What is the result of Park's proposal to Nicole's figures? How much would it cost Nicole in interest payments?

Key

17.15 Listen and read

Nicole and Park are about to finish their discussion. Listen to what they say. How did Nicole calculate her interest payments? Why does Park think that the new figures don't make any difference?

PARK But this is hypothetical see the meaning - you are guessing what the royalty will be, and how big your orders will be.
NICOLE Oh? I thought we agreed on these figures as the basis for discussion a month ago?
PARK Well, there you are, then! You see - the result is the same either way, just as I said! You may clear two million dollars. see the meaning
NICOLE I need two million dollars! But look at the differences between the balances, month by month, and then the interest I have to pay each month on my overdraft. I'm just reckoning eighteen per cent annually, that's one point five per cent a month at simple interest. If you total those interest payments, they come to twenty-seven thousand dollars! If anyone's going to pay that much interest, it should be Fashionpark, not Nicole Vernay.
PARK Can't you pass it on to your customers?
NICOLE Why should my customers pay you twenty-seven thousand dollars? Look, I'll tell you what. You make me an interest-free loan of three hundred thousand dollars for a period of three months, starting on the date the contract starts ...
PARK I'd be better off paying you a hundred thousand a month. Hm. I wonder, though. Perhaps I could arrange some sort of guarantee with my bank. see the meaning Would you excuse me while I make a phone call?
Key

17.16 Listen and read

Nicole and Park have now reached agreement. What has Park agreed to pay Nicole? What has Nicole agreed in return?

PARK So, as part of our contract, Fashionpark will include a clause guaranteeing a minimum royalty payment of three hundred thousand dollars on 1 December, three months into the contract period.
NICOLE Yes, I think my bank will go along with that see the meaning - it'll enable me to get my overdraft extended if I have to. And on my side I agree to any money I owe you being offset against the monthly licence fee. In return you will give an additional two point five per cent discount on all invoices.
PARK Yes - on the f.o.b. price, that is.
NICOLE Well, I'm very encouraged by the conversations we've had.
PARK I'm confident we're going to have a very big success this spring.
NICOLE I'll have to go through the small print with my lawyer and my accountant. see the meaning But I don't think there will be any problems. Thank you for everything you've done, Mr Park. I've enjoyed my visit and I look forward to seeing you in Paris in the New Year. Au revoir!
PARK Au revoir, mademoiselle. You'll be hearing from me soon. Have a good flight!
Key

17.17 Reading for key words

Find the words or phrases in 17.15 and 17.16 that tell you the following:

1 This may happen, but it is not certain.
2 I don't think they ought to pay.
3 I've got a suggestion to make.
4 Lend me some money, with no interest.
5 It would be more profitable for me.
6 The contract will compel Fashionpark to pay a minimum royalty.
7 Three months after the contract comes into force.
8 Agree to that course of action.
9 Make it possible for me to.
10 Discuss every detail of the agreement.
Key


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