International Business Law and Its Environment, Case Study Example

The Ethical Dilemma

The basic ethical dilemma found in the case of the unidentified firm (supposedly an import firm that buys goods from foreign markets) is one of self-interest. This refers to the concept of egoism when an individual face with a specific business decision (in this instance, attempting to find a minor discrepancy in the documents in order to relinquish the terms of contract, i.e., attempting to “slide out” of all responsibility) chooses a course of action that best suits his/her best interest or the interest of the company or firm. From an ethical perspective, the firm’s attempt to reject the contract based on self-interest is clearly wrong; however, James H. Conley notes that since the beginning of American capitalism, many have advocated for a free and open market unencumbered by government regulations which in effect would allow them to pursue their own self-interest as profiteers (“Ethics: Reference for Business”).

Perspectives On the Case

Generally speaking, it is not the fault of the unidentified firm that the price of silk in China significantly decreased after signing and agreeing to a contract to buy an unknown amount of silk from the seller which one must assume is located in China with links to the huge Chinese market for raw silk and the products made from it. Since the firm wishes to find some type of discrepancy in the contract to justify its rejection, this indicates that the firm paid more for the silk that its present value on the Chinese market.

As to the letter of credit, an official document that is utilized in “international transactions to ensure that payment will be received” from a buyer and which is generally held by a bank “on behalf of the buyer (holder of letter of credit) so as to ensure that the supplier will not be paid until the bank receives a confirmation that the goods have been shipped” (“Letter of Credit”), the unidentified firm is definitely acting in an unethical way when it knows that there is nothing legally wrong with the letter of credit.

Also, the statement “Buyers and their banks have on occasion been known to ‘invent’ discrepancies” clearly indicates that the firm and its bank would be willing to falsify the situation in order to “slide out” of the silk buying deal. The firm and the bank would also be willing to “make a mountain out of a molehill” or exaggerate an alleged discrepancy in the contract or letter of credit in order to simply to renege on their obligations to purchase silk from the seller.

Possible Rationalizations

Due to the fact that this particular case is based upon self-interest, either through an individual or the firm itself, rationalizing that the letter of credit and the contract do contain some type of discrepancy borders on deceit, especially if the individual and/or firm knows that such a discrepancy does not exist. Therefore, ‘inventing’ a discrepancy in the letter of credit and/or the contract itself is unethical and deceptive.

This situation is quite similar to that of the Oracle Corporation, the Association for Competitive Technology (ACT), and Oracle’s chairman Mr. Ellison who more or less attempted to discredit the Microsoft Corporation by locating sensitive information that could potentially harm Microsoft via the federal lawsuit of 1998. Also, if Mr. Ellison had been successful, the Oracle Corporation’s self-interest would have been duly served, due to the fact that Microsoft is one of Oracle’s main competitors in the software manufacturing market.

The same holds true for Mrs. Lopez whose rationale was based on explaining to the janitors of ACT that she was working on a criminal case when in fact she had been hired by Group International to attempt to bribe the janitors to allow her to dig through ACT’s trash. In this respect, the self-interest of Oracle was top priority, due to the fact that recovering sensitive data and documentation could potentially ruin Microsoft as evidence for monopolizing the computer software market.

Ethical Models & Resolution

Much like the business ethics case of the Oracle Corporation and Mr. Ellison, this case concerning the unidentified firm and its attempts to wriggle out of its obligations to buy silk from a seller in China would best be served via two ethical models–the Laura Nash Perspective and the Front Page of the Newspaper test. With the first model, the unidentified firm must switch its perspective to that of the company from which they intended to buy the silk prior to the drop in price. In other words, the firm must stand on the proverbial other side of the fence and adhere to their obligations related to the contract even though it has not been presented. As Schaffer, Agusti, and Dhooge see it, “the contract for purchase and sale embodies the agreement of the parties” and “expresses their intention to be bound by the contract’s terms” and to remain responsible for upholding their end of the bargain; otherwise, the firm would be ethically guilty of breach of contract (86). Secondly, the Front Page of the Newspaper test for the firm and its obvious conspirators would suit them well if they were forced to envision a national front page headline that reads “ABC Inc. Guilty of Unethical Behavior” which would negatively affect all of their future dealings with foreign sellers.

As to encountering an ethical dilemma in the real world, late last year my employer was embroiled in a dispute over a contract for purchasing some goods from a supplier in Germany. Ironically, my employer after discovering that the price of a specific electronic component had dropped in price in Asia, attempted to wriggle out of his contract with the supplier in Germany who in turn filed suit against my employer for breach of contract. The outcome of this lawsuit is unknown because it is still pending in the German courts.

Works Cited

Conley, James H. “Ethics: Reference for Business.” 2015. Web. Accessed 16 February 2015. < http://www.referenceforbusiness.com/management/Em-Exp/Ethics.html>.

“Letter of Credit.” 2015. Web. Accessed 16 February 2015. < http://www.investopedia.com/terms/l/letterofcredit.asp>.

Schaffer, Richard, Agusti, Filiberto, and Dhooge, Lucien J. International Business Law and Its Environment. 9th ed. Stamford, CT: Cengage Learning, 2015.