Com 390 Letter Of Business Agreement

COMM 390

Letter Of Agreement Activity - Seller
The purpose of this activity is to explore how to negotiate and write business agreements. You’ll begin by negotiating the sale of a large industrial printing press. Then you’ll each write a Letter of Agreement setting out the terms you’ve agreed on.
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Don’t share the details of your scenario with the buyer—this is valuable business information that could be used against you. The scenario doesn’t include every detail, so use your business knowledge and common sense to fill in the gaps. Negotiate the items listed below and get the best deal you can.
If you can’t reach an agreement, write up the Letter of Agreement setting out the terms you’ve
agreed
on, the terms that you couldn’t agree on, and the steps you propose taking to agree on those terms in the future.
Write from your point of view. You may also want to add other terms to clarify issues you did not discuss or to otherwise protect your business interests. It’s never too late to get the best deal you can! At the bottom, include two sign-off blocks so you can both sign the agreement.
Terms to Negotiate
Purchase price (excluding applicable taxes)
Delivery time (usually weeks or months)
Late delivery penalty (% of purchase price per month if the seller delivers late)
Order cancellation penalty (usually a fixed amount if the buyer cancels the order)
Warranty period (months or years the printer is guaranteed)
Delivery and installation cost (usually a fixed amount)
Training (assume 10 machine operators will need a week of training)
Payment terms (% up front, % on installation, or other terms)
Any other terms you think are relevant or would help you get the deal you want
Print your letter and bring to class for review with your negotiating partner. Good luck and get the best deal you can!
Contact Information
Buyer
Robert Mason
Operations Manager
Jones Printing Inc.
McCormack
Building
One Ashburton Place
Vancouver, British Columbia
V7V 4S1

Seller
Jerry Lundegaard
Sales Manager
Komodo Canada Corporation
911 Mosquito Slough Rd.
Flatland Industrial Park
Winnipeg, Manitoba
R8Y 4M9

COMM 390

Seller’s Scenario
You are Jerry Lundegaard, the new Sales Manager of Komodo Canada Corporation, based in
Winnipeg, Manitoba, which makes high-quality printing presses for the commercial printing industry. Komodo is the last printer maker still manufacturing in Canada—all of the competition has moved production offshore.
Because of your higher production costs, the company’s stock price has plunged over the last few months, putting the jobs of the management team at risk.
Luckily, one of your new printers, the MagPro 6900, has proven to be very popular. As a result, you now have orders flooding in—in fact, so many orders that your manufacturing division can’t keep up. You are back ordered more than 6 months. The company’s inability to capitalize on the success of this printer has been a major stumbling block to the recovery of Komodo’s stock price. While the 6900 has all the bells and whistles that the printing industry seems to want, it costs a lot to manufacture, and with your higher wage costs, it’s at the top end of the price range for comparable printers. Your boss, the Vice-President of Sales, told you that unless you can sell them for at least $650,000 each, Komodo will lose money. Your job is on the line, so you need to show your boss that you are worth the high salary you just negotiated (a lot more than you got in your last job as sales manager of an auto dealership). So even though you know Komodo can’t deliver new presses for more than six months, you need to continue to get new sales,
and preferably with a lot of the money up front.
Your only competitor for this type of press is in Seattle, Washington, and offers a well-tested printer—not so many bells and whistles, but solid and well-regarded. And because they manufacture them offshore, the company can sell the printers for much less than you can sell the
6900. As a result, this Seattle manufacturer is making serious inroads into your business, and is jeopardizing not only Komodo’s recovery, but your new job.
This afternoon you are meeting with Robert Mason, Operations Manager of Jones Printing Inc., a major Vancouver-based commercial printer that is interested in buying a 6900. Your intelligence sources tell you that Jones has been having big problems with its existing printing press and needs a replacement quickly. And being based in Vancouver, you figure they probably want the best. From your Google research, Jones is exactly the type of printing company that the
6900 was designed for. It’s the last day of your first month and you haven’t made a single sale yet, so you are desperate to get this deal signed.
Seller delivery a replacement printer to buyer
(maybe a old version or second-handed, as long as it is workable)
Buyer can use the old version printer for free before buyer receives 6900
If they both agreed, buyer will have to pay a deposit of $2000 to Seller
Delivery and installation cost will be on buyer, but training, and any maintenance and repairs will be on sellers
If printing problems occur and cost damage to buyer, buyer and seller split damage.
Then,
Seller sell 6900 for $65,000 (includes warranty and service support of 2 years) and promised to delivery within 7 months.