How to Make a Turkey Sandwich

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Ocean Manufacturing

The client acceptance process can be quite complex. Discuss five procedures an auditor should perform in determining whether to accept a client. Which of these five are required by auditing standards and identify the applicable standards?1. Obtain an understanding of the client's business and operations. Consideration should be given to reading available financial information regarding the prospective client such as annual reports, registration statements, Forms 10-K, other reports to regulatory agencies and income tax returns.2. Inquire as to the general reputation of high ranking employees, influential directors and shareholders, as well as the entity itself. Carefully consider any matters that may negatively reflect on management's integrity, ability and attitude. Such inquiries may be directed to the prospective client's bankers, legal counsel, underwriters, and others in the business community. Background checks obtained by investigative firms may also be useful.3. Consider mana gement's response to observations about or suggestions for improvements in internal controls made by the predecessor auditor and/or the internal auditor.4. Consider the composition and autonomy of the Board of Directors and the Audit Committee, including the number of independent outside directors.5. Communicate with the predecessor auditor in accordance with the provisions of Statement on Auditing Standards (SAS) No. 84 [AU315]. Inquiries should be directed to the integrity of management and the reasons for the change in auditor.The following situations should be carefully considered in assessing whether to accept a client: o There has been a disagreement with the previous auditor over accounting principles or practices; financial statement disclosures; auditing scope; or the Form 8-K discloses a reportable event as defined in Securities and Exchange Commission Regulation S-K. o The previous auditor resigned or declined to stand for re-election or there is no clear reason for the c essation of the client relationship. o Access to the predecessor auditor's working papers has been denied. Other CPA firms have declined to serve the prospective client. There appears to be evidence of â€Å"opinion shopping. â€Å"2. Return on Equity (ROE=Net profit after tax /Total Shareholders' Equity * 100) 2521/35469 x100 = 7. 11% Return on Assets (ROA=Net profit after tax / Total Assets * 100)2521/66820 x 100 = 3. 77  Ã‚  Unfavorable Assets to Equity (Total Assets / Total Shareholders' Equity) 66821/35469 = 1. 88  Ã‚   favorable Accounts Receivable Turnover (Sales / Account receivable) 104026/7936 = 13. 10 favorable Average Collection Period (Account receivable / Sales * 365) 7936104026 x 365 = 27. 4 favorable Inventory Turnover (Cost of sales / Inventory) 69177/10487 = 6. 6  Ã‚  Unfavorable Days in Inventory (Inventory / Cost of sales * 365) 10487/69177 x365= 44. 3  Ã‚  Favorable Debt Ratio (Total Liabilities / Total Assets)31352/66821 = 0. 47  Ã‚  Not available ( industry figures) Debt to Equity (Total Liabilities / Total Shareholders' Equity) 31353/35469 = 0. 88 Favorable Times Interest Earned (Profit before interest and tax / Interest expense) 6242/1474 = 4. 23  Ã‚  Favorable Current Ratio (Current assets / Current liabilities)27064/14118 =1. 2  Ã‚  favorable Profit Margin (Net Profit before interest and tax / Sales * 100) 6242/104026 x100 = 6. 00Unfavorable The comparison needs to be done for the audited accounts and since the audited accounts are available for 2001 and 2000 but the industry figures are available only for 2001 and 2002 we have to select the year 2001 for comparison. The accounts show that the company is healthy and the ratios are mainly favorable except that the company is not properly leveraged and this is leading to a loss of opportunities and a lower profit margin and lower return on equity. There are no grounds of objection emanating from the ratios and the company can be accepted for auditing.3. What non-financia l matters should be considered before accepting Ocean as a client? How important are these issues to the client acceptance decision? Why? In order to minimize the likelihood of association with a client whose management lacks integrity, Statement on Quality Control Standards No. 2, System of Quality Control for a CPA Firm's Accounting and Auditing Practice, (QC Section 20. 4) (applicable to auditing and accounting and review services) provides that â€Å"policies and procedures should be established for deciding whether to accept or continue a client relationship and to perform a specific engagement for that client (QC Section 20. 14)†, to minimize the likelihood of the specific policies and procedures established and the nature and extent to which they may be documented may vary significantly from firm to firm. Throughout the process, from initial consideration about accepting or continuing a client to issuance of an audit report, auditors are faced with risk.This risk can b e thought of as having three components: ? The entity's business risk – The risk that the entity will not survive or will not be profitable. ? The auditor's business risk – The risk to the auditor from association with the client, consisting of the risk of potential litigation costs and the related effect on the auditor's reputation and the risk of other costs (not related to litigation) such as the effects on fee realization. ? The auditor's audit risk – The risk that the auditor may unknowingly fail to appropriately modify his or her opinion on financial statements that are materially misstated.The following discussion highlights matters that a firm may wish to consider in connection with establishing policies and procedures for client acceptance and continuance. The extent to which a firm may choose to employ any of the following is, with the exception of certain procedures required by generally accepted auditing standards, largely a matter of professional ju dgment. The discussion of specific policies and procedures is intended to be thought-provoking and useful to a firm in assessing the particular client acceptance and continuance policies and procedures it may choose to employ in its practice.4a) Ocean wants Barnes and Fischer to aid in developing and improving their IT system. What are the advantages and disadvantages of having the same audit firm provide both auditing and consulting services? Given current rules on professional independence in the Joint Code of Professional Conduct, will Barnes and Fischer be able to help Ocean with their IT system and still provide a financial statement audit?No, given the current rules on professional independence in the Joint Code of Professional Conduct, Barnes and Fisher will not be able to help Ocean with heir IT system and still provide a financial statement audit. This appointment as an IT system consultant violates this rule: â€Å"Consider whether any financial interests or relationships exist that would impair the appearance of the firm's independence from the client and preclude its expression of an opinion on the entity's financial statements. The firm should consider Rule 101 of the AICPA Code of Professional Ethics. For clients that are public companies, the firm should also consider the requirements of the SEC â€Å". and also, Consider any potential conflicts of interest that could result from the acceptance of a client†4 b. As indicated in the case, one of the partners in another office has invested in a venture capital fund that owns shares of Ocean common stock. Would this situation constitute a violation of independence according to the Joint Code of Professional Conduct? Why or why not? The venture capital fund holds 50,000 shares of Ocean stock, currently valued at approximately $18 a share. This investment represents just over a half of one percent of the value of the fund's total holdings.The partner's total investment in the mutual fund is cu rrently valued at about $56,000. Since, the value of the investment represents just over one half percent of the value of the fund's total holdings, the influence of the partner is negligible, and in addition, the partner is located at a separate office so the company may go ahead with acceptance.5a)  Ã‚  Prepare a memo to the partner making a recommendation as to whether Barnes and Fischer should or should not accept Ocean Manufacturing, Inc as an audit client. Carefully justify your position in light of the information in the case.Include consideration of reasons both for and against acceptance and be sure to address both financial and non-financial issues to justify your recommendation Ocean should be accepted as a client for the company. Even though: A check on the background of Ocean's management revealed that five years ago Ocean's vice president of finance was charged with a misdemeanor involving illegal gambling on local college football games. Charges were later dropped i n return for Mr. Stevens' agreeing to pay a fine of $500 and perform 100 hours of community service. There were no other integrity problems found in the company.The various checks carried out in Ocean include:1. Entity's Business Risk o Management:– Engages in activities indicative of a lack of integrity.– Is prone to engage in speculative ventures or accept unusually high business risks.– Displays a poor attitude toward compliance with outside regulatory or legislative obligations.– Engages in complex transactions or innovative deals that make the determination of the effects on the financial statements difficult to assess or highly subjective.– Lacks a proven track record. Is evasive, uncooperative or abusive to the audit team.– APART FROM RELUCTANCE TO INTRODUCE US TO THE PREVIOUS AUDITORS ALL THE FACTORS WERE FOUND TO BE NEGATIVEThe Entity:– Has products that are new and unproven.– Depends on a limited number of customers o r suppliers.– Is experiencing a deteriorating financial condition or liquidity crisis.– Is subject to uncertainties that raise substantial doubt about its ability to continue as a going concern.– Operates in countries where business practices are questionable.– Has an inadequate capital base or is highly leveraged.– Is experiencing difficulty in meeting restrictive debt covenants.– Generates negative cash flows from operations but reports operating profits.– Has publicly traded debt outstanding that is below investment grade.– Is a low tier firm in an emerging or maturing industry where weak competitors are exiting the market.– Is subject to unpredictable changes in price and availability of product inputs that cause significant variance in profitability.– Is vulnerable to rapidly changing technology.– Is investing cash from short-term borrowings in long-term assets.INVESTIGATIONS SHOW THAT ALL THE ABOVE FA CTORS AT OCEAN ARE NEGATIVE o The Industry:– Is undergoing rapid change.– Is subject to high competition, market saturation, product obsolescence, or declining demand.– Has high operating leverage demonstrated by high fixed costs and low variable costs.– Is highly cyclical or counter cyclical.– Has a low entry barrier.– Is facing regulations that will adversely impact profitability throughout the industry.EXAMINATION OF INDUSTRY DETAILS AT LEXIS NEXIS SHOWS THAT NONE OF THE NEGATIVE TRENDS IN THE INDUSTRY ARE PRESENT2. Barnes and Fischer ‘s Business Risk o The entity is prone to a high number of lawsuits or controversies. o There are frequent changes in the entity's auditors. o The entity plans to engage in an initial public offering or use the financial statements to engage in a debt or equity offering. o The financial statements will be used in connection with an acquisition or disposal of a business or segment INVESTIGATIONS HAVE SH OWN THAT IN CASE OF THE PROSPECTIVE CLIENT NONE OF THE ABOVE MENTIONED RISKS ARE THERE FOR Barnes and Fischer .5. b. Prepare a separate memo to the partner briefly listing and discussing the five or six most important factors or risk areas that will likely affect how the audit is conducted if the Ocean engagement is accepted. Be sure to indicate specific ways in which the audit firm should tailor its approach based on the factors you identify. The risk areas in case of Ocean include;2. The company is under levered.3. The company is not getting loans in the market because of disrepute not know to us.4. There might be integrity issues related to the vice- president involved in gambling but kept underground and secret. The Barnes and Fischer should be vigilant on the activities of the main executives of Ocean.5. The percentage of profit earned by the company is lower than the industry norm. Barnes and Fischer should keep a close watch on the profit margin of the company and in case of anomalistic behavior should mention it in the auditor's report Barnes and Fischer should follow SAS No. 47, as amended, Audit Risk and Materiality in Conducting an Audit (AU Section 312), which provides guidance on the auditor's consideration of audit risk when planning and performing an audit of financial statements.Examples of factors that may increase audit risk include:o Operations that are dominated by a single individual.o Undue emphasis on achieving earnings per share; maintaining the market price of the company's stock; or meeting earnings projections.o Unreliable processes for making accounting estimates or questionable estimates by executives.o Unrealistic budget levels that encourage unrealistic objectives.o A high volume of significant year-end transactions.o Compensation based to a significant degree on reported earnings. o An unnecessarily complex corporate structure. Prior-year financial statements that were restated for correction of an error or irregularity.o Attemp ts by management to reduce the scope of Barnes and Fischer .o Substantial litigation involving the entity's business practices.o Material weaknesses or other reportable conditions in the internal control structure.o Significant and unusually complex related party transactions. o Affiliates that are unaudited or audited by others.o Management espouses aggressive accounting principles.o Understaffed accounting department or inexperienced personnel.Financial reports not prepared on a timely basis. Please note the lacunae in the question. First, the question does not mention the weights Barnes and Fischer intend to give financial measure and non-financial measures for accepting Ocean as the client. Second, the question does not mention what influence the partner in the ‘other' office has in the auditing of Barnes and Fischer. This is related to the policies of the auditors. Third, the question of there being advantages and disadvantages of appointing the same firm as auditor and c onsultant does not arise. Remember, the Enron scam!Fourth, the question is not clear if Barnes and Fischer have experience of auditing accounts of firms making small home appliances. Fifth, the question mention in one place that Ocean wants to make a public issue, on the other hand the company accounts are showing that the company is under leveraged, these two things are antithetical and Barnes and Fischer should have investigated why Ocean wants to go in for equity when Ocean should actually go in for debt. Still this is an excellent question in auditing. Please use the above guidelines and write an excellent answer. Ocean Manufacturing Barnes and Fischer, LLP| To:| Jane Hunter| From:| Susan Anderson, Elizabeth Lane, Chantal Murphy, Elizabeth Robinson| CC:| Dr. Cashell| Date:| 3/5/2013| Re:| Decision on Accepting Ocean Manufacturing as a client| | Recommendation: We recommend that we do not accept Ocean Manufacturing as a client. Justification:There were several issues we considered when making our recommendation:0Independence Violation0No experience in the industry0Can’t do consulting because SOX violation0Red flag with regard to contact to previous auditor0Significant Mgt.Turnover0Unethical behavior (illegal gambling)03 years ago received qualified opinion0Aggressively accounting to meet creditor’s requirements0New accounting system0Audit trails not kept in tactFirst, we considered possible GAAS and GAAP violations. When reviewing Ocean Manufacturing’s background information, we found that a partner in the Salt Lake City office owns shares in a venture fund which holds a private equity investm ent in Ocean common stock. This is an independence violation which goes against the second general standard of GAAS.Another GAAS violation could be considered because we have a background in the healthcare service industry and Ocean Manufacturing is in the appliance industry. Since we do not have training in this field, we would be violating the first general standard of GAAS. There is also a SOX violation because Ocean Manufacturing would like us to do consulting and help prepare for the IPO. They also would like us to work with their IT program. This goes against the rules of GAAP.Since they are getting ready to offer an IPO we would be faced with higher litigation risk. Ocean Manufacturing also has various management issues that have raised red flags. The company has experienced high management turnover, which could be an indication of how the company is run on a daily basis. When the vice-president of Ocean was approached to discuss the previous auditor, he was hesitant to talk about the previous audit firm. If a potential client is even hesitant to allow engagement with prior auditor, this is not usually a good sign.Also, when the client background check was conducted, it was discovered that the vice-president of finance was involved with illegal gambling in the past, which could be an indication of his lack of ethics. This behavior could carry over to unethical behavior in the company since the leaders set the tone of the company which in turn reflects a higher litigation risk. There were also issues with the company’s financial statements. Three years ago Ocean Manufacturing received a qualified report from their auditor.Ocean’s previous auditor told us their problems with Ocean primarily related to management reflecting their revenue and accruals aggressively in order meet creditors’ requirements and the complexity of Ocean’s new IT system. When reviewing their control systems, we noticed a few issues. Ocean Manufacturingâ⠂¬â„¢s audit trails were not kept intact due to system failures and errors. There are also system failures when it comes to their new accounting system. There are problems in inventory tracking and cost accumulation, receivable billing and aging, payroll tax deductions, payables, and balance sheet account classifications.This could also explain some of the aspects of the financial statements that appeared to be off compared to previous years. Ocean’s accounts receivable, accounts payable, and accrued expenses appear to be much greater than the changes in the year before. This could also be because of the aggressive accruing that was discussed earlier. In conclusion, we feel that the issues with auditing standards, management, and financial statements are good enough indications as to why we should not accept Ocean Manufacturing as a client. |

Notes of Commercial Law

Contracts (C3, pg 58) |Nature of contract |- Legal relationship consisting of the right and promises constituting an agreement between the parties that give each party a legal | | |duty to the other and also the right to seek for breach of those duties | | |- Consensus ad idem (meeting of minds); what the parties agree on must be clear and unambiguous and parties must be ad idem. | |Wellmix Organics (International) Pte Ltd v Lau Yu Man (2006) , | | |T2 Networks Pte Ltd v Nasioncom Sdn Bhd (2008) | |Types of Contracts | Oral contracts | | |Written contract provides evidence of the parties’ contractual obligations. | |Forefront Medical Technology (Pte) Ltd v Modern-Pak Pte Ltd (2006) | | |Parol evidence rule = oral evidence not admissible to add to, vary, amend or contradict written contract s 93-94 Evidence Act (refer | | |to Terms) | | |Engelin Teh Practice LLC v Wee Soon Kim Anthony (2004) | . Offer (C3, pg 63) |As the expression to another of a willingness to be bound by stated terms. | |Invitation to treat (pg 64) | |An invitation to others to enter into a negotiation which may eventually lead to the making of an offer. | |An ad is view as invitations to treat. | |Auction without reservations (refer to Barry v Davis (2000) pg 5) |(Offer = Bids made by audience, Acceptance = Auctioneer indicates bids accepted) | |Display of Goods | |Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd (1952) the court held that the display of goods with prices constitutes an | |invitation to treat. The offer is only made when a customer selects the item he wants and brings it to the cashier to pay for it. |Reaffirmed by Singapore High Court in Chwee Kin Keong & Others v Digilandmall com Pte Ltd (2004) | |Advertisements An ad is view as invitations to treat. | |Partridge v Crittenden (1968) | |Provision of Information | |Harvey v Facey (1893) – The court held that there was no contract because provision of information was not an offer .Stevenson, Jacques & Co v McLean | |(1880) – Seeking for more information is neither a rejection nor acceptance, it was merely an enquiry. | |*compare between offer and invitation to treat, must prove why choose one over the other | |Specific Offeree |An offer is an expression made by one party to another party. For an offer to be effective, the offer must be communicated to the | | |offeree. | Unilateral Contracts |A contract brought into existence by the act of one party in response to a conditional promise by another. Harvela Investments Ltd v | |(involving only one |Royal Trust Co of Canada (Cl) Ltd & Ors (1984)No exchange of promise, only 1 promise (made by offeror). | |side) |Offeree makes no promise, only performs conditions attached to offeror’s promise. Carlill v Carbolic Smoke Ball Co. (1892) – Where | |(pg 63) |advertisement contains a promise in return for an act, an offer is intended. (No general rule that an ad cannot be an offer. | |Bi-lateral Co ntracts |An agreement where one party makes a promise to the other party. | |(involving on 2 side |There are duties, rights and considerations on both parties. In other words, performance of the conditions is an acceptance of the | |or both) |offer and this acceptance should be notified. | Termination of Offer (Pg 75) (5 ways) |Withdrawal |Law: Offer can be withdrawn or revoked by the offeror at any time before it is accepted. (When an offer is withdrawn, the offer is said | | |to be revoked). Overseas Union Insurance Ltd v Turegum Insurance Co (2001) | | |Law: Withdrawal must be communicated to offeree (Revocation is only effective when the offeree receives notice of the revocation) Byrne | | |v Van Tienhoven (1880) – It was held that the revocation was not effective until it was received by the plaintiff. Since the offer was | | |accepted prior to the revocation, there was a valid contract. | |Law: Revocation of offer can be communicated by a third party (as long as offeree obtains knowledge of the revocation) (must be a | | |reliable and trustworthy source) Dickinson v Dodds (1876) Law: Fresh Offer (Revocation can also occer if the offer is replaced by a | | |fresh offer) Ban Paribas v Citibank NA (1989) | | |Law: Offer is opened for a fixed period Routledge v Grant (1828) –Rationale is that an offeree cannot enforce an offeror’s promise to | | |keep his offer open unless there is separate contract supported by consideration to do so, such contracts are called options – Tay Joo | | |Sing v Ku Yu Sang – essentially a promise, supported by consideration, to keep an offer open for a specific period of time within which | | |to decide whether or not to enter into the purchase of agreement. | | |Law: Unilateral Contracts Abbot v Lance (1860), it was held that the offeror cannot withdraw his offer once the offeree has started to | | |act. – Dickson Trading(s) Pte Ltd v Transmarco Ltd (1989), obiter dictum, the offeror in a unilateral contract has an obligation not to | | |revoke the offer after the offeree has involved in the performance of the conditions. |Lapse of time |Acceptance after specific period which offeror states that his offer is open = Ineffective | | |If the offer is opened for a specified period, a purported acceptance after that period would not be effective since the offer had | | |lapsed. the court may imply that the offeror has specified the period of offer even if he has not done so expressly. Wee Ah Lian v Teo | | |Siak Weng (1992) | | |- however, if it is clear from the offeror’s conduct and other evidence that the terms of the supposedly lapsed offer continue to govern| | |their relationship after the specified period, then it is still valid and acceptable after the deadline. Panwell Pte Ltd & Anor v | | |Indian Bank (No2) (2002) | | |When no specified period of time is expressed, an offer would lapse after a reasonable amount of time, (depending on the facts of the | | |case). Ramsgate Victoria Hotel Co v Montefiore (1866) – the court held that Montefiore could refuse to take up the shares because his | | |offer had lapsed after a reasonable time. | |Failure of |Offer automatically terminated if condition not met | |Condition |An offer may terminate on the occurrence of a specified event if the offer is subjected to the condition that it will do. e. g. erminate| | |if goods are damaged before acceptance, subject to the approval of my lawyer Financings Ltd v Stimson (1962) | |Death |Dickinson v Dodds( if the man who makes an offer dies, the offer cannot be accepted after he is dead. Reynolds v Atherton (1921)( | | |Offeree dies before acceptance, this offer cease to be capable of acceptance. Bradbury v Morgan (1862)( the court held that the death of| | |an offeror did not terminate the offer unless the offeree had notice of the offeror’s death. | 2. Acceptance (C3, pg 67) |Indication by the offeree of his consent to the offer and his intention to form a contract based on the exact terms of the offer | |- Whatever its form, a communication constitutes acceptance only if it is an unconditional expression of assent to the terms of offer.Compaq Computer Asia| |Pte Ltd v Computer Interface(s) Pte Ltd (2004) | |- Conditional Acceptance is treated as no acceptance. Struttgart Auto Pte Ltd v Ng Shwu Yong (2005); | |- Accepts seller’s offer subject to a written contract drafted – Thmoas Plaza (Pte) Ltd v Liquidators of Yaohan Departmental Store Singapore Pte Ltd (in | |liquidation) (2001); | |- Agreenment shall not be final and binding agreement – Cendekia Candranegara Tjiang v Yin Kum Choy & Others (2002) | |Brogden v Metropolitan Railway Co. 1877) The Court held that the facts and actual conduct of the parties, established the existence of a contract, and | |there having a clear breach of it, Brogden must be held liable upon it. | |Law: Acceptance of unilateral contract is when all the terms o f the contract are fully performed Carlill v Carbolic Smoke Ball Co. (1892) | |Counter |Offeree introduces a new term or varies the terms of an offer (original offeror is free to accept or reject the â€Å"counter offer†) Hyde v Wrench | |Offer |(1840) – The court held that there was no contract because Hyde’s reply was a counter offer which extinguished the earlier offer.When the | | |response is an inquiry or a request of information, it should not be construed as an offer | |Knowledge|Law: Offeree cannot accept in ignorance of the law | |of Offer |offeree must be aware of the offer – Fitch v Snedaker (1868) and R v Clarke (1927) – As long as offeree has knowledge of offer, motive is | | |irrelevant. Once the offeree is aware of the offer, it does not matter that he was prompted to act for reasons other than the desire to accept | | |the offer.William v Carwardine (1833) – the court held that the plaintiff was entitled to a reward, she ha d done so with knowledge of the reward| | |even though her motive for giving the information was her own remorse. | | |Cross-offer: Do not constitute to agreement/contract; lack of consensus / meeting of minds between parties at the time of making offer. – Tinn v | | |Hoffman & Co (1873) | |Communica|General Rule: Acceptance must be communicated (Acceptance must actually be received by the offeror) | |tion of |Acceptance effective when communicated/received by offeror. | |Acceptanc|If in writing, it must be physically received by the offeror, and if orally, heard by the offeror. Acceptance must be unconditional and absolute. |e |obiter dictum in Entores Ltd v Miles Far East Corporation (1955) and CS Bored Pile System Pte Ltd v Evan Lam &Co Pte Ltd (2006) | | |Powell v Lee (1908) Held that there was no authorized communication of intention to contract on part of the body hence no contract. | |Silence |Silence is only a form of acceptance if both parties agree to it. Silence o f the offeree would not constitute a valid acceptance | | |Felthouse v Bindley (1862)–held that there was no contract between the two parties. The plaintiff had no right to impose a condition that a sale | | |contract would come into existence if the defendant remained silent. | |Exemption case: Both parties agree that the offeree would have a positive obligation to communication only if he wished to reject the offer. | | |Albeit rare in practice, silence is properly be construed as acceptance – Southern Ocean Shipbuilding Co Pte Ltd v Deutsche Bank AG (1993) and | | |Midlink Development Pte Ltd v The Stansfield Group Pte Ltd (2004) – defendant’s conduct of paying the reduced rent showed that a contact exists. | |Instantan|Time of acceptance is the time at which the acceptance is communicated to the offeror | |eous |Ithe acceptance will take effect when and where it is received, acceptance must be absolute and unconditional Entores v Miles Far East Corp | Communica|(1955) | |tions |- if got designated info system; receipt when e-record entered the designated info system. Emails, Fax, Telex | | |- if got designated info system but sent elsewhere then is receipt upon retrieval. | | |- if no designated info system; receipt upon entering any info system of addressee. | |Exception|The Postal Rule (ONLY FOR LETTERS OF ACCEPTANCE! ) | |s |- Quenerduaine v Cole (1883) – telegram means speedy reply; not attracted by postal rule.Offeror will claim that it is only valid acceptance | | |when physically received. | | |- Agreement cannot be withdrawn once the post is sent out. Henthorn v Fraser (1892) | | |- Acceptance deemed effective as soon as the letter is posted regardless as to when it reaches the offeror or whether it reaches him at all. | | |Adams v Lindsell (1818) | | |- the court held that the acceptance was communicated and the contract was formed as soon as the plaintiff posted the acceptance letter. Lee | | |Seng Heng v Guard ian Assurance CO Ltd (1932) | | |Waiver of Communication: facts show that the offeror has waived the need for communiation of acceptance; when offer made to whole world | | |(unilateral contract; anyone can accept) – Calill v Carbolic Smoke Ball. | | |( the doing of the act by the offeree may itself be constructed as acceptance, without requiring formal communication to the offeror. | | |Termination of acceptance: Once posted, an acceptance cannot be revoked. – Wenkheim v Arndt (1873) | 3. Consideration (C4, Pg 85) Two Main Rules on Consideration Must move from promisee but need not move to promisor.Tweedle v Atkinson (1861) Need not be adequate but must be sufficient. Chappell & Co Ltd v Nestle Co Ltd (1960) |Is what each party gives to the other as the agreed price for the other’s promise | |Detriment to one OR Benefit to another | |But it need not move to the promisor Malayan Banking Bhd v Lauw Wisanggeni – A third party who is a stranger to the contra ct may benefit from the contract | |although he may not enforce it. | |Need not be adequate but must be sufficient – Law will not interfere with parties contract so long as consideration is of â€Å"some value† in the eyes of the | |law. |In order for a promise to be enforceable in court, consideration must first be given (exchange of promises would be sufficient consideration)– Dunlop v | |Selfridge (1915) | |Past Consideration is |Refers to an act performed prior to and to that extent independent of, the promises being exchanged (act performed without the | |not valid |reciprocal promise in mind). | | |Past consideration is no consideration The court held that the promise was made after the transaction had already been concluded | | |and therefore past consideration.Roscorla v Thomas (1842) and Teo Song Kwang (alias Richard) v Gnau Lye Chan and Another (2006) | | |To become executed consideration: – Pao On v Lau Yiu Long (1980) and Sim Tony v Ah Ghee (t /a Phil Real Estate &Building Services) | | |(1995) | | |Act done at promisor’s request If the promisor has previously asked the other party to provide goods or services, then a promise | | |made after they are provided will be treated as binding. | | |Contract must otherwise be enforceable Done in biz context and it is clearly understood by both sides that it will be paid for then| | |valid.Re Caseys’s Patent v Casey (1892) held the request to Casey to manage the patent carried an implied promise to pay for that | | |service, hence it was enforceable. | |Consideration must move|The only person who can sue for breach of contract must be the party who has given consideration (promise) – Tweedle v Atkinson | |from the promisee |(1861) – the court held that Tweedle could not enforce the contract between the two fathers because firstly he is not a party of | | |the contract, and secondly, no consideration flowed from him. | | |Consideration need not move to the promisor; 3rd party can may benefit although may not enforce it. Malayan Banking Bhd v Lauw | | |Wisanggeni | |Sufficient, |- Law will not inquire to the fairness of consideration, as long as the parties agree to it willingly – Lam Hong Leong Aluminium | |Need not be Adequate; |Pte Ltd v Lian Teck Huat Consruction Pte Ltd and Another (2003) | |Adequacy of |- Law does not measure value (once the subject of exchange is recognized in law as suitable consideration, quantity is irrelevant) | |Consideration |- Swiss Singapore Overseas Enterprise Pte Ltd v Navalmar UK Ltd (No2) (2003) and Chappell & Co Ltd v Nestle Co Ltd (1960) –the | | |consideration included the wrappers even though they were of no value to Nestle. | | |Thomas v Thomas (1842) – The court held that the nominal rent was sufficient consideration but the husband’s wishes were | | |irrelevant; motive is not the same thing as consideration. |Sufficiency of |A promise not to enforce a Claim is Good Consideration Promise not to sue or enforce a valid claim or settlement of legal action = | |Consideration |sufficient consideration Lam Hong Leong Aluminium Pte Ltd v Lian Teck Huat Consruction Pte Ltd and Another (2003) and Alliance Bank| | |Ltd v Broom (1864) Normally, banks would not promise to enforce debt but is not done here. For not suing, considerations shown ( | | |binding agreement to provide security. | |Sufficient |Forbearance to sue |A promise to forbear from suing or enforcing a valid claim can constitute sufficient or valuable | | | |consideration. Alliance Bank Ltd v Broom (1864).K-Rex Finance Ltd v Cheng Chih Cheng (1993) – The court | | | |spoke the words of Cockburn CJ in Callisher v Bischoffsheim (1870). | | | |The same applies to a compromise of a legal action. The req. is that the legal action must be reasonable and| | | |not frivolous, that the claimant has an honest belief that in the chance of success of the claim and that | | | |the claimant h as not concealed from the other party any fact which, to the claimant’s knowledge, might | | | |affect its validity.Miles v New Zealand Alford Estate Co (1886) | | |Performance of |The Eurymedon (1975) – The Privy Council held that even though the defendant was already contractually bound| | |existing contractual |to a third party to do so, the defendant’s act of unloading the ship formed good consideration for the | | |duty to third party |contract with the plaintiff. This was also clarified in Pao On v Lau Yiu Long (1980) by the HOL. This was | | | |also accepted in the Singapore High Court in SSAB Oxelosund AB v Xendral Trading Pte Ltd (1992). | |Moral obligation & |Eastwood v Kenyon (1840) – The court rejected the plaintiff’s view and held that moral obligation is | | |motives |insufficient consideration for a fresh promise. | |Insufficient |Vague or insubstantial|White v Bluett (1853) – The court held that Bluett’s promise was no thing more than a promise â€Å"not to bore | | |consideration |his father†. As such it was too vague(fake) and was insufficient consideration for the alleged discharge by | | | |his father. | | |Performance of |Collins v Godefroy (1831) –Performance of an existing public duty is not valid consideration. | |existing public duty |Glassbrook Bros Ltd v Glamorgan City Council (1925)- If the court finds the promisee did something more that| | | |required by an existing public duty, then it may be sufficient. | | |Performance of |Stilk v Myrick (1809) – It was held that there was no consideration for the captain’s promise because the | | |existing contractual |remaining crew did what they were contractually required. Two sailors deserting were within the usual | | |duty |emergencies found in such a voyage. | | |However, if it is more than what is contractually required, that may constitute good consideration – Hartley| | | |v Ponsonby (1857) and William s v Roffey Bros (1991) – The English Court of Appeal held that as long as the | | | |extra payment was not given under duress or fraud, the oral promise was enforceable because the defendant | | | |obtained â€Å"practical benefits† from the plaintiff’s work. The benefit was that they would not be liable under| | | |the main contract for late completion. | | |Rule in Pinnel’s Case |Pinnel’s case is authority for the proposition that payment of a lesser sum without anything extra is not a | | | |good consideration. | | |- It would be good consideration provided with a gift (can be anything, even time) is given as the gift | | | |might be more beneficial than the money. -But if the person asks me pay lesser, then cannot sue. – If I | | | |accepted a smaller amount, after that I decided to sue again, CAN! Provided no gift! | | | |Pinnel’s Case (1602) – The part payment of a debt does not discharge the entire debt unless the part p ayment| | | |was made at the request of the creditor and the payment was made earlier, at a different place, or in | | | |conjunction with some other valuable consideration.Foakes v Beer (1884) affirmed Pinnel’s Case – the HOL | | | |held that Beer’s promise not to take further action was not supported by consideration. She could claim the | | | |money. ( in Euro-Asia Realty Pte Ltd v Mayfair Investment Pte Ltd (2001), District Court in Singapore | | | |endorsed the rule in Foakes v Beer and held favor in creditor. | | |Promissory Estoppel is an equitable doctrine whose origin may be traced to Lord Cairns in Hughes v Metropolitan Railway Co (1877). | | |When p. e. is established, the court may enforce a promise despite the fact that there was no consideration. Central London | | |Property Trust v High Trees House Ltd (1947) | | |Elements (Central London Property Trust v High Trees House Ltd (1947) and D&C Builders v Rees (1966)) | | |1)Parties must have existin g legal relationship 2)Clear and unequivocal promise which affects the legal relationship 3)Promisee | | |relied upon promise and altered his position 4)Inequitable for the promisor to go back on his promise. | |Promissory Estoppel |Cause of action | |(For no consideration) |When the promisor gives reasonable notice of his intention to revert to the original legal relationship, the original relationship | | |is restored. The effect of p. e. is to suspend promisor’s rights temporarily.Tool Metal Manufacturing Co Ltd v Tungsten Electric Co| | |Ltd (1995) However, the promise could become ‘final and irrevocable if the promisee cannot resume his position. † Ajayi v R T | | |Briscoe (Nigeria) Ltd (1964) | | |A defensive tool | | |This means that it can only be raised as a shield and not a sword, i. e. a defense against a claim and not to commence a suit.Combe| | |v Combe (1951) (people sue you then can use ) Assoland Construction Pte Ltd v Malayan Credit Properties Pt e Ltd (1993) and Lai Yew | | |Tay Pte Ltd v Pilecon Engineering BHd (2002) | | | | 4. Intention to Create Legal Relations (Pg 17) |The test is whether a reasonable person viewing all the circumstances of the case would consider that the promisor intended his promise to have legal | |consequences. objective test† (objectively ascertained) | |Social and |General presumption = no legal intention | |Domestic |Balfour v Balfour (1919) and Jones v Padavatton (1969) – An agreement is not legally binding unless the parties intend that each will | |Agreements |accept the lefal consequences for its breach. Choo Tiong Hin v Choo Hock Swee (1959) – the plaintiff’s promises were not enforceable | | |because the lack of intention to create legal relations. De Cruz Andrea Heidi v Guangzhou Yuzhitang Health Products Co Ltd and Others | | |(2003) -Friend doing a favor even though secret profit or commission is earned. | |However in Merritt v Merritt (1970) and Wakeling v Ripley– The English Court of Appeal found the necessary intention and held that the | | |wife succeeded in her claim for breach of contract. | |Commercial |General presumption = Legal intention | |Agreements |- There is necessary intention to create legal relations. Edwards v Skyway Ltd (1964) – The court held that Skyways was legally bound. | | |Binding but unenforceable | | |Honour Clauses – When parties have expressly stated that their agreement is not to be legally binding. Rose &Frank Co v J R Crompton | | |&Bros Ltd (1925) | | |Exceptions (not legally binding): | | |Letter of Comfort (pg 17) ( may be binding depending on its terms | | |usually a document supplied by a 3rd party to a creditor indicating a concern to ensure that a debtor meets his obligations to the | | |creditor. | | |Kleinwort Benson Ltd v Malaysian Mining Corporation Berhad (1989) Court only found a moral not legal obligation. refer to pg 17) | | |Letter of Intent (LOI) (pg 17) | | |A de vice by which one indicates to another of his intention to enter into a contract with him | | |E. g. a main contractor is prearing a tender and he plans to subcontract some of the work. | Privity of Contract (Pg 105) |The general rule is that no one, other than a person who is a party to the contract may be entitled to enforce or be bound by the terms of the contract. – | |Price v Easton (1833) – court held that Price could not succeed, as he was not a party to the contract between the debtor and the Easton.Management | |Corporation Strata Title Plan No 2297 v Seasons Park Ltd (2005) | |Exceptions (Thai Kenaf Co Ltd v Keck Seng (S) Pte Ltd (1993) | |Agency relationship | |Assignment of choses in action – consent of 3 parties | |Letter of Credit | |Agreement |Intention to create legal relations |Consideration | |Is it an offer? Define offer |Is there any intention? |Is it revocation? Via broadcast? | |Was the offer effectively revoked? |Is the agreement legally bind (To place under legal|Is Consideration need to be sufficient but not | |Is it valid acceptance?Communicated |obligation by contract)? |adequate? | |Third party’s conversation? |Is the agreement reached in a business context? |Promissory Estoppel? Talk about the elements, sword| |Postal rude? |(eg. Family, friends) |or shield? | |Is there any provision of information? |Is it (social and domestic) or commercial |Is the consideration moved from promisee? | |Any counter offer? |agreement? | | |Is the offeree aware of offer with motive? | | | |Is the offer lapse? | | | | | | | | | | | | | | | | | | | | | | | | | | Notes of Commercial Law Contracts (C3, pg 58) |Nature of contract |- Legal relationship consisting of the right and promises constituting an agreement between the parties that give each party a legal | | |duty to the other and also the right to seek for breach of those duties | | |- Consensus ad idem (meeting of minds); what the parties agree on must be clear and unambiguous and parties must be ad idem. | |Wellmix Organics (International) Pte Ltd v Lau Yu Man (2006) , | | |T2 Networks Pte Ltd v Nasioncom Sdn Bhd (2008) | |Types of Contracts | Oral contracts | | |Written contract provides evidence of the parties’ contractual obligations. | |Forefront Medical Technology (Pte) Ltd v Modern-Pak Pte Ltd (2006) | | |Parol evidence rule = oral evidence not admissible to add to, vary, amend or contradict written contract s 93-94 Evidence Act (refer | | |to Terms) | | |Engelin Teh Practice LLC v Wee Soon Kim Anthony (2004) | . Offer (C3, pg 63) |As the expression to another of a willingness to be bound by stated terms. | |Invitation to treat (pg 64) | |An invitation to others to enter into a negotiation which may eventually lead to the making of an offer. | |An ad is view as invitations to treat. | |Auction without reservations (refer to Barry v Davis (2000) pg 5) |(Offer = Bids made by audience, Acceptance = Auctioneer indicates bids accepted) | |Display of Goods | |Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd (1952) the court held that the display of goods with prices constitutes an | |invitation to treat. The offer is only made when a customer selects the item he wants and brings it to the cashier to pay for it. |Reaffirmed by Singapore High Court in Chwee Kin Keong & Others v Digilandmall com Pte Ltd (2004) | |Advertisements An ad is view as invitations to treat. | |Partridge v Crittenden (1968) | |Provision of Information | |Harvey v Facey (1893) – The court held that there was no contract because provision of information was not an offer .Stevenson, Jacques & Co v McLean | |(1880) – Seeking for more information is neither a rejection nor acceptance, it was merely an enquiry. | |*compare between offer and invitation to treat, must prove why choose one over the other | |Specific Offeree |An offer is an expression made by one party to another party. For an offer to be effective, the offer must be communicated to the | | |offeree. | Unilateral Contracts |A contract brought into existence by the act of one party in response to a conditional promise by another. Harvela Investments Ltd v | |(involving only one |Royal Trust Co of Canada (Cl) Ltd & Ors (1984)No exchange of promise, only 1 promise (made by offeror). | |side) |Offeree makes no promise, only performs conditions attached to offeror’s promise. Carlill v Carbolic Smoke Ball Co. (1892) – Where | |(pg 63) |advertisement contains a promise in return for an act, an offer is intended. (No general rule that an ad cannot be an offer. | |Bi-lateral Co ntracts |An agreement where one party makes a promise to the other party. | |(involving on 2 side |There are duties, rights and considerations on both parties. In other words, performance of the conditions is an acceptance of the | |or both) |offer and this acceptance should be notified. | Termination of Offer (Pg 75) (5 ways) |Withdrawal |Law: Offer can be withdrawn or revoked by the offeror at any time before it is accepted. (When an offer is withdrawn, the offer is said | | |to be revoked). Overseas Union Insurance Ltd v Turegum Insurance Co (2001) | | |Law: Withdrawal must be communicated to offeree (Revocation is only effective when the offeree receives notice of the revocation) Byrne | | |v Van Tienhoven (1880) – It was held that the revocation was not effective until it was received by the plaintiff. Since the offer was | | |accepted prior to the revocation, there was a valid contract. | |Law: Revocation of offer can be communicated by a third party (as long as offeree obtains knowledge of the revocation) (must be a | | |reliable and trustworthy source) Dickinson v Dodds (1876) Law: Fresh Offer (Revocation can also occer if the offer is replaced by a | | |fresh offer) Ban Paribas v Citibank NA (1989) | | |Law: Offer is opened for a fixed period Routledge v Grant (1828) –Rationale is that an offeree cannot enforce an offeror’s promise to | | |keep his offer open unless there is separate contract supported by consideration to do so, such contracts are called options – Tay Joo | | |Sing v Ku Yu Sang – essentially a promise, supported by consideration, to keep an offer open for a specific period of time within which | | |to decide whether or not to enter into the purchase of agreement. | | |Law: Unilateral Contracts Abbot v Lance (1860), it was held that the offeror cannot withdraw his offer once the offeree has started to | | |act. – Dickson Trading(s) Pte Ltd v Transmarco Ltd (1989), obiter dictum, the offeror in a unilateral contract has an obligation not to | | |revoke the offer after the offeree has involved in the performance of the conditions. |Lapse of time |Acceptance after specific period which offeror states that his offer is open = Ineffective | | |If the offer is opened for a specified period, a purported acceptance after that period would not be effective since the offer had | | |lapsed. the court may imply that the offeror has specified the period of offer even if he has not done so expressly. Wee Ah Lian v Teo | | |Siak Weng (1992) | | |- however, if it is clear from the offeror’s conduct and other evidence that the terms of the supposedly lapsed offer continue to govern| | |their relationship after the specified period, then it is still valid and acceptable after the deadline. Panwell Pte Ltd & Anor v | | |Indian Bank (No2) (2002) | | |When no specified period of time is expressed, an offer would lapse after a reasonable amount of time, (depending on the facts of the | | |case). Ramsgate Victoria Hotel Co v Montefiore (1866) – the court held that Montefiore could refuse to take up the shares because his | | |offer had lapsed after a reasonable time. | |Failure of |Offer automatically terminated if condition not met | |Condition |An offer may terminate on the occurrence of a specified event if the offer is subjected to the condition that it will do. e. g. erminate| | |if goods are damaged before acceptance, subject to the approval of my lawyer Financings Ltd v Stimson (1962) | |Death |Dickinson v Dodds( if the man who makes an offer dies, the offer cannot be accepted after he is dead. Reynolds v Atherton (1921)( | | |Offeree dies before acceptance, this offer cease to be capable of acceptance. Bradbury v Morgan (1862)( the court held that the death of| | |an offeror did not terminate the offer unless the offeree had notice of the offeror’s death. | 2. Acceptance (C3, pg 67) |Indication by the offeree of his consent to the offer and his intention to form a contract based on the exact terms of the offer | |- Whatever its form, a communication constitutes acceptance only if it is an unconditional expression of assent to the terms of offer.Compaq Computer Asia| |Pte Ltd v Computer Interface(s) Pte Ltd (2004) | |- Conditional Acceptance is treated as no acceptance. Struttgart Auto Pte Ltd v Ng Shwu Yong (2005); | |- Accepts seller’s offer subject to a written contract drafted – Thmoas Plaza (Pte) Ltd v Liquidators of Yaohan Departmental Store Singapore Pte Ltd (in | |liquidation) (2001); | |- Agreenment shall not be final and binding agreement – Cendekia Candranegara Tjiang v Yin Kum Choy & Others (2002) | |Brogden v Metropolitan Railway Co. 1877) The Court held that the facts and actual conduct of the parties, established the existence of a contract, and | |there having a clear breach of it, Brogden must be held liable upon it. | |Law: Acceptance of unilateral contract is when all the terms o f the contract are fully performed Carlill v Carbolic Smoke Ball Co. (1892) | |Counter |Offeree introduces a new term or varies the terms of an offer (original offeror is free to accept or reject the â€Å"counter offer†) Hyde v Wrench | |Offer |(1840) – The court held that there was no contract because Hyde’s reply was a counter offer which extinguished the earlier offer.When the | | |response is an inquiry or a request of information, it should not be construed as an offer | |Knowledge|Law: Offeree cannot accept in ignorance of the law | |of Offer |offeree must be aware of the offer – Fitch v Snedaker (1868) and R v Clarke (1927) – As long as offeree has knowledge of offer, motive is | | |irrelevant. Once the offeree is aware of the offer, it does not matter that he was prompted to act for reasons other than the desire to accept | | |the offer.William v Carwardine (1833) – the court held that the plaintiff was entitled to a reward, she ha d done so with knowledge of the reward| | |even though her motive for giving the information was her own remorse. | | |Cross-offer: Do not constitute to agreement/contract; lack of consensus / meeting of minds between parties at the time of making offer. – Tinn v | | |Hoffman & Co (1873) | |Communica|General Rule: Acceptance must be communicated (Acceptance must actually be received by the offeror) | |tion of |Acceptance effective when communicated/received by offeror. | |Acceptanc|If in writing, it must be physically received by the offeror, and if orally, heard by the offeror. Acceptance must be unconditional and absolute. |e |obiter dictum in Entores Ltd v Miles Far East Corporation (1955) and CS Bored Pile System Pte Ltd v Evan Lam &Co Pte Ltd (2006) | | |Powell v Lee (1908) Held that there was no authorized communication of intention to contract on part of the body hence no contract. | |Silence |Silence is only a form of acceptance if both parties agree to it. Silence o f the offeree would not constitute a valid acceptance | | |Felthouse v Bindley (1862)–held that there was no contract between the two parties. The plaintiff had no right to impose a condition that a sale | | |contract would come into existence if the defendant remained silent. | |Exemption case: Both parties agree that the offeree would have a positive obligation to communication only if he wished to reject the offer. | | |Albeit rare in practice, silence is properly be construed as acceptance – Southern Ocean Shipbuilding Co Pte Ltd v Deutsche Bank AG (1993) and | | |Midlink Development Pte Ltd v The Stansfield Group Pte Ltd (2004) – defendant’s conduct of paying the reduced rent showed that a contact exists. | |Instantan|Time of acceptance is the time at which the acceptance is communicated to the offeror | |eous |Ithe acceptance will take effect when and where it is received, acceptance must be absolute and unconditional Entores v Miles Far East Corp | Communica|(1955) | |tions |- if got designated info system; receipt when e-record entered the designated info system. Emails, Fax, Telex | | |- if got designated info system but sent elsewhere then is receipt upon retrieval. | | |- if no designated info system; receipt upon entering any info system of addressee. | |Exception|The Postal Rule (ONLY FOR LETTERS OF ACCEPTANCE! ) | |s |- Quenerduaine v Cole (1883) – telegram means speedy reply; not attracted by postal rule.Offeror will claim that it is only valid acceptance | | |when physically received. | | |- Agreement cannot be withdrawn once the post is sent out. Henthorn v Fraser (1892) | | |- Acceptance deemed effective as soon as the letter is posted regardless as to when it reaches the offeror or whether it reaches him at all. | | |Adams v Lindsell (1818) | | |- the court held that the acceptance was communicated and the contract was formed as soon as the plaintiff posted the acceptance letter. Lee | | |Seng Heng v Guard ian Assurance CO Ltd (1932) | | |Waiver of Communication: facts show that the offeror has waived the need for communiation of acceptance; when offer made to whole world | | |(unilateral contract; anyone can accept) – Calill v Carbolic Smoke Ball. | | |( the doing of the act by the offeree may itself be constructed as acceptance, without requiring formal communication to the offeror. | | |Termination of acceptance: Once posted, an acceptance cannot be revoked. – Wenkheim v Arndt (1873) | 3. Consideration (C4, Pg 85) Two Main Rules on Consideration Must move from promisee but need not move to promisor.Tweedle v Atkinson (1861) Need not be adequate but must be sufficient. Chappell & Co Ltd v Nestle Co Ltd (1960) |Is what each party gives to the other as the agreed price for the other’s promise | |Detriment to one OR Benefit to another | |But it need not move to the promisor Malayan Banking Bhd v Lauw Wisanggeni – A third party who is a stranger to the contra ct may benefit from the contract | |although he may not enforce it. | |Need not be adequate but must be sufficient – Law will not interfere with parties contract so long as consideration is of â€Å"some value† in the eyes of the | |law. |In order for a promise to be enforceable in court, consideration must first be given (exchange of promises would be sufficient consideration)– Dunlop v | |Selfridge (1915) | |Past Consideration is |Refers to an act performed prior to and to that extent independent of, the promises being exchanged (act performed without the | |not valid |reciprocal promise in mind). | | |Past consideration is no consideration The court held that the promise was made after the transaction had already been concluded | | |and therefore past consideration.Roscorla v Thomas (1842) and Teo Song Kwang (alias Richard) v Gnau Lye Chan and Another (2006) | | |To become executed consideration: – Pao On v Lau Yiu Long (1980) and Sim Tony v Ah Ghee (t /a Phil Real Estate &Building Services) | | |(1995) | | |Act done at promisor’s request If the promisor has previously asked the other party to provide goods or services, then a promise | | |made after they are provided will be treated as binding. | | |Contract must otherwise be enforceable Done in biz context and it is clearly understood by both sides that it will be paid for then| | |valid.Re Caseys’s Patent v Casey (1892) held the request to Casey to manage the patent carried an implied promise to pay for that | | |service, hence it was enforceable. | |Consideration must move|The only person who can sue for breach of contract must be the party who has given consideration (promise) – Tweedle v Atkinson | |from the promisee |(1861) – the court held that Tweedle could not enforce the contract between the two fathers because firstly he is not a party of | | |the contract, and secondly, no consideration flowed from him. | | |Consideration need not move to the promisor; 3rd party can may benefit although may not enforce it. Malayan Banking Bhd v Lauw | | |Wisanggeni | |Sufficient, |- Law will not inquire to the fairness of consideration, as long as the parties agree to it willingly – Lam Hong Leong Aluminium | |Need not be Adequate; |Pte Ltd v Lian Teck Huat Consruction Pte Ltd and Another (2003) | |Adequacy of |- Law does not measure value (once the subject of exchange is recognized in law as suitable consideration, quantity is irrelevant) | |Consideration |- Swiss Singapore Overseas Enterprise Pte Ltd v Navalmar UK Ltd (No2) (2003) and Chappell & Co Ltd v Nestle Co Ltd (1960) –the | | |consideration included the wrappers even though they were of no value to Nestle. | | |Thomas v Thomas (1842) – The court held that the nominal rent was sufficient consideration but the husband’s wishes were | | |irrelevant; motive is not the same thing as consideration. |Sufficiency of |A promise not to enforce a Claim is Good Consideration Promise not to sue or enforce a valid claim or settlement of legal action = | |Consideration |sufficient consideration Lam Hong Leong Aluminium Pte Ltd v Lian Teck Huat Consruction Pte Ltd and Another (2003) and Alliance Bank| | |Ltd v Broom (1864) Normally, banks would not promise to enforce debt but is not done here. For not suing, considerations shown ( | | |binding agreement to provide security. | |Sufficient |Forbearance to sue |A promise to forbear from suing or enforcing a valid claim can constitute sufficient or valuable | | | |consideration. Alliance Bank Ltd v Broom (1864).K-Rex Finance Ltd v Cheng Chih Cheng (1993) – The court | | | |spoke the words of Cockburn CJ in Callisher v Bischoffsheim (1870). | | | |The same applies to a compromise of a legal action. The req. is that the legal action must be reasonable and| | | |not frivolous, that the claimant has an honest belief that in the chance of success of the claim and that | | | |the claimant h as not concealed from the other party any fact which, to the claimant’s knowledge, might | | | |affect its validity.Miles v New Zealand Alford Estate Co (1886) | | |Performance of |The Eurymedon (1975) – The Privy Council held that even though the defendant was already contractually bound| | |existing contractual |to a third party to do so, the defendant’s act of unloading the ship formed good consideration for the | | |duty to third party |contract with the plaintiff. This was also clarified in Pao On v Lau Yiu Long (1980) by the HOL. This was | | | |also accepted in the Singapore High Court in SSAB Oxelosund AB v Xendral Trading Pte Ltd (1992). | |Moral obligation & |Eastwood v Kenyon (1840) – The court rejected the plaintiff’s view and held that moral obligation is | | |motives |insufficient consideration for a fresh promise. | |Insufficient |Vague or insubstantial|White v Bluett (1853) – The court held that Bluett’s promise was no thing more than a promise â€Å"not to bore | | |consideration |his father†. As such it was too vague(fake) and was insufficient consideration for the alleged discharge by | | | |his father. | | |Performance of |Collins v Godefroy (1831) –Performance of an existing public duty is not valid consideration. | |existing public duty |Glassbrook Bros Ltd v Glamorgan City Council (1925)- If the court finds the promisee did something more that| | | |required by an existing public duty, then it may be sufficient. | | |Performance of |Stilk v Myrick (1809) – It was held that there was no consideration for the captain’s promise because the | | |existing contractual |remaining crew did what they were contractually required. Two sailors deserting were within the usual | | |duty |emergencies found in such a voyage. | | |However, if it is more than what is contractually required, that may constitute good consideration – Hartley| | | |v Ponsonby (1857) and William s v Roffey Bros (1991) – The English Court of Appeal held that as long as the | | | |extra payment was not given under duress or fraud, the oral promise was enforceable because the defendant | | | |obtained â€Å"practical benefits† from the plaintiff’s work. The benefit was that they would not be liable under| | | |the main contract for late completion. | | |Rule in Pinnel’s Case |Pinnel’s case is authority for the proposition that payment of a lesser sum without anything extra is not a | | | |good consideration. | | |- It would be good consideration provided with a gift (can be anything, even time) is given as the gift | | | |might be more beneficial than the money. -But if the person asks me pay lesser, then cannot sue. – If I | | | |accepted a smaller amount, after that I decided to sue again, CAN! Provided no gift! | | | |Pinnel’s Case (1602) – The part payment of a debt does not discharge the entire debt unless the part p ayment| | | |was made at the request of the creditor and the payment was made earlier, at a different place, or in | | | |conjunction with some other valuable consideration.Foakes v Beer (1884) affirmed Pinnel’s Case – the HOL | | | |held that Beer’s promise not to take further action was not supported by consideration. She could claim the | | | |money. ( in Euro-Asia Realty Pte Ltd v Mayfair Investment Pte Ltd (2001), District Court in Singapore | | | |endorsed the rule in Foakes v Beer and held favor in creditor. | | |Promissory Estoppel is an equitable doctrine whose origin may be traced to Lord Cairns in Hughes v Metropolitan Railway Co (1877). | | |When p. e. is established, the court may enforce a promise despite the fact that there was no consideration. Central London | | |Property Trust v High Trees House Ltd (1947) | | |Elements (Central London Property Trust v High Trees House Ltd (1947) and D&C Builders v Rees (1966)) | | |1)Parties must have existin g legal relationship 2)Clear and unequivocal promise which affects the legal relationship 3)Promisee | | |relied upon promise and altered his position 4)Inequitable for the promisor to go back on his promise. | |Promissory Estoppel |Cause of action | |(For no consideration) |When the promisor gives reasonable notice of his intention to revert to the original legal relationship, the original relationship | | |is restored. The effect of p. e. is to suspend promisor’s rights temporarily.Tool Metal Manufacturing Co Ltd v Tungsten Electric Co| | |Ltd (1995) However, the promise could become ‘final and irrevocable if the promisee cannot resume his position. † Ajayi v R T | | |Briscoe (Nigeria) Ltd (1964) | | |A defensive tool | | |This means that it can only be raised as a shield and not a sword, i. e. a defense against a claim and not to commence a suit.Combe| | |v Combe (1951) (people sue you then can use ) Assoland Construction Pte Ltd v Malayan Credit Properties Pt e Ltd (1993) and Lai Yew | | |Tay Pte Ltd v Pilecon Engineering BHd (2002) | | | | 4. Intention to Create Legal Relations (Pg 17) |The test is whether a reasonable person viewing all the circumstances of the case would consider that the promisor intended his promise to have legal | |consequences. objective test† (objectively ascertained) | |Social and |General presumption = no legal intention | |Domestic |Balfour v Balfour (1919) and Jones v Padavatton (1969) – An agreement is not legally binding unless the parties intend that each will | |Agreements |accept the lefal consequences for its breach. Choo Tiong Hin v Choo Hock Swee (1959) – the plaintiff’s promises were not enforceable | | |because the lack of intention to create legal relations. De Cruz Andrea Heidi v Guangzhou Yuzhitang Health Products Co Ltd and Others | | |(2003) -Friend doing a favor even though secret profit or commission is earned. | |However in Merritt v Merritt (1970) and Wakeling v Ripley– The English Court of Appeal found the necessary intention and held that the | | |wife succeeded in her claim for breach of contract. | |Commercial |General presumption = Legal intention | |Agreements |- There is necessary intention to create legal relations. Edwards v Skyway Ltd (1964) – The court held that Skyways was legally bound. | | |Binding but unenforceable | | |Honour Clauses – When parties have expressly stated that their agreement is not to be legally binding. Rose &Frank Co v J R Crompton | | |&Bros Ltd (1925) | | |Exceptions (not legally binding): | | |Letter of Comfort (pg 17) ( may be binding depending on its terms | | |usually a document supplied by a 3rd party to a creditor indicating a concern to ensure that a debtor meets his obligations to the | | |creditor. | | |Kleinwort Benson Ltd v Malaysian Mining Corporation Berhad (1989) Court only found a moral not legal obligation. refer to pg 17) | | |Letter of Intent (LOI) (pg 17) | | |A de vice by which one indicates to another of his intention to enter into a contract with him | | |E. g. a main contractor is prearing a tender and he plans to subcontract some of the work. | Privity of Contract (Pg 105) |The general rule is that no one, other than a person who is a party to the contract may be entitled to enforce or be bound by the terms of the contract. – | |Price v Easton (1833) – court held that Price could not succeed, as he was not a party to the contract between the debtor and the Easton.Management | |Corporation Strata Title Plan No 2297 v Seasons Park Ltd (2005) | |Exceptions (Thai Kenaf Co Ltd v Keck Seng (S) Pte Ltd (1993) | |Agency relationship | |Assignment of choses in action – consent of 3 parties | |Letter of Credit | |Agreement |Intention to create legal relations |Consideration | |Is it an offer? Define offer |Is there any intention? |Is it revocation? Via broadcast? | |Was the offer effectively revoked? |Is the agreement legally bind (To place under legal|Is Consideration need to be sufficient but not | |Is it valid acceptance?Communicated |obligation by contract)? |adequate? | |Third party’s conversation? |Is the agreement reached in a business context? |Promissory Estoppel? Talk about the elements, sword| |Postal rude? |(eg. Family, friends) |or shield? | |Is there any provision of information? |Is it (social and domestic) or commercial |Is the consideration moved from promisee? | |Any counter offer? |agreement? | | |Is the offeree aware of offer with motive? | | | |Is the offer lapse? | | | | | | | | | | | | | | | | | | | | | | | | | |

Cooperative learning Assignment Example | Topics and Well Written Essays - 500 words

Cooperative learning - Assignment Example The Teaching and Evaluating the Collaborative Process step is the most important that requires more time to plan and execute. The result of a cooperative learning process is determined by how well the group can communicate to each other effectively without misunderstanding. Moreover, learning how to communicate individuals ideas and feelings give confidence to individuals and enable a successful goal achievement. Tutors and another teaching staff can effectively choose the members of groups in monitoring performance stage (Borich). During this state, members have already conceptualized what is supposed to be done and played their part. Thus, it prudent to separate individuals according to their capabilities to ensure the achievement of goals. Moreover, it is important to use different ways of monitoring to ensure keeping track on each group activities. Moreover, it is important to establish problems and rectify them as the group progresses. Active un-involvement can be incorporated in a cooperating learning tasks by assigning tasks that require division of labor (Borich). In addition, un-involvement in a group can be minimized by integrating members of the group’s role to correct each other when they err in their roles (Borich). Furthermore, passive and active un-involvement can be solved by encouraging the poor and slow learners to work hard to achieve the group goal (Borich). However, the best way to deal with non-engaged performers in a group is by assigning individual roles to group members (Borich). Through this, each member will have to engage other when he or she is in a difficult

Democracy and human rights in asia Essay Example | Topics and Well Written Essays - 1500 words

Democracy and human rights in asia - Essay Example As far Asian and Western culture is concerned, it can be studied in two ways along wise that is dogmatic or communal (Bell, 2000, pg. 67). If one has to pen down the social uplifts in both these cultures, then morally and ethically Western culture is far behind in moral norms as compared to Asian averages. West has by far with an approach being not keeping abreast of religious medians in political implementations. Religious medians are more expressive and demanding regarding the human uplifts and hominid elevations. Although West has totally defined human rights and since by far trying reach the best of its output but the limitations and boundaries set by such Western liberalism is not apprehend able by a nonprofessional. Western democracy is somehow a kind of dictatorship where only those can survive easily who are in relation to those liberal rights designers from the perspective of religion. Western liberal democracy does not render a true platform to followers of a certain minority religion holder to apply their values openly while living in such states. Roseau stated that the big the state is; the more difficult it would be to run it with democracy where rights and thoughts of every person are valued. Asian democracies in political perspectives although not very successful in certain countries of the world but their values for upholding a pure socially upgraded and esteemed are far fruitful than those of Western ones. Liberal democracies are true pictures of autonomy, copious, supremacy, and genuine build-ups. Therefore, simply if these attributes are existed in any democratic state either western or eastern that state would be more appropriate in building up a pure social and human rights building state. Asian democratic sates are individual value based set ups with power of legitimate enactments. There is a conflict in human rights and societies dimensions in both cultures because as far the individual is satisfied and pro-active the more that society

Importance of Classifying Period Cost and Product Cost Assignment

Importance of Classifying Period Cost and Product Cost - Assignment Example The period costs are normally reported in form of expenditures in the period of accounting in which they match the best with revenues, in the period of accounting and when they expire. In addition to general administrative and selling expenses, most of the interest expenses are categorized as a period expense. Mr Smith’s classification of these costs, therefore, would increase the reported earnings of the period. The classification of the period cost and product cost is hence important since the classification will ensure that the net income is properly measured during the time period in which the best match. Classifying period cost and product cost will also ensure that Mr Smith reports the proper inventory cost appearing on the balance sheet. It is also important to classify these costs since the two costs cling to the units of the manufactured or purchased products. This will increase the reported period earnings because if any unit of a product will not be sold, the produc t cost will appear as a current asset on the balance sheet since it will be reported as an inventory. The classification will also ensure that the product cost will be reported at the expense of the cost of sold goods on the income statement for the period in which the product units were sold. In addition, classifying period costs will ensure that the expenses incurred in sales and salaries of the general administration are only featured during the exact period in which those salaries were paid to the employees. This will increase the reported earnings of the company. The actions of Mr Smith to postpone expenditures to the new year such as cancelling or postponing supplier orders, delaying maintenance already planned, and cutting down on the travels and adverts of the end year is ethical enough since it was in the best interest of the company to report an increase in the end year earnings. By ordering reclassification of both the period and product costs, Mr Smith significantly increased the reported earnings since every particular period cost was to be reported in the financial year to which it relates to.  

African American history assessing the antebellum slavery Essay

African American history assessing the antebellum slavery - Essay Example The aristocrats were very wealthy and owned vast pieces of land which were developed by the slaves. One factor that had an effect on slave institution was need for labor to work in the white farms. Slave trade was viewed by slave masters as necessary evil because there was sparse population and therefore they needed labor to work in their farms. In order to get this labor they had to force the blacks to work in their farms. The effect of this on the slaves is that they were forced to leave their homes to go and provide the required labor. The greatest oppressor of antebellum slaves was lack of education. There were also limited opportunities to professionals. They were denied education because the masters wanted to ensure that accumulation of property was easy. Lack of education was also contributed to by the fact that the slaves no property that could help them subsidize for a good education. As per the nature of work done, slavery involved involuntary servitude. It involved securin g labor services by means of force and treating the slaves so acquired as property. Work was assigned according to one’s physical capability where a day’s hours of work ranged from 15-16 hours. Moreover work was not assigned according to sex differentiation. Therefore even pregnant women could find themselves doing hard tasks like hoeing. An accident of birth is what determined the status of the slaves. Human nature coupled with inequality in power is the greatest factor that influenced slavery. The slavery had negative effects on the slaves. Effect of the slave trade on slaves was that they were subjected to very little or no privacy at all. They were put in various concentration camps in very large numbers. As a result there was a lot of overcrowding such that there could be no longer private life for the slaves. There was also a lot of work for the slaves. Due to this they had no free time for them. They were always expected to be working all the time. There was als o no time for the family. This was mainly due to the amount of work that they were expected to do. Secondly, due to the manner in which different tasks were allocated to different slaves, it meant that there was little time for the family. They were not able to see each other occasionally. Their children were usually sold or given away by the slave masters therefore they could not be closely knit together as a family. Furthermore, the slaves were not allowed to marry. This was because the slave masters thought that if the slaves were allowed to form families, they could have other responsibilities and thus they could not be able to work as they were expected to. To avoid this, they prohibited them from marrying. Another negative effect of the slavery is that they were subjected to very many rapes. They were raped by other slaves as well as by the slave masters. Profitability of slave trade To the holding master Slave trade though considered as a vice, it brought with it a number of considerable benefits. There were different benefits that accrued to different people. Since this was controlled workforce, coupled with economies of scale, ensured that there was free labor. The greatest beneficiary of this system was the white master. The system ensured that they produced more than they could have if they worked on their own. Benefit of slavery to the slave masters was that they were able to amass great wealth owing to the fact that slaves made doing of work in the firms easier. To the slaves The benefits that accrued to the slaves were that they were able to access better housing, better food and better clothing. There was also increased freedom of movement as well as more

Analysis of Articles about Leadership Values and Ethics Term Paper

Analysis of Articles about Leadership Values and Ethics - Term Paper Example Leaders, who are honest in their welfare plans and continuously strive to improve their skills and competency through the constant learning process, are capable of motivating and encouraging the target group to optimal performance. The article is highly relevant in the contemporary environment of highly competitive business. Indeed, basic assumptions about the leadership qualities especially which relates to the individual approach of tackling issues and objectives, are vital as they may create a vast difference to the results achieved. Leadership refers to people who have the capacity to bring about changes in other people. Leaders create visions and goals for people, not only for self-development but also for the organization and society at large. It is important because leaders provide an intangible stability within the organization that comprises of people coming from cross-cultural value systems and facilitates their integration with the system. At the same time, they are also known to promote the collective vision of the organization and provide the necessary impetus to the people to strive towards it. This article is written by Susan Heathfield stresses that ethics and value-based leadership greatly enhances organizational performance. The organizational code of conduct and leadership initiative in ethically delivered goals and objectives are important paradigms in the workplace. The author has emphasized that leaders are responsible for advocating and nurturing a high standard of ethics and quality work while fostering a good relationship amongst them. Good leaders are optimistic and build relationships based on mutual trust and confidence. People observe and imbibe qualities that help them to evolve as an individual with a strong character. Credibility and trust are important characteristics that significantly impact his or her followers.  

Personal & Business Taxation PowerPoint Presentation

Personal & Business Taxation - PowerPoint Presentation Example Basically, there are domains for the taxation in UK, they are personal taxation and company taxation. Personal taxation is required for a UK resident who spent 183 days in UK during a tax year and he earned a net income which is taxable according to the law in place in the taxable year. Company or business taxation is applicable if the company situates in the UK and it is payable as given below Though this is the general tax rate for a company, UK tax law has given a tax-rate relief for small businesses in order to encourage entrepreneurship and enhance job creation as well as small-business innovation. Removing tax barriers and thus to ensure small business growth was one of the main aims for this tax relief (Freedman, 2003, p. 22). But this has been widely questioned whether this tax relief make any contribution to economic growth or whether this targeting is achieved. In UK, the small business rate relief is normally administered by the concerned local authority. A business man, no matter whether it is sole proprietorship or partnership or other form of business, will be eligible for tax relief if his taxable value is below  £18,000 (but  £25,500 in London). If the rateable value of a small business is just  £6,000 or lower, the small business rate multiplier will be used along with a 50 percent relief. If the rateable value is between  £6,001 to  £11,999, the small business rate multiplier will be used and the rate relief will be between 0 to 50 percent. If the rateable amount is above  £12,000 and less than  £18,000, there won’t be any relief, but only small business rate multiplier will be used (Business Link,

Factors that may impact the demand for products by customers Essay

Factors that may impact the demand for products by customers - Essay Example Services and products that a business gives to the market may have an impact on the customers’ demand for the Services or products. For instance, a business may be selling hot dogs; in contrast, a corresponding business may be selling hot dog rolls. If the cost of the hot dog rolls augments, it may make the demand for hot dogs to diminish. Consequently, the demand curve moves to the left, and value for hot dogs would be forced to augment.Customers may choose alternate services and products in place of what a person’s business provides. These alternative products and services function as opposition to a person’s business. For example, if a business sells coffee, the alternative for the product may be tea. If the cost of tea augments, a business may observe an increase in the number of customers who want to buy coffee. Consequently, the demand curve will move to the right, and costs for the business’ coffee may decrease. As indicated above, a substitute refe rs to a commodity that may be utilized in position of another commodity. To simplify the above example, if the cost of coffee increases then the consequence will be an increased demand for tea, and if the cost of tea increases then the result will be an increase in the demand of coffee. In contrast, compliments refer to commodities that may be utilized together, for example, sugar and tea. In case there is an increase in the cost of tea, the demand for tea diminishes, and consequently, the demand of sugar also decreases.... In case there is an increase in the cost of tea, the demand for tea diminishes, and consequently, the demand of sugar also decreases. Customer Preference Customers’ preference and tastes may vary depending on the details they get from family and friends, form of advertisements they come across, or the season. Varying preferences and tastes may have a tremendous impact on demand for various commodities. The degree at which a client needs a product may have an impact on the demand of the product. In addition, persuasive advertisements are developed to cause a variation in preference and tastes and thereby causes and increase in demand of a commodity. The more a customer prefers a commodity, the larger their demand for the commodity. In contrast, if the customer does not have a preference for a specified commodity, the customer will decrease the demand for the commodity (Sullivan & Sheffrin 2003, p. 79). For instance, a person suffering from diabetes will have minimal or no deman d for commodities that contain sugar. Income of Customers The incomes and salaries of buyers highlight the commodities that they are able to buy. When the incomes and salaries of customers augment the customer’s demand for services and products also increases. If a customer takes another position that has a low salary or becomes unemployed the customer’s demand for commodities lessens. In contrast, when the salary and income of a customer increases, the customer’s capacity to buy goods and services escalates (Sullivan & Sheffrin 2003, p. 79). This causes an increase in demand. Competition Rivals are always attempting to occupy the larger part of the market, maybe by developing better or new

Born Global Firms Essay Example | Topics and Well Written Essays - 2500 words

Born Global Firms - Essay Example These firms are established to go global from the first day with a general view that the world is a single market and not an extension of the domestic market. Currently, there is a rapid increase in these firms, most of which have their origin from developed economies. Most of these firms are technological in nature and take advantage of the high technology developments in these countries. However, the firms are not limited to technology but are distributed across other areas as well. This report seeks to understand born global firms to details regarding their formation and the mode of operation. Born Global Firms Introduction Born global firms are business entities that are formed with the single purpose of doing business internationally. From its formation, a born global firm has the main objective of attaining a competitive advantage from harnessing resources and selling its products in many countries, and in most cases, these firms go global within their three years of inception. Multinationals are usually referred to as global firms, though there are major differences between multinationals and born global firms. ... Therefore, the main differentiating factor in these firms is that they have a borderless worldview and all their strategies are geared towards achieving a global presence. In this report, born global firms will be investigated in detail to understand the reasons behind the rapid increase in such firms in the recent past, how the companies undertake their operations, their features and the challenges that these firms face in their operations. The aim of this paper is to derive a better understanding of born global firms, the mode of operations in the global market and their differences from the conventional multinational organizations. Background study Michael Rennie coined the born global tag name in 1993 after studying a new concept of new firms that were established with the single purpose of competing on a global scale to harness resources in a number of countries at the same time (Jones et al., 2011). The interesting aspect of these firms is in the way a small firm is established with the single intention of meeting the varying needs of customers on a global scale. Such an approach requires a new focus in understanding the concept behind internationalization of firms and the need to attain a global status today. The new concept of a born global is to satisfy the need of customers on a global scale from its first day of inception, in that the firms are internationalized by design and not by emergence (Jones et al, 2011). In international trade models, a firm wishing to go global has to outlay the initial investment and make the entry costs before it commences operating globally.  

Studies and researches on diverse groups of English speakers Essay Example for Free

Studies and researches on diverse groups of English speakers Essay In lieu of the English language expansion throughout the globe, particular nation should really take the advantage of being proficient in the English language even if it is not its official language. As stated earlier, the English language is widely known and used not only by the English-spoken countries but also by the international community (Cheshire 2007). Thus, it is really an advantage if countries would learn how to speak and understand the English language. However, the inclusion of the English language in the curriculum of education of different countries is not really that simple. Moreover, the English language itself is being draft and constructed in a new structure depending on the culture, tradition and established educational method. Hence in a way, there is still a different way of using and understanding the English language. Shaobin’s â€Å"English as a Global Language in China† According to Ji Shaobin, the English language is a very important tool for the Chinese in order to have access on the international scene. He argued that in this modern period, the language that is commonly used in the international scene is the English language hence China should improve their proficiency in the English language (2002). He said that in the ancient times China was against having any contact with the Western culture because of a fear that their Chinese cultural heritage might be contaminated (Shaobin 2002). However, such conservatism would not really help China in advancing itself economically and politically speaking (Weixing 2003). Also, such attempt to close China from the influence of the English language became so impossible given the fact that in order to have a good international business transaction or any international affair, one should do it using the English language otherwise both parties would not understand each other. Moreover, China realized that only through the use of the English language can they penetrate and have access on modern scientific and technological advances (Liu 2007). Besides, the English language is the language that is being used in economic transactions globally (Ross 1993). Hence, China was forced to recognize the importance of a foreign language – that is the English language. In 1978, the reformation of the Chinese economy marked the total entrance of English as its foreign language (Shaobin 2002). With the consideration that Western companies and other transnational organizations may really help the economy of China, English was allowed to be used and practiced in China (Ross 1993). Due to overwhelming advantages of learning and using the English language, China included in its curriculum of education the teaching of English. Such change in educational system facilitated the economic progress in China wherein people who have something to do with business and marketing were using the English language to make business transactions outside China (Shaobin 2002). In addition, Chinese students, even if learning English was not really compulsory, were forced to study it since it has a great advantage on employment. There was an increase of need on English teachers who would teach the English language top the Chinese students (Shaobin 2002). And because of this event, even Chinese teachers were motivated to take English courses too. Nonetheless, China does not really intend to embrace the Western tradition. It is only the English language that they want to adopt. Evidently, China is rising as one of the superpowers in this modern era (Weixing 2003). Together with Japan, China has truly made use of the English language to boost its economic and political aspects. Japan on the English Language and English-speakers The English Language has been considered as the second official language in Japan (Porcaro 2002). It cannot be doubted that Japan has a distinct culture and tradition as well as form of educational system that which is far different from other countries. However, due to economic pursuit, Japan realizes the importance of having a second language that other countries can understand. Japan uses the English to advance itself politically, economically and internationally (Marciamo 2005). The English language is widely used in Japan as public signs. Although, these signs are still printed in Japanese language, it is translated in the English language. Street signs, area maps, transportation directions, post offices and banks’ signs are also translated in English. Such is made for the benefit of the tourists. It is a lot easier and practicable to translate those signs in the English language in order for the tourists to understand the signs posted in Japan (for travel convenience) (Marciamo 2005). When it comes to internet and websites, Japanese companies provide an English version of their websites. Further, the government of Japan and its agencies has also an English version of its websites (McMillan 1999). With regards to media and movies, Japanese films are shown with English subtitles (Marciamo 2005). There are also bilingual programs that are being simulcast and shown in the national TV channel of Japan – in Japanese and in English (McMillan 1999). Major newspapers and magazines are also printed with English translations. Japan’s curriculum for education includes the teaching of the English language (just like China). The Japanese government makes English a required subject. All Japanese schools include English in their education program (Saito, Nakamura, Yamazaki 2002). However it is not the case that all Japanese are proficient in the English language – in writing and speaking of it. Yet, it shows that Japan’s proficiency in speaking the English language is rising (Marciamo 2005). Moreover, the Japanese language is said to have an increasing character of having assimilations on the English language (Marciamo 2005). But then, it does not follow that all English speakers worldwide can understand the Japanese language. Only that the English language is being used extensively by the Japanese people in their everyday activities and dwellings (Stanlaw 2005). There is no other country but Japan where the English language has a special status (McMillan 1999). As mentioned above, it does not follow that all or even most of the Japanese can speak and understand (Marciamo 2005) English. Hitherto, Japan is one of the countries which regard the English language as an essential means to communicate with other people of different culture, race and tradition.

Forex Market Case Study Analysis

Forex Market Case Study Analysis Preface Just as stranger walk on path last arrive at their destination; project work is like a path after walking in which students can gain experience knowledge that can be stepping stone towards their success. It is such a work that enhances each every individual working capacity knowledge. The Importance of Thesis is that it is blending of both theoretical practical knowledge. Through the thesis, I got a golden change to have guidance under professionals senior executives which can definitely be a platform of establishing themselves. During my thesis work I visited AMA Library, Gujarat Chamber of Commerce and SBI which helped us a lot to gain information about Forex derivatives. This opportunist of thesis provided to me was not only a platform to develop enhance my appetite of learning but also served a fusion of the theoretical concept their practical application in corporate world. INTRODUCTION: To make a profit from the forex market of International trade you have a grip on mainly five key factors that affects a currency value. When making our trades we analyze five key factors which are as follows. Interest Rates Economic Growth Geo-Politics Trade and Capital Flows Merger and Acquisition Activity Interest Rates: Interest income and capital appreciation these two methods we can use to make profit from different in terms of countries interest rates. Interest Income. Every currency in the world comes attached with an interest rate that is set by its countrys central bank. All things being equal, you should always Buy currencies from countries with high-interest rates and Finance these purchases with currency from countries with low-interest rates. For example, as of the fall of 2006, interest rates in the United States stood at 5.25%, while rates in Japan were set at .25%. You could have taken advantage of this rate difference by borrowing a large sum of Japanese yen, exchanging it for US dollars and using the US dollars to purchase bonds or cds at the US 5.25% rate. In other words, you could have borrowed money at .25%, lent it out at 5.25%, and made a 5% return.Or you could save yourself all the hassle of becoming a money lender by simply trading the currency pairto affect the same transaction. Capital appreciation. Asa countrys interest rate rises, the value of the countrys currency also tends to rise this phenomenon gives you a chance to profit from your currencys increased value, or capital appreciation. In the case of the USD/JPY spread in 2005 and 2006, as the US interest rates stayed higher than Japans, the dollar continued to increase in value. Investors who traded yen for dollars gained from interest income as well as the US dollars capital appreciation. Economic Growth. Economic Growth is next factor when predicting a countrys currency movements.The stronger the economy, the greater the possibility that the central bank will raise its interest rates in order to the growth of inflation.Andthe higher a countrys interest rates, the bigger the likelihood those foreign investors will invest in a countrys financial markets.More foreign investors mean a greater demand for the countrys currency.A greater demand results in an increase in a currencys value. Hence economic growth inspires higher interest rates inspires more foreign investment inspires greater currency demand which inspires an increase in the currencys value. Geo-Politics. The currency market is the only market in the world that can be successfully traded on political news as well as economic releases.Because currencies representcountries rather than companies and any disturbance to the political landscape will oftentimes affect the direction in which the exchange rate moves. The key to understanding speculative behavior with respect to any geopolitical unrest is that speculators run first and ask questions later.In other words, whenever investors fear any threat to their capital, they will quickly retreat to the sidelines until they are certain that the political risk has disappeared.Therefore, the general rule of thumb in the currency market is thatpolitics almost always trumps economics. Trade and Capital Flows Before ever making a final prediction regarding the movement (or trend) of a particular currency you should determine whether or not the currency is dependent on its countrys capital or trade flow. Capital flow refers to the amount of investment a country receives from international sources. Trade flow is the income resulting from trade. Some countries can be very dependent their capital flow, while other countries are extremely sensitive to trade flows. Mergers and Acquisitions Merger and acquisition activity is the least important factor in determining the long-term direction of currencies. It can be the most powerful force in stagingnear-term currency moves.Merger and acquisition activity occurs when a company from one economic region wants to make a transnational transaction and buy a corporation from another country. For example, a European company wants to buy a Canadian asset for $20 billion, it would have to go into the currency market and acquire the currency to affect this transaction.Typically, these deals are not price sensitive, buttime sensitivebecause the acquirer may have a date by which the transaction is to be completed. Because of this underlying dynamic, merger and acquisition flow can exert a very strong temporary force on FX trading, sometimes skewing the natural course of currency flow for days or weeks. OBJECTIVE: Main Objective is for getting in depth knowledge of my topic. To critically analyze the Forex market of International trade. To analyze the five key factors that moves the Forex market and how to make profit out of them. To analyze the present data and forecasting a future movement of Forex market. METHODOLOGHY: * Introduction of the topic in detail. * For predict market movement I am using two methods like fundamental analysis and technical analysis. Technical analysis includes Candlestick Charts and Moving Averages (Simple and Exponential) SOURCES: Primary source  · Taking interview of the expertise in the Forex market. Secondary source  · Use Books, Magazines, Newspapers, Research papers and Internet as secondary sources LIMITATIONS:  · I have to follow only these five factors for move the Forex market.  · Interview is the only primary research in the Forex market.  · Inflation is the main factor which moves the Forex market but which is not included in the five factors.  · Merger and Acquisition is the least important factor. CHAPTER 1: INTRODUCTION OF FOREIGN EXCHANGE Foreign Exchange is the method or process of conversion/converting one currency into another currency. Currency becomes money and legal tender for a country. But for a foreign country it becomes the value as a commodity. Since the commodity has a value its relation with the other currency determines the exchange value of one currency with the other. It is just the game of supply and demand. For example, the US dollar in USA is the currency in USA but for India it is just like a commodity which has a value which varies according to demand and supply. Foreign exchange is one of the economic activity which deals with the means and methods by which rights to wealth expressed in terms of the currency of one country are converted into rights to wealth in terms of the current of another country. It involves the investigation of the method which exchanges the currency of one country for that of another. Foreign exchange can also be defined as the means of payment in which currencies are converted into each other and by which international transfers are made also the activity of transacting business in further means. Most countries of the world have their own currencies. The US has its dollar, France its franc, Brazil its cruziero and India has its Rupee. Trade between the countries involves the exchange of different currencies. The foreign exchange market is the market in which currencies are bought and sold against each other. It is the largest market in the world. Transactions conducted in foreign exchange markets determine the rates at which currencies are exchanged for one another, which in turn determine the cost of purchasing foreign goods financial assets. The most recent, bank of international settlement survey stated that over $900 billion were traded worldwide each day. During peak volume period, the figure can reach upward of US $2 trillion per day. The corresponding to 160 times the daily volume of NYSE. CHAPTER 2: ORIGIN OF THE FOREX MARKET The FOREX trading traces its history to centuries ago. Different currencies and the need of exchange them had existed since the Babylonians. They are credited with the first use of paper notes and receipts. In that time the value of goods were expressed in terms of other goods which were called as Barter system. The obvious limitations of such a system encouraged establishing more generally accepted mediums of exchange. It was important that a common base of value could be established. In some economies, items such as teeth, feathers even stones served this purpose, but soon various metals, in particular gold and silver, established themselves as an accepted means of payment as well as a reliable storage of value. Trade was carried among people of Africa, Asia etc through this system. Coins were initially minted from the preferred metal and in stable political regimes, the introduction of a paper form of governmental I.O.U. during the middle Ages also gained acceptance. This type of I.O.U. was introduced more successfully through force than through persuasion and is now the basis of todays modern currencies. Before the First World War, most Central banks supported their currencies with convertibility to gold. However, the gold exchange standard had its weaknesses of boom-bust patterns. As an economy strengthened, it would import a great deal from out of the country until it ran down its gold reserves required to support its money. As a result, the money supply would diminish, interest rates escalate and economic activity slowed to the point of recession. Ultimately, prices of commodities had hit bottom and it appearing attractive to other nations who would sprint into buying fury that injected the economy with gold until it increased its money supply, drive down interest rates and restore wealth into the economy. However, for this type of gold exchange, there was not necessarily a Centrals bank need for full coverage of the governments currency reserves. This did not occur very often, however when a group mindset fostered this disastrous notion of converting back to gold in mass, panic resulted in so-called Run on banks. The combination of a greater supply of paper money without the gold to cover led to devastating inflation and resulting political instability. The Great Depression and the removal of the gold standard in 1931 created a serious lull in FOREX market activity. From 1931 until 1973, the FOREX market went through a series of changes. These changes greatly affected the global economies at the time and speculation in the FOREX markets during these times was little. Inorder to protect local national interests, increased foreign exchange controls were introduced to prevent market forces from punishing monetary irresponsibility. Nearthe end of World War II, the Bretton Woods agreement was reached on the initiative of the USA in July 1944. The conference held in Bretton Woods, New Hampshire rejected John Maynard Keynes suggestion for a new world reserve currency in favor of a system built on the US Dollar. International institutions such as the IMF, The World Bank and GATT were created in the same period as the emerging victors of WWII searched for a way to avoid the destabilizing monetary crises leading to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that reinstated The Gold Standard partly, fixing the USD at $35.00 per ounce of Gold and fixing the other main currencies to the dollar, initially intended to be on a permanent basis. TheBretton Woods system came under increasing pressure as national economies moved in different directions during the 1960s. A number of realignments held the system alive for a long time but eventually Bretton Woods collapsed in the early 1970s following president Nixons suspension of the gold convertibility in August 1971. The dollar was not any longer suited as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits. Thelast few decades have seen foreign exchange trading develop into the worlds largest global market. Restrictions on capital flows have been removed in most countries, leaving the market forces free to adjustforeign exchange ratesaccording to their perceived values. TheEuropean Economic Community introduced a new system of fixed exchange rates in 1979, the European Monetary System. The quest continued in Europe for currency stability with the 1991 signing of The Maastricht treaty. This was to not only fix exchange rates but also actually replace many of them with the Euro in 2002. London was, and remains the principal offshore market. In the 1980s, it became the key center in the Eurodollar market when British banks began lending dollars as an alternative to pounds in order to maintain their leading position in global finance. InAsia, the lack of sustainability of fixedforeign exchange rateshas gained new relevance with the events in South East Asia in the latter part of 1997, where currency after currency was devalued against the US dollar, leaving other fixed exchange rates in particular in South America also looking very vulnerable. Whilecommercial companies have had to face a much more volatile currency environment in recent years, investors and financial institutions have discovered a new playground. The FOREX exchange market initially worked under the central banks and the governmental institutions but later on it accommodated the various institutions. At present it also includes the dot com booms and the World Wide Web. The size of the FOREX market now dwarfs any other investment market. Theforeign exchange marketis the largest financial market in the world. Approximately 1.9 trillion dollars are traded daily in theforeign exchange market. It is estimated that more than USD 1,200 Billion are traded every day. It can be said easily that FOREX market is a lucrative opportunity for the modern day savvy investor SHORT INFO OF FOREX The history of FOREX trading was traced centuries ago. Different countries need different currencies and the need of exchange them had existed since the Babylonians. It is said that Babylonians were the first one who used paper notes and receipts. During those days, goods were exchanged for another goods based on the value of both the goods, which was known as barter system. But this system had some limitations and this lead to encourage establishing more generally accepted medium of exchange. It was also important that a common base of value could be established. In some economies, items such as teeth, feathers even stones served this purpose, but soon various metals, in particular gold and silver, established themselves as an accepted means of payment as well as a reliable storage of value. Trade was carried among people of Africa, Asia etc through this system. Coinswere initially minted from the preferred metal and in stable political regimes, the introduction of a paper form of governmental I.O.U. during the middle Ages also gained acceptance. This type of I.O.U. was introduced more successfully through force than through persuasion and is now the basis of todays modern currencies. Beforethe First World War, most Central banks supported their currencies with convertibility to gold. However, the gold exchange standard had its weaknesses of boom-bust patterns. As an economy strengthened, it would import a great deal from out of the country until it ran down its gold reserves required to support its money. As a result, the money supply would diminish, interest rates escalate and economic activity slowed to the point of recession. Ultimately, prices of commodities had hit bottom and it appearing attractive to other nations who would sprint into buying fury that injected the economy with gold until it increased its money supply, drive down interest rates and restore wealth into the economy. However, for this type of gold exchange, there was not necessarily a Centrals bank need for full coverage of the governments currency reserves. This did not occur very often, however when a group mindset fostered this disastrous notion of converting back to gold in mass, panic resulted in so-called Run on banks. The combination of a greater supply of paper money without the gold to cover led to devastating inflation and resulting political instability. The Great Depression and the removal of the gold standard in 1931 created a serious lull in FOREX market activity. From 1931 until 1973, the FOREX market went through a series of changes. These changes greatly affected the global economies at the time and speculation in the FOREX markets during these times was little. Inorder to protect local national interests, increased foreign exchange controls were introduced to prevent market forces from punishing monetary irresponsibility. Nearthe end of World War II, the Bretton Woods agreement was reached on the initiative of the USA in July 1944. The conference held in Bretton Woods, New Hampshire rejected John Maynard Keynes suggestion for a new world reserve currency in favor of a system built on the US Dollar. International institutions such as the IMF, The World Bank and GATT were created in the same period as the emerging victors of WWII searched for a way to avoid the destabilizing monetary crises leading to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that reinstated The Gold Standard partly, fixing the USD at $35.00 per ounce of Gold and fixing the other main currencies to the dollar, initially intended to be on a permanent basis. TheBretton Woods system came under increasing pressure as national economies moved in different directions during the 1960s. A number of realignments held the system alive for a long time but eventually Bretton Woods collapsed in the early 1970s following president Nixons suspension of the gold convertibility in August 1971. The dollar was not any longer suited as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits. Thelast few decades have seen foreign exchange trading develop into the worlds largest global market. Restrictions on capital flows have been removed in most countries, leaving the market forces free to adjustforeign exchange ratesaccording to their perceived values. TheEuropean Economic Community introduced a new system of fixed exchange rates in 1979, the European Monetary System. The quest continued in Europe for currency stability with the 1991 signing of The Maastricht treaty. This was to not only fix exchange rates but also actually replace many of them with the Euro in 2002. London was, and remains the principal offshore market. In the 1980s, it became the key center in the Eurodollar market when British banks began lending dollars as an alternative to pounds in order to maintain their leading position in global finance. InAsia, the lack of sustainability of fixedforeign exchange rateshas gained new relevance with the events in South East Asia in the latter part of 1997, where currency after currency was devalued against the US dollar, leaving other fixed exchange rates in particular in South America also looking very vulnerable. Whilecommercial companies have had to face a much more volatile currency environment in recent years, investors and financial institutions have discovered a new playground. The FOREX exchange market initially worked under the central banks and the governmental institutions but later on it accommodated the various institutions. At present it also includes the dot com booms and the World Wide Web. The size of the FOREX market now dwarfs any other investment market. Theforeign exchange marketis the largest financial market in the world. Approximately 1.9 trillion dollars are traded daily in theforeign exchange market. It is estimated that more than USD 1,200 Billion are traded every day. It can be said easily that FOREX market is a lucrative opportunity for the modern day savvy investor CHAPTER 3: METHODS OF QUOTING EXCHANGE RATES There are two methods of quoting exchange rates. Direct method: For change in exchange rate if foreign currency is kept constant and home currency is kept variable, then the rates are stated be expressed in ‘Direct Method E.g. US $1 = Rs. 45.50. Indirect method: For change in exchange rate if home currency is kept constant and foreign currency is kept variable, then the rates are stated be expressed in ‘Indirect Method. E.g. Rs. 100 = US $ 2.5116 With the effect from August 2, 1993, all the exchange rates are quoted in direct method, i.e. US $1 = Rs. 45.50 GBP1 = Rs. 79.82 Method of Quotation In the Forex market there are two rates like one is for buying and one is for selling rates. This helps in eliminating the risk of being given bad rates i.e. if a party comes to know what the other party intends to do i.e., buy or sell, the former can take the latter for a ride. There are two parties in an exchange deal of currencies. To begin the deal one party asks for quote from another party and the other party quotes a rate. The party asking for a quote is known as ‘Asking party and the party giving quote is known as ‘Quoting party The advantages of two way quote. Ø It automatically ensures alignment of rates with market rates. Ø The market constantly makes available price for buyers and sellers. Ø Two-way price limits the profit margin of the quoting bank and comparison of one quote with another quote can be done immediately. Ø It is not necessary for any player in the market to show whether he intends to buy or sell foreign currency but this ensures that the quoting bank cannot take advantage by manipulating the prices. Ø Two-way quotes lend depth and liquidity to the market and which is very essential for efficient. Ø In two-way quotes for the first rate is the rate for buying and another rate is for selling. We should understand here that in India the banks which are authorized dealers, always quote rates. So the rates quote buying and selling is for banks will buy the dollars from him so while calculation the first rate will be used which is a buying rate, as the bank is buying the dollars from the exporter. Ø The same case will happen inversely with the importer, as he will buy the dollars from the banks and bank will sell dollars to importer. BASE CURRENCY Even if a foreign currency can be bought and sold in the same way as a commodity but theyre use as a minor difference in buying/selling of currency aid commodities. Unlike in case of commodities, in case of foreign currencies two currencies are involved so, it is necessary to know which the currency to be bought and sold is and the same one is known as ‘Base Currency. BID OFFER RATES The buying and selling rates are also referred to as the bid and offered rates. In the dollar exchange rates referred to above, namely, $ 1.6288/96, the quoting bank is offering (selling) dollars at $ 1.6288 per pound while bidding for them (buying) at $ 1.6296. So in this quotation the bid rate for dollars is $ 1.6296 while the offered rate is $ 1.6288. The bid rate for one currency is automatically the offered rate for the other. In the above example, the bid rate for dollars $ 1.6296, is also the offered rate of pounds. CROSS RATE CALCULATION US Dollar is the most trading currency in the forex market. In other words one support of most exchange trades is the US currency so margins between bid and offered rates are lowest quotations if the US dollar. The margins tend to widen for cross rates, as the following calculation would show. Consider the following structure: GBP 1.00 = USD 1.6288/96 EUR 1.00 = USD 1.1276/80 In this rate structure, we have to calculate the bid and offered rates for the euro in terms of pounds. Let us see how the offered (selling) rate for euro can be calculated. Starting with the pound, you will have to buy US dollars at the offered rate of USD 1.6288 and buy Euros against the dollar at the offered rate for euro at USD 1.1280. The offered rate for the euro in terms of GBP, therefore, becomes EUR (1.6288*1.1280), i.e. EUR 1.4441 per GBP, or more conventionally, GBP 0.6925 per euro. Similarly, the bid rate the euro can be seen to be EUR 1.4454 per GBP (or GBP 0.6918 per euro). Thus, the quotation becomes GBP 1.00 = EUR 1.4441/54. It will be eagerly noticed that in percentage terms the difference between the bid and offered rate is higher for the EUR: pound rate as compared to dollar: EUR or pound: dollar rates. CHAPTER 4: ADVANTAGES OF FOREX MARKET The Forex market is by far the largest and most liquid in the world but also day traders have up to now focused on looking for profits in mainly stock and futures markets. This is mainly due to the restrictive nature of bank-offered forex trading services. There are Advanced Currency Markets (ACM) offers both online and traditional phone forex-trading services to the small investor with minimum account opening values starting at 5000 USD. There are many advantages to trading spot foreign exchange as opposed to trading stocks and futures. These are the some advantages as under. Commissions: ACM offers foreign exchange trading commission free. This is in sharp contrast to (once again) what stock and futures brokers offer. A stock trade can cost anywhere between USD 5 and 30 per trade with online brokers and typically up to USD 150 with full service brokers. Futures brokers can charge commissions anywhere between USD 10 and 30 on a round turn basis. Margins requirements: ACM offers a foreign exchange trading with a 1% margin. In laymans terms that means a trader can control a position of a value of USD 1000000 with a mere USD 10000 in his account. By comparison, futures margins are not only constantly changing but are also often quite sizeable. Stocks are generally traded on a non-margined basis and when they are, it can be as restrictive as 50% or so. 24 hour market: Foreign exchange market trading occurs over a 24 hour period picking up in Asia around 24:00 CET Sunday evening and coming to an end in the United States on Friday around 23:00 CET. Although ECNs (electronic communications networks) exist for stock markets and futures markets (like Globex) that supply after hours trading, liquidity is often low and prices offered can often be uncompetitive. No Limit up / limit down: Futures markets contain certain constraints that limit the number and type of transactions a trader can make under certain price conditions. When the price of a certain currency rises or falls beyond a certain pre-determined daily level traders are restricted from initiating new positions and are limited only to liquidating existing positions if they so desire. The controlling of daily price volatility is the main mechanism but in effect since the futures currency market follows the spot market anyway the following day the futures market may undergo what is called a gap or we can say also in other words the futures price will re-adjust to the spot price the next day. In the OTC market no such trading constraints exist permitting the trader to truly implement his trading strategy to the fullest extent. Since a trader can protect his position from large unexpected price movements with stop-loss orders the high volatility in the spot market can be fully controlled. Sell before you buy: Equity brokers offer very restrictive short-selling margin requirements to customers. This means that a customer does not possess the liquidity to be able to sell stock before he buys it. When initiating a selling or buying position in the spot market a trader has exactly the same capacity in margin wise. In spot trading when you are selling one currency you are necessarily buying another. CHAPTER 5: FOREX EXCHANGE RISK The Risk Management Guidelines are primarily an accent of some good and prudent practices in exposure management. They have to be understood and slowly internalized and customized so that they yield positive reimbursement to the company over time. Any business is open to risks from movements in competitors prices, raw material prices, competitors cost of capital, foreign exchange rates and interest rates, all of which need to be (ideally) managed. Forex Risk Everywhere in the world risk is attached. Without risk there is no gain. Also the FOREX is not risk-free. Like if you are trading with substantial sums of money and there is always a possibility that trades will go against you.Also there are several trading tools so that can minimize your risk and with caution and above all education the FOREX trader can learn how to trade profitably and while minimizing losses. Risks Assuming you are dealing with a reputable broker and there are still risks to FOREX trading. Transactions are subject to unexpected rate changes, volatile markets and political events. Exchange Rate Risk: Exchange rate risk which refers to the fluctuations in the currency prices over a long trading period. The Prices can fall rapidly which are resulting in substantial losses unless and until stop loss orders are used when trading FOREX. And so stop loss orders specify that the open position should be closed if currency prices pass a predetermined level. Stop loss orders can be used in conjunction with limit orders to automate FOREX trading limit orders specify an open position should be closed at a specified profit target. Interest Rate Risk: It can result from discrepancies between the interest rates in the two countries which represented by the currency pair in a FOREX quote. This discrepancy can result in variations from the expected profit or loss of a particular FOREX transaction. Credit Risk: It is the possibility that when the deal is closed one party in a FOREX transaction may not honor their debt and this may happen when a bank or financial institution declares insolvency. The Credit risk is minimized by dealing on regulated exchanges which require members to be monitored for credit worthiness. Country Risk: Country risk is connected with governments that may become involved in foreign exchange markets by limiting the flow of currency. There is more country risk associated with exotic currencies than with major currencies that allow the free trading of their currency. Limiting Risk in your FOREX currency trading system FOREX trading can be very risky but there are ways to limit your risk and financial exposure. Every FOREX trader should have a trading strategy for knowing when to enter and when to ex Forex Market Case Study Analysis Forex Market Case Study Analysis Preface Just as stranger walk on path last arrive at their destination; project work is like a path after walking in which students can gain experience knowledge that can be stepping stone towards their success. It is such a work that enhances each every individual working capacity knowledge. The Importance of Thesis is that it is blending of both theoretical practical knowledge. Through the thesis, I got a golden change to have guidance under professionals senior executives which can definitely be a platform of establishing themselves. During my thesis work I visited AMA Library, Gujarat Chamber of Commerce and SBI which helped us a lot to gain information about Forex derivatives. This opportunist of thesis provided to me was not only a platform to develop enhance my appetite of learning but also served a fusion of the theoretical concept their practical application in corporate world. INTRODUCTION: To make a profit from the forex market of International trade you have a grip on mainly five key factors that affects a currency value. When making our trades we analyze five key factors which are as follows. Interest Rates Economic Growth Geo-Politics Trade and Capital Flows Merger and Acquisition Activity Interest Rates: Interest income and capital appreciation these two methods we can use to make profit from different in terms of countries interest rates. Interest Income. Every currency in the world comes attached with an interest rate that is set by its countrys central bank. All things being equal, you should always Buy currencies from countries with high-interest rates and Finance these purchases with currency from countries with low-interest rates. For example, as of the fall of 2006, interest rates in the United States stood at 5.25%, while rates in Japan were set at .25%. You could have taken advantage of this rate difference by borrowing a large sum of Japanese yen, exchanging it for US dollars and using the US dollars to purchase bonds or cds at the US 5.25% rate. In other words, you could have borrowed money at .25%, lent it out at 5.25%, and made a 5% return.Or you could save yourself all the hassle of becoming a money lender by simply trading the currency pairto affect the same transaction. Capital appreciation. Asa countrys interest rate rises, the value of the countrys currency also tends to rise this phenomenon gives you a chance to profit from your currencys increased value, or capital appreciation. In the case of the USD/JPY spread in 2005 and 2006, as the US interest rates stayed higher than Japans, the dollar continued to increase in value. Investors who traded yen for dollars gained from interest income as well as the US dollars capital appreciation. Economic Growth. Economic Growth is next factor when predicting a countrys currency movements.The stronger the economy, the greater the possibility that the central bank will raise its interest rates in order to the growth of inflation.Andthe higher a countrys interest rates, the bigger the likelihood those foreign investors will invest in a countrys financial markets.More foreign investors mean a greater demand for the countrys currency.A greater demand results in an increase in a currencys value. Hence economic growth inspires higher interest rates inspires more foreign investment inspires greater currency demand which inspires an increase in the currencys value. Geo-Politics. The currency market is the only market in the world that can be successfully traded on political news as well as economic releases.Because currencies representcountries rather than companies and any disturbance to the political landscape will oftentimes affect the direction in which the exchange rate moves. The key to understanding speculative behavior with respect to any geopolitical unrest is that speculators run first and ask questions later.In other words, whenever investors fear any threat to their capital, they will quickly retreat to the sidelines until they are certain that the political risk has disappeared.Therefore, the general rule of thumb in the currency market is thatpolitics almost always trumps economics. Trade and Capital Flows Before ever making a final prediction regarding the movement (or trend) of a particular currency you should determine whether or not the currency is dependent on its countrys capital or trade flow. Capital flow refers to the amount of investment a country receives from international sources. Trade flow is the income resulting from trade. Some countries can be very dependent their capital flow, while other countries are extremely sensitive to trade flows. Mergers and Acquisitions Merger and acquisition activity is the least important factor in determining the long-term direction of currencies. It can be the most powerful force in stagingnear-term currency moves.Merger and acquisition activity occurs when a company from one economic region wants to make a transnational transaction and buy a corporation from another country. For example, a European company wants to buy a Canadian asset for $20 billion, it would have to go into the currency market and acquire the currency to affect this transaction.Typically, these deals are not price sensitive, buttime sensitivebecause the acquirer may have a date by which the transaction is to be completed. Because of this underlying dynamic, merger and acquisition flow can exert a very strong temporary force on FX trading, sometimes skewing the natural course of currency flow for days or weeks. OBJECTIVE: Main Objective is for getting in depth knowledge of my topic. To critically analyze the Forex market of International trade. To analyze the five key factors that moves the Forex market and how to make profit out of them. To analyze the present data and forecasting a future movement of Forex market. METHODOLOGHY: * Introduction of the topic in detail. * For predict market movement I am using two methods like fundamental analysis and technical analysis. Technical analysis includes Candlestick Charts and Moving Averages (Simple and Exponential) SOURCES: Primary source  · Taking interview of the expertise in the Forex market. Secondary source  · Use Books, Magazines, Newspapers, Research papers and Internet as secondary sources LIMITATIONS:  · I have to follow only these five factors for move the Forex market.  · Interview is the only primary research in the Forex market.  · Inflation is the main factor which moves the Forex market but which is not included in the five factors.  · Merger and Acquisition is the least important factor. CHAPTER 1: INTRODUCTION OF FOREIGN EXCHANGE Foreign Exchange is the method or process of conversion/converting one currency into another currency. Currency becomes money and legal tender for a country. But for a foreign country it becomes the value as a commodity. Since the commodity has a value its relation with the other currency determines the exchange value of one currency with the other. It is just the game of supply and demand. For example, the US dollar in USA is the currency in USA but for India it is just like a commodity which has a value which varies according to demand and supply. Foreign exchange is one of the economic activity which deals with the means and methods by which rights to wealth expressed in terms of the currency of one country are converted into rights to wealth in terms of the current of another country. It involves the investigation of the method which exchanges the currency of one country for that of another. Foreign exchange can also be defined as the means of payment in which currencies are converted into each other and by which international transfers are made also the activity of transacting business in further means. Most countries of the world have their own currencies. The US has its dollar, France its franc, Brazil its cruziero and India has its Rupee. Trade between the countries involves the exchange of different currencies. The foreign exchange market is the market in which currencies are bought and sold against each other. It is the largest market in the world. Transactions conducted in foreign exchange markets determine the rates at which currencies are exchanged for one another, which in turn determine the cost of purchasing foreign goods financial assets. The most recent, bank of international settlement survey stated that over $900 billion were traded worldwide each day. During peak volume period, the figure can reach upward of US $2 trillion per day. The corresponding to 160 times the daily volume of NYSE. CHAPTER 2: ORIGIN OF THE FOREX MARKET The FOREX trading traces its history to centuries ago. Different currencies and the need of exchange them had existed since the Babylonians. They are credited with the first use of paper notes and receipts. In that time the value of goods were expressed in terms of other goods which were called as Barter system. The obvious limitations of such a system encouraged establishing more generally accepted mediums of exchange. It was important that a common base of value could be established. In some economies, items such as teeth, feathers even stones served this purpose, but soon various metals, in particular gold and silver, established themselves as an accepted means of payment as well as a reliable storage of value. Trade was carried among people of Africa, Asia etc through this system. Coins were initially minted from the preferred metal and in stable political regimes, the introduction of a paper form of governmental I.O.U. during the middle Ages also gained acceptance. This type of I.O.U. was introduced more successfully through force than through persuasion and is now the basis of todays modern currencies. Before the First World War, most Central banks supported their currencies with convertibility to gold. However, the gold exchange standard had its weaknesses of boom-bust patterns. As an economy strengthened, it would import a great deal from out of the country until it ran down its gold reserves required to support its money. As a result, the money supply would diminish, interest rates escalate and economic activity slowed to the point of recession. Ultimately, prices of commodities had hit bottom and it appearing attractive to other nations who would sprint into buying fury that injected the economy with gold until it increased its money supply, drive down interest rates and restore wealth into the economy. However, for this type of gold exchange, there was not necessarily a Centrals bank need for full coverage of the governments currency reserves. This did not occur very often, however when a group mindset fostered this disastrous notion of converting back to gold in mass, panic resulted in so-called Run on banks. The combination of a greater supply of paper money without the gold to cover led to devastating inflation and resulting political instability. The Great Depression and the removal of the gold standard in 1931 created a serious lull in FOREX market activity. From 1931 until 1973, the FOREX market went through a series of changes. These changes greatly affected the global economies at the time and speculation in the FOREX markets during these times was little. Inorder to protect local national interests, increased foreign exchange controls were introduced to prevent market forces from punishing monetary irresponsibility. Nearthe end of World War II, the Bretton Woods agreement was reached on the initiative of the USA in July 1944. The conference held in Bretton Woods, New Hampshire rejected John Maynard Keynes suggestion for a new world reserve currency in favor of a system built on the US Dollar. International institutions such as the IMF, The World Bank and GATT were created in the same period as the emerging victors of WWII searched for a way to avoid the destabilizing monetary crises leading to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that reinstated The Gold Standard partly, fixing the USD at $35.00 per ounce of Gold and fixing the other main currencies to the dollar, initially intended to be on a permanent basis. TheBretton Woods system came under increasing pressure as national economies moved in different directions during the 1960s. A number of realignments held the system alive for a long time but eventually Bretton Woods collapsed in the early 1970s following president Nixons suspension of the gold convertibility in August 1971. The dollar was not any longer suited as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits. Thelast few decades have seen foreign exchange trading develop into the worlds largest global market. Restrictions on capital flows have been removed in most countries, leaving the market forces free to adjustforeign exchange ratesaccording to their perceived values. TheEuropean Economic Community introduced a new system of fixed exchange rates in 1979, the European Monetary System. The quest continued in Europe for currency stability with the 1991 signing of The Maastricht treaty. This was to not only fix exchange rates but also actually replace many of them with the Euro in 2002. London was, and remains the principal offshore market. In the 1980s, it became the key center in the Eurodollar market when British banks began lending dollars as an alternative to pounds in order to maintain their leading position in global finance. InAsia, the lack of sustainability of fixedforeign exchange rateshas gained new relevance with the events in South East Asia in the latter part of 1997, where currency after currency was devalued against the US dollar, leaving other fixed exchange rates in particular in South America also looking very vulnerable. Whilecommercial companies have had to face a much more volatile currency environment in recent years, investors and financial institutions have discovered a new playground. The FOREX exchange market initially worked under the central banks and the governmental institutions but later on it accommodated the various institutions. At present it also includes the dot com booms and the World Wide Web. The size of the FOREX market now dwarfs any other investment market. Theforeign exchange marketis the largest financial market in the world. Approximately 1.9 trillion dollars are traded daily in theforeign exchange market. It is estimated that more than USD 1,200 Billion are traded every day. It can be said easily that FOREX market is a lucrative opportunity for the modern day savvy investor SHORT INFO OF FOREX The history of FOREX trading was traced centuries ago. Different countries need different currencies and the need of exchange them had existed since the Babylonians. It is said that Babylonians were the first one who used paper notes and receipts. During those days, goods were exchanged for another goods based on the value of both the goods, which was known as barter system. But this system had some limitations and this lead to encourage establishing more generally accepted medium of exchange. It was also important that a common base of value could be established. In some economies, items such as teeth, feathers even stones served this purpose, but soon various metals, in particular gold and silver, established themselves as an accepted means of payment as well as a reliable storage of value. Trade was carried among people of Africa, Asia etc through this system. Coinswere initially minted from the preferred metal and in stable political regimes, the introduction of a paper form of governmental I.O.U. during the middle Ages also gained acceptance. This type of I.O.U. was introduced more successfully through force than through persuasion and is now the basis of todays modern currencies. Beforethe First World War, most Central banks supported their currencies with convertibility to gold. However, the gold exchange standard had its weaknesses of boom-bust patterns. As an economy strengthened, it would import a great deal from out of the country until it ran down its gold reserves required to support its money. As a result, the money supply would diminish, interest rates escalate and economic activity slowed to the point of recession. Ultimately, prices of commodities had hit bottom and it appearing attractive to other nations who would sprint into buying fury that injected the economy with gold until it increased its money supply, drive down interest rates and restore wealth into the economy. However, for this type of gold exchange, there was not necessarily a Centrals bank need for full coverage of the governments currency reserves. This did not occur very often, however when a group mindset fostered this disastrous notion of converting back to gold in mass, panic resulted in so-called Run on banks. The combination of a greater supply of paper money without the gold to cover led to devastating inflation and resulting political instability. The Great Depression and the removal of the gold standard in 1931 created a serious lull in FOREX market activity. From 1931 until 1973, the FOREX market went through a series of changes. These changes greatly affected the global economies at the time and speculation in the FOREX markets during these times was little. Inorder to protect local national interests, increased foreign exchange controls were introduced to prevent market forces from punishing monetary irresponsibility. Nearthe end of World War II, the Bretton Woods agreement was reached on the initiative of the USA in July 1944. The conference held in Bretton Woods, New Hampshire rejected John Maynard Keynes suggestion for a new world reserve currency in favor of a system built on the US Dollar. International institutions such as the IMF, The World Bank and GATT were created in the same period as the emerging victors of WWII searched for a way to avoid the destabilizing monetary crises leading to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that reinstated The Gold Standard partly, fixing the USD at $35.00 per ounce of Gold and fixing the other main currencies to the dollar, initially intended to be on a permanent basis. TheBretton Woods system came under increasing pressure as national economies moved in different directions during the 1960s. A number of realignments held the system alive for a long time but eventually Bretton Woods collapsed in the early 1970s following president Nixons suspension of the gold convertibility in August 1971. The dollar was not any longer suited as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits. Thelast few decades have seen foreign exchange trading develop into the worlds largest global market. Restrictions on capital flows have been removed in most countries, leaving the market forces free to adjustforeign exchange ratesaccording to their perceived values. TheEuropean Economic Community introduced a new system of fixed exchange rates in 1979, the European Monetary System. The quest continued in Europe for currency stability with the 1991 signing of The Maastricht treaty. This was to not only fix exchange rates but also actually replace many of them with the Euro in 2002. London was, and remains the principal offshore market. In the 1980s, it became the key center in the Eurodollar market when British banks began lending dollars as an alternative to pounds in order to maintain their leading position in global finance. InAsia, the lack of sustainability of fixedforeign exchange rateshas gained new relevance with the events in South East Asia in the latter part of 1997, where currency after currency was devalued against the US dollar, leaving other fixed exchange rates in particular in South America also looking very vulnerable. Whilecommercial companies have had to face a much more volatile currency environment in recent years, investors and financial institutions have discovered a new playground. The FOREX exchange market initially worked under the central banks and the governmental institutions but later on it accommodated the various institutions. At present it also includes the dot com booms and the World Wide Web. The size of the FOREX market now dwarfs any other investment market. Theforeign exchange marketis the largest financial market in the world. Approximately 1.9 trillion dollars are traded daily in theforeign exchange market. It is estimated that more than USD 1,200 Billion are traded every day. It can be said easily that FOREX market is a lucrative opportunity for the modern day savvy investor CHAPTER 3: METHODS OF QUOTING EXCHANGE RATES There are two methods of quoting exchange rates. Direct method: For change in exchange rate if foreign currency is kept constant and home currency is kept variable, then the rates are stated be expressed in ‘Direct Method E.g. US $1 = Rs. 45.50. Indirect method: For change in exchange rate if home currency is kept constant and foreign currency is kept variable, then the rates are stated be expressed in ‘Indirect Method. E.g. Rs. 100 = US $ 2.5116 With the effect from August 2, 1993, all the exchange rates are quoted in direct method, i.e. US $1 = Rs. 45.50 GBP1 = Rs. 79.82 Method of Quotation In the Forex market there are two rates like one is for buying and one is for selling rates. This helps in eliminating the risk of being given bad rates i.e. if a party comes to know what the other party intends to do i.e., buy or sell, the former can take the latter for a ride. There are two parties in an exchange deal of currencies. To begin the deal one party asks for quote from another party and the other party quotes a rate. The party asking for a quote is known as ‘Asking party and the party giving quote is known as ‘Quoting party The advantages of two way quote. Ø It automatically ensures alignment of rates with market rates. Ø The market constantly makes available price for buyers and sellers. Ø Two-way price limits the profit margin of the quoting bank and comparison of one quote with another quote can be done immediately. Ø It is not necessary for any player in the market to show whether he intends to buy or sell foreign currency but this ensures that the quoting bank cannot take advantage by manipulating the prices. Ø Two-way quotes lend depth and liquidity to the market and which is very essential for efficient. Ø In two-way quotes for the first rate is the rate for buying and another rate is for selling. We should understand here that in India the banks which are authorized dealers, always quote rates. So the rates quote buying and selling is for banks will buy the dollars from him so while calculation the first rate will be used which is a buying rate, as the bank is buying the dollars from the exporter. Ø The same case will happen inversely with the importer, as he will buy the dollars from the banks and bank will sell dollars to importer. BASE CURRENCY Even if a foreign currency can be bought and sold in the same way as a commodity but theyre use as a minor difference in buying/selling of currency aid commodities. Unlike in case of commodities, in case of foreign currencies two currencies are involved so, it is necessary to know which the currency to be bought and sold is and the same one is known as ‘Base Currency. BID OFFER RATES The buying and selling rates are also referred to as the bid and offered rates. In the dollar exchange rates referred to above, namely, $ 1.6288/96, the quoting bank is offering (selling) dollars at $ 1.6288 per pound while bidding for them (buying) at $ 1.6296. So in this quotation the bid rate for dollars is $ 1.6296 while the offered rate is $ 1.6288. The bid rate for one currency is automatically the offered rate for the other. In the above example, the bid rate for dollars $ 1.6296, is also the offered rate of pounds. CROSS RATE CALCULATION US Dollar is the most trading currency in the forex market. In other words one support of most exchange trades is the US currency so margins between bid and offered rates are lowest quotations if the US dollar. The margins tend to widen for cross rates, as the following calculation would show. Consider the following structure: GBP 1.00 = USD 1.6288/96 EUR 1.00 = USD 1.1276/80 In this rate structure, we have to calculate the bid and offered rates for the euro in terms of pounds. Let us see how the offered (selling) rate for euro can be calculated. Starting with the pound, you will have to buy US dollars at the offered rate of USD 1.6288 and buy Euros against the dollar at the offered rate for euro at USD 1.1280. The offered rate for the euro in terms of GBP, therefore, becomes EUR (1.6288*1.1280), i.e. EUR 1.4441 per GBP, or more conventionally, GBP 0.6925 per euro. Similarly, the bid rate the euro can be seen to be EUR 1.4454 per GBP (or GBP 0.6918 per euro). Thus, the quotation becomes GBP 1.00 = EUR 1.4441/54. It will be eagerly noticed that in percentage terms the difference between the bid and offered rate is higher for the EUR: pound rate as compared to dollar: EUR or pound: dollar rates. CHAPTER 4: ADVANTAGES OF FOREX MARKET The Forex market is by far the largest and most liquid in the world but also day traders have up to now focused on looking for profits in mainly stock and futures markets. This is mainly due to the restrictive nature of bank-offered forex trading services. There are Advanced Currency Markets (ACM) offers both online and traditional phone forex-trading services to the small investor with minimum account opening values starting at 5000 USD. There are many advantages to trading spot foreign exchange as opposed to trading stocks and futures. These are the some advantages as under. Commissions: ACM offers foreign exchange trading commission free. This is in sharp contrast to (once again) what stock and futures brokers offer. A stock trade can cost anywhere between USD 5 and 30 per trade with online brokers and typically up to USD 150 with full service brokers. Futures brokers can charge commissions anywhere between USD 10 and 30 on a round turn basis. Margins requirements: ACM offers a foreign exchange trading with a 1% margin. In laymans terms that means a trader can control a position of a value of USD 1000000 with a mere USD 10000 in his account. By comparison, futures margins are not only constantly changing but are also often quite sizeable. Stocks are generally traded on a non-margined basis and when they are, it can be as restrictive as 50% or so. 24 hour market: Foreign exchange market trading occurs over a 24 hour period picking up in Asia around 24:00 CET Sunday evening and coming to an end in the United States on Friday around 23:00 CET. Although ECNs (electronic communications networks) exist for stock markets and futures markets (like Globex) that supply after hours trading, liquidity is often low and prices offered can often be uncompetitive. No Limit up / limit down: Futures markets contain certain constraints that limit the number and type of transactions a trader can make under certain price conditions. When the price of a certain currency rises or falls beyond a certain pre-determined daily level traders are restricted from initiating new positions and are limited only to liquidating existing positions if they so desire. The controlling of daily price volatility is the main mechanism but in effect since the futures currency market follows the spot market anyway the following day the futures market may undergo what is called a gap or we can say also in other words the futures price will re-adjust to the spot price the next day. In the OTC market no such trading constraints exist permitting the trader to truly implement his trading strategy to the fullest extent. Since a trader can protect his position from large unexpected price movements with stop-loss orders the high volatility in the spot market can be fully controlled. Sell before you buy: Equity brokers offer very restrictive short-selling margin requirements to customers. This means that a customer does not possess the liquidity to be able to sell stock before he buys it. When initiating a selling or buying position in the spot market a trader has exactly the same capacity in margin wise. In spot trading when you are selling one currency you are necessarily buying another. CHAPTER 5: FOREX EXCHANGE RISK The Risk Management Guidelines are primarily an accent of some good and prudent practices in exposure management. They have to be understood and slowly internalized and customized so that they yield positive reimbursement to the company over time. Any business is open to risks from movements in competitors prices, raw material prices, competitors cost of capital, foreign exchange rates and interest rates, all of which need to be (ideally) managed. Forex Risk Everywhere in the world risk is attached. Without risk there is no gain. Also the FOREX is not risk-free. Like if you are trading with substantial sums of money and there is always a possibility that trades will go against you.Also there are several trading tools so that can minimize your risk and with caution and above all education the FOREX trader can learn how to trade profitably and while minimizing losses. Risks Assuming you are dealing with a reputable broker and there are still risks to FOREX trading. Transactions are subject to unexpected rate changes, volatile markets and political events. Exchange Rate Risk: Exchange rate risk which refers to the fluctuations in the currency prices over a long trading period. The Prices can fall rapidly which are resulting in substantial losses unless and until stop loss orders are used when trading FOREX. And so stop loss orders specify that the open position should be closed if currency prices pass a predetermined level. Stop loss orders can be used in conjunction with limit orders to automate FOREX trading limit orders specify an open position should be closed at a specified profit target. Interest Rate Risk: It can result from discrepancies between the interest rates in the two countries which represented by the currency pair in a FOREX quote. This discrepancy can result in variations from the expected profit or loss of a particular FOREX transaction. Credit Risk: It is the possibility that when the deal is closed one party in a FOREX transaction may not honor their debt and this may happen when a bank or financial institution declares insolvency. The Credit risk is minimized by dealing on regulated exchanges which require members to be monitored for credit worthiness. Country Risk: Country risk is connected with governments that may become involved in foreign exchange markets by limiting the flow of currency. There is more country risk associated with exotic currencies than with major currencies that allow the free trading of their currency. Limiting Risk in your FOREX currency trading system FOREX trading can be very risky but there are ways to limit your risk and financial exposure. Every FOREX trader should have a trading strategy for knowing when to enter and when to ex