NOTE: The shipping terms will also determine who pays the tariff when the dolls enter the U.S. That will be important to both sides, because the Chinese company will want Mattel to pay and the Mattel will want the Chinese to pay.

Information for the Buyer, Mattel, Inc. Mattel is the worldwide leader in the design, manufacture and marketing of toys and family products. The Mattel family is comprised of such bestselling brands as Barbies, the most popular fashion doll ever introduced, Hot Wheels, Matchbox, American Girls, and Radica, as well as Fisher-Prices brands, including Little Peoples, Power Wheels and a wide array of entertainment-inspired toy lines. Mattel is recognized as one of 2008s 100 Best Companies to Work For by FORTUNE Magazine, among the 100 Most Trustworthy U.S. Companies by Forbes Magazine and is ranked among the 100 Best Corporate Citizens by CRO Magazine. Committed to ethical manufacturing sustainable business practices, Mattel marked a ten-year milestone in 2007 for its Global Manufacturing Principles. With global headquarters in El Segundo, Calif., Mattel employs more than 30,000 people in 43 countries and territories and sells products in more than 150 nations. Mattels vision is to be the worlds premier toy brands today and tomorrow. (Source: International Center for Corporate Accountability) For additional information, see Mattels official Web site at http://mattel.com.

THE MANUFACTURER/SELLER: SHENZHEN UNION KING INDUSTRIAL CO., LTD.

Union King is a plastic toy manufacturer located in Shenzhen (Guangdong Province) China. Founded in 1990, it is located close to Hong Kong, convenient for both transportation and foreign trading. Union King has been known for many years in the plastics development field and has a good reputation. It is capable in research, development and production of all kinds of plastic toys, electronic toys, vinyl figures, action toys, and promotional toys. The factory has full production lines for injection, rotocasting, painting, and silk-screening. The company adheres to the principle of credit, efficiency, good quality, and creativity, to provide the best service to its customers. Union King has established business relationships with customers from all over the world, especially in Japan, Italy, the USA, Korea, Taiwan, Indonesia, and China. Additionally, it claims to have a very good reputation with and full support from the Chinese local government.

KEY INFORMATION ABOUT THE TOYS AND TRANSACTION:

In 2007, following a series of problems with manufacturers in China, Mattel is very careful about selecting vendors. It currently desires to contract with a new vendor for the manufacture of a new line of toys, which must be in full compliance with Mattels Global Manufacturing Principles, which are available at https://corporate.mattel.com/about-us/GMP-PrinciplesOverview.pdf

Mattel is concerned about Union Kings self-characterized good reputation and full support of the local government to the extent that this could signal potential problems with bribery of local officials.

Mattel seeks a vendor to manufacture a series of colorful plastic action figures designed to appeal to girls ages four to eight. Your team should design a prototype of the doll to show Union King to determine if it is feasible to manufacture the design. Ideally, the line of dolls will expand, introducing a new doll every six months for two years. Mattel, however, would prefer not to get locked into a long-term contract with Union King until it feels comfortable with the quality of Union Kings manufacturing.

The dolls should be similar in size to Mattels Avatar Navi Neytiri action figures and convey a strong role model message for young girls.

Mattels plan is to introduce a million action figures into the marketplace to hype the product for holiday sales, hoping that the figures will be one of the seasons hottest sought-after items.

Estimated retail price for each action figure: $11.99 (similar to the Avatar figures). Mattel would prefer to keep the retail price under $12.

Approximate cost to manufacture the current line of Avatar figures: approximately $2.50.

Other cost considerations: shipping & insurance ($50 to ship a case of 100 dolls), marketing (about 5% of the contract price), wholesale price and profit.

Also consider: What cultural differences could affect your negotiations?

CONTRACT DRAFTING CHECKLIST:

Are all terms sufficiently definite in the contract (description, price, quantity)? What are the packaging details? How will payment be made? What currency will be used? (Check the value of the dollar vs. Yuan and recent trends.) When is payment due? (My note: The exchange rate and trends may impact the currency that is chosen in this contract) What are the terms of delivery? Who bears the risk of loss? (This relates to the UCC material) Who is paying for shipping costs? (If shipping terms are used, then this is automatic in the terms, but you need to understand that) What warranties will be made? Goal: very detailed warranties to avoid previous problems with lead paint and design deficiencies. What law will govern the contract? What forum will hear any disputes? This is were you would put the arbitration agreement that you created earlier. HOWEVER, it must be changed to meet this contract, and some terms in it may be up for negotiation (such as location, etc.) Therefore, you must negotiate those terms and put them into the agreement. Is intellectual property adequately protected? Is Union King prevented from manufacturing knock-offs? Can Mattel limit Union King from manufacturing for competitor companies? Are potential public relations nightmares over recalls, labor issues, etc. avoided? Have you addressed all problems you can envision from the factory to the playroom?