Legal Issues

Law and morality are two concepts that are ideally mutually exclusive yet morality affects law adversely as well as positively. Despite the fact that presumptions such as what is legal can be comprehended as befitting the norms that are spelt out in a given societies morality, such presuppositions turn out to be wrong and as such, come about as simplistic. However, morality remains the basis of harmonious existence between enterprise and the community as well as between businesses themselves. This is because businesses though being separate legal entities that stand on their own, are dependent on human force for their prosperity. It therefore follows that divorcing human factors which are ideally social factors from business practice would yield disastrous results. As such, morality in business practice is absolutely critical in defining success in an enterprise.  For instance, it would be significantly immoral to stand by while a man is in danger yet one is in a position to salvage the situation though legally, they are not obligated to do so. Similarly, in business enterprise there is a moral question in regards to legal business practices such as failing to fulfill a promise which ideally is not legally binding. Problems in contract law arise as a result of various reasons. These are mistakes, misrepresentations, undue influence and illegal contracts. A misrepresentation, as Cheshire, Furmston and Fifoot (2007) observe is a sham declaration of facts which is made by one party to a contract. This declaration is primarily made prior to or after the contract whereupon the purpose that the individual to whom the statement is made acts upon the said representation and as such heshe does so act. Plaintiffs in misrepresentations must have endured damage from the misrepresentation. Misrepresentation can also be as a result of conduct which may be written or oral. We will now assess two cases with regard to contract law.

Case One
Pennzoil and Getty Oil, in early 1984 entered into a contractual agreement in a merger. But prior to signing formal documents, Texaco brought a better offer on the table for Getty Oil whereupon Gordon Getty who owned a majority of the companys shares rescinded the Pennzoil deal and agreed to accept Texaco as a partner. Naturally, Pennzoil did not agree with the resulting scenario as it felt offended and unfairly treated. Consequently, it filed a lawsuit against Texaco in which it alleged that the latter had illegally interfered in its negotiations with Getty Oil. Ultimately, Pennzoil won the case. In late nineteen eighty five the company was granted 11.1 billion dollars, which in the case of America was the largest judgment ever. The court of appeal reduced the amount by two billion dollars but because of penalties and interests the amount shot back to 10.3 billion dollars.  

Texacos C E O James Kinnear had commented that the company would file for bankruptcy in the event that Pennzoil was granted permission by the court to secure the judgment through filing of liens against the companys assets. The C.E.O had promised to face his opponents up to the Supreme Court level if the circumstances demanded so through arguing partly that Pennzoil did not adhere to SEC set regulations in the companys negotiations with Getty. In April nineteen eighty seven, on the brink of Pennzoil filing of liens, Texaco offered to compensate Pennzoil two billion dollars in settlement of the whole case. Pennzoils Chairman, Hugh Liedtke, pointed out that advisors of the company had notified him that an ideal settlement should be within the range of three to five billion dollars. Consequently, Pennzoil chairman, Liedtke, turned down Texacos offer of two billion and within a number of days, and only a single day to filing of liens on Texacos assets, the company (Texaco) filed for protection from its creditors as outlined in Chapter eleven of the United States bankruptcy law. Later, in 1987 Pennzoil submitted a plan for financial reorganization on behalf of Texaco. Under the plan Texaco would have paid a sum of 4.1 billion dollars to Pennzoil. In the end, prior to Christmas 1987, as observed in The Washington Post (1987) the two companies agreed on a settlement of three billion dollars which was part of Texacos reorganization financially.

Case Two
On May 21st in 2004, UFJ Group and its business counterpart Sumitomo came into agreement for business co-operation which was in fact the buying of UFJ Trust by Sumitomo Trust. The primary contract that was agreed by both companies contained various provisions. The contract stated that both parties were to be based on results of legal matters as well as review of business in addition to accounting. The parties contract was also based on each companys investigation and subsequent confirmation by the relevant bodies whereupon through good faith negotiations each party was to execute a basic contract which was to provide details of their corporation and henceforth enter into a contract with a target date set at the end of July 2004. The agreement also provided that each of the parties in the agreement, primarily the two companies, was barred from disclosing either indirectly or directly, any information of either company moreover, negotiations with third parties were also barred with regard to transactions that were thought to affect the aim of the basic agreement, which though did not spell out in its form a specific statute that enabled the two companies to execute the final contract. Moreover, the contract did not also spell out measures that were to be taken against a partner that was in breach of the contract. Later UFJ presented written notification to Sumitomo instructing Sumitomo to terminate the Agreement whereupon it ended the negotiations and restrained from executing the final contract. UFJ later proposed a business partnership to MTFG. Sumitomo sued UFJ Group for damages and asked to be compensated monetarily with a sum within the range of 100 to 233 billion yen. The court rejected this offer as observed in The Nihon Keizai Shimbun (2003).     

To arrive at conclusions for both cases of Pennzoil and Texaco as well as UFJ Group and Sumitomo, the question that guides my arrival at what ought to have been the courts decision is guided by the question of whether the corporation is a moral organization. In the law, the corporation is an individual and as such, distinct in its personality from the person who bears its ownership. Additionally, the corporation is also distinct from the individuals that carry out activities on its behalf. These are its directors as well as officers and other employees. This implies that companies are separate business entities which stand as persons and as such they are obligated to adhere to moral principles that govern societies. The violations in the contracts that regard the four companies involve not only the law but laws that have stemmed out of ethics. As such, the basis of arriving at conclusions to their cases should have invoked ethical theories as opposed to legal laws. If the organization was perceived as an individual the conventions it had violated pertains to the morality that governed those individuals and as such it called for invoking ethical principles to guide the final decisions. As such, the following principles and their derived decisions should have been followed.

Ethical relativism is a theory that can be used against the courts case. In this doctrine individuals judge their actions by what they feel is right or wrong for them. It propagates that all the disagreeing parties with regard to a moral question are ideally correct because in essence morality is relative. What this principle renders in the case of Pennzoil and Texaco as well as UFJ Group and Sumitomo Trust is the fact that ideally all the organizations were both right in their intentions. As such, Texacos agreement with Getty Oils was motivated by the companies need to maximize its profit as well as ensure returns on its stakeholders investments. These objectives would only be yielded in the event that the company came into agreement with Getty Oil and as such increase productivity through the opportunity acquired from partnership with Getty Oil. The court should not have ruled against Texaco as these are good motives. Moreover, according to ethical relativism, businesses as separate legal entities that enjoy rights as citizens can not be wrong. It therefore follows that the courts decision to find Texaco in violation of the Law was flawed as it was derived from wrong standards of decision making that were irrespective of ethical relativism.

If we are to argue in the perspective of Pennzoil, we also find Pennzoil to be right in its own sense but it is also worth observing that since ethical relativism finds everybody to be right, Pennzoil should not have found Texaco in violation of anything. This is because it lacks ground on which to stem the validity of its concern as according to ethical relativism everybody is right. The courts ruling that Pennzoil was to be compensated by Texaco was thus wrong. In the case of Sumitomo Trust and UFJ Group, the derived decision should also have borne resemblance to what was analyzed above. As such Sumitomo was not posited to define UFJs withdrawal from their prior engagement as wrong. It was bound by ethical relativism to find UFJs withdrawal as right. The deficiency of this principle of ethical relativism is its characteristic of deriving anarchy as everybody perceives hisher inclination to be right and as such there fails to have a clear premise structure that can be used to arrive at a meaning. This makes ethical relativism to some extent deficient in arriving at an efficient decision. As such it calls for analyses of whether utilitarianism can be used. 

The second principle of ethics that I invoke in analyzing the two cases is utilitarianism. This concept assesses good as well as evil in terms of the consequences of actions taken.  As such, the underlying rule behind this principle is the concept of decision and consequence. Whether the decision is right or wrong is judged by the consequences the said decision yields. As such those actions that derive the greatest pleasure for the greatest number of persons are conceived as morally right. If we were to define the people in the context of Texaco and Pennzoil as well as UFJ Group and Sumitomo Trust we have to define these people as the stakeholders of these companies. These stakeholders include both external as well as internal stakeholders. They range from employees, investors, customers, business partners as well as the surrounding communities that benefit both directly and indirectly from the companies.

There are two aspects to utilitarianism with regard to these cases. First is the fact that, if the decision by Texaco to come into contract with Getty Oil was meant to be of benefit to a majority of people as compared to Getty Oils contract with Pennzoil, it would follow that Texaco would not have been wrong. But in the instance where the benefit derived from the contract between Pennzoil and Getty Oil was immense when compared to that of Getty Oil with Texaco, Pennzoil had grounds to seek compensation because ideally, Texaco was wrong. The second issue regards the courts decision. The courts decision should have been based on the number of stakeholders each company had. As such, if Texaco was a bigger company that upon a decision not in its favor being made would have impacted negatively on a majority of people as compared to Pennzoil, it would have followed that such a decision would have been wrong. Much is the case for UFJ Group and Sumitomo. If the benefits of Sumitomos contract with UFJ Trust superseded the contract benefits between UFJ and MTFG, bearing the people that were posited to benefit from these contracts, it would follow that UFJ was in violation and as such it was obligated to compensate Sumitomo.

These benefits in the said companies also regard the concept of cost-benefit analysis. In this concept, businesses pursue strategies that lower business operational cost but consequently derive colossal produce. Through such a strategy the businesses are able to produce the greatest pleasure to its stakeholders as a result of increased return on investment. The increased return on investment ideally implies that there is more money that can be used by the greatest number of people who constitute the companies stakeholders for their greatest pleasure. If Texacos motives were driven by cost benefit analysis, it would follow that its business venture was moral and as such the courts decision to find it liable for contractual relationship with Getty Oil to derive this cost-benefit analysis would be flawed. Much is the same case for Pennzoil as well as UFJ Group and Sumitomo Trust. This concept of utilitarianism lacks in given senses. Firstly, the court could not have used it because defining pleasure, a concept that is totally subjective, implies that amassing an overall definition of what is pleasurable to a compact majority with regard to the beneficiaries of this pleasure is absolutely impossible. This means that the principle can not define what was pleasurable to be one thing, monetary benefits, and amass it on all respective potential beneficiaries of the said companies. This leads to Deontological theories.

The theory of deontology purports that underlying principles can be wrong or right irrespective of calculations that posit given actions as pleasurable or painful. As Such, they address the deficiency wrought in utilitarianism through holding the postulation that actions ought to be judged by their intended motives and the means they use to arrive at these motives. This Kantian theory is the basis of my deriving conclusions to the two cases. Kants two proposals aid my final conclusions. Firstly, Kant proposes that individuals and companies should act only by adhering to a given maxim which at that time has the potential to agree with conventionally embraced norms. Secondly, companies have the obligation to respect the autonomy as well as rationality of others whereupon they should strive to desist from treating other companies as expedient.

Primarily my conclusion to the above cases is that Texaco by virtue of being a separate legal entity that qualified as a person had the obligation to embrace moral conventions that were conceptualized and practiced universally. One such norm was fairness in dealings. Because Pennzoil was already in contractual agreement with Getty Oil, Texaco was obligated to restrain dealings with Getty Oil by virtue of the fact that, in fair dealings, one is not supposed to invoke hisher immense financial resources to put another party out of contention. This is a universally agreed moral principle and as such the case against Texaco. Secondly, I propose the Kantian principle as described above. As such, Texaco can not realistically state for a fact that its treatment of Pennzoil, by going behind Pennzoils back to seek business partnership with Getty Oil is an action that it had no problem with if Pennzoil or any other given company pursued the same course of action against it. As such, the punishment through compensation that the company was subjected to is valid with regard to the use of deontology as the standard of assessment.  Using deontology as the standard of assessment of the case that involves UFJ Group with Sumitomo Trust, deontology posits UFJ as the wrong doer. This is because it is a universally agreed norm that people in this case companies, are obligated to keep their word. This implies that UFJ had to abide by the contract it had with Sumitomo and thus, it was supposed to be fined heavily for going against this standard.