Strategies for Depository Companies in Financial Crisis

Strategies for Depository Companies in Financial Crisis Introduction The development of capital markets is highly dependent on the activities of related securities market infrastructure institutes that include, inter alia, depository companies engaged in provision of the services for record-keeping of entitlements under securities (registration and transfer of rights to securities), collection of coupon and dividends (payable income) arising from the portfolios, facilitation of corporate actions processing (such as tender offer, proxy voting, buy-backs), and other services. This study focuses on the issues and relevant remediation steps applicable to depository companies being integral part of the stock market infrastructure. Recent volatility in the stock markets provided a positive impetus to change the business model of depository companies. Securities market participants seek to use the services of depository companies as an additional measure of protection for a significant amount of assets and portfolios. Moreover, the market is shrinking and brokerage houses are going bankrupt that also boosts customers desire to move their assets to specialized players in depository business by establishing direct relations. Nevertheless, the global turmoil has affected the research market segment resulting in rapidly decreasing value of assets under custody, reduction of on-exchange and OTC trading volumes, and redistribution of portfolios of assets by risk-averse investors seeking alternative strategies in times of crisis. Keywords: capital market, strategic alternatives, competitive strategy, depository services. The objective of the research paper is to identify the key strategic options that would increase economic profit of the depositories’ organizations amid ongoing financial crisis. Effectively, we would like to develop and propose different approaches towards the companies’ strategic options aimed at defining current condition, future growth factors and drivers for relatives companies of the market segment. The findings section of the research paper describes most topical problems that depository companies are currently facing in Russia. The economic value drivers are identified and can be used to translate them into the economic profit model of depository companies. Furthermore, the main strategic options are identified to highlight client portfolio rebalancing opportunities in the market segment. Methodology The methodological base of the research paper is based on the analysis of data and information available in public sources, and made through desk study, along with the opinion expressed by the market experts. The following sources of information were used for different sections of the report: Legal framework: federal laws on securities and custody operations, information on securities market volumes and other statistics was retrieved from the Russian National Association of Securities Market Participants (NAUFOR) and the Central Bank of Russia (CBR) official web-sites, the official publications and documents of the Federal State Statistics Service (Rosstat), and the Ministry of Economic Development; The problems were identified through interviews conducted with securities market specialists in Russia; Securities services sector development: the data was retrieved from annual NAUFOR Russian Stock Market. Facts and Events survey of 2014. The research paper is represented by six chapters that include introduction, methodology, the main part – hypothesis, findings, conclusion, footnotes and bibliography. Hypotheses We suggests the following hypotheses to be tested in the course of empirical research: Hypothesis 1: The growth strategic alternative (merger / acquisition, and integration / alliance) is winning in terms of achieving the objectives set by the company during crisis. Criteria: Cost-saving through synergies with other small providers; introduction of new product offering. Hypothesis 2. Companies that apply product expansion strategy instead of infrastructure needs can be more effective during crisis times, create competitive advantage and fulfill the objectives of the company. Criteria: The presence / absence of the relation between the degree of product diversification of the company (interoperability with the Central Depository, Central Counterparties, communication standards) with product standardization. Hypothesis 3. Depositories companies prone to invest in quality assurance (service organization), rather than implement cost reduction strategies. Criteria: The presence / absence of large market players, including investment funds and wealthy individuals. Characteristics of the research object Object depository companies that provide services to broker / dealers, investment funds, private individuals and other depositories. Characteristics and features of the market segment: Approximately 570 companies. From 15 to 80 employees. Revenue from 0.1 to 5 million dollars a year. Clients local and foreign residents. Entry barriers – licensing requirements, IT technology, staff competencies. Large number of small companies with a small scope of operations and market share. Trend towards consolidation of businesses. The market segment of the securities market industry has a number of distinctive features that influences application of discussed strategic alternatives in the crisis. Findings The current global financial crisis requires depository companies to respond quickly to all macro-environment changes and stay competitive player with large amounts of assets deposited. The securities services are fairly stable line of business, where the client portfolio (equities and fixed income instruments) size is crucial and steady income for the maintenance would facilitate the development of the company. However, the depositary companies are affected by unstable situation, which is observed in the stock market in recent years. Therefore, we would like to see new threats and opportunities that have emerged recently. We analyze the strategies of corporate governance of companies affected by the financial crisis on this basis, the following assumptions that were designated for the research paper: We assume that all actions are undertaken in the interests of the stakeholders of the company or business. Set of strategic alternatives designated for the management in order to adjust the companys goals, drivers and incentives. It should be aimed at achieving long-term stability and development of the companys competitive advantages. We offer three strategic alternatives focused on the development of depository companies. Strategic integration opportunity is aimed at further increasing the scale of production for the purpose of reducing the share of the unit cost. The implementation of the strategic alternative is expected to be done either by improving production processes or acquiring other depositary companies of market segment for the purpose of achieving the economy of scale. The strategy also suggests the possibility of further acquisitions and development of the most profitable depositary companies of the group. The strategy of product expansion in companies offering depository services promote the interests of customers and investors in attracting new portfolios. This strategy, however, requires a systematic approach and professional competence to be successful. The Russian capital market has grown rapidly over the last 15 years, but the securities market infrastructure could not keep up the pace. Effectively, depository companies that had specialized in improving the securities market infrastructure of the stock market, promoting new electronic document interchange, new product offering and interconnection services, can achieve success in the crisis. Given the opportunity to work with local authorities on the development of the securities market infrastructure in the long term they can lead to key roles in the value chain. These depositories companies has a fundamental knowledge and significant resources to identify and resolve discrepancies in connection with the accelerated development o f the stock market. The strategic alternative of the service organization if they can meet service level claimed by sophisticated investment funds, private individuals and global custodians forced by the credit crunch to hold their assets through depository companies using them as extra protection during the financial crisis. For depository companies, there are many opportunities to retain these customers and grow the business, if they can agree and guarantee services that their customers demand. Nevertheless, many questions arise when thinking about the possibility of service in the framework of this strategy, there is no innovation component. It may be difficult to implement such a strategy for large depository companies whose business models are based on cost reduction and unification of services provided. However, the innovative component cannot be a panacea for all the ills in the short term. The decisive role is played by the demand and requirements of the customers and investors, and also monitor ing and control regulatory bodies. Business model of depository companies are highly dependent on the cost of fees for safekeeping as a percentage of total assets in custody, as well as fees for each transaction in securities. Probably the situation could become worse, given the negative reaction from politicians and regulators in light of the financial crisis. One of the key areas which will have an impact on the financial services sector is information transparency. Stagnation of business activity in the stock market has provided many opportunities for depository companies, and put some pressure on the volume of investment and resources management companies. Business and operational models were tested under the conditions subject to increased demands of customers in the pursuit of improving the quality of service and flexibility of services provided. The rapid reduction in the value of client assets under custody put pressure on revenues and spending in order to remain profitable. Conclusion The practical conclusions of the study can be summarized as follows: The specific strategic alternatives have been formulated for depository companies acting in a financial crisis. Each option describes opportunities and focus group, and is presented as optimal one for the company with certain level of expertise and specific client types. Each of the strategic alternatives is aimed at selected market participants and shall provide opportunities to survive, improve operational activities, and also to strengthen their position in the market segment. In conclusion, we notes that at the present time, when the whole world is deepening the financial crisis, more and more companies risk losing their ability to pay. Accordingly, it is necessary to pay more attention to the anti-crisis strategy of corporate governance. Bibliography Rubcov B.B. Modern Financial Markets M.: Alpina Business Books, 2007. – 926 p. Clearnet. Rules conditions for clearing house membership. Paris, 2000.-p. 114 Group 30. Report of Committee on Interbank Netting Schemes of the Central Banks of 2005 www.cbr.ru/sbrfr CBR legal framework, financial market participants, market statistics www.naufor.ru NAUFOR Russian Stock Market Fact Book 2014 www.gks.ru – Federal State Statistics Service. www.ved.gov.ru – The Ministry of Economic Development of the Russian Federation. 1

Morality †Macbeth Essay

Morality is the reference to codes of conduct that are brought forward by a society. It is evident in the play Macbeth that making moral decisions is superior to making immoral choices. In the end of the play the result of the characters moral and immoral choices all comes to fruition. Consequently the actions of those who acted morally dealt with their situation much better than those who did not. Morality is the reference to codes of conduct that are brought forward by a society. It is evident in the play Macbeth that making moral decisions is superior to making immoral choices. In the end of the play the result of the characters moral and immoral choices all comes to fruition. Consequently the actions of those who acted morally dealt with their situation much better than those who did not. There were some characters in the play that knew exactly what was right and wrong, but still chose to ignore their integrity. Lady Macbeth demonstrates immoral behavior throughout the whole play which results in a tragic conclusion for everyone. For instance, she devised the plan to kill the king knowing very well that it was wrong to do so. In addition, she was tempted by the opportunity for power and convinced Macbeth to go along with the plan even though he was thinking about not doing it. â€Å"What beast was’t, then, /That made you break this enterprise to me? / When you durst do it, then you were a man;† (Shakespeare. 1. 7. 48-50). Macbeth was mainly depicted in the play to be immoral however he did seem to have some good morals in the beginning. He was perceived as a great warrior and was thought so highly of that Duncan granted him the title of Thane of Cawdor. Throughout the rest of the play there is a decline in Macbeth’s character after he immorally killed the King for no good reason other than power. â€Å"I am settled, and bend up/ Each corporal agent to this terrible feat. † (Shakespeare 1. 7. 80). This decision sparked a whole bunch of murders which resulted in a catastrophic ending for both Macbeth and his wife. There is some evidence in the play that would suggest that acting immorally will bring you good results. For instance, Macbeth knew that he would not become king since Duncan already revealed that his son Malcolm would be the imminent king. In order to fulfill the ambition that he was feeling he knew he had to act immorally. This turned out to be a great decision because Macbeth ended up with what he wanted which was to become the king. â€Å"Thou has it now: king, Cawdor, Glamis, all. † (Shakespeare. 3. 1. 1). Although Macbeth did get what the witches prophesied, the immoral behavior had its consequences. For example, towards the end of the play everything had turned against him including his own people and his wife committed suicide. â€Å"The Queen, my lord, is dead. † (Shakespeare 5. 5. 17). In Macbeth it is very blatantly depicted that choosing to indulge in immoral behavior will result in negative consequences. It is apparent at the end of the play that all of the immoral actions that took place resulted in a very disastrous ending.

Internal and External Factors affect the four functions of management Essay

Internal and External Factors Affecting the Four Functions of Management In relation to the four functions of management, there are several internal and external factors that affect an organization’s success. Using DaVita, Inc. as an example, we can look at each internal factor that would affect the function of management and the external factors. Internal factors would include ethics, innovation and diversity while external factors would include globalization and technology. When we look at why DaVita would consider globalization, we would need to consider the external factors that created this need. In general, when a company looks outside of the country for support it is watching what the competitors are doing. DaVita has found an area where they can run their clinics much more economical. The cost for labor is less which is their highest cost of operation. They also need to consider they have tapped most of the resources available in the United States for growth. They need new areas to continue to grow and dialysis is a global disease. They saw an opportunity with providing high quality dialysis in the less fortunate areas in the world that do not provide that currently (Travis, 2012). DaVita sat down and began the plan of expanding for this purpose. After they specified the goal and thought of the appropriate actions to get there, the next step was to organize. They needed to find a way for everyone to work together to make this a successful transition. The executives began the campaign to lead the group to their vision by helping everyone see what they saw. Only if everyone was on the same page, would this be successful. The support of the public is necessary in order to get through any scrutiny this may cause. After they were able to implement their idea, it was time to control the plan and determine if it was successful or not. The clinical model that DaVita provides to these other countries make this more affordable to the general population and is proven to be able to serve from the current 6% of kidney failure patients to  20-30% (Peerzada, 2012). This would be a significant success for DaVita to accomplish their plan of providing this service to areas that cannot provide this service. In reference to diversity, DaVita is a company that operates in eleven countries in addition to the United States. They deal with diversity on a daily basis. As individuals in the company start to plan their next goal, evaluating who uses thei r service is key. The ideas need to be innovative but also needed by the customer. The target audience is people with kidney failure, but from any nationality. This is key when deciding how customers will pay for the service as well as how to market to them. When management is organizing their plans they must consider where they will get the resources to accomplish this. Moving forward will be challenging when dealing with such a diverse group. Language barriers, culture, cultural norms and resource availability to name a few of the things that need to be considered. When DaVita moves forward with the idea, having effective diverse leaders will prove most valuable. Leaders must posess the ability to communicate with a variety of people. Placing people in various locations is key, and having employees trained in diversity, cultural norms and each countries policy’s. When doing business around the globe, leaders need the ability to motivate someone from China as well as India without violating their beliefs or values. Also leaders need to find a common ground with their staff as well as lead the staff to working as a team. Monitoring such a diverse group will be challenging but also rewarding. The goals set at the beginning of the project will need to be realistic as well as based on each countries health care options. As change needs to happen, they must recognize this and have the right person in place to make those changes will be key. Having a diverse group can bring various insight to a team. An organization must be able to embrace this insight and experience to allow the company to prosper. Using technology effectively can improve and at the same time be inconvenient in the work place. Stress level can rise in employees when the innovation of technology is introduced. Dedicated employees must learn new abilities. They are usually forced to gain skills involving their judgment, when and how to best use technology. Some can see technology as a positive improvement, others can over due the use and become workaholics since there is flexibility that applies and they can even work from home. Advanced and efficient service is a cause of stress in some  employees. The internet has become an impact not just for business but also by individuals. DaVita has made many dedicated changes in their technology some affecting their job performance. Some of their equipment has been changed for better usage and process improvement. As an organization, they focus on the studies and protocol that provide resource of disease and cancer indicators. Chief Executive Officer, Jim Joyce, was selective when the pioneer development of the use of therapeutic filtration devices addressed infectious diseases, cancer and other life-threating conditions. They presented research o nce they were cleared by the FDA of their device. This company was presented the opportunity to change their equipment for better usage and productivity. Referring to innovation, Davita finds consistent dedication to differentiate itself from other kidney companies. With hard work from each employee they use innovative skills and teamwork. The interesting message that I learned from reading DaVita’s website is the word DaVita is italian for â€Å"giving life â€Å". It is a company that specifically treats for kidney health. Regardless of the size, all organizations use and develop ways to manage with tact, strategy and decision-making. They use the four functions of management such as planning, organizing, directing, and controlling. Of the many health care companies that are part of the fortune 500, DaVita is one healthcare provider that brings variety. It provides variety of health care service to patient populations through the United States and abroad. Striving to improve patient’s quality of life and innovative clinical care they were able to offer integrity in treatment plans. This company serves 73 outpatient dialysis centers located in 10 countries outside the United States. They actually focus on programs that are dedicated to bring positive changing communities around the world. DaVita is inv olved in leadership programs that help develop innovation as a part of their social responsibilities. With teams and strong leaders, the company works on basic techniques to reach to those all around the world. DaVita has employees all around the nation. An example of ethics that the company has implemented is to create their own management concept. Davita educates patients with information of their core values. They take privacy serious and comply with policy that protects patient equality. Goals, objectives and tactics are part of their focus on engaging service excellence. This helps eliminate not meeting  expectations that arise by their doctor, team members and patients. They collaborate with integrity and believe in what they say. As I gather from their website on their mission and values section they use phrases like â€Å"one for all, and all for one!†. Together they share purpose and common goals. There is always room for improvement with commitment. They set aside goals that influence their team. When planning for requirement and values they come together as one te am working towards one goal. In conclusion, organizations use function of management to successfully accomplish the goals and objectives. Working in different areas, the four functions are used in globalization, innovation, diversity, technology and the ethics of a company. DaVita dialysis focuses on the health of the kidney and find a method to comply with these functions. They have goals that encourage all employees to determine the best functions for positive success. References Bateman, T. S., & Snell, S. A. (2011). Management: Leading and Collaborating in a Competitive World (9th ed.). Phoenix, AZ: Author. DaVita, Inc. (2014). www.Davita.com. Retrieved from http://www.davita.com Peerzada, A. (2012, January 12). US-based DaVita picks up stake in NephroLife Care for India entry. Retrieved from http://articles.economictimes.indiatimes.com/2012-01-12/news/30620033_1_davita-dialysis-renal-failure Travis, T. (2012, October 2). Time To Follow Berkshire Into DaVita. Retrieved from http://seekingalpha.com/articla/901091-time-to-follow-berkshire-into-davita

Byrne and Frew vs. Australian Airlines - Free Essay Example

Sample details Pages: 6 Words: 1937 Downloads: 8 Date added: 2017/06/26 Category Law Essay Type Compare and contrast essay Did you like this example? CONTRACT LAW 1 Name: Professor: Course Code: Date of Submission: Paper Outline: Introductionà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦.3 What is contract law? Macaulay and Macneil on contracts Relational contract theory Purpose of the paper Case law of Byrne and Frewà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦..à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦.à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦3 Concept of implied Terms and Relational Contractsà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦4 Relational Contracts and Byrneà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦..6 Conclusionà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢ ‚ ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦..8 Don’t waste time! Our writers will create an original "Byrne and Frew vs. Australian Airlines" essay for you Create order Summary of the points identified. Referencesà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦..9 Introduction: Contracts refer to agreements creating obligations that are enforceable by law. The basic elements that constitute a contract are consideration, mutual assent, legality, and capacity (Barker, 2000). Macaulay and Macneil identify another perspective of contracts, by introducing relational contract theory (Macneil and Evanston, 2013). A relational contract is a type of contract that is built upon the relationship of trust between parties concerned. Under this theory, parties involved in a commercial contract are engaged in creating a long term relationship, affecting the manner in which they w ill associate with one another. This paper examines whether relational contract gives an adequate explanation on the reasons as to why the High Court did not imply terms when analyzing the case of Byrne and Frew against Australian airlines. This paper takes a stand that relational contract does not give an adequate explanation on why the court refused to imply the terms identified. The Case of Byrne and Frew: In the case of Bryne and Frew vs. Australian Airlines, the main issue that the court was to determine on the relationship between an individual employment contract, and an award from the industrial court. The two appellants were employed by the Australian airline company. They were dismissed on assertions that they interfered with luggages of the airline customers. This is after they were captured by the secret cameras, interfering with luggages. They sued the airline company for purposes of recovering damages, because of a statutory provision of clause 11 (a) which provi ded that the termination of an employment contract should not be unjust, unreasonable, or harsh (Gooley, Radan and Vickovich, 2007). Their main argument was that clause 11 (a) is an implied term in an employment contract, and on this basis, the company breached these terms by dismissing them through a harsh and unjust manner. In coming up with a judgment, the court denoted that terms can either be implied by law, or by fact. The court gave an opinion that the test of an implied term in a formal contract is established by the case of BP refinery vs. Hastings Shire Council (Ellinghaus, 2007). Terms that are implied by fact must pass the test of equitable and reasonableness, have a clear expression, obvious, consistent, and must pass the test of business efficacy. These terms did not pass the obvious test, and hence they cannot be implied. Implied Terms and Relational Contracts: An implied term refers to the legal provisions that are not directly identified by a spoken word, b ut introduced in a contract through courts as a necessary method to give meaning to the intentions of a contracting party. It is possible to imply a term in a contract through law. This is depicted in the 1977 case of the city council of Liverpool vs. Irwin (Ellinghaus, 2007). Under this case, the tenants lived in a fifteen storey tower, whose lifts did not work, and stairs in a bad condition. Tenants refused to pay, citing that the council had a duty to keep the common parts of the building in a decent manner. The court was to rule on whether maintaining the common parts of a building was the responsibility of the landlord or not (Barker, 2000). Lord Wilberforce was very categorical by denoting that it was necessary for tenants to live in a house maintained by the landlord (Willmott and Butler, 2013). The court gave a ruling that an implied word under this scenario must pass the test of necessity (Willmott and Butler, 2013). The words, à ¢Ã¢â€š ¬Ã…“taking reasonable careà ¢Ã ¢â€š ¬Ã‚  passes this test. The question to ask; what is reasonable care under this circumstance? The court ruled that à ¢Ã¢â€š ¬Ã…“reasonable careà ¢Ã¢â€š ¬Ã‚  is dependent on what tenants should do for themselves (Willmott and Butler, 2013). It was the duty of tenants to take care of the landlordà ¢Ã¢â€š ¬Ã¢â€ž ¢s property, and hence these terms could be implied. It is also possible to imply contract by facts. Justice Mason, in giving a ruling in Codelfa construction vs. State Rail Authority, denotes that it is appropriate to imply a term, if it is obvious. In determining an obvious situation, the court will use the bystander test. This is a test in which the court might try to find the opinion of a neutral person. Codelfa was contracted by the railway authority, and he was allowed to work around the clock (Gooley, Radan and Vickovich, 2007). However, an injunction prevented him from working on Sundays, and during the night. The court refused to recognize the terms à ¢Ã ¢â€š ¬Ã…“authority would indemnify any additional costs, if their working hours was affectedà ¢Ã¢â€š ¬Ã‚  because they were not obvious (Gooley, Radan and Vickovich, 2007). It is also possible to imply a contract by customs. This is contained in a decision arrived by the court in Con-Stan industries vs. Norwich Winterthur Insurance. The judges denoted à ¢Ã¢â€š ¬Ã…“that it is possible to imply a term based on the custom, provided that there is considerable evidence that the custom under consideration is well established in that industry, and a contract in that situation can be assumed to have borrowed the term, and incorporated it in the contractà ¢Ã¢â€š ¬Ã‚  (Gooley, Radan and Vickovich, 2007). Though this ruling, the judges agreed that an established custom in a particular industry can be implied in a contract that governs relations in the industry under consideration. Under this case, Con-Stan hired an insurance broker, Norwich, who was approved by the insurance compan y. Norwich went into liquidation and Con-Stan sued for unpaid premium, denoting that it was the customs of the insurance industry, for people to pay premiums to brokers. The court ruled that the custom identified is not recognized within the industry. Relational contract views a contract as a relation, rather than a transaction (Gooley, Radan and Vickovich, 2007). The basic characteristic of a relational contract is that there must be mutual trust, respect, and good faith amongst the parties engaged in the contract. It is impossible to conduct a relational contract without the use of implied terms. Bryne and Frew and Relational Contracts: There are a variety of reasons given as to why the High Court refused to imply the terms harsh, unjust and unfair in the case of case of Byrne and Frew against Australian airlines. One of the decisions given by the High Court is that the words unjust, unfair and harsh treatment was not implied in circumstances of the case under considerati on. This is after Justice Hill, of the Federal Court found out that Australian airlines did carry out a proper investigation on the conduct of the accused, and it specified the type of misconduct they were accused for. Further on, Justice Hill was able to denote that Australian airline proved that it gave the defendantà ¢Ã¢â€š ¬Ã¢â€ž ¢s time to defend themselves against the allegations (Gooley, Radan and Vickovich, 2007). In the Australian legal system, there are very few laws that explain the concept of a fair procedure under employment contracts. In Bryne and Frew, the appellants appealed against the lower courtà ¢Ã¢â€š ¬Ã¢â€ž ¢s decision that Australian airlines followed the correct procedure, and was fair in dismissing the appellants. Carter (2006) identifies the following facts that the courts normally consider when identifying a correct procedure, Notifying the employee on the accusations against him or her. Giving them an opportunity to defend themselves. Carrying out proper investigations. Solving the case in the same manner that previous similar cases have been solved. It is these procedures that Bryne and Frew argued that the company breached. However, in defending themselves, Australian airlines argued that in circumstances where the court finds out that the company breached the procedures of employment, then the court should consider that the words harsh, fair and unjust are not implied words, and hence they are not part of the employment contract. The court agreed on this assertion by Australian airlines, and refused to imply those terms in the contract. By refusing to imply these words, and relying more on express words, and statutes, the court did not use the principles of relational contract theory in coming up with their decisions (Paterson and Duke, 2012). It is important to denote that an employment contract is an example of a relational contract, and this is because it does not create rigid conditions and terms when it is being initiated. However, it creates an evolving relationship, whereby parties agree to cooperate with each othe r, for their mutual benefits (Gooley, Radan and Vickovich, 2007). On this basis, an important characteristic of a relational contract is that parties agree to cooperate with each other, based on the principles of good faith. By refusing to imply those words in an employment contract, the court affected this principle of good faith. This ruling limited the kind of damages that employees could get. This had an effect of limiting the applications of the ruling contained in Gregory vs. Philips (Butler, Duke and Wilmott, 2013). According to the principles of good faith in the employment law, employees expect an employer to treat them fairly, and in a just manner. These are implied expectations, and they are not expressed. By refusing to imply these words, the courts played a role in destroying this principle of good faith, a major characteristic of relational contracts. A relational contract is also based on mutual trust and confidence. This is a major principle that guides an employm ent contract, and if it is breached, this trust and confidence amongst the parties to the contract would be destroyed. By recognizing that Australian airline breached the procedures of dismissing employees, and then refusing to imply the words harsh, unjust and unfair, in an employment contract, did not help in creating a sense of mutual trust and confidence to the employer (Gooley, Radan and Vickovich, 2007). This had an effect of portraying the company, as one which does not carter for the need of its employees. Conclusion: In conclusion, the court refused to honor the implied term, basically relying on the law, and express facts. In refusing to honor this term, the court was of the opinion that the word, harsh, unfair, and unjust did not satisfy the test that allows terms to be implied by law. For a term to be able to be implied by law, it has to satisfy two major conditions; applicable to a defined and specific category of contracts, and suitable in a manner that it would be applied in all similar contracts. The test of necessity had to be used under this scenario. The case did not pass this test, and hence, these words could not be implied. Furthermore, the terms identified did not pass the bystander test. The term harsh, unjust and unfair are not very obvious, or necessary for the contract under consideration to operate. On this basis, it could not be implied. References: Barker, D. (2000). Essential Australian Law. London: Routledge Cavendish Australia. Butler, C., Duke, S., Wilmott, C. (2013). Contract Law: Case Book,. Oxford: Oxford University Press. Carter, J. W. (2006). Carters guide to Australian contract law. Chatswood, NSW: LexisNexis. Ellinghaus, M. P. (2007). Australian cases on contract (2007 ed.). Melbourne, Vic.?: Code Press. Gooley, J., Radan, P., Vickovich, I. (2007). Principles of Australian contract law: cases and materials. Chatswood, NSW: LexisNexis Butterworths. Macneil, I. R., Evanston, I. (201 3). Relational contract theory: unanswered questions : a symposium in honor of Ian R. MacNeil.. Oxford: Oxford University Press. Paterson, J., Duke, A. (2012). Principles of Contract Law,. Sidney: Thomson Reuters,. Willmott, C., Butler,, D. (2013). Contract Law, (4 ed.). Oxford: Oxford University Press. References: