TWENTIETH ANNUAL WILLEM C. VIS INTERNATIONAL COMMERCIAL ARBITRATION MOOT Vienna, Austria 22 – 28 March 2013 MEMORANDUM FOR CLAIMANT UNIVERSITY OF SYDNEY LAW SCHOOL On Behalf Of: CLAIMANT Mediterraneo Exquisite Supply, Co. 45 Commerce Road Capital City, Mediterraneo Tel. (0) 485 62 11 Telefax (0) 485 62 11 [email protected]Against: RESPONDENT Equatoriania Clothing Manufacturing, Ltd. 286 Third Avenue Oceanside, Equatoriania Tel. (0) 238 86 00 Telefax (0) 238 86 01 [email protected]NICHOLAS BOYCE | KATIA CONTOS | SOPHIE MALTABAROW | ROISIN McCARTHY
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TWENTIETH ANNUAL
WILLEM C. VIS INTERNATIONAL COMMERCIAL ARBITRATION MOOT
Vienna, Austria
22 – 28 March 2013
MEMORANDUM FOR CLAIMANT
UNIVERSITY OF SYDNEY LAW SCHOOL
On Behalf Of: CLAIMANT Mediterraneo Exquisite Supply, Co. 45 Commerce Road Capital City, Mediterraneo Tel. (0) 485 62 11 Telefax (0) 485 62 11 [email protected]
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ILO 1973 Minimum Age Convention
ILO Minimum Age Convention, 1973 (No. 138) 69; 80
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28
OECD Guidelines OECD Guidelines for Multinational Enterprises http://www.oecd.org/daf/internationalinvestment/guidelinesformultinationalenterprises/48004323.pdf
69
UCL Contract Law of the People’s Republic of China, Second Session of the Ninth National People’s Congress, 1999
17
UNICITRAL Model Law
1985 UNCITRAL Model Law on International Commercial Arbitration, with amendments as adopted in 2006
38
UNIDROIT Principles
1985 UNCITRAL Model Law on International Commercial Arbitration, with amendments as adopted in 2006
24; 55; 71
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MEMORANDUM FOR CLAIMANT 6
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67
UNCESCR UN Global Compact http://www.unglobalcompact.org/aboutthegc/thetenprinciples/index.html
69
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17; 19; 35 - 36; 44
IBA Rules UNIDROIT Principles of International Commercial Contracts, 2010
35 - 40; 42; 43; 46; 105
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Bockstiegel Bockstiegel, Karl-Hanz, The Role of the Arbitrators in Investment Treaty Arbitration in van den Berg, Albert (ed.) International Commercial Arbitration: Important Contemporary Questions ICCA Congress Series, No. 11 Kluwer Law International, The Hague, 2003
41
Born 2011 Born, Gary International Commercial Arbitration: Commentary and Materials Kluwer Law International, New York, 2010
28
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MEMORANDUM FOR CLAIMANT 7
Abbreviation Full citation Cited in Born/Kent Born, Gary; Kent, Rachael
The “Internationalisation” of International Commercial Arbitration 2005 Chambers Client Report 22
37
CISG Advisory Council Opinion No. 6
Gotanda, John Y., Rapporteur: Professor John Y Gotanda, Villanova University School of Law, Villanova, Pennsylvania, USA. CISG-AG Opinion No. 6 Calculation of Damages under CISG Article 74, 2006
99; 100
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38
Dimolitsa Dimolitsa, Antonias Giving Evidence: Some reflections on oral evidence vs documentary evidence and on the obligations and rights of the witnesses in Arbitration and Oral Evidence ICC Institute of World Business Law 2004
38
Di Matteo et al. Di Matteo, Larry; Dhooge, Lucien; Greene, Stephanie; Maurer, Virginia; Pagnattaro, Marisa International Sales Law: A Critical Analysis of CISG Jurisprudence Cambridge University Press, New York, 2005
37
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Enderlein, Fritz and Maskow, Dietrich International sales law : United Nations Convention on Contracts for the International Sale of Goods Oceana Publishing, New York, 1992
78
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87; 90
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23
Fortier Fortier, Yves, International Arbitration and National Courts: Who Has The Last Word? in International Arbitration and National Courts: The Never Ending Story ICCA Congress Series No. 10, ed. Albert Jan van den
44
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MEMORANDUM FOR CLAIMANT 8
Abbreviation Full citation Cited in Berg Kluwer Law International, The Hague, 2001
Fouchard/Gaillard/Goldman
Gaillard, Emmanuel; Savage, John (eds.) Fouchard Gaillard Goldman on International Commercial Arbitration Kluwer Law International, The Netherlands, 1999
25
Gélinas Gélinas, Paul Evidence Through Witnesses in Arbitration and Oral Evidence ICC Institute of World Business Law, 2004
38; 45
Graffi Graffi, Leonardo Case Law on the Concept of “Fundamental Breach” in the Vienna Sales Convention 3 International Business Law Journal 338, 2003
87
Hanotiau
Hanotiau, Bernard Document Production in International Arbitration: A Tentative Definition of “Best Practices” in ICC International Court of Arbitration Bulletin 2006 Special Supplement: Document Production in International Arbitration ICC Publishing, Paris, 2006
36
Henschel 2004 Henschel, René Conformity of Goods in International Sales Governed by CISG Article 35: Caveat Venditor, Caveat Emptor and Contract Law as Background Law and as a Competing Set of Rules Nordic Journal of Commercial Law, 2004/1 http://www.cisg.law.pace.edu/cisg/biblio/henschel2.html#ii
82
Henschel 2005 Henschel, René Conformity of goods in international sales Forlage Thomson, Copenhagen, 2005
75
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11; 12
Honnold 2009 Honnold, John Uniform Law for International Sales under the 1980 United Nations Convention (4th ed.)
12; 21
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MEMORANDUM FOR CLAIMANT 9
Abbreviation Full citation Cited in Kluwer Law International, Deventer, The Netherlands, 2004
Huber/Mullis Huber, Peter and Mullis, Alastair CISG : A New Textbook for Students and Practitioners Sellier, Munich, 2007
12; 65; 82
Lew/Mistelis/Kröll Lew, Julian; Mistelis, Loukas, A and Kröll, Stefan Comparative International Commercial Arbitration Kluwer Law International, The Netherlands, 2003
19
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87; 90
Mehren/Salomon Mehren, George and Salomon, Claudia Evidence in an International Arbitration: The Common Lawyer's Guide 20(3) Journal of International Arbitration 285, 2003
36
Moens/Sharma Moens, Gabriël and Sharma, Rajesh The CEAC Hamburg Arbitration Rules: A European-Chinese Trade-Related Adaptation of the Revised UNCITRAL Arbitration Rules 2010 http://cisgw3.law.pace.edu/cisg/moot/CEAC_Rules_Moens_Sharma.pdf
17
Park Park, William Arbitration’s Protean Nature: The Value of Rules and the Risks of Discretion 16 Mealey’s Intl. Arb. Rep. 37, 2001
45
Redfern/Hunter Blackaby, Nigel; Partasides, Constantine, et al Redfern and Hunter on International Arbitration Oxford University Press, New York, 2009
32
Schlechtriem 2001 Schlechtriem, Peter (Todd J. Fox (trans.)) Uniform Sales Law in the Decisions of the Bundesgerichtshof in 50 Years of the Bundesgerichtshof [Federal Supreme Court of Germany]: A Celebration Anthology from the Academic Community (2001) http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem3.html#iv
76
Schlechtriem 2007 Schlechtriem, Peter Non-material Damages – Recovery Under the CISG? 19 Pace International Review 89, 2007
65
Author in Schlechtriem, Peter and Schwenzer, Ingebor (ed. 10; 55; 57;
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MEMORANDUM FOR CLAIMANT 10
Abbreviation Full citation Cited in Schlechtriem/ Schwenzer 2010
Schwenzer) Commentary on the UN Convention on the International Sale of Goods (CISG) (3rd ed.) Oxford University Press, Oxford, 2010
58; 68; 81; 82; 90; 9397; 99
Schwenzer/ Leisinger
Schwenzer, Ingeborg and Leisinger, Klaus Ethical Values and International Sales Contracts in Cranston/Ramberg/Ziegel (eds) Commercial Law Challenges in the 21st Century – Jan Hellner in memoriam Uppsala, Stockholm, Stockholm Centre for Commercial Law, 2007, 249-76 http://cisgw3.law.pace.edu/cisg/biblio/schwenzer-leisinger.html
65; 66; 80; 92
Schroeter Schroeter, Ulrich Backbone or Backyard of the Convention? The CISG’s Final Provisions http://www.cisg.law.pace.edu/cisg/biblio/schroeter5.html
21
UNIDRIOT Official Comment
International Institute for the Unification of Private Law Official Commentary, UNIDROIT Principles Of International Commercial Contracts (UNIDRIOT), Rome, 2010
24
Veeder Veeder, V in Introduction to Arbitration and Oral Evidence ICC Institute of World Business Law 2004
45
Waincymer Waincymer, Jeffrey Procedure and Evidence in International Arbitration Kluwer Law International, 2012
37; 38
Wang/Andersen Wang, Xiaolin and Andersen, Camilla, Baasch The Chinese Declaration against Oral Contracts under the CISG 8 Vindobona Journal of International Commercial Law & Arbitration, 145, 2004
17; 23
Winship Winship, Peter Harmonizing Formal Requirements for Cross-Border Sales Contracts International Review of Law, 2012 http://dx.doi.org/10.5339/irl.2012.6
21; 22
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MEMORANDUM FOR CLAIMANT 11
Abbreviation Full citation Cited in Wolff Wolff, Lutz-Christian
Hong Kong's Conflict of Laws: Quo Vadis 6(2) Journal of Private International Law 465, 2010
32
WTO Labour Standards
WTO Labour standards: consensus, coherence and controversy http://www.wto.org/english/thewto_e/whatis_e/tif_e/bey5_e.htm
34
Zeller Zeller, Bruce Damages under the Convention on Contracts for the International Sale of Goods, 2nd ed. Oxford University Press, USA, 2009
99; 101
ARBITRAL AWARDS
China International Economic and Trade Arbitration Commission
Engines case CIETAC Arbitration Proceeding China, 6 September 1996 http://cisgw3.law.pace.edu/cases/960906c1.html !
21
Lindane case CIETAC Arbitration Proceeding China, 31 December 1997 http://cisgw3.law.pace.edu/cases/9719LXc1.html
21
Tinplate case CIETAC Arbitration Proceeding China, 16 October 1996 http://www.cisg.law.pace.edu/cisg/wais/d=[4)7'79[FBXMX\4X8&/3(!!
21
Court of Arbitration of the International Chamber of Commerce ICC Case 4132/1999
ICC Award Case No. 4132 110 Journal du Droit International (Clunet), 1983
33
JUDICIAL DECISIONS
Austria
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MEMORANDUM FOR CLAIMANT 12
Abbreviation Full citation Cited in Scaffolding Hooks case
Austrian Supreme Court (Oberster Gerichtshof)
19 April 2007
http://cisgw3.law.pace.edu/cases/070419a3.html
76
Belgium
N. V. Maes v N. V. Kapa Reynolds
N. V. Maes v N. V. Kapa Reynolds
Appellant Court Gent
10 May 2004, Case No. 2003/AR/2026
http://cisgw3.law.pace.edu/cases/990210s1.html
100
Canada
Chateau Des Charmes Wines
Chateau Des Charmes Wines Ltd v Sabaté USA, Inc
Ontario Super Ct
28 October 2005, CISG-online 1139, http://cisgw3.law.pace.edu/cases/051028c4.html
54
Germany
Glass Bottles case
BGH
27 November 2007, CISG-online 1617, http://cisgw3.law.pace.edu/cases/071127g1.html
52
Judgment of 12 July 1990
GBH
1990 NJW 3210
28
Organic Barley case
OLG München
13 November 2002, CISG-online 786
http://www.cisg-online.ch/cisg/urteile/786.pdf
65
NZ Mussels case BGH
8 Mar 1995, CISG-online 144 = NJW 1995, 2099
http://www.cisg3.law.pace.edu/cases/950308g3.html
76; 77; 79
Spanish Paprika case
LG Elwangen 1 KfH O 32/95 http://cisgw3.law.pace.edu/cases/950821g2.html
76; 77
Hong Kong
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MEMORANDUM FOR CLAIMANT 13
Abbreviation Full citation Cited in Hebei Import Hebei Import & Export Corporation v. Polytek
Engineering Company Limited (1999) 2 HKC 205 29
Pacific China Holdings
Pacific China Holdings Ltd v Grand Pacific Holdings Ltd CACV 136/2011
41; 45
New Zealand
NZ Truck case RJ & AM Smallmon and Transport Sales Limited v Grant Alan Miller
New Zealand Court of Appeal
[2011] NZCA 340, 22 July 2011
http://cisgw3.law.pace.edu/cases/100730n6.html
76
Russia
Judgment of 25 March 1997
Electrim (Poland) v. Firma Kosmos High Arbitration Court of the Russian Federation Ruling No. 6, Resolution No. 4670/96 http://cisgw3.law.pace.edu/cases/970325r1.html
21
Switzerland
Art books case Art books case
Commercial Court Zurich , 10 February 1999, Case No. HG 970238.1
http://cisgw3.law.pace.edu/cases/990210s1.html
100
Sports clothing case Tribunal Cantonal du Valais
29 June 1998
http://cisgw3.law.pace.edu/cases/980629s1.html
83
USA
MCC-Marble MCC-Marble Ceramic Center Inc v Ceramica Nuova D’Agostino
US Federal Court of Appeals
144 F.3d 1384 (11th Cir. 1998)
http://www.cisg.law.pace.edu/cases/980629u1.html
15
Medical Marketing International
Medical Marketing International, Inc v Internazionale Medico Scientifico SRL
76; 77
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MEMORANDUM FOR CLAIMANT 14
Abbreviation Full citation Cited in US District Court (ED Louisiana)
17 May 1999, CISG-online 387
http://cisgw3.law.pace.edu/cases/990517u1.html
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MEMORANDUM FOR CLAIMANT 15
TABLE OF ABBREVIATIONS &Art./Arts. Article/Articles CEAC Chinese European Arbitration Centre CEAC Rules CEAC Hamburg Arbitration Rules 2012 CISG United Nations Convention on Contracts for the International
Sale of Goods, Vienna, 11 April 1980
Cl. Ex Claimant’s Exhibit e.g. Exempli gratia (for example) IBA Rules International Bar Association Rules on Taking of Evidence in
International Arbitration, 2010
Model Law on Arbitration
UNICITRAL Model Law on International Commercial Arbitration, 1985
No. Number p./pp. Page/Pages para. Paragraph Proc. Ord. Procedural Order Resp. Ex. Respondent’s Exhibit
St. of Cl. Statement of Claim
St. of Def. Statement of Defence
UCL Contract Law of the People’s Republic of China, Second Session of the Ninth National People’s Congress, 1999
&
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MEMORANDUM FOR CLAIMANT 16
ACTORS Claimant
Mediterraneo Exquisite Supply, Co (“CLAIMANT ”). Clothing supplier based in Mediteranneo. Subsidiary of Oceania Plus.
Respondent
Equatoriana Clothing Manufacturing, Ltd (“RESPONDENT”). Clothing manufacturer based in Equatoriana.
Oceania Plus
Oceania Plus Enterprises (“Oceania Plus”). Joint owner of CLAIMANT. Owner of Doma Cirun and several other retail clothing chains.
Doma Cirun
Retail clothing chain located primarily in Oceania with some markets in Equatoriana. Owned by Oceania Plus.
STATEMENT OF FACTS
2011 2 January
Doma Cirun contacts CLAIMANT to search for a new manufacturer to complete an order of polo shirts on a rush basis.
2 – 4 January
CLAIMANT identifies RESPONDENT as capable of fulfilling the order. CLAIMANT last contracted with RESPONDENT in April 2008. During an audit of RESPONDENT prior to contracting, CLAIMANT discussed Oceania Plus’s ethical policy and suspicions that RESPONDENT used child labour.
5 January
CLAIMANT and RESPONDENT enter into a contract for the delivery of 100 000 polo shirts (“parties’ contract”). Delivery is required by 19 February 2011. The polo shirts must be distributed to Doma Cirun’s Oceania stores in time for the launch of the summer selling season on 15 March 2011. Article 12 of the contract requires that RESPONDENT ‘conform to the highest ethical standards in the conduct of [its] business’. Article 12 is incorporated into the contracts between all Oceania Plus subsidiaries and their suppliers.
7 January
CLAIMANT concludes a supply contract with Doma Cirun.
9 February
RESPONDENT’S Contracting Officer, Mr Short, advises CLAIMANT’S Procurement Specialist, Mr Long, by telephone that RESPONDENT cannot make the shipping date of 19 February 2011. Mr Short states the shirts could be ready by 24 February 2011. Mr Long stresses the importance of the 19 February delivery date, but amends the letter of credit and arranges shipping for 24 February 2011.
10 February
Mr Long informs Doma Cirun of the delay. Doma Cirun advises CLAIMANT that it will be held responsible.
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MEMORANDUM FOR CLAIMANT 17
2011 cont. 24 February
The polo shirts are delivered to Oceanside, Equatoriana.
11 March
The polo shirts are delivered to Doma Cirun warehouse.
5 April Channel 12 television broadcasts a ‘shocking documentary’ showing child labour allegedly at one of RESPONDENT’S production facilities and condemning Oceania Plus and Doma Cirun.
After 5 April
Demonstrations occur at Doma Cirun stores throughout Oceania.
6 April
Sales in Doma Cirun stores are 30% below those of the previous year and continue to drop progressively to almost nothing.
8 April
Oceania Times publish an investigative article concerning the use of child labour in the supply chains of leading firms. The article also describes Oceania’s leading efforts in combatting child labour.
Late afternoon, 8 April
Doma Cirun initially notifies CLAIMANT by telephone of its intention to avoid the contract and that CLAIMANT should arrange to dispose of the remaining polo shirts. CLAIMANT notifies RESPONDENT by telephone that contract is avoided and demands RESPONDENT arrange to dispose of the unsold stock.
10 April
RESPONDENT receives written notice of avoidance of contract with CLAIMANT. RESPONDENT writes to CLAIMANT denying breach of contract and refusing to deal with the unsold stock.
20 April
CLAIMANT sells remaining polo shirts to Pacifica Trading Co. CLAIMANT contracts with Gold Service Clothing for 90, 000 polo shirts for on a rush basis, at Doma Cirun’s request.
15 September 2012
Doma Cirun bring arbitration proceedings against CLAIMANT.
14 January The arbitration between CLAIMANT and Doma Cirun is settled. CLAIMANT settles lawsuits made by the Children Protection Fund of Oceania and the other investors.
15 February
Oceania Plus brings suit against CLAIMANT in Oceania claiming reimbursement of the settlement sum paid by Oceania Plus to the investors.
25 June
CLAIMANT agrees to pay the full amount claimed by Oceania Plus.
1 July
CLAIMANT submits a request for arbitration to the CEAC Arbitration Institute (“CEAC”).
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MEMORANDUM FOR CLAIMANT 18
SUMMARY OF ARGUMENT
1. Requirements of writing apply to the contract between CLAIMANT and RESPONDENT.
The reservation by Mediterraneo under Art. 96 CISG applies to the parties’ contract. This
means that that the freedom of form provisions in the CISG do not apply. The parties’
purported exclusion of Mediterraneo’s Art. 96 reservation should not be enforced by the
Tribunal due to the mandatory nature of Art. 12 CISG. It was not the parties’ intention to
exclude Mediterraneo’s reservation and even if it was, public policy requires the Tribunal
to give effect to the reservation. The Tribunal must apply the law Mediterraneo to the
form of the contract. Accordingly, the contract cannot be orally amended.
2. The witness statement of Mr Short should not be considered by the Tribunal in his
absence. The Tribunal cannot consider Mr Short’s written testimony if he cannot be
present for an oral hearing. The IBA Rules and general principles of procedural fairness
require the Tribunal to disregard the statement. The veracity of Mr Short's statement can
only be ascertained through cross-examination. Failure to afford CLAIMANT this right
when requested would be procedurally unfair and would carry serious public policy
implications.
3. RESPONDENT’S late delivery breached the contract. RESPONDENT’s failure to deliver
the goods on the date stipulated in the contract amounted to a breach of contract.
RESPONDENT’s allegation that the delivery date was amended should be rejected by the
Tribunal because the parties did not agree to expressly or impliedly modify the contract.
CLAIMANT is entitled to recover the fixed sum for late delivery as specified under the
contract, and other damages that resulted from RESPONDENT's breach.
4. RESPONDENT breached the contract for non-conformity of goods. RESPONDENT used
child labour in one of its factories. Article 12 of the parties’ contract created an express
condition of quality which encompassed compliance with ethical standards.
Accordingly, RESPONDENT breached the express contractual quality under Art. 35(1)
CISG. Additionally, RESPONDENT breached Art. 35(2) CISG because the polo shirts
were not fit for the particular purpose expressly or impliedly made known to
RESPONDENT.
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MEMORANDUM FOR CLAIMANT 19
5. RESPONDENT’S breach for non-conformity was a fundamental breach entitling
CLAIMANT to avoid the contract. CLAIMANT had grounds to avoid the contract by
virtue of RESPONDENT’S breach under Art. 35(1) CISG. CLAIMANT was entitled to
expect that the goods would comply with the parties’ contract so that CLAIMANT could
fulfil its subsequent contract with Doma Cirun. RESPONDENT’S failure to deliver polo
shirts of the quality required by the contract substantially deprived CLAIMANT of this
expectation. CLAIMANT was therefore entitled to declare the contract avoided.
6. CLAIMANT is entitled to damages for RESPONDENT’S breach of conformity.
CLAIMANT wholly performed their obligations under the contract and therefore may
claim restitution of the full purchase price. In accordance with the principle of full
compensation under Art. 74 CISG, CLAIMANT is entitled to damages for consequential
loss resulting from settlements with third parties. CLAIMANT took reasonable measures
to mitigate their loss resulting from RESPONDENT’S breach.
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MEMORANDUM FOR CLAIMANT 20
ARGUMENT ON PROCEDURE
I. REQUIREMENTS OF WRITING APPLY TO THE CONTRACT BETWEEN
CLAIMANT AND RESPONDENT
7. CLAIMANT submits that in order to be effective, any modification to the contract between
CLAIMANT and RESPONDENT must be made in writing. CLAIMANT’S place of business is
in Mediterraneo [St. of Cl., para. 5]. Mediterranean national law requires that contracts
be concluded and amended in writing [Proc. Ord. No. 1, para. 34]. Mediterraneo has
made a reservation under Art. 96 CISG [St. of Cl., para. 32], which, per Art. 12, CISG
precludes the applicability of Arts. 11 & 29 CISG (“the freedom of form provisions”).
Article 11 provides that contracts may be concluded in any form; Art. 29 permits
contracts to be modified by mere agreement. The effect of an Art. 96 reservation is that
where one party has its place of business in a reserving state, contracts must be amended
in writing.
8. Despite the non-derogable nature of Art. 12, RESPONDENT contends that amendments
need not be made in writing on the basis that Art. 20 of the parties’ contract provides
that the CISG apply ‘without regard to national reservations’ [St. of Cl., para. 31].
Effectively, RESPONDENT is contending that even though CLAIMANT has its place of
business in a reserving state, the parties can amend the CISG to apply freedom of form
provisions to the contract.
9. The Tribunal should reject RESPONDENT’S contention because it requires an
impermissible derogation from Art. 12 CISG (A). Further, the parties did not intend that
an exclusion of national reservations in Art. 20 of their contract would include
Mediterraneo’s Art. 96 reservation (B). The Tribunal should apply the law of
Mediterraneo to the contract in respect of form requirements (C).
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MEMORANDUM FOR CLAIMANT 21
A. THE TRIBUNAL SHOULD FIND THAT ART. 12 CISG PREVENTS THE PARTIES FROM
EXCLUDING MEDITERRANEO’S ART. 96 RESERVATION AS TO THE REQUIREMENT OF
WRITING
10. The Tribunal should strictly construe Art. 12 CISG. Both CLAIMANT and RESPONDENT
have their place of business in Contracting States [St. of Cl., paras. 3; 5]. The CISG
therefore applies to the contract under Art. 1(1)(a). In such circumstances, it has been
confirmed that Art. 12 cannot be circumvented [Schlechriem/Schmidt-Kessel in
Schlechtriem/Schwenzer, Art. 12, para. 4].
11. Contrary to RESPONDENT’s submission that the parties can amend the CISG to apply
freedom of form provisions to the contract, the mandatory character of Art. 12 demands
strict compliance. Article 12 contains an express statement that ‘parties may not
derogate from or vary its effect’. The Secretariat Commentary on the 1978 Draft of the
CISG, considered the ‘most authoritative’ source on the Official Text of the CISG, states
that ‘party autonomy is not applicable to this article’ [Honnold, 1989, p. 410]. While
Art. 6 permits parties to expressly or impliedly derogate from any other provision in the
CISG, Art. 12 is expressly excepted [Art. 6 CISG].
12. The drafting history of the CISG supports a strict construction of Art. 12. Article 12 was
included in the CISG as a compromise to accommodate states who consider
requirements of writing to be fundamental for effective engagement in international
commerce [Huber & Mullis, p. 60; Honnold, 1989, p. 410]. Reserving states depend
upon the preservation of their formal requirements in order to protect established
mechanisms for concluding foreign contracts and to ensure certainty throughout their
international contractual obligations [Honnold, 2009, p. 129].
13. Given the significance afforded to the preservation of reserving states’ form
requirements in the CISG, the Tribunal cannot permit the parties to disregard
Mediterraneo’s Art. 96 reservation.
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MEMORANDUM FOR CLAIMANT 22
B. CLAIMANT AND RESPONDENT DID NOT INTEND TO EXCLUDE MEDITERRANEO’S ART. 96
RESERVATION FROM THEIR CONTRACT
14. Even if the Tribunal finds that the phrase ‘without regard to any national reservation’ in
Art. 20 of the parties’ contract can include Mediterraneo’s Art. 96 reservation, it was not
the intention of CLAIMANT and RESPONDENT for it to be excluded from the applicable
law.
15. The parties’ conduct evinces an intention that requirements of writing apply to the
contract. Article 8(3) CISG permits the Tribunal to consider, inter alia, the subsequent
conduct of the parties [Art. 8(3) CISG]. This is possible notwithstanding the existence of
a written agreement between CLAIMANT and RESPONDENT. In the MCC-Marble case the
court found that a subsequent agreement between buyer and seller not to be bound by
certain provisions on the seller’s standard order form was a sufficient indication of the
parties’ intention to modify their written agreement [MCC-Marble Ceramic Center Inc v
Cermanica Nuova D’Agostino, p. 1387].
16. In this case, the significance of writing in the termination of the parties’ contract is a
strong indication that the parties intended writing requirements to govern their contract.
Despite a telephone conversation between Mr Long for CLAIMANT and Mr Short for
RESPONDENT on 8 April 2011 in which a discussion of the alleged breach took place,
[Resp. Ex. No. 1], CLAIMANT sent a notice of avoidance in writing to RESPONDENT [Cl.
Ex. No. 6]. While RESPONDENT knew what the letter was to contain, RESPONDENT waited
until receipt of CLAIMANT ’s written avoidance on 10 April 2011 before issuing a written
reply to CLAIMANT ’S avoidance [Cl. Ex. No. 7]. Given the urgency of the situation, it is
unlikely that RESPONDENT would have delayed its response for two days if the parties
had intended the freedom of form provisions to apply. Moreover, Mr Short’s inability to
authoritatively accept the shirts or arrange for their disposal over the telephone [Resp.
Ex. No. 1] suggests that it was the intention of the parties writing requirements to apply
to all aspects of the contract.
17. The parties’ choice of law clause was based on a model clause in the CEAC Rules which
was only intended to apply in very specific circumstances. Article 20 of the parties’
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MEMORANDUM FOR CLAIMANT 23
contract is identical to model clause (b) in Art. 35(1) CEAC Rules. This clause was
introduced by CEAC to overcome an apparent conflict in Chinese law and to avoid
confusion concerning requirements of form where contracts are concluded with parties
located in China [Moens/Sharma, p. 26] China made a reservation under Art. 96 upon
adopting the CISG on 30 September 1981. At that time, China’s domestic law prescribed
strict requirements of writing for all contracts [Wang/Andersen, p. 152]. In 1999 China
adopted a new Uniform Contract Law, applicable to international contracts, which
provides that contracts may be made ‘made in writing … as well as in any other form’
[Art. 10 UCL]. This introduction of freedom of form provisions into Chinese domestic law
through the UCL has therefore deprived China’s Art. 96 reservation of its effect
[Wang/Andersen, p. 157].
18. The present situation is wholly different. Mediterraneo is not a state that has made a
reservation and subsequently introduced freedom of form provisions into its domestic
law. Rather, Mediterranean law imposes a strict requirement of writing upon the
conclusion of contracts and their amendment. Given that the precise wording of Art. 20
of the parties contract was not negotiated, the tribunal should rule that the parties never
intended to exclude Mediterraneo’s Art. 96 reservation
C. THE TRIBUNAL SHOULD APPLY THE LAW OF MEDITERRANEO TO THE CONTRACT IN
RESPECT OF FORM REQUIREMENTS
19. CLAIMANT submits that the Tribunal should apply the law of Mediterraneo to the
contract. Under Art. 35 CEAC Rules, the Tribunal should apply the law that it
determines to be appropriate. When applying a national law to the substance of a
contract, the hierarchy of rules that exist in that nation’s domestic tradition are all
applicable [Lew/Mistelis/Kroll, p. 444]. Mediterranean law requires that contracts be
concluded in writing. The Supreme Court of Mediterraneo has ruled that contracts must
also be evidenced in writing [St. of Cl., para, 32]. As Mediterraneo is a common law
country [Proc. Ord. No. 2, para. 36], the decisions of its courts, as well as to the
provisions of its legislation represent binding national law. Thus, the decisions of its
Supreme Court form part of the applicable national law of Mediterraneo that apply to the
contract.
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MEMORANDUM FOR CLAIMANT 24
20. Mediterranean law applies automatically to the contract by virtue of the Art. 96
reservation (i). The requirement of writing is a mandatory rule under Mediterranean law
and must be applied by the Tribunal (ii). In the alternative, a conflict of laws analysis
leads to the application of Mediterranean law (iii).
(i) The law of Mediterraneo automatically applies to the contract
21. The form requirements of the reserving state apply automatically to a contract between a
party who has their place of business in a reserving state and a party located in a non-
reserving state [Honnold 1999, para. 129; Winship, p.11]. This view has been adopted
by both national courts and arbitral tribunals who have held that the domestic form
requirements of a reserving state always apply [e.g. Lindane case; Tinplate case;
Engines case; High Arbitration Court of the Russian Federation, Ruling No. 6,
Resolution No. 4670/96]. Given the international recognition accorded to this approach,
it is appropriate that it be followed by the Tribunal [Schroeter, p.442].
22. In addition, the automatic application of the domestic law of Mediterraneo is consistent
with public policy in both Mediterraneo and Equitoriana. Where Mediterraneo’s
reservation is evidence of the importance Mediterraneo places on the requirement of
writing [supra para. 12], Equitoriana’s adoption of the CISG without a reservation
reflects the subordination of ‘its interest in freedom-of-form provisions to the greater
good of having wider participation in the Convention’ [Winship, p. 8]. To give effect to
the intentions of states when acceding to the CISG, the writing requirements of the
reserving state should always prevail.
23. While RESPONDENT may assert that the Tribunal should undertake a conflict of laws
analysis to determine the applicable law, this approach has been labelled ‘overly
formalistic’ and ‘arbitrary’ in situations like the present, where only one party is located
in a reserving state [Wang/Andersen, p. 161]. This is because a conflict of laws analysis
based exclusively on ‘closest connection’ ignores the intentions of states in becoming
signatories to the CISG. The Tribunal should not apply the CISG in a manner
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MEMORANDUM FOR CLAIMANT 25
inconsistent with Mediterraneo and Respondent’s intentions in acceding to the CISG
regime [Flechner, 1998, p. 195].
(ii) The requirement of writing is a national mandatory rule and must be applied by
the Tribunal
24. Mediterranean requirements of writing must be applied to the contract because they
constitute a national mandatory rule. As mandatory rules are not governed by the CISG,
the Tribunal is required to apply the UNIDROIT Principles in accordance with the
parties’ contract [St. of Cl., para. 31]. Where the rules of private international law lead to
the application of a mandatory rule, a contract concluded in accordance with the
UNIDROIT Principles cannot prevail over a national, international or supranational
mandatory rule [Art. 1.4 UNIDROIT Principles; UNIDROIT Official Comment].
25. Private international law dictates that a mandatory rule must be applied where there is a
sufficiently close connection ‘between the rule and the situation in dispute’ and where
failure to apply the rule would lead to an outcome contrary to transnational or truly
international public policy [Fouchard/Galliard/Goldman, p. 847].
26. First, the form of the parties’ contract is sufficiently connected to Mediterraneo [infra
para. 35]. It originated in Mediterraneo, the domicile of CLAIMANT, and was based on
CLAIMANT’s standard form [Proc. Ord. No. 2, para. 7.]. The written form of the parties
contract directly pertains to the applicable mandatory rule, thereby establishing the
requisite connection.
27. Second, failure to apply the writing requirement to the contract would be contrary to
international or transnational public policy. Failure to recognise Mediterraneo’s writing
requirements violates the international endorsement given to the preservation of form
requirements for reserving states. The legislative purpose and history of Art. 12 CISG,
together with the large number of signatories to the CISG, demonstrates that this rule has
attained transnational status [supra para. 12]. Contracting states to the CISG, whether
reserving states to Art. 96 or not, have all accepted the existence of circumstances where
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MEMORANDUM FOR CLAIMANT 26
form requirements must be upheld [see supra para. 22]. The international character of
the CISG demands the uniform interpretation of its provisions [Henschel, p. 34].
28. Additionally, failure to apply Mediterraneo’s mandatory rule of writing puts at risk the
enforcement and recognition of any award issued by this Tribunal in a court of
Mediterraneo on the grounds of a violation of public policy [Art. V (2)(b) NY
Convention]. The exception to the general obligation to recognise arbitral awards in Art.
V (2)(b) has been held to include circumstances where a rule regulating the commercial
sphere is violated [Born 2011, p. 1196; GBH 1990 NJW 3210, 3211]. Given the
importance of the form of contracts for regulating commercial transactions and
relationships, CLAIMANT submits that a failure to apply this mandatory rule would
amount to a violation of Mediterranean public policy.
29. Claimant submits that the public policy of Mediterranean, and its interest in the
enforcement of its mandatory rule, is also a matter of transnational public policy [Hebei
Import]. It would be manifestly unjust, and would offend the CISG regime to ignore a
governing principle of national law, the preservation of which has international
recognition [supra para 27].
(iii) Alternatively, a conflict of laws analysis leads to the application of
Mediterranean law
30. Automatic application of Mediterraneo law is the correct approach for the Tribunal to
take [see supra para. 21]. However, if the Tribunal conducts a conflict of laws analysis
to determine the law as to form, Mediterranean law still applies. A conflict of laws
analysis requires the Tribunal to settle the applicable national law by determining which
country has the closest connection to the contract, as this is the lex fori [Proc. Ord. No.
2, para. 33].
31. The Tribunal should give most weight to the fact that the parties' contract was based on
CLAIMANT’S model [Proc. Ord. No. 2, para. 7]. This establishes a closer connection to
Mediterraneo than any other state. The model contract was written in a country with
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MEMORANDUM FOR CLAIMANT 27
strict form requirements and the Tribunal should acknowledge the importance of this
legal context.
32. The Tribunal must look beyond the place of conclusion of the contract and the place
where the party making the characteristic performance has its place of business [Proc.
Ord. No. 2, para. 33] because these factors are not exhaustive [Wolff], and not relevant
to the particular facts of this case. The place of conclusion is a less relevant factor given
the technological ease with which international contracts can be concluded [Redfern and
Hunter]. The increasing interconnectedness of global markets and supply chains also
demonstrates that the place of performance, the manufacture of the polo shirts, is no
longer an important consideration.
33. Conclusion: The parties’ contract must modified in writing. Their contract cannot be
used to override the non-derogable nature of Art. 12. Accordingly, the Art. 96
reservation of Mediterraneo is applicable to the contract and the Tribunal must apply
Mediterranean law as to form for reasons of public policy. The ultimate duty of any
Tribunal is to render an enforceable award. Any failure to apply a domestic law which
has the status of a mandatory rule would jeopardise this goal.
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MEMORANDUM FOR CLAIMANT 28
II. THE WITNESS STATEMENT OF MR SHORT SHOULD NOT BE CONSIDERED
BY THE TRIBUNAL IN HIS ABSENCE
34. The Tribunal should disregard Mr Short’s witness statement in his absence. The
evidence of Mr Short goes to whether the contract was orally amended. CLAIMANT has
requested Mr Short appear to give oral testimony [Proc. Ord. No. 1, para. 4]. Mr Short
is unlikely to voluntarily appear [Proc. Ord. No. 2, para 26]. CLAIMANT submits that
without Mr Short’s presence the Tribunal has insufficient evidence to resolve the nature
of the discussion between Mr Long and Mr Short concerning the purported amendment
of the parties’ contract. His appearance before the Tribunal is necessary to determine the
veracity of his statement.
35. The CEAC Rules give the Tribunal the discretion to determine how evidence should be
taken, regarding admissibility and relevance, including the hearing of witness testimony
[CEAC Rules Art. 27; 28]. CLAIMANT submits that the IBA Rules apply to the taking of
evidence (A). Under the Rules, Mr Short’s witness statement should be disregarded (B).
Alternatively, procedural fairness demands that Mr Short’s witness statement should not
be admitted (C).
A. THE TRIBUNAL SHOULD APPLY THE IBA RULES ON EVIDENCE IN INTERNATIONAL
ARBITRATION
36. The Tribunal should apply the IBA Rules. The Rules are much more extensive than the
CEAC Rules and reflect the expertise of the leading practitioners who developed them
[Hanotiau, p. 114]. There are no discretionary factors in the CEAC Rules that outline
what the Tribunal can consider or how the evidence can be evaluated. Institutional rules
are generally lacking in their guidance on evidence and often require tribunals to look
elsewhere [Mehren and Salomon, p. 294]. For this reason the Tribunal should adopt the
well-recognised practice of supplementing the CEAC Rules with guideliens that cater
specifically to evidence.
37. The IBA Rules reflect customary practice in international arbitration. They are a set of
rules that allow for the fair and efficient resolution of a dispute [Born & Kent, p. 23;
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MEMORANDUM FOR CLAIMANT 29
Waincymer, p.760]. The Presiding Arbitrator wished that the arbitration be conducted in
line with international practice [Proc. Ord. No. 2, para. 24] and applying the IBA Rules
would satisfy this intention.
38. The IBA Rules are appropriate because they are a confluence of both common law and
civil law traditions [Dimolitsa, p. 11; Gélina, p. 44; Commentary 2010 IBA Rules, p. 7].
The obligation to treat parties equally in the interest of procedural fairness is a
mandatory norm [Waincymer, p. 81] and this extends to the taking of evidence [see infra
39; cf Art. 18 UNCITRAL Model Law]. Given that CLAIMANT comes from a common
law country and RESPONDENT comes from a civil law country [Proc. Ord. No 2, para.
36], the IBA Rules are apposite to the attainment of procedural fairness.
B. THE IBA RULES WOULD NOT ALLOW THE ADMISSION OF MR SHORT’S WITNESS
STATEMENT IN HIS ABSENCE
39. Applying the IBA Rules, Mr Short’s witness statement would not be admitted. Mr
Short’s statement does not meet the requirements of written testimony under the IBA
Rules (i) and Mr Short’s failure to appear at the request of CLAIMANT would require the
Tribunal to disregard his witness statement (ii).
(i) Mr Short's witness statement does not meet the requirements of written
testimony under the rules
40. The IBA Rules specify certain requirements for any written testimony that is submitted
to the Tribunal as evidence. Mr Short’s witness statement would not be admissible
because it lacks the required affirmation of truth [IBA Rules Art. 4.5(d)]. If Mr Short
does not appear in front of the tribunal for testimony there is no way to ascertain the
truth of Mr Short’s statement.
41. The structural integrity of the arbitral proceedings would be compromised by admitting
an unverified witness statement when the witness is unavailable. One of the commercial
advantages of bringing proceedings to arbitration is the degree of flexibility afforded to
the Tribunal. However, this must be balanced against the Tribunal’s responsibility to
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MEMORANDUM FOR CLAIMANT 30
guarantee a fair and equitable outcome for the parties. Parties must be given a full
opportunity to present their case [Bockstiegel, 371; Pacific China Holdings Ltd].
CLAIMANT cannot fully present their case without the opportunity to test and verify Mr
Short’s version of events before the Tribunal.
(ii) Failure to appear at the request of CLAIMANT would deem Mr Short's witness
statement inadmissible.
42. The Tribunal should follow Art. 4.7 IBA Rules and disregard Mr Short’s statement. The
IBA Rules require that any witnesses that are requested by a party to appear before the
Tribunal in person must give testimony at an evidentiary hearing [IBA Rules Art. 8.1].
This allows for cross-examination and assists the Tribunal in determining fact. Failure of
a witness to appear if they have been requested results in their written statement not
being considered [IBA Rules Art. 4.7].
43. The IBA Rules permit written witness statements to be considered without the presence
of a requested witness only in exceptional circumstances [IBA Rules Art. 4.7]. For
circumstances to be exceptional they would have to be extremely unusual or very
unlikely to occur. Mr Short's ‘tight timetable’ and the fact that his employer does not
want him to appear do not satisfy this requirement [Proc. Ord. No. 2, para. 25]. The
reluctance of Mr Short's employer to permit him to appear may be inconvenient but it is
certainly not an extremely unusual or unlikely situation. These are commonplace
circumstances in the sphere of international arbitration. Thus, Mr Short is not exempt
from appearing for oral testimony.
C. ALTERNATIVELY, EVEN IF THE IBA RULES DO NOT APPLY, MR SHORT'S WITNESS
STATEMENT SHOULD NOT BE CONSIDERED FOR REASONS OF PROCEDURAL FAIRNESS
44. To ensure procedural fairness the Tribunal should not consider Mr Short’s witness
statement in his absence. The Tribunal has the power to deem the statement inadmissible
if Mr Short is not present [CEAC Rules 27.4]. The Tribunal has a responsibility to ensure
that the arbitral process is not only efficient, but also fair [Fortier, p. 69]. The Tribunal
has been presented with two contrary interpretations of events and the only way to
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MEMORANDUM FOR CLAIMANT 31
properly determine the facts in this situation is through cross-examination to enable the
Tribunal to determine the credibility of the witness. As such, the Tribunal ought not
consider Mr Short's witness statement without the opportunity to have that evidence
tested in an oral hearing as it would be manifestly unfair.
45. The written statement alone is insufficient because it may not reflect Mr Short's
independent recollection of the facts. It is likely the result of drafting, editing and the
possible influence of an advocate [Veeder, p. 7]. The great advantage to the Tribunal of
having a witness appear in person is that they can assess the veracity of what the witness
is saying by their attitude and their demeanour [Gélinas, p.32]. Without the chance for
cross-examination, it would be unfair for the Tribunal to make any determinations from
unchallenged and unsubstantiated testimony. It is for these good reasons that the right to
cross-examination at the request of a party has achieved international consensus [Park,
p. 37] and this best practice should be adhered to by the Tribunal. Because the
opportunity to challenge Mr Short’s statement is a fundamental right, his non-
appearance would be a serious and egregious breach of procedural fairness, sufficient to
jeopardise the enforcement of any award issued by the Tribunal [Pacific China
Holdings].
46. Conclusion: The witness statement should be disregarded. The IBA Rules would not
permit the consideration of the statement without Mr Short’s presence. The Tribunal
cannot sufficiently determine the veracity of the statement in the absence of oral
testimony and it would be procedurally unfair to deny Claimant their right to cross-
examination and rely solely on an unverified statement.
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MEMORANDUM FOR CLAIMANT 32
ARGUMENT ON THE MERITS
III. RESPONDENT'S LATE DELIVERY BREACHED THE CONTRACT
47. RESPONDENT’S late delivery breached the contract. The delivery date in the contract was
not amended by the parties (A). RESPONDENT failed to deliver the polo shirts by the date
stipulated and CLAIMANT is accordingly entitled to damages (B).
A. THE DELIVERY DATE IN THE CONTRACT WAS NOT AMENDED BY THE PARTIES
!
48. The contract specified that the delivery date for the goods was 19 February 2011 [Cl. Ex.
1, Art. 3]. There was no modification of this date in writing (i). In the alternative, there
was no effective oral modification of this date (ii).
(i) There was no written modification of the contractual delivery date
49. Mediterraneo’s reservation under Art. 96 and Tribunal’s application of Mediterranean
law precludes the parties from amending the contract in any manner other than writing
[CISG Art. 12; Supra 19]. Accordingly, the contract was not amended as there is no
written evidence of any modification.
(ii) Alternatively, Mr Long's conduct did not constitute modification
50. Even if the Tribunal finds that the writing requirement is not applicable to the parties'
contract, the parties did not agree to modify the contract [CISG Art. 29].
51. The parties did not expressly agree to amend the contract. Mr Short, Contracting Officer
for RESPONDENT, telephoned Mr Long, Procurement Specialist for CLAIMANT, to advise
that the goods would not be delivered on time [St. of Cl., para 13]. CLAIMANT and
RESPONDENT are in agreement that Mr Long never specifically agreed to amend the
contract during the telephone conversation with Mr Short [Proc. Ord. No. 2, 27].
52. Further, the parties did not impliedly agree to amend the contract. In order to determine
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MEMORANDUM FOR CLAIMANT 33
whether there was an implied agreement under Art. 29 CISG, the Tribunal must look to
the parties' intention, which includes their subsequent conduct and all relevant
circumstances of the case [Glass Bottles case; Art. 8(3) CISG]. The correspondence
between Doma Cirun and CLAIMANT on 10 February in relation to RESPONDENT’S late
delivery demonstrates that Mr Long had no intention of modifying the delivery date [Cl.
Ex. No. 3]. Ms Stippel was writing to Mr Long to confirm the telephone conversation of
the same day. She stated that she was ‘glad to hear that (he) did not waive the delivery
date in the contract.’ This comment supports a conclusion that Mr Long did not intend to
modify the contract.
53. Further, a reasonable person in Mr Short’s position would not infer from the
recollections of Mr Short and Mr Long’s telephone conversation that the delivery date in
the contract was to be amended. The words of Mr Long were to the effect that he would
‘make sure that all the paper work reflected the new delivery date’ [Proc. Ord. No. 2,
No. 27]. CLAIMANT submits that these words only evince an intention to alter the letter
of credit, not to amend the terms of the parties’ contract. Mr Long was only doing what
was practicable in order to mitigate RESPONDENT'S breach.
54. It would be unreasonable for the Tribunal to find that CLAIMANT impliedly modified the
contract to their disadvantage [Chateau Des Charmes Wines Ltd v Sabaté USA].
RESPONDENT knew that the parties' contract was a ‘rush job’ and that CLAIMANT had to
deliver the goods to Oceania in time for the opening of the summer selling season [Resp.
Ex. No. 1]. Mr Long stressed the importance of the delivery date to Mr Short and Mr
Short appreciated the urgency of the delivery [Cl. Ex. No. 2]. On the basis of the
undisputed facts of the conversation, a reasonable person in Mr Short’s position would
not infer that the contract had been amended. It would be against CLAIMANT’s interests
to agree to waive their rights to damages or possible compensation by amending the
contract without receiving consideration.
B. RESPONDENT BREACHED THE CONTRACT BY FAILING TO DELIVER THE GOODS ON TIME
AND CLAIMANT IS ENTITLED TO DAMAGES
!
55. RESPONDENT contracted to deliver the polo shirts on 19 February 2011 [Cl. Ex. No 1,
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MEMORANDUM FOR CLAIMANT 34
Art. 3], however delivery did not occur until 24 February [St. of Cl., para. 17]. The date
for delivery was fixed pursuant to Art. 33(a) CISG. Accordingly, RESPONDENT’s failure
to deliver on time constitutes a breach of contract.
(i) RESPONDENT is not exempt from liability for supplier’s failure to deliver
materials on time
!56. RESPONDENT may assert pursuant to Art. 79 CISG that they are exempt from liability for
their supplier's failure to deliver the required goods to them on time [St. Cl., para. 14].
CLAIMANT contends that the supplier’s failure to deliver the required goods in time does
not exempt RESPONDENT from liability.
57. RESPONDENT alleges that they could not perform the contract on time due to a strike
from their supplier [Proc. Ord. No. 2, para. 12]. Strikes are a recognised commercial
risk when supplying goods and do not exempt RESPONDENT of liability [Schwenzer in
Schlechtriem/Schwenzer, Art. 79, para. 23-24]. RESPONDENT therefore assumed the risk
that performance could be delayed by their supplier’s failure to deliver the required
material on time [Schwenzer in Schlechtriem/Schwenzer, Art. 79, para. 13].
58. Furthermore, RESPONDENT could have reasonably avoided or overcome this impediment.
RESPONDENT found other suppliers but chose not to engage them due to their higher
price [Proc. Ord. No. 2, para. 13]. RESPONDENT is expected to overcome this
impediment to deliver the goods on time even when this results in RESPONDENT
incurring increased costs [Schwenzer in Schlechtriem/Schwenzer, Art. 79, para.14].
Therefore, RESPONDENT should have taken all possible steps to acquire replacement
materials from other companies irrespective of price.
59. RESPONDENT'S failure to perform their obligation in respect of delivery gives rise to a
right to damages as provided by the liquidated damages sum in Art. 10(b) of the parties’
contract. RESPONDENT agreed to pay CLAIMANT a fixed sum of money in the event that
delivery of the goods was late [Cl. Ex. No. 1, para. 10]. The breach for late delivery
entitled CLAIMANT to recover damages as stipulated in the contract and accordingly
RESPONDENT is liable to pay USD 27,500 as agreed. The Tribunal should therefore apply
Art. 7.4.13 UNIDROIT Principles, as CISG is silent as to liquidated damages, which
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MEMORANDUM FOR CLAIMANT 35
entitles CLAIMANT to recover the fixed sum payable under Art. 10(b) of the parties’
contract [Cl. Ex. No. 1].
60. In accordance with the principle of full compensation [infra para 97] The CISG allows
for parties to recover for all the loss that they suffer from the other party's breach [CISG
Art. 74]. Consequently, if the fixed sum payable under the contract does not fully
compensate CLAIMANT for any consequential loss that may arise; they are not precluded
from claiming further damages as a result of the breach for late delivery.
61. Conclusion: The parties' contract was never amended and accordingly, any delivery
after the date specified under the contract constituted breach. Due to RESPONDENT’S
breach for late delivery, RESPONDENT is liable to CLAIMANT for the fixed damages
agreed by the parties’ under the contract. No circumstances existed to exempt
RESPONDENT from liability.
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MEMORANDUM FOR CLAIMANT 36
IV. RESPONDENT BREACHED CONTRACT FOR NON-CONFORMITY OF
GOODS
62. At the request of Oceania retailer Doma Cirun, CLAIMANT Contracted with RESPONDENT
for the manufacture of 100, 000 polo shirts. Article 12 of the contract expressly required
RESPONDENT to adhere to the ‘highest ethical standards in the conduct of [its] business’
[Cl. Ex. 1, para. 12]. Oceania’s mainstream media exposed RESPONDENT’S use of child
labour on 5 and 8 April 2011 [St. of Cl., paras. 18-19]. As a result of ensuing public
outrage, Yes Casual polo shirt sales dropped to almost nothing and Doma Cirun avoided
its contract with CLAIMANT [St. Cl., paras. 20; 22].
63. RESPONDENT’S use of child labour was unethical and in breach of the CISG’s express
and implied conformity requirements of goods. The polo shirts were not of the quality
required by the contract pursuant to Art. 35(1) CISG (A). The polo shirts were also not
fit for the particular purpose of resale in Oceania by the retailer Doma Cirun. This was
the particular purpose expressly or impliedly made known to RESPONDENT at the time of
contracting and is a breach of Art. 35(2)(b) CISG (B).
A. THE POLO SHIRTS WERE NOT OF THE QUALITY REQUIRED BY THE CONTRACT (ART.
35(1) CISG)
64. RESPONDENT failed to deliver goods of the quality required by the contract in breach of
Art. 35(1) CISG. The term ‘quality’ under Art. 12 of the parties’ contract required
compliance with the ‘highest ethical standards’ in the conduct of RESPONDENT’S
business (i). The use of child labour in one of RESPONDENT’S factories breached the
required ethical standards (ii). The ethical standards requirement extended beyond the
particular factory in which the polo shirts were manufactured (iii).
(i) The term ‘quality’ under the contract required RESPONDENT to comply with the
‘highest ethical standards’ when manufacturing
65. Article 12 of the parties’ contract required RESPONDENT to conform with the ‘highest
ethical standards’ in the conduct its business, including the manufacturing of goods.
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MEMORANDUM FOR CLAIMANT 37
Schlechtriem states that parties may stipulate production standards based on ethical
values as a contractual quality requirement [Schlechtriem 2007]. An express term is the
simplest way to ensure ethical values are incorporated into contracts for international
sales [Schwenzer/Leisinger]. The Tribunal must interpret the terms of the parties’
contract so as to give effect to all the terms rather than to deprive Art. 12 of effect [Art.
4.5 UNIDROIT Principles]. The reference to ‘quality’ under Art. 35(1) CISG
encompasses non-physical conditions [Huber/Mullis, p. 132; Schwenzer/Leisinger]. The
quality under Art. 35(1) of the CISG has been considered to encompass methods of
production. Failure to adhere to the required production standard, such as organic
manufacture, has accordingly resulted in a breach for non-conformity of goods [Organic
Barley case]. In light of the broad definition of quality, the Tribunal should construe the
ethical standards of manufacturing prescribed by Art. 12 as a quality requirement under
Art. 35(1) CISG.
66. Article 12 of the contract creates an express condition as to quality of the polo shirts. To
satisfy this condition, RESPONDENT is required to conform to the Oceania Plus Group’s
ethical standards. CLAIMANT is a subsidiary of Oceania Plus [St. Cl., para. 5]. When
interpreting the nature and extent of this condition Art. 8(3) CISG permits recourse to
the ‘factual and legal circumstances concerning the relationship of the goods to their
surroundings’. This includes the parties’ conduct [Schwenzer/Leisinger].
67. The factual circumstances demonstrate Art. 12’s importance to the business of the
Oceania Plus group. CLAIMANT’S policy included ethical standards and was extensively
discussed with RESPONDENT during an audit of RESPONDENT’S practices in 2007/2008
[Proc. Ord. No. 2, para. 4]. The Oceania Plus group is known for its high ethical
standards and they feature prominently on its website and corporate communications [St.
of Cl., para. 7]. To enforce general principles concerning the ethical conduct of the
group’s suppliers, Oceania Plus places one manager from Oceania Plus’s board of
directors on the board of its subsidiaries, including CLAIMANT [Proc. Ord. No. 2., para.
1]. Further, as a matter of Oceania Plus policy all members of the group contracting with
third party manufacturers are required to audit the manufacturing firms to ensure that
they conform to Oceania Plus policies in regard to ethical and other matters [St. of Cl.,
para. 6]. Finally, Oceania Plus participates in the United Nations Global Compact,
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MEMORANDUM FOR CLAIMANT 38
which asks companies to support and enact ‘a set of core values in the areas of human
rights, labour standards, the environment and anti-corruption’ [St. of Cl., para. 8; UN
Global Compact, emphasis added]. These factual circumstances indicate that an ethical
means of production was material to the quality of the goods purchased by CLAIMANT
generally. Therefore, Art. 12 is an express agreement as to the required quality of the
goods.
(ii) The use of child labour breached ethical manufacturing standards
68. The use of child labour breached the ethical standards stipulated in Art. 12 of the
contract. RESPONDENT was aware that the use of child labour contravened these
standards. When determining the parties’ intention as to ethical standards, Art. 8(3)
CISG permits reference to all relevant circumstances, including negotiations, established
practices and usages between the parties [Schwenzer in Schlechtriem/Schwenzer, Art.
35(6), para. 7]. CLAIMANT raised suspicions of RESPONDENT’S use of child labour
during their 2007/2008 audit of RESPONDENT’S manufacturing practices. CLAIMANT’S
policies under audit ‘covered labour matters and especially the use of child labour’ [St.
of Cl., para. 9] and the one page Oceania Plus policy referred to in Art. 12 of the
contract was ‘extensively discussed between the parties’ [Proc. Ord. 2, para. 4]. These
prior dealings had the effect of communicating to RESPONDENT that child labour was in
contravention of Oceania Plus’ ethical standards.
69. Even if ethical standards under the contract are not sufficiently defined by the parties’
conduct, a reasonable person in RESPONDENT’S circumstances would understand that the
use of child labour was a breach of Art. 12 of the parties’ contract [Art. 8(2) CISG].
International labour law and public international law widely condemn child labour [see,
eg, Art. 10(3), 1976 UNCESCR; WTO Labour Standards; Principle 5, UN Global