MEMORANDUM FOR RESPONDENT · TWENTIETH ANNUAL WILLEM C. VIS INTERNATIONAL COMMERCIAL ARBITRATION MOOT 22 TO 28 MARCH 2013 MEMORANDUM FOR RESPONDENT LUDWIG-MAXIMILIANS-UNIVERSITÄT

TWENTIETH ANNUAL

WILLEM C. VIS INTERNATIONAL COMMERCIAL ARBITRATION MOOT

22 TO 28 MARCH 2013

MEMORANDUM FOR RESPONDENT

LUDWIG-MAXIMILIANS-UNIVERSITÄT MÜNCHEN

ON BEHALF OF:

Equatoriana Clothing Manufacturing, Ltd.

286 Third Avenue

Oceanside

Equatoriana

RESPONDENT

AGAINST:

Mediterraneo Exquisite Supply, Co.

45 Commerce Road

Capital City

Mediterraneo

CLAIMANT

COUNSEL:

Felix Aiwanger Clara Freißmuth Ronja Schregle

Sophie Schröter Luise Seidel Michael Strecker


II

TABLE OF CONTENTS

TABLE OF CONTENTS ........................................................................................................... II

INDEX OF AUTHORITIES ...................................................................................................... VI

INDEX OF AWARDS .............................................................................................................. XX

INDEX OF CASES .............................................................................................................. XXII

INDEX OF LEGAL SOURCES .............................................................................................. XXV

LIST OF ABBREVIATIONS ................................................................................................ XXVI

STATEMENT OF FACTS ........................................................................................................... 1

SUMMARY OF ARGUMENT ...................................................................................................... 3

ARGUMENT ON THE PROCEDURAL ISSUE ............................................................................... 4

MR. SHORT’S WRITTEN STATEMENT MUST REMAIN IN THE RECORD ................................. 4

A. Mr. Short’s Written Statement by Itself Is Valid Evidence

Under the CEAC Rules .................................................................................................. 4

B. Also Under the IBA Rules Mr. Short’s Written Statement Must Be Considered ... 5

1. Art. 4 (7) IBA Rules requires Mr. Short’s written statement to remain in the

record ...................................................................................................................................... 6

(a) Mr. Short’s absence is justified by a valid reason ..................................................... 6

(b) In any case, exceptional circumstances require Mr. Short’s statement to be

considered ...................................................................................................................... 6

2. Mr. Short’s oral testimony is dispensible under Art. 9 (2) IBA Rules ........................... 7

(a) Mr. Short’s written testimony renders an oral examination irrelevant ................. 7

(b) The burden to produce Mr. Short is unreasonable ................................................. 7

(c) Dispensing with Mr. Short’s oral examination promotes

procedural economy ............................................................................................................. 8

C. In Order to Safeguard Procedural Fairness Mr. Short’s Written Statement Must

Remain in the Record ............................................................................................. 8

1. The Tribunal would not violate procedural fairness by admitting the written

statement by itself ................................................................................................................. 9

(a) CLAIMANT and RESPONDENT are treated equally .................................................... 9

(b) Oral examination is not necessary to grant CLAIMANT a reasonable opportunity

to present its case .......................................................................................................... 9

(i) External influences compromise the credibility of oral testimony ................... 9

(ii) Written statements are a precise and reliable record ........................................ 10


III

2. Disregarding Mr. Short’s Written Statement Violates RESPONDENT’s Right To

Be Heard ............................................................................................................................... 10

ARGUMENT ON THE SUBSTANTIVE ISSUES ........................................................................... 12

II. THE TRIBUNAL SHOULD APPLY THE CISG WITHOUT REGARD TO ANY NATIONAL

RESERVATION ................................................................................................................ 12

A. The Tribunal Should Honor the Parties Choice of Law ....................................... 12

1. The parties were free to choose the application of a neutral version of the CISG .. 12

2. The parties effectively excluded Art. 96 CISG from the CISG ................................... 13

3. Art. 35 (1) (b) CEAC Rules was precisely intended to exclude Art. 96 CISG ........... 13

B. An Award Honoring the Parties’ Agreement Would Not Be Refused

Enforcement on Grounds of Public Policy ............................................................ 14

1. The substance of an arbitral award may contradict national form requirements ...... 14

2. The writing requirement does not form part of Mediterraneo’s public policy .......... 15

III. RESPONDENT DELIVERED THE POLO SHIRTS ON TIME ............................................... 16

A. The Parties Agreed to Change the Delivery Date ................................................. 16

1. RESPONDENT made an offer to change the delivery date to 24 February 2011 ........ 16

2. CLAIMANT accepted 24 February 2011 as the new delivery date ................................. 17

(a) Mr. Long’s reference to “paper work” qualifies as an acceptance to amend the

contract ......................................................................................................................... 17

(b) At latest by changing the letter of credit Mr. Long agreed to amend the

contract ......................................................................................................................... 18

(c) Accepting the new delivery date was reasonable for CLAIMANT ........................ 18

B. The Parties’ Oral Contract Amendment Is Valid .................................................. 19

1. Art. 96 CISG opens a gap in the CISG as regards the form requirements for

contracts ............................................................................................................................... 19

2. The UPICC’s freedom of form principle applies when filling this gap ...................... 20

IV. RESPONDENT’S ASSOCIATION WITH CHILD LABOR DOES NOT ENTITLE CLAIMANT TO

REIMBURSEMENT OF THE PURCHASE PRICE ................................................................ 20

A. RESPONDENT Delivered Shirts Which Conformed to the Contract ...................... 21

1. The shirts are of the quality required by the contract, Art. 35 (1) CISG .................... 21

(a) The shirts conform to all physical quality requirements ....................................... 21

(b) The shirts also conform to the non-physical requirement to be produced

ethically ......................................................................................................................... 21


IV

2. CLAIMANT cannot invoke Art. 35 (2) (b) CISG .............................................................. 22

(a) RESPONDENT could not reasonably infer that it may not be associated with

child labor in order for the goods to be resalable in Oceania .............................. 22

(I) RESPONDENT took into account all compulsory factors to have the shirts be

resalable in Oceania ............................................................................................ 23

(aa) RESPONDENT only had to adhere to public law standards .................. 23

(bb) A seller is not required to investigate into the political ideology of

customers in a certain market ........................................................................... 23

(ii) Since CLAIMANT was an expert in the Oceanian market, it could in any case

not reasonably rely on RESPONDENT’s skill and judgment .......................... 24

(b) CLAIMANT knew or in any case could not have been unaware of

RESPONDENT’s association with child labor .......................................................... 25

(i) CLAIMANT knew that RESPONDENT is associated with child labor ............... 25

(ii) At least, CLAIMANT could not have been unaware of RESPONDENT’s

association with child labor ............................................................................... 25

B. The Purported Breach of Contract Is in Any Case Not Fundamental ................. 26

1. It was not CLAIMANT’s reasonable expectation to receive shirts not associated

with child labor .................................................................................................................... 26

(a) The outdated audit does not affect the reading of Sec. 12 ................................... 27

(b) The prior audit did not indicate that CLAIMANT attached particular importance

to the prohibition of child labor ............................................................................... 27

2. In any case, the breach is not fundamental since CLAIMANT could still sell the

shirts ...................................................................................................................................... 27

V. CLAIMANT IS NEITHER ENTITLED TO THE SPECIFIED SUM NOR DAMAGES ............... 28

A. CLAIMANT Is Not Entitled to the Specified Sum ................................................. 28

1. RESPONDENT is exempt from liability due to a strike at its supplier .......................... 29

(a) The strike was an unforeseeable impediment beyond RESPONDENT’s control 29

(b) RESPONDENT could not reasonably overcome the strike’s consequences ........ 29

2. Sec. 10 of the contract is invalid ....................................................................................... 30

3. In any case, the sum should be reduced to a reasonable amount ................................ 31

B. CLAIMANT Is Not Entitled To Damages ............................................................... 31

1. CLAIMANT is not entitled to damages for late delivery .................................................. 31

2. CLAIMANT is neither entitled to damages due to the purported lack of

conformity ............................................................................................................................ 32


V

(a) RESPONDENT is not liable for CLAIMANT’s loss due to the settlement with

Doma Cirun ................................................................................................................. 32

(I) Doma Cirun’s losses were not foreseeable to CLAIMANT ............................... 32

(ii) By no means were Doma Cirun’s losses foreseeable to RESPONDENT ........ 33

(b) RESPONDENT is not liable for the loss CLAIMANT incurred due to the

settlement with Oceania Plus .................................................................................... 33

(i) RESPONDENT does not bear the risk of Oceania Plus’s loss of goodwill ..... 34

(ii) CLAIMANT’s loss resulting from the settlement with Oceania Plus was not

foreseeable ........................................................................................................... 34

REQUEST FOR RELIEF ......................................................................................................... 35


VI

INDEX OF AUTHORITIES

1999 IBA Working

Party/ 2010 IBA Rules

of Evidence Review

Subcommittee (eds.)

Commentary on the 2010 text of the IBA Rules on the Taking of

Evidence in International Arbitration

Available at: http://www.ibanet.org/Document/Default.aspx?

DocumentUid=DD240932-0E08-40D4-9866-309A635487C0

Cited as: Commentary on the 2010 IBA Rules

In § 25

BANIASSADI,

Mohammad Reza

Do Mandatory Rules of Public Law Limit Choice of Law in

International Commercial Arbitration?

[1992] 10 International Tax & Business Lawyer, pp. 59-85

Cited as: BANIASSADI

In §§ 48, 51

BENEYTO, José-Maria/

BRÖDERMANN, Eckart/

MEYER, Bernhard F./

ZHAO, Hang

Neue Wege in der Schiedsgerichtsbarkeit: das Chinese European

Arbitration Centre (CEAC) für China-Verträge

[2011] Recht der Internationalen Wirtschaft, pp. 12-29

Cited as: BENEYTO et al.

In § 57

BEULKER, Jette Die Eingriffsnormenproblematik in internationalen Schiedsverfahren.

Parallelen und Besonderheiten im Vergleich zur staatlichen

Gerichtsbarkeit

Mohr Siebeck, Tübingen 2005

Cited as: BEULKER

In § 49

BIANCA, Cesare/

BONELL, Michael J.

(eds.)

Commentary on the International Law of Sales

The 1980 Vienna Sales Convention

Guiffre, Milan, 1987

Cited as: AUTHOR in Bianca/Bonell

In §§ 94, 145, 149


VII

BLESSING, Marc Introduction to Arbitration – Swiss and International Perspectives

Helbing & Lichtenhahn, Basel/Frankfurt a.M., 1999

Cited as: BLESSING

In § 66

BORN, Gary B.

International Commercial Arbitration

Kluwer Law International, The Hague, 2009

Cited as: BORN

In § 51

BRÖDERMANN, Eckart/

ROSENGARTEN,

Joachim

Internationales Zivilverfahrensrecht (IPR/IZVR) - Anleitung zur

systematischen Fallbearbeitung,

Vahlen, Munich, 6th ed., 2012

Cited as: BRÖDERMANN/ROSENGARTEN

In § 47

BROWER, Charles N. Evidence Before International Tribunals: The Need for Some

Standard Rules

[1994] 28 International Lawyer, pp. 47-58

Cited as: BROWER

In § 37

BRUNNER, Christoph UN-Kaufrecht – CISG. Kommentar zum Übereinkommen der

Vereinten Nationen über Verträge über den Internationalen

Warenverkauf von 1980

Stämpfli, Bern, 2004

Cited as: BRUNNER

In §§ 128, 148

BÜHLER, Michael/

DORGAN, Carroll

Witness Testimony Pursuant to the 1999 IBA Rules of Evidence in

International Commercial Arbitration. Novel or Tested Standards?

[2000] 17 Journal of International Arbitration, pp. 3-29

Cited as: BÜHLER/DORGAN

In § 27


VIII

CARON, David D./

CAPLAN, Lee M./

PELLONPÄÄ, Matti

The UNCITRAL Arbitration Rules. A Commentary

Oxford University Press, Oxford et al., 2006

Cited as: CARON et al.

In §§ 7, 27

CHATTERJEE, C. The Reality of the Party Autonomy Rule in International Arbitration


Cited as: CHATTERJEE

In § 48

CHUKWUMERIJE, Okezie Choice of Law in International Commercial Arbitration

Quorum, Westport et al., 1994

Cited as: CHUKWUMERIJE

In § 51

CYMROT, Mark A. Cross-Examination in International Arbitration

[2007] Dispute Resolution Journal, pp. 52-65

Cited as: CYMROT

In § 36

DEMEYERE, Luc The Search for the “Truth”: Rendering Evidence under Common Law

and Civil Law

[2003] SchiedsVZ, pp. 247-253

Cited as: DEMEYERE

In § 38

ENDERLEIN, Fritz/

MASKOW, Dieter

International Sales Law: United Nations Convention on Contracts for

the International Sale of Goods

Oceana Publications, New York, 1992

Cited as: ENDERLEIN/MASKOW

In § 148


IX

ENDERLEIN, Fritz/

MASKOW, Dietrich/

STROHBACH, Heinz

Internationales Kaufrecht: Kaufrechtskonvention,

Verjährungskonvention, Vertretungskonvention,

Rechtsanwendungskonvention

Haufe, Berlin, 1991

Cited as: AUTHOR in Enderlein et al.

In § 176

Ethical Fashion Forum The Market For Ethical and Sustainable Fashion Products

Available at: http://www.ethicalfashionforum.com/assets-

uploaded/documents/Market_for_sustainable_fashion_Briefing_2011

.pdf

Cited as: The Market For Ethical and Sustainable Fashion Products

In § 180

FERRARI, Franco/

KIENINGER, Eva-

Maria/

MANKOWSKI, Peter/

OTTO, Karsten/

SAENGEL, Ingo/

STAUDINGER, Ansgar

Internationales Vertragsrecht,

EGBGB, CISG, CMR, FactÜ. Kommentar

C.H. Beck, Munich, 2007

Cited as: AUTHOR in Ferrari et al.

In §§ 103, 128

FLECHTNER, Harry M. The Several Texts of the CISG in a Decentralized System –

Observations on Translations, Reservations and other Challenges to

the Uniformity Principle in Article 7 (1)

[1998] 17 Journal of Law and Commerce, pp. 187-217

Cited as: FLECHTNER

In § 93

GAILLARD, Emmanuel/

SAVAGE, John

Fouchard, Gaillard, Goldman On International Commercial

Arbitration

Kluwer Law Interntional, The Hague et al., 1999

Cited as: FOUCHARD et al.

In § 5


X

GARRO, Alejandro M. Reconciliation of Legal Traditions in the U.N. Convention on

Contracts for the International Sale of Goods

[1989] 23 International Lawyer, pp. 443-483

Cited as: GARRO

In § 52

GOTANDA, John Y. CISG-AC Opinion No. 6.

Calculation of Damages under CISG Article 74

Available at: http://www.cisg.law.pace.edu/cisg/CISG-AC-

op6.html#*

Cited as: CISG-AC Op. No. 6

In § 166

HARRIS, Troy L. The “Public Policy” Exception to Enforcement of International

Arbitration Awards Under the New York Convention. With Particular

Reference to Construction Disputes


Cited as: HARRIS

In § 63

HABSCHEID, Walther J. Droit Judiciaire Privé Suisse

Librairie de l’Université Georg et Ciei, Geneva, 2nd ed. 1981

Cited as: HABSCHEID

In § 37

HONSELL, Heinrich (ed.) Kommentar zum UN-Kaufrecht

Springer, Berlin et al., 1997

Cited as: AUTHOR in Honsell

In § 119


XI

HOYER, Hans/

POSCH, Willibald

(eds.)

Das Einheitliche Wiener Kaufrecht - Neues Recht für den

internationalen Warenkauf

Wirtschaftsverlag Dr. Anton Orac, Vienna, 1992.

Cited as: AUTHOR in Hoyer/Posch

In § 145

HUBER, Peter/

MULLIS, Alastair

The CISG: A new textbook for students and practitioners

Sellier. European Law Publishers, Munich, 2007

Cited as: AUTHOR in Huber/Mullis

In § 140

HYLAND, Richard Conformity of Goods to the Contract Under the United

Nations Sales Convention and the Uniform Commercial

Code, in: Schlechtriem, Peter (Ed.), Einheitliches

Kaufrecht und Nationales Obligationenrecht: Referate und

Diskussionen der Fachtagung Einheitliches Kaufrecht, pp. 305-343

Nomos, Baden-Baden, 1987

Cited as: HYLAND

In § 122

JERMINI, Cesare Witnesses and the right to be heard in international arbitration: some

remarks on recent decisions of the Swiss Federal Court

[2004] 22 ASA Bulletin, pp. 605-609

Cited as: JERMINI

In § 35

JONES, Doug Developing Best Practice In International Arbitration: Witness

Statements

[2011] 15 Vindobona Journal, pp. 303-318

Cited as: JONES

In §§ 27, 36

KAROLLUS, Martin UN-Kaufrecht.

Eine systematische Darstellung für Studium und Praxis


XII

Springer Verlag, Wien et al., 1991

Cited as: KAROLLUS

In § 176

KARTON, Joshua D.H. Party Autonomy and Choice of Law: Is International Arbitration

Leading the Way or Marching to Beat of ist Own Drummer?

Working Paper 19 November 2009

available at:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1509764

Cited as: KARTON

In § 48

KRÖLL, Stefan/

MISTELIS, Loukas/

VISCASILLAS, Pilar

Perales (eds.)

UN Convention For The International Sale of Goods (CISG)

C.H. Beck/Hart/Nomos, Munich, 2011

Cited as: AUTHOR in Kröll et al.

In §§ 119, 145, 148

KRUGER, Wolfgang/

WESTERMANN, Peter

(eds.)

Münchener Kommentar zum Bürgerlichen Gesetzbuch, Band 3

Wiener Übereinkommen über Verträge über den internationalen

Warenkauf (CISG)

C.H. Beck München, Munich, 5th ed. 2008

Cited as: AUTHOR in MüKo

In §§ 128, 138

LALIVE, Pierre Les Règles De Conflit De Loi Appliquées Au Fond Du Litige Par

L’Arbitre International Siègant En Suisse

[1976] Révue de l’Arbitrage, pp. 155-185

Cited as: LALIVE

In § 53

LEW, Julian D.M./

MISTELIS, Loukas A./

KRÖLL, Stefan M.

Comparative International Commercial Arbitration

Kluwer Law International, The Hague et al., 2003

Cited as: LEW et al.

In § 5


XIII

LOFTUS, Geoffrey R./

LOFTUS, Elizabeth F.

Human Memory: The Processing of Information

Lawrence Erlbaum Associates, Hillsdale, 1976

Cited as: LOFTUS/LOFTUS

In § 36

MALEY, Kristian The Limits to the Conformity of Goods in the United Nations

Convention on Contracts for the International Sale of Goods (CISG)

[2009] 12 International Trade & Business Law Review, pp. 82-126

Cited as: MALEY

In § 122

MERKIN, Robert Arbitration Law

LLP, London/Singapore, 2004

Cited as: MERKIN

In § 39

MOSES, Margaret L. The Principles and Practice of International Commercial Arbitration

Cambridge University Press, Cambridge et. al., 2nd ed. 2012

Cited as: MOSES

In §§ 49, 63

MÜLLER-CHEN,

Markus/ PAIR, Lara M.

Avoidance for Non-conformity of Goods under Art. 49(1)(a) CISG,

in: KRÖLL et al. (eds.), International Arbitration and International

Commercial Law: Synergy, Convergence and Evolution, pp. 655-675

Kluwer Law International, Alphen aan den Rijn, 2011

Available at: http://www2.ambrac.nl/kli-ka-csg/print.aspx?ids=KLI-

KA-1143536-n

Cited as: MÜLLER-CHEN/PAIR

In § 140

NEUMAYER, Karl H./

MING, Catherine

Convention de Vienne sur les Contracts de Vente International de

Merchandides. Commentaire

CEDIDAC, Lousanne, 1993


XIV

Cited as: NEUMAYER/MING

In § 135

O’MALLEY, Nathan Rules of Evidence in International Arbitration. An Annotated Guide

Informa, London, 2012

Cited as: O’MALLEY

In §§ 15, 16

PAULSSON, Jan Arbitration Unbound: Award Detached from the Law of its Country

of Origin

[1981] 30 International and Comparative Law Quarterly, pp. 358-387

Cited as: PAULSSON

In § 53

PETROCHILOS, Georgios Procedural Law in International Arbitration


Cited as: PETROCHILOS

In § 63

PIETROWSKI, Robert Evidence in International Arbitration

[2006] 22 Arbitration International, pp. 373-410

Cited as: PIETROWSKI

In § 16

PILTZ, Burghardt Internationales Kaufrecht: Das UN-Kaufrecht in praxisorientierter

Darstellung

C.H. Beck München, Munich, 2nd ed. 2008

Cited as: PILTZ

In § 108

REDFERN, Alan/

HUNTER, Martin/

BLACKABY, Nigel/

PARTASIDES,

Redfern and Hunter on International Arbitration

Oxford University Press, Oxford et al., 5th ed. 2009

Cited as: REDFERN/HUNTER

In §§ 36, 63


XV

Constantine

SAIDOV, Djakhongir

The Law of Damages in International Sales: The CISG and other

International Instruments

Hart Publishing, Oxford et al., 2008

Cited as: SAIDOV

In § 176

SCHLAEPFER, Anne

Véronique

Witness Statements

In: LÉVY, Laurent/ VEDER, Johnny (eds.), Dossier of the ICC

Institute of World Business Law: Arbitration and Oral Evidence

ICC International Chamber of Commerce, Paris, 2005

Cited as: SCHLAEPFER

In § 23

SCHLECHTRIEM, Peter/

BUTLER, Petra

UN Law on International Sales

Springer, Heidelberg, 2009

Cited as: SCHLECHTRIEM/BUTLER

In § 119


SCHWENZER, Ingeborg

(eds.)

Commentary on the UN Convention on the International Sale of

Goods (CISG)

Oxford University Press, Oxford et al., 3rd ed. 2010

Cited as: AUTHOR in Schlechtriem/Schwenzer

In passim


SCHWENZER, Ingeborg

(eds.)

Kommentar zum Einheitlichen UN-Kaufrecht

C.H. Beck München, Munich, 5th ed. 2008

Cited as: AUTHOR in Schlechtriem/Schwenzer (German)

In § 122

SCHROETER, Ulrich G. The Cross-Border Freedom of Form Principle Under Reservation:

The Role of Articles 12 and 96 CISG in Theory and Practice -

Working Paper 31 October 2012


XVI

Available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id

=2169834

Cited as: SCHROETER

In § 95

SCHWENZER, Ingeborg Avoidance of the Contract in Case of Non-Conforming Goods

(Article 49(1)(a) CISG)

[2005] 25 Journal of Law and Commerce (2005-06), pp. 437-442

Cited as: SCHWENZER in Avoidance of the Contract in Case of Non-

Conforming Goods

In § 140

SCHWENZER, Ingeborg/

LEISINGER, Benjamin

Ethical Values and International Sales Contracts, in: Cranston, Ross/

Ramberg, Jan/ Ziegel, Jacob (Eds.), Commercial Law Challenges In

The 21st Century

Iustus Förlag, Uppsala, 2007

Cited as: SCHWENZER/LEISINGER

In § 128

STOLL, Hans Inhalt und Grenzen der Schadensersatzpflicht sowie Befreiung von

der Haftung im UN-Kaufrecht im Vergleich zu EKG und BGB, in:

SCHLECHTRIEM, PETER (ED.), Einheitliches Kaufrecht und Nationales

Obligationenrecht: Referate und Diskussionen der Fachtagung

Einheitliches Kaufrecht, pp. 257-281

Nomos, Baden-Baden, 1987

Cited as: STOLL

In § 176

SUTCLIFFE, Jonathan/

WIRTH, Markus

Witness Evidence: Written or Oral, Who asks the Questions?, in:

BÖCKSTIEGEL, Karl-Heinz/BERGER, Klaus-Peter/BREDOW, Jens,

The Taking of Evidence in International Commercial Arbitration

Carl Heymanns Verlag, Cologne et al., 2010

Cited as: SUTCLIFFE/ WIRTH

In § 35


XVII

United Nation

Convention on

International Trade Law

Commentary on the Draft Convention on Contracts for the

International Sale of Goods prepared by the Secretariat

("Secretariat Commentary") / UN DOC. A/CONF. 97/5 Available

at: http://www.globalsaleslaw.org/index.cfm?pageID=644

Cited as: Secretariat Commentary

In § 166

United Nation

Commission on


Report of the Working Group on the work of its eleventh session, in:

Yearbook Volume XI: 1978

United Nations, New York, 1981

Cited as: Working Group Report

In § 94

United Nations

Commission on


Report of the Secretary-General: analysis of comments by

Governments and international organizations on the draft convention

on the international sale of goods as adopted by the Working Group

on the international sale of goods, in:

Yearbook Volume VIII: 1977

United Nations, New York, 1977

Cited as: Report of the Secretary-General

In § 52

VOGENAUER, Stefan/

KLEINHEISTERKAMP,

Jan

(eds.)

Commentary on the Unidroit Principles of International Commercial

Contracts (PICC)


Cited as: AUTHOR in Vogenauer/Kleinheisterkamp

In § 152

VON HOFFMANN, Bernd Internationally Mandatory Rules of Law Before Arbitral Tribunals. A

General Outline, in: BÖCKSTIEGEL, Karl-Heinz, Acts of State and

Arbitration

Carl Heymanns Verlag, Cologne et al., 1997

Cited as: VON HOFFMANN


XVIII

In § 66

VON MEHREN, George/

SALOMON, Claudia

Submitting Evidence in an International Arbitration: The Common

Lawyer’s Guide

[2003] 20 Journal of International Arbitration 3, pp. 285-294

Cited as: VON MEHREN/SALOMON

In § 6

VON STAUDINGER,

Julius (ed.)

J. von Staudingers Kommentar zum Bürgerlichen Gesetzbuch mit

Einführungsgesetz und Nebengesetzen.

Wiener UN-Kaufrecht (CISG)

Sellier-de Gruyter, Berlin, 1999

Cited as: AUTHOR in Staudinger

In passim

WALTHER, Lena/

MORAWIETZ, Matthias

Declaration according to Article 96 CISG – Senseless?

[2006] 6 Internationales Handelsrecht, pp. 252-254

Cited as: WALTHER/MORAWIETZ

In § 93

WEIGAND, Frank-Bernd

(ed.)

Practitioner’s Handbook on International Arbitration

C.H. Beck Verlag, Munich, 2002

Cited as: AUTHOR in Weigand

In § 63

WITZ, Wolfgang/

SALGER, Hanns-

Christian/

LORENZ, Manuel

International Einheitliches Kaufrecht. Praktiker-Kommentar und

Vertragsgestaltung zum CISG

Verlag Recht und Wirtschaft, Heidelberg, 2000

Cited as: AUTHOR in Witz et al.

In § 166

ZELLER, Bruno Penalty Clauses: Are they governed by the CISG?

[2011] 23 Pace International Law Review 1, pp. 1-14

Cited as: ZELLER


XIX

In § 163

ZUBERBÜHLER, Tobias/

HOFMANN, Dieter/

OETIKER, Christian/

ROHNER, Thomas

IBA Rules of Evidence. A commentary on the Taking of Evidence in

International Arbitration

Sellier. European Law Publisher, Munich, 2012

Cited as: ZUBERBÜHLER et al.

In § 41


XX

INDEX OF AWARDS

China International Economic & Trade Arbitration Commission [CIETAC]

CIETAC Award of 2000

Available at: http://cisgw3.law.pace.edu/cases/000000c1.html (full text in English)

Cited as: Award 2000/17 (CIETAC)

In § 140

CIETAC Award of 15 April 1997

Available at: http://cisgw3.law.pace.edu/cases/970415c1.html

Cited as: Award of 15 April 1997 (CIETAC)

In § 83

Hamburg Chamber of Commerce [HCC]

Partial award of 21 March 1996

Available at: http://cisgw3.law.pace.edu/cases/960321g1.html (full text in English)

Cited as: Award of 21 March 1996 (HCC)

In § 148

Tribunal of International Commercial Arbitration at the Russian Federation Chamber of

Commerce and Industry [ICAC]

ICAC Arbitration Award of 5 June 1997

Available at: http://cisgw3.law.pace.edu/cases/970605r1.html (full text in English)

Cited as: Award of 5 June 1997 (ICAC)

In § 158

International Chamber of Commerce [ICC]

ICC Arbitration Case No. 15892

[2012] O’Malley, Rules of Evidence in International Arbitration, p. 129 et. seq. (extract in

English)


XXI

Cited as: Case No. 15892 (ICC)

In § 15

ICC Arbitration Case No. 9333 (1998), Procedural Order of 12 March 1998

[2004] 22 ASA Bulletin, pp. 520-530 (full text in French)


In § 35

ICC Arbitration Case No. 6379 (1990)

[1992] XVII Yearbook of Commercial Arbitratrion


In § 51

ICC Arbitration Case No. 4132, Preliminary Award of 22 September 1983

[1985] Yearbook of Commercial Arbitration, pp. 49 et seqq.


In § 44


[1985] Yearbook of Commercial Arbitration, p. 49


In § 66


[1984] 111 Journal du droit international (Clunet), p. 920


In § 66

International Centre for Settlement of Investment Disputes [ICSID]

Noble Ventures Inc. v. Romania, 12 October 2005

Available at: http://italaw.com/documents/Noble.pdf (full text in English)

Cited as: Noble Ventures Inc. v. Romania (ICSID)

In § 6


XXII

INDEX OF CASES

Austria

Oberster Gerichtshof, 21 June 2005

Available at: http://cisgw3.law.pace.edu/cases/050621a3.html (full text in English)

Cited as: OGH 21 June 2005 (Austria)

In § 135

France

Appellate Court Grenoble, 13 September 1995

Available at: http://cisgw3.law.pace.edu/cases/950913f1.html (full text in English)

Cited as: Cour d’appel de Grenoble 13 September 1995 (France)

In § 117

Germany

Bundesgerichtshof, 3 April 1996


Cited as: BGH 3 April 1996 (Germany)

In § 135

Oberlandesgericht Köln, 14 October 2002


Cited as: OLG Köln 14 October 2002 (Germany)

In § 140

Landgericht Coburg, 12 December 2006


Cited as: LG Coburg 12 December 2006 (Germany)

In § 122

Landgericht Ellwangen, 21 August 1995


XXIII


Cited as: LG Ellwangen 21 August 1995 (Germany)

In § 117

Landgericht Trier, 12 October 1995


Cited as: LG Trier 12 October 1995 (Germany)

In § 117

Netherlands

Gerechtshof Arnhem, 27 April 1999

Available at: http://cisgw3.law.pace.edu/cases/990427n1.html (full text in English)

Cited as: Gerechtshof Arnhem 27 April 1999 (Netherlands)

In § 119

Switzerland

Schweizerisches Bundesgericht, 7 January 2004

[2004] 22 ASA Bulletin, pp. 592-604 (extract in French)

Cited as: BG 7 January 2004 (Switzerland)

In § 35

Schweizerisches Bundesgericht, 14 July 2003


Cited as: BG 14 July 2003 (Switzerland)

In § 35

Schweizerisches Bundesgericht, 11 November 2002


Cited as: BG 11 November 2002 (Switzerland)

In § 40

Schweizerisches Bundesgericht, 15 September 2000

Available at: http://cisgw3.law.pace.edu/cases/000915s2.html (full text in English)


XXIV

Cited as: BG 15 September 2000

In § 135

Schweizerisches Bundesgericht, 28 October 1998

Available at: http://cisgw3.law.pace.edu/cases/981028s1.html (full text in English)

Cited as: BG 28 October 1998 (Switzerland)

In § 140


XXV

INDEX OF LEGAL SOURCES

• Arbitration Rules of the Chinese European Arbitration Centre in Hamburg, 2012 (CEAC)

• IBA Rules on the Taking of Evidence in International Arbitration, 29 May 2010 (IBA Rules)

• Free Alongside Ship Incoterms ® 2010 (FAS INCOTERMS® 2010)

• International Labour Organisation, Convention Concerning the Prohibition and Immediate

Action for the Elimination of the Worst Forms of Child Labour, 17 June 1999 (ILO

Convention No. 182)

• UNCITRAL Model Law on International Commercial Arbitration, 1985 with 2006

Amendments

• UNCITRAL Arbitration Rules, 2010 (UNCITRAL Rules)

• UNIDROIT Principles of International Commercial Contracts (UPICC)

• United Nations Convention on the International Sale of Goods, 1980 (CISG)


XXVI

LIST OF ABBREVIATIONS

% per cent

& and

§(§) paragraph(s)

AG Appellationsgericht (Swiss Court of Appeal)

Art(t). Article(s)

BG Schweizerisches Bundesgericht (Federal Supreme Court of

Switzerland)

BGH Bundesgerichtshof (German Federal Supreme Court)

CEAC Rules Arbitration Rules of the Chinese European Arbitration

Centre, Hamburg, September 2012

cf. confer

CIETAC China International Economic and Trade Arbitration

Comission

Cir. Circuit

CISG United Nations Convention on the International Sale of

Goods, Vienna, 11 April 1980

CISG-AC Op. No. CISG Advisory Council Opinion Number

Cl. Ex. No. CLAIMANT’s Exhibit Number

Co. Company

DAL Danubian Arbitration Law

Ed(s). Editor(s)

ed. Edition

EGBGB Einführungsgesetz zum Bürgerlichen Gesetzbuch

emph. add. emphasis added

et al. et alii (and following)

et seq. et sequented (and following)

FAS INCOTERMS® 2010 Free Alongside Ship International Commercial Terms

® 2010

HCC Hannover Congress Centrum

i.e. id est (that means)

IBA International Bar Association

IBA Rules IBA Rules on the Taking of Evidence in International


XXVII

Arbitration, London, 29 May 2010

Ibid. ibidem (the same)

ICAC Tribunal of International Commercial Arbitration at the

Russian Federation Chamber of Commerce and Industry

ICC International Chamber of Commerce and Industry

ICSID International Centre for Settlement of Investment

Disputes

ILO International Labour Organization

Inc. Incorporated

Infra see below

Iran-US Claims Tribunal Iran-United States Claims Tribunal

LCIA The London Court of International Arbitration

LG Landgericht (German Regional Court)

LLC Limited Liability Company

Ltd. Limited

Mr. Mister

No. Number(s)

Oceania Plus Oceania Plus Enterprises

OG Obergericht (Swiss High Court)

OLG Oberlandesgericht (German Regional Court of Appeal)

p(p). pages

Pacifica Trading Pacifica Trading Co.

Passim throughout

Proc. Procedural

Proc. Order No. Procedural Order Number

Prof. Professor

Res. Ex. No. RESPONDENT’s Exhibit Number

Sec. Section

sent. sentence

Supra see above

U.S. United States

UN United Nations

UNCITRAL United Nations Commission on International Trade Law

UNICEF United Nations Children’s Fund


XXVIII

UPICC UNIDROIT Principles of International Commercial

Contracts

USA United States of America

USD United States Dollar(s)

v. versus


1

STATEMENT OF FACTS

Mr. Russell Long amended the “paper work”

RESPONDENT produced polo shirts

Pacifica Trading Co. bought the remaining shirts

Gold Service Clothing was engaged by CLAIMANT

after 20 April 2011

Doma Cirun retails

“Yes Casual” polo shirts sold shirts

Jumpers Production competes with RESPONDENT

Mr. Tomas Short changed employers

Oceania Plus supplies leisure clothing as a

multinational group

Atlantica Megastores owns a chain of megastores,

which sell casual clothing

jointly own

5"5"

CLAIMANT procured polo shirts

as a distributor

The parties to this arbitration are Mediterraneo Exquisite Supply, Co. (hereinafter CLAIMANT)

and Equatoriana Clothing Manufacturing, Ltd. (hereinafter RESPONDENT).

RESPONDENT is a manufacturer of clothing, seated in Equatoriana. It agreed to produce 100,000

polo shirts for CLAIMANT on a rush basis.

CLAIMANT is a supplier in the fashion business, seated in Mediterraneo. It is jointly owned by

Oceania Plus Enterprises (hereinafter Oceania Plus) and Atlantica Megastores.

Atlantica Megastores owns a chain of megastores in Atlantica and several other countries

selling a variety of items, including casual clothing.

Oceania Plus is a large multi-national group supplying leisure clothing to numerous

international brands, supermarket chains and other buyers.

Doma Cirun is a subsidiary of Oceania Plus. It is a retailer of leisure clothing including the

house brand “Yes Casual”. It is primarily located in Oceania.


2

April 2008 CLAIMANT audits RESPONDENT in regard to Oceania Plus’s policy.

The audit reveals that RESPONDENT is associated with child labor.

Following the audit, the parties conclude a sales contract.

5 January 2011 Without a prior audit, the parties contract over the manufacture of

100,000 polo shirts to be delivered on 19 February 2011.

9 February 2011 RESPONDENT’s contracting officer Mr. Short calls CLAIMANT’s

procurement specialist Mr. Long to tell him that RESPONDENT is not

able to meet the original delivery date. This delay was caused by a

strike at its supplier’s factory. Mr. Long promises Mr. Short he will

make sure that all of the paper work reflects the new delivery date of

24 February 2011.

24 February 2011 RESPONDENT delivers the polo shirts to Oceanside, Equatoriana.

5 April 2011 Channel 12 broadcasts a documentary about child labor, in part

based on a film allegedly taken at one of RESPONDENT’s production

facilities. The polo shirts sold to CLAIMANT had neither been

produced at this facility nor by child labor.

6 to 8 April 2011 Sales in Doma Cirun stores drop.

8 April 2011 Doma Cirun avoids the contract with CLAIMANT. Subsequently,

CLAIMANT declares its contract with RESPONDENT avoided.

15 August 2011 Mr. Long submits a written witness statement alleging that he did not

intend to change the contractual delivery date for the shirts.

18 August 2011 Mr. Short submits a written witness statement in which he testifies

that the parties did change the contractual delivery date orally.

15 September 2011 CLAIMANT settles Doma Cirun’s claim for damages due to the

delayed delivery and the shirts’ association with child labor.

January 2012 Mr. Short starts working for RESPONDENT’s competitior Jumper’s

Production.

15 February 2012 CLAIMANT settles Oceania Plus’s claim for damages it had to pay its

investors after being brought in connection with child labor.

2 July 2012 CLAIMANT initiates arbitral proceedings against RESPONDENT

attempting to recover the purchase price and the entire sum it had

paid for the settlements with Doma Cirun and Oceania Plus.


3

SUMMARY OF ARGUMENT

CLAIMANT attempts to avoid the contract and claim damages for a purported late delivery and an

alleged lack of conformity. These claims prove unsubstantiated.

The subject matter of this dispute is a delivery of polo shirts. When CLAIMANT was in urgent

need to supply its sister company Doma Cirun it placed a rush order for 100,000 polo shirts with

RESPONDENT. Although RESPONDENT carried out this order in accordance with the terms of the

contract, CLAIMANT was not able to sell the shirts in the targeted market. Contrary to its assertion

this was neither caused by the purported late delivery nor the alleged lack of conformity, but

simply a matter of business risk. For this, RESPONDENT cannot be held liable.

Handling the rush order, RESPONDENT got held up by a strike beyond its control. Nevertheless, it

was still able to deliver only five days after the initial delivery date. While initially understanding

the situation and agreeing to postpone the delivery date, CLAIMANT now denies to have agreed to

an amendment of contract. In light of CLAIMANT’s contracting officer’s statement and conduct,

however, the parties did agree to change the delivery date (III.).

CLAIMANT tries to evade the consequences of this amendment by ignoring the rules it had

initially agreed to apply. First, it alleges that RESPONDENT’s written witness statement, which

proves the amendment of contract, must be removed from the record. However, while the

procedural rules the parties have chosen allow to consider this statement, procedural fairness

actually requires so (I.). Second, it tries to impose a writing requirement the parties had agreed to

exclude in their choice of law clause. The Tribunal should honor party autonomy and apply the

freedom of form principle envisaged in the parties’ choice of law (II.).

Once CLAIMANT had coincidentally learned from the media that RESPONDENT could be

associated with child labor, it claimed the shirts no longer conformed to the contract. However,

the particular shirts conformed to all quality requirements to the contract. While CLAIMANT may

not have been able to sell the shirts in the targeted market, it was effortlessly able to sell them in

another market. CLAIMANT is thus not entitled to reimbursement of the purchase price (IV.).

In light of the above submissions, CLAIMANT is neither entitled to any of the damages it

claims (V.).


4

ARGUMENT ON THE PROCEDURAL ISSUE

MR. SHORT’S WRITTEN STATEMENT MUST REMAIN IN THE RECORD

1 Both CLAIMANT and RESPONDENT have submitted written witness statements addressing

the controversial amendment of contract. CLAIMANT urges the Tribunal to disregard the written

statement of RESPONDENT’s witness Mr. Short due to Mr. Short’s unavailability for oral

examination (Cl. Memo. § 20). Contrary to this submission, RESPONDENT respectfully requests the

Tribunal to keep its sole piece of evidence in the record. Mr. Short’s statement is most relevant as

it proves that the parties amended the delivery date of the contract (infra §§ 71 et seqq.).

2 CLAIMANT bases its request of dismissal on several assertions, all of which are unfounded. In

its argument CLAIMANT insinuates the applicability of the IBA Rules on the Taking of Evidence

in International Arbitration (hereinafter IBA Rules) (Cl. Memo. §§ 21 et seqq.). It further suggests

that oral evidence is more reliable and credible than Mr. Short’s signed statement, making an oral

examination necessary (Cl. Memo. §§ 28 et seqq.). Finally, according to CLAIMANT, allowing Mr.

Short’s written statement would violate procedural fairness (Cl. Memo. §§ 24 et seqq.).

3 These arguments do not hold up. First, CLAIMANT ignores the primarily applicable

Arbitration Rules of the Chinese European Arbitration Centre (hereinafter CEAC Rules) which

comprehensively cover the present situation and require the written statement to remain in the

record (A.). Second, even if the Tribunal followed CLAIMANT’s proposal to apply the IBA Rules,

they do not allow for the statement to be removed but come to the same result as the CEAC

Rules (B.). Finally, procedural faireness does not demand removing Mr. Short’s statement but

keeping it in the record (C.).

A. Mr. Short’s Written Statement by Itself Is Valid Evidence Under the

CEAC Rules

4 In its memorandum, CLAIMANT ignores the CEAC Rules and asks the Tribunal to apply the

IBA Rules instead (Cl. Memo. §§ 21 et seqq.). RESPONDENT rejects this reference to the IBA Rules

and their application.

5 The IBA Rules do not apply by themselves but have to be incorporated into the parties’

agreement (FOUCHARD et al. § 356; LEW et al. § 22-5). CLAIMANT and RESPONDENT have not

agreed to apply the IBA Rules. In their arbitration agreement the parties stipulated the CEAC

Rules to be the primarily applicable procedural rules (Cl. Exh. No. 1 § 19).


5

6 RESPONDENT acknowledges that Tribunals tend to apply the IBA Rules as they often govern

procedural issues not covered by the otherwise applicable rules (VON MEHREN/SALOMON p. 292;

cf. Noble Ventures Inc. v. Romania (ICSID)). The CEAC Rules do not need to be supplemented as

they comprehensively cover the situation at hand.

7 Art. 27 (2) CEAC Rules provides that statements by witnesses may be presented in writing

and signed by them. If the Tribunal decides not to accept written statements as a valid means of

evidence by themselves it has to explicitly exclude their admissibility (cf. CARON et al. p. 620 [on the

equivalent UNCITRAL Rules]). Thus, in default written witness statements suffice as evidence (cf.

ibid.). This default rule applies as the present Tribunal has not decided otherwise. Hence,

Mr. Short’s written and signed statement is valid evidence under Art. 27 (2) CEAC Rules. The

CEAC Rules squarely cover the situation at hand and do not need supplementation.

8 In conclusion, the Tribunal should apply the CEAC Rules which determine that Mr. Short’s

written statement suffices as evidence.

B. Also Under the IBA Rules Mr. Short’s Written Statement Must Be

Considered

9 Even if the Tribunal considered the IBA Rules, Mr. Short’s written statement must be kept

in the record. However, RESPONDENT suggests not to follow CLAIMANT’s approach to apply the

outdated 1999 version of the IBA Rules but seek guidance in the current set of 2010 (cf. Cl. Memo.

§ 22).

10 CLAIMANT asks the Tribunal to disregard Mr. Short’s statement under Art. 4 (7) IBA Rules

(Cl. Memo. §§ 21 et seqq.). However, at no point in its brief does CLAIMANT elaborate on the

application of Art. 4 (7) IBA Rules and how this provision would lead to the inadmissibility of

Mr. Short’s written statement. In fact, it concedes that the Tribunal “may be required” to

disregard the written statement (Cl. Memo. § 22, emph. added). This indicates that CLAIMANT itself

is not convinced of the asserted consequence of Art. 4 (7) IBA Rules. Neither is RESPONDENT.

11 Contrary to CLAIMANT’s assertion (Cl. Memo. § 22), Art. 4 (7) IBA Rules does not lead to a

dismissal of Mr. Short’s written statement but requires it to remain in the record (1.). Mr. Short’s

written statement can in any case stand for itself, since Mr. Short’s oral testimony is dispensible

under Art. 9 (2) IBA Rules (2.).


6

1. Art. 4 (7) IBA Rules requires Mr. Short’s written statement to remain in the record

12 Art. 4 (7) IBA Rules provides that the Tribunal may disregard a written statement if a witness

whose appearance has been requested fails to attend an oral hearing. However, if there is a valid

reason for his absence or if exceptional circumstances require so, the Tribunal must regard the

written statement.

13 There is a valid reason excusing Mr. Short’s absence from an oral hearing (a). In any case,

the exceptional circumstances of the case require the written statement to be taken into account

without an oral examination (b).

(a) Mr. Short’s absence is justified by a valid reason

14 Under Art. 4 (7) IBA Rules, the Tribunal should admit a written statement without an oral

hearing if the witness’s failure to appear is justified by a valid reason.

15 As the wording of Art. 4 (7) IBA Rules indicates, such valid reasons relate to the witness’s

failure to appear, not a party’s inability to present the witness (cf. O’MALLEY § 4.55). Reasons

justifying the witness’s failure are objective reasons which do not lie within the witness’s sphere

of control (cf. Case No. 15892 (ICC)). Mr. Short refuses to appear for cross-examination as his

new employer Jumpers Production urges him not to be further involved in the proceedings (Proc.

Order No. 2 § 26). Hence, the reason why Mr. Short is not able to appear for oral questioning has

been imposed from a third party outside Mr. Short’s sphere of control. He cannot reasonably be

expected to disobey his employer’s orders, thereby risking his employment. This valid reason

justifies his failure to appear. Thus, the Tribunal should admit Mr. Short’s written statement

under Art. 4 (7) IBA Rules.

(b) In any case, exceptional circumstances require Mr. Short’s statement to be

considered

16 Under Art. 4 (7) IBA Rules, the Tribunal should also consider the written statement, if

exceptional circumstances require its consideration despite the witness’s unexcused absence. The

term “exceptional circumstances” refers to the probative value of the written statement and

applies when the Tribunal has little or no other evidence (cf. O’MALLEY § 4.58). Mr. Short’s

statement is RESPONDENT’s sole piece of evidence. It is highly relevant as it is the only piece of

information countervailing CLAIMANT’s account of the telephone conversation. It proves that

Mr. Short in fact intended to amend the contract (infra §§ 75 et seqq.). The Tribunal should take

into account all available evidence to ascertain differing interpretations (cf. PIETROWSKI p. 378). It

thereby gains as broad a picture as possible and can determine the parties’ real intentions at the


7

time of the telephone conversation. Thus, its probative value requires the statement’s further

admission to the proceedings.

17 Hence, an actual application of Art. 4 (7) IBA Rules would have led CLAIMANT to the

conclusion that Mr. Short’s absence is justified by a valid reason. In any case, the high probative

value of Mr. Short’s written statement requires it to remain in the record.

2. Mr. Short’s oral testimony is dispensible under Art. 9 (2) IBA Rules

18 Art. 9 (2) IBA Rules enumerates several reasons which make an oral examination

dispensible. Since three of these reasons apply to Mr. Short’s oral testimony, the Tribunal should

keep Mr. Short’s written statement in the record despite his absence.

19 First, given Mr. Short’s written statement, his oral testimony lacks sufficient relevance

pursuant to Art. 9 (2) (a) IBA Rules (a). Second, his production is an unreasonable burden under

Art. 9 (2) (c) IBA Rules (b). Third, relying solely on Mr. Short’s written statement promotes

procedural economy under Art. 9 (2) (g) IBA Rules (c).

(a) Mr. Short’s written testimony renders an oral examination irrelevant

20 An oral examination of Mr. Short is unnecessary in terms of Art. 9 (2) (a) IBA Rules as his

written statement does not need to be tested.

21 In its brief, CLAIMANT itself points out that both witnesses agree on the wording and the

content of the telephone conversation (Cl. Memo. § 28). Therefore, Mr. Short’s written statement

does not contradict Mr. Long’s statement on the facts.

22 According to CLAIMANT, an examination of Mr. Short is further needed to “ascertain” his

subjective impression of the conversation (Cl. Memo. § 28). Mr. Short’s subjective impression has

been sufficiently laid down in Mr. Short’s written statement. He understood Mr. Long to refer to

the contract document, thus agreeing to an amendment of the delivery date in the contract (Resp.

Exh. No. 1).

23 In any case, oral questioning of a witness is limited to the facts contained in their written

statement (SCHLAEPFER p. 72) so that an oral examination of Mr. Short could not reveal new

facts. Mr. Short would merely restate his subjective impression.

24 Therefore, an oral examination of Mr. Short is irrelevant, making it dispensible pursuant

Art. 9 (2) (a) IBA Rules.

(b) The burden to produce Mr. Short is unreasonable

25 Mr. Short’s oral testimony is also dispensible under Art. 9 (2) (c) IBA Rules since the

evidentiary burden is unreasonable. The term “unreasonable burden” includes a situation where


8

certain evidence is claimed to be relevant but which nevertheless is unreasonably difficult for the

presenting party to obtain (cf. Commentary on the 2010 IBA Rules p. 26).

26 RESPONDENT had contacted Mr. Short immediately after CLAIMANT had indicated that it

was going to request cross-examination (Proc. Order No. 1 § 4). However, Mr. Short refused as his

new employer had forbidden him to appear (supra § 15). RESPONDENT could also not have filed

for the assistance of state courts in order to ensure the appearance of Mr. Short. The concerned

state courts of Equatoriana do not have the power to mandatorily order appearance of a witness

in an arbitral proceeding (Proc. Order No. 2 § 28). Although RESPONDENT’s conduct is therefore

blameless it proved impossible to produce Mr. Short. This unreasonable evidentiary burden

renders an oral examination dispensible under Art. 9 (2) (c) IBA Rules.

(c) Dispensing with Mr. Short’s oral examination promotes procedural economy

27 Procedural economy in terms of Art. 9 (2) (g) IBA Rules requires the Tribunal to reach an

efficient procedure for the handling of witness statements in light of the peculiarites of the case

(JONES pp. 309 et seq.). In international commercial arbitration it often proves difficult and costly

to have all witnesses appear in person (cf. CARON et al. p. 619 [on the equivalent UNCITRAL Rules]).

Especially the instrument of witness statements is meant to save hearing time and to ease the

taking of witness evidence (BÜHLER/DORGAN p. 12). Reducing oral testimony to writing thus

enhances procedural efficiency. To benefit from this efficiency detailed written statements must

be allowed to speak for themselves (JONES p. 312).

28 Thus, an oral examination of Mr. Short would only lengthen and encumber the proceedings

unnecessarily. Procedural economcy in terms of Art. 9 (2) (g) IBA Rules confirms that

Mr. Short’s testimony is dispensible. The Tribunal should therefore keep his written statement in

the record despite his absence.

29 If the Tribunal applied the IBA Rules, Mr. Short’s written statement should be considered

under Art. 4 (7) IBA Rules. Under Art. 9 (2) IBA Rules, an oral examination is not necessary.

C. In Order to Safeguard Procedural Fairness Mr. Short’s Written Statement

Must Remain in the Record

30 CLAIMANT alleges that admitting Mr. Short’s written statement violates procedural fairness

under Art. 18 Danubian Arbitration Law (DAL) (Cl. Memo. §§ 24 et seq.), which is equivalent to

the UNCITRAL Model Law (Statement of Claim § 32). Yet, procedural fairness is not at stake when

admitting Mr. Short’s written statement but rather when not admitting it.


9

31 Contrary to its assertion (Cl. Memo. §§ 24 et seq.), CLAIMANT is treated fairly (1.). Conversely,

if the Tribunal decided to disregard Mr. Short’s written statement it would deprive RESPONDENT

of the possibility to present its case, thereby violating procedural fairness on RESPONDENT’s part

(2.).

1. The Tribunal would not violate procedural fairness by admitting the written

statement by itself

32 Art. 18 DAL provides that the parties shall be treated with equality and each party shall be

given a full opportunity to present its case. CLAIMANT is treated the same way as RESPONDENT

(a) and has full opportunity to present its case (b).

(a) CLAIMANT and RESPONDENT are treated equally

33 Both parties are granted the same opportunity to present their case. RESPONDENT has not

requested an oral examination of CLAIMANT’s witness Mr. Long and neither has the Tribunal

ordered one. Both Claimant’s and RESPONDENT’s witness thus will not appear for examination.

CLAIMANT does not have any disadvantage that needs to be compensated. RESPONDENT’s

written statement should therefore remain in the record as CLAIMANT’s does.

(b) Oral examination is not necessary to grant CLAIMANT a reasonable opportunity to

present its case

34 CLAIMANT states that “the parties have been granted a reasonable opportunity to present

their case” (Cl. Memo. § 26). RESPONDENT agrees. Since, however, CLAIMANT seemingly still

alleges a violation of Art. 18 DAL (Cl. Memo. § 24), RESPONDENT submits as a precautionary

measure that CLAIMANT is treated fairly.

35 Art. 18 DAL providing for procedural fairness does not grant a party the right to orally

examine a witness (BG 7 January 2004 (Switzerland); cf. BG 14 July 2003 (Switzerland); Case No. 9333

(ICC); JERMINI p. 608). Nevertherless, CLAIMANT argues that in order to present its case, it needs

to test Mr. Short’s written statement by cross-examination (Cl. Memo. §§ 28 et seqq.). Yet, cross-

examination is not necessary since it would not increase the credibility of Mr. Short’s written

statement (cf. SUTCLIFFE/WIRTH pp. 38 et seq.). While oral examination is subject to external

influences (i), written statements are a precise and reliable record of a course of events (ii).

(i) External influences compromise the credibility of oral testimony

36 Oral examination is at least as susceptible to external influences as other means of evidence

(JONES p. 313). Prior to the oral examination, counsel extensively prepare witnesses for their


10

appearance in front of the arbitral tribunal (REDFERN/HUNTER § 6.140). In the course of the

questioning, they influence the hostile witness by exploiting the tense situation the witness is in

(CYMROT pp. 59 et seqq.). Psychological experiments confirm that the questions posed during oral

examination result in a manipulated memory when recalling a particular situation

(LOFTUS/LOFTUS pp. 159 et seqq.). Hence, Mr. Short’s oral examination is subject to various

external influences, compromising its credibility.

(ii) Written statements are a precise and reliable record

37 When drafting a written document as permanent record of a course of events a witness is

particularly aware of the demand to tell the truth compared with the fleeting spoken word

(BROWER p. 51; cf. HABSCHEID p. 446). In the instant case, the reliability of Mr. Short’s written

statement is higher than his answers in an oral examination. Mr. Short drafted his written

statement promptly after CLAIMANT’s Notice of Arbitration (Resp. Exh. No. 1). At that time, his

memory of the phone call was still fresh. Now, more than a year later, his memory must be rather

cloudy.

38 Thus, oral examination does not necessarily offer more reliable results than written witness

testimony. The importance of oral examination roots in the Middle Ages when the jury consisted

of illiterate people (DEMEYERE p. 249). Today’s arbitration does not require these inconvenient

means to its full extent. Mr. Short’s written statement is at least as reliable as any oral

examination. Oral examination does therefore not increase the credibility and reliability of Mr.

Short’s statement.

2. Disregarding Mr. Short’s Written Statement Violates RESPONDENT’s Right To Be

Heard

39 While CLAIMANT’s rights are preserved, disregarding the written evidence submitted by

RESPONDENT would violate RESPONDENT’s right to be heard pursuant to Art. 18 DAL. This

right encompasses that a party may introduce relevant evidence (MERKIN § 15.24).

40 Mr. Short’s witness statement depicts his negotiations with Mr. Long during the phone call.

It is apt to prove the content of the call and Mr. Short’s perception regarding an amendment of

contract. Merely the former may already be proven by CLAIMANT’s witness statement. As

RESPONDENT’s sole piece of evidence, Mr. Short’s written testimony is crucial for proving how

RESPONDENT interpreted the parties’ negotiations and to assess the controversial amendment of

contract. On this matter the Tribunal has not formed an opinion so far (Proc. Order No. 1 § 7).

Hence, no reason justifies rejecting RESPONDENT’s written evidence. Doing so amounts to a


11

violation of its right to be heard (cf. BG 7 January 2004 (Switzerland); BG 11 November 2002

(Switzerland)).

41 An eventual award on this basis might be annulled pursuant to Art. 34 (2) (a) (ii) DAL or

denied recognition and enforcement pursuant to Art. V (1) (b) of the New York Convention on

the Recognition and Enforcement of Foreign Arbitral Awards (hereinafter NYC)

(cf. ZUBERBÜHLER et al. Art. 4 § 74). To avoid such further proceedings the Tribunal should

consider Mr. Short’s written witness statement by itself.

42 In conclusion, admitting Mr. Short’s written statement by itself does not violate CLAIMANT’s

rights under Art. 18 DAL. However, not admitting the written statement violates RESPONDENT’s

rights under this provision.

CONCLUSION: Mr. Short’s written statement must remain in the record.


12

ARGUMENT ON THE SUBSTANTIVE ISSUES

II. THE TRIBUNAL SHOULD APPLY THE CISG WITHOUT REGARD TO ANY

NATIONAL RESERVATION

43 CLAIMANT argues that the parties were not able to orally amend the contract (infra §§ 58 et

seqq.) since Mediterraneo’s domestic writing requirement allegedly applies to the present dispute

through Mediterraneo’s reservation under Art. 96 CISG (Cl. Memo. §§ 69 et seqq.). However, the

parties have explicitly chosen to apply the CISG “without regard to any national reservation” (Cl.

Exh. No. 1 § 20).

44 According to Art. 35 (1) CEAC Rules, when determining the law applicable to the merits of

the dispute, the Tribunal is bound by the parties’ choice of law agreement. It can only deviate

from this agreement if the eventual award would otherwise become unenforceable due to public

policy considerations (cf. Case No. 4132 (ICC)).

45 RESPONDENT requests the Tribunal to respect the parties’ agreement to apply the CISG

without regard to any national reservation (A.). Contrary to CLAIMANT’s concern (Cl. Memo.

§ 18), an award rendered on the basis of this choice of law is not at risk of being denied

enforcement on grounds of public policy (B.).

A. The Tribunal Should Honor the Parties Choice of Law

46 CLAIMANT tries to circumvent the parties’ agreement by alleging that Mediterraneo’s Art. 96

reservation “cannot be effectively disregarded by the parties” (Cl. Memo. § 12). This is incorrect.

47 The parties were free to choose the application of a neutral version of the CISG (1.).

Contrary to CLAIMANT’s assertion (Cl. Memo. §§ 12 et seqq.), this choice of law is also effective

regarding Art. 96 CISG (2.). Art. 35 (1) (b) CEAC Rules supports this view (3.).

1. The parties were free to choose the application of a neutral version of the CISG

48 Party autonomy is the “pillar of the arbitration system” (CHATTERJEE p. 540). It translates to

the parties’ competence to choose the law most appropriate to meet their needs and to exclude

the application of unfavorable national laws (BANIASSADI p. 72). This freedom reaches so far that

parties can choose flexible sets of rules like the lex mercatoria or to have their dispute settled

without regard to any law whatsoever (ex aequo et bono) (cf. KARTON p. 10).

49 This flexibility and neutrality international arbitration provides is one of the main reasons

parties choose to arbitrate in the first place (MOSES p. 1; BEULKER pp. 151 et seq.). Accordingly, it


13

is in line with the international character of the contract at hand that the parties chose a neutral

version of the CISG that is not influenced by national peculiarities.

2. The parties effectively excluded Art. 96 CISG from the CISG

50 Art. 6 CISG generally allows parties to exclude certain provisions of the CISG. CLAIMANT

argues that the parties could, however, not effectively exclude Art. 96 CISG (Cl. Memo. § 12). To

support this assertion it refers to a limitation of Art. 6 CISG which, in connection with

Art. 12 CISG, renders Art. 96 CISG mandatory (Cl. Memo. §§ 7 et seqq.). From this it seemingly

deduces the invalidity of the parties’ choice of law (cf. Cl. Memo. § 12).

51 However, this line of argument does not hold up. It would only be valid if the present

dispute was litigated in front of a state court. In international commercial arbitration, tribunals are

not automatically bound to apply mandatory provisions contradicting the parties’ choice of law

(BANIASSADI p. 65; CHUKWUMERIJE pp. 182 et seqq.). Such mandatory rules only apply if they were

intended for the particular circumstances of the case (cf. Case No. 4132 (ICC); Case No. 6379

(ICC); BORN p. 569).

52 Art. 12 CISG is a result of the “clear-cut compromise” the drafters of the CISG had to make

in order to accommodate the wish of those states that wanted to uphold their domestic writing

requirement for political reasons (GARRO p. 460). Art. 12 CISG was thus only intended to

harmonize the drafting states’ diplomatic relationship (cf. Report of the Secretary-General p. 150).

53 Arbitral tribunals, being detached from national law and without diplomatic obligations

towards any states (LALIVE p. 159; PAULSSON p. 362), do not have to safeguard the drafting

states’ compromise. The intention behind Art. 12 CISG is not a circumstance relevant for the

Tribunal.

54 The Tribunal does therefore not have to take account of the otherwise mandatory nature of

Art. 96 CISG. The parties effectively agreed on the exclusion of all national reservations,

including Art. 96 CISG.

3. Art. 35 (1) (b) CEAC Rules was precisely intended to exclude Art. 96 CISG

55 The CEAC Rules support this result. CLAIMANT correctly states that Art. 35 (1) CEAC Rules

offers a “model clause which enables parties to mark an appropriate box to express the law

applicable to the dispute” (Cl. Memo. § 9). The parties have chosen option b) of Art. 35 (1) CEAC

Rules and incorporated it in the contract as their choice of law (supra §§ 43 et seqq.; Cl. Exh. No. 1

§ 20).

56 CLAIMANT’s argument that this model clause only applies where the CEAC’s intention to

exclude “outdated” national reservations is met (Cl. Memo. § 10) fails. This is because an arbitral


14

institution’s intent behind a model clause is irrelevant for the effectiveness of the parties’ choice

of law.

57 In any case, the CEAC’s main intent was to provide a neutral set of rules for the resolution

of international commercial disputes (BRÖDERMANN/ROSENGARTEN § 747). They especially

intended to exclude the Art. 96 reservation (BENEYTO et al. p. 20). The parties’ choice of the

“CISG without regard to any national reservation” is thus supported by the view of an

international arbitral institution.

58 In conclusion, CLAIMANT’s argument that the Tribunal should disregard the parties’

agreement and apply Art. 96 CISG does not hold up. RESPONDENT requests the Tribunal to

honor the parties’ agreement and apply the CISG without regard to any national reservation.

B. An Award Honoring the Parties’ Agreement Would Not Be Refused

Enforcement on Grounds of Public Policy

59 CLAIMANT argues that the award would not be recognized or enforceable in Mediterraneo

under Art. V (2) (b) NYC as it would go against public policy (Cl. Memo. § 18). To support this

contention it asserts that Mediterraneo’s written form requirement developed in national case law

is part of Mediterraneo’s public policy (Cl. Memo. §§ 18 et seq.).

60 Art. V (2) (b) NYC provides that recognition and enforcement of an award may be refused if

it violates the public policy of the country where recognition and enforcement is sought. As there

are no indications that RESPONDENT has any assets in Mediterraneo, CLAIMANT would not seek

enforcement there. It is therefore incomprehensible why CLAIMANT is concerned about the

enforceability in its own country.

61 RESPONDENT nevertheless points out that the award would be fully enforceable in all

relevant countries, including Mediterraneo. Contrary to CLAIMANT’s assertion (Cl. Memo. § 18) an

arbitral award will not be denied enforcement because the enforcing court will not consider

whether the parties’ choice of law ignores national form requirements (1.). In any case,

Mediterraneo’s writing requirement does not form part of its public policy (2.).

1. The substance of an arbitral award may contradict national form requirements

62 CLAIMANT argues that any contradiction of an arbitral award to national form requirements

already goes “against the very grain of justice” (Cl. Memo. § 18). With this argument it

misconceives the nature of enforcement proceedings under the NYC.


15

63 In such proceedings the state court will not scrutinize the award in regards to the merits of

the dispute (REDFERN/HUNTER § 11.56; MOSES p. 217). Rather, it will only verify whether the

consequences of enforcing or recognizing the award constitute grounds for refusal under the

NYC (cf. HAAS in Weigand p. 521; HARRIS p. 10). As far as the validity of the parties’ choice of law

goes, state courts have adopted a particularly “disinterested attitude” (PETROCHILOS § 2.42). The

question of whether the Tribunal should apply the CISG with or without regard to the

Art. 96 reservation, leading to a writing requirement or not (cf. supra §§ 43 et seqq.), is therefore not

relevant in enforcement proceedings.

64 An arbitral award does hence not “go against the very grain of justice” (Cl. Memo. § 18) if it

contradicts national form requirements.

2. The writing requirement does not form part of Mediterraneo’s public policy

65 In any case, Mediterraneo’s domestic writing requirement does not form part of the

country’s public policy. CLAIMANT correctly states that a rule is part of a state’s public policy if its

violation “offend[s] basic public notions of morality” (Cl. Memo. § 17).

66 Public policy is concerned with basic notions of justice such as the protection of weaker

parties (VON HOFMANN p. 16). Cases where enforcement is denied on grounds of a public policy

violation accordingly concern fraud, corruption or the violation of market restrictions (BLESSING

§§ 691 et seqq.; cf. Case No. 3913 (ICC), Case No. 4145 (ICC)).

67 A formal requirement like a writing requirement does not carry any moral quality

whatsoever. Neither does it advantage one party over the other. Rather than being meant to

protect a weaker party, Mediterraneo’s writing requirement applies to every international sales

contract, regardless of the position of the parties (Proc. Order No. 2 § 34). This form requirement

is therefore not part of Mediterraneo’s public policy, its violation not a ground for non-

enforcement under Art. V (2) (b) NYC.

68 CLAIMANT’s concerns about the enforceability of an eventual award in its own country are

irrelevant. In any case, there are no indications that the award might not be enforceable on

grounds of public policy.

CONCLUSION: The Tribunal may honor the parties’ agreement to apply the CISG without regard

to any national reservation, still rendering an effective and enforceable award.


16

III. RESPONDENT DELIVERED THE POLO SHIRTS ON TIME

69 Both witnesses agree that Mr. Long stated that he “would make sure that all of the paper

work reflected the new delivery date” (Proc. Order No. 2 § 27). Mr. Short understood this as an

agreement to amend the contract (Resp. Exh. No. 1).

70 CLAIMANT to the contrary alleges that the parties did not validly change the contractually

agreed delivery date (Cl. Memo. § 35). This is incorrect since the parties did agree to postpone the

contractual delivery date to 24 February 2011 (A.) This agreement did not have to be in written

form in order to amount to an amendment of contract (B.).

A. The Parties Agreed to Change the Delivery Date

71 Pursuant to Art. 29 (1) CISG, contracts can be amended by the mere agreement of the

parties. RESPONDENT submits that the parties agreed on 24 February 2011 as the new delivery

date for the polo shirts. Mr. Short’s telephone call was an offer to amend the contract (1.), which

CLAIMANT accepted (2.).

1. RESPONDENT made an offer to change the delivery date to 24 February 2011

72 RESPONDENT made an offer to amend the contract when Mr. Short called Mr. Long.

According to Art. 8 (2) CISG a party’s statement has to be interpreted in light of the

understanding a reasonable third person in the position of the other party would have had.

Mr. Short first explained that RESPONDENT would not be able to deliver on 19 February 2011 as

originally planned (Resp. Exh. No. 1 §§ 2 et seq.). He then suggested 24 February 2011 as a new

delivery date (ibid.).

73 A reasonable third person in the shoes of Mr. Long would have understood this as a

proposal to change the delivery date. Such person would hardly have assumed that Mr. Short just

mentioned the new date but wanted to uphold the original delivery date (cf. Cl. Memo. § 73). He

would rather propose a contract amendment than inform CLAIMANT of a future breach. Such

proposal is all the more reasonable in light of the fact that the later delivery was not

RESPONDENT’s but its supplier’s fault (Proc. Order No. 2 § 12).

74 Moreover, CLAIMANT seems to argue that according to Art. 14 (1) CISG Mr. Short’s

proposal was not sufficiently definite to qualify as an offer to amend the contract (Cl. Memo.

§ 73). However, nothing remained unclear or indefinite between the parties. In particular, they

were aware of which goods they were talking about, the good’s quantity and price as required by

Art 14 (1) sent. 2 CISG. A reasonable person would thus have understood that Mr. Short made

an offer to set 24 February 2011 as the new delivery date.


17

2. CLAIMANT accepted 24 February 2011 as the new delivery date

75 CLAIMANT accepted this offer. Mr. Long stated that he would make sure that all of the paper

work reflected the new delivery date (Proc. Order No. 2 § 27). Mr. Long’s reference to “paper

work” (Proc. Order No. 2 § 27, Resp. Exh. No. 1 § 4) had to be understood as an acceptance to

modify the delivery date (a). Such amendment is also evidenced by the fact that Mr. Long only

changed the date but not the purchase price in the letter of credit (b). The importance

CLAIMANT had attached to timely delivery does not contradict a later amendment of the delivery

date (c).

(a) Mr. Long’s reference to “paper work” qualifies as an acceptance to amend the

contract

76 CLAIMANT argues that Mr. Long’s reference to “paper work” could not be construed as an

agreement to amend the contract as he did not explicitly mention the contract itself (Cl. Memo.

§ 78). However, the contract and the change of its delivery date were the underlying subject of

the entire telephone conversation. There was no need to make explicit reference to the contract.

77 Rather, when Mr. Long said that he would take care of the “paper work” (Proc. Order

No. 2 § 27, Resp. Exh. No. 1 § 4) a reasonable person would have understood this as an agreement

to amend the contract. This is because the reference to “paper work” could only refer to the

contract and not to the shipping contract or the letter of credit.

78 The shipping contract was not relevant to RESPONDENT as its contractual obligation under

FAS INCOTERMS®2010 Oceanside, Equatoriana (Cl. Exh. No 1 § 2) ended with the delivery to

its own port in Equatoriana. RESPONDENT could not have understood the promise to take care

of “paper work” as to refer to a document which is irrelevant for it.

79 Had the term “paper work” only referred to the letter of credit, a reasonable person would

have expected him to just name the letter of credit. A reference to “paper work” has to be

understood as to include more than just one document. When Mr. Long talked about “paper

work” RESPONDENT could only understand this as to refer to the contract itself.

80 In addition, when facing Mr. Short’s offer to amend the contract Mr. Long did not explicitly

refuse. He did not reserve any rights as he usually does in its communications (cf. Cl. Exh. No. 6).

He was even silent on a deduction of the purchase price under Sec. 10 of the contract

(Cl. Exh. No. 1 § 10).

81 A reasonable person would have understood Mr. Long’s statement that the “paper work”

would reflect the new delivery as an acceptance to amend the contract.


18

(b) At latest by changing the letter of credit Mr. Long agreed to amend the contract

82 Even if the reference to paper work did not indicate the acceptance to amend the contract,

Mr. Long’s subsequent changes to the letter of credit did (cf. Art. 8 (3) CISG).

83 Changes to a letter of credit indicate the intention to amend the corresponding contract

(Award of 15 April 1997 (CIETAC); SCHROETER in Schlechtriem/Schwenzer, Art. 29 § 7). Mr. Long

changed the delivery date, but not the purchase price in the letter of credit (Statement of

Claim § 15). Sec. 10 of the contract provides for a deduction of the purchase price in case of late

delivery (Cl. Exh. No. 1 § 10). Accordingly, Mr. Long would have needed to reduce the purchase

price by 5 % for the five days of later delivery had he not considered the contract amended.

However, the only change Mr. Long made to the letter of credit was to update the delivery date.

He did not reduce the purchase price. Thus Mr. Long must have considered the contract

amended.

(c) Accepting the new delivery date was reasonable for CLAIMANT

84 It was also reasonable for a third person to understand CLAIMANT to have accepted delivery

on 24 February 2011 as time was not as important as CLAIMANT asserts.

85 CLAIMANT repeatedly emphasizes the great importance of delivery on 19 February 2011

(Cl. Memo. §§ 74, 76, 79). However, during the two weeks between 20 March 2011, when the

shirts were ready to be sold, and 5 April 2011, when the documentary about child labor aired,

Doma Cirun sold less than 1,000 polo shirts (Statement of Claim § 24). This poor result implies that

for the five days when the shirts were not available Doma Cirun would have had projected sales

of only 330 shirts out of the 100,000 it had contracted for (cf. ibid.).

86 Moreover, CLAIMANT bought 90,000 shirts from Gold Service Clothing because of its

longterm need for polo shirts even after 20 April 2011 (Statement of Claim § 25). This shows that

delivery of the polo shirts was still needed even two months after the original delivery date of 19

February 2011.

87 RESPONDENT therefore rejects the notion that a delay of just five days was of such detriment

to CLAIMANT that it would not amend the contract (cf. Cl. Memo. §§ 77, 79). RESPONDENT

understands that CLAIMANT would have preferred to receive the shirts on 19 February 2011.

Nevertheless, delivery on this exact day was not important enough that it would have been

unreasonable for CLAIMANT to accept a new delivery date merely five days later.

88 In any case, the most reasonable step for CLAIMANT to save time was to accept the later

delivery and amend the contract rather than enter in discussions over possible damages or inquire

for subsidiary suppliers. It thereby saved all the time that could still be saved.


19

89 In light of Mr. Long’s reference to “paper work” and his subsequent amendment to the

letter of credit, a reasonable third person would have understood him to have accepted the offer

to amend the contract. The parties have agreed to amend the delivery date of the contract to be

24 February 2011.

B. The Parties’ Oral Contract Amendment Is Valid

90 CLAIMANT brings forth that any purported amendment of contract would have required

written form pursuant to Art. 96 CISG (Cl. Memo. §§ 70 et seqq.). However, the parties effectively

excluded the application of Art. 96 CISG (supra § 58) so that the freedom of form principle set

forth in Artt. 11, 29 CISG applies.

91 Even if the Art. 96 reservation applied, it does, contrary to CLAIMANT’s contention (Cl.

Memo. § 70), not lead to a writing requirement. Rather, the Art. 96 reservation leads to a gap in

the CISG (1.). This gap needs to be filled by the subsidiarily applicable law providing for the

freedom of form (2.).

1. Art. 96 CISG opens a gap in the CISG as regards the form requirements for contracts

92 CLAIMANT seems to assume that Mediterraneo’s Art. 96 reservation and the interpretation

given to it by the Supreme Court of Mediterraneo trigger an automatically applicable writing

requirement (Cl. Memo. §§ 69 et seqq.).

93 However, it correctly states itself that the consequence of an Art. 96 reservation is that

Artt. 11, 29 CISG “do not apply” (Cl. Memo. § 4). Artt. 96, 12 CISG thus eliminate the freedom

of form principle, but do not automatically dictate the writing requirement as it exists in the

Reserving State (WALTHER/MORAWIETZ pp. 253 et seq.; FLECHTNER § 36). This is underlined by

the drafting history of Art. 96 CISG and the wording of Artt. 96, 12 CISG.

94 The drafting history of Art. 96 CISG proves that a direct application of the writing

requirement was never intended by the drafters. A respective proposal was rejected during the

negotiations as its adoption would make the form requirements of the law of the declaring state

too widely applicable (Working Group Report; RAJSKI in Bianca/Bonell Art. 96 § 1.2).

95 The wording of Artt. 96, 12 CISG, i.e. that any provision of Artt. 11, 29 CISG “does not

apply” also indicates the existence of an external gap in the CISG. Due to the elimination of the

freedom of form principle, the CISG does not address the question which law governs the

formal validity of a sales contract anymore (SCHROETER p. 21). Any direct application of the

writing requirement would not be feasible and contrary to the wording of Art 96, 12 CISG

(SCHLECHTRIEM/SCHMIDT-KESSEL in Schlechtriem Art. 12 §§ 2, 5).


20

96 Thus, a reservation under Art. 96 CISG leads to a gap in the CISG regarding the form

requirements for the formation of and amendments to contracts.

2. The UPICC’s freedom of form principle applies when filling this gap

97 As CLAIMANT correctly states, Art. 7 (2) CISG provides that external gaps are to be filled by

the rules of private international law (Cl. Memo. § 7). However, the relevant conflict of law rules

do, contrary to CLAIMANT’s assertion (Cl. Memo. § 70), not lead to written form.

98 The relevant conflict of law rule is Art. 35 (1) CEAC Rules. This clause provides that the

party’s agreement is decisive. The parties have agreed to supplement the CISG with the

UNIDROIT Principles of International Commercial Contracts (UPICC) (Cl. Exh. No. 1 § 20).

Art. 1.2 UPICC establishes the freedom of form principle for all contractual dealings between

parties.

99 Thus, even if Art. 96 CISG applied, it would lead to freedom of form.

CONCLUSION: With their oral agreement, the parties validly amended the contractual delivery

date to 24 February 2011. RESPONDENT’s delivery on this day was in conformity with the

contract.

IV. RESPONDENT’S ASSOCIATION WITH CHILD LABOR DOES NOT ENTITLE

CLAIMANT TO REIMBURSEMENT OF THE PURCHASE PRICE

100 CLAIMANT asserts that it was entitled to avoid the contract and claim reimbursement of the

purchase price (Cl. Memo. §§ 85 et seqq.). Allegedly, the shirts RESPONDENT delivered lacked

conformity because RESPONDENT had used child labor in one of its plants that was not

concerned with CLAIMANT’s order (Cl. Memo. §§ 86 et seqq.).

101 Under Art. 49 (1) (a) CISG a buyer may only declare the contract avoided if the failure by

the seller to perform his obligations amounts to a fundamental breach of contract. CLAIMANT

challenges RESPONDENT’s production methods, arguing that they amounted to a fundamental

breach of contract (Cl. Memo. §§ 101 et seqq,).

102 In repudiation of this assertion, RESPONDENT submits that CLAIMANT was not entitled to

avoid the contract since RESPONDENT did not breach its obligations. RESPONDENT delivered

shirts which were in conformity with the contract (A.). Any alleged breach of contract was in any

case not fundamental (B.).


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A. RESPONDENT Delivered Shirts Which Conformed to the Contract

103 CLAIMANT correctly states that Art. 35 CISG deals with the conformity of the goods (Cl.

Memo. § 32). It brings forth that the shirts RESPONDENT delivered were not fit for their particular

purpose under Art. 35 (2) (b) CISG (Cl. Memo. §§ 86 et seqq). However, it does not argue that the

goods lacked the conformity required by the contract under Art. 35 (1) CISG. It thereby ignores

the structure of Art. 35 CISG, namely the subsidiary nature of Art. 35 (2) CISG (FERRARI in

Ferrari et al. Art. 35 § 11). One can only resort to the particular purpose if the quality requirements

of the contract are not conclusive (ibid.; MAGNUS in Staudinger Art. 35 § 17). Accordingly, if the

contract conclusively addresses all quality requirements, a party asserting a breach of contract can

only rely on Art. 35 (1) CISG and not Art. 35 (2) (b) CISG.

104 In the case at hand RESPONDENT delivered shirts that conformed to the conclusive

quality requirements of the contract (1.). Should the Tribunal not follow RESPONDENT’s line of

argument and find the quality requirement inconclusive, the goods were in any case fit for their

particular purpose (2.).

1. The shirts are of the quality required by the contract, Art. 35 (1) CISG

105 The shirts conformed to all physical quality requirements (a) as well as to the non-

physical requirement that the shirts be produced under ethical circumstances (b).

(a) The shirts conform to all physical quality requirements

106 In Annex 1 the contract stipulated specific requirements for quality, size and colors of the

shirts (Cl. Exh. No. 1 § 1; Proc. Order No. 2 § 9). Sec. 1 of the contract further required the shirts

to carry the “Yes Casual” label on the inside collar. It is undisputed that the shirts conformed to

all these quality requirements (Proc. Order No. 2 § 9).

(b) The shirts also conform to the non-physical requirement to be produced ethically

107 Sec. 12 of the contract requires RESPONDENT to adhere to “highest ethical standards in

the conduct of [its] business” (Cl. Exh. No. 1 § 12). CLAIMANT argues that this clause required

RESPONDENT to uphold “certain standards” (Cl. Memo. § 104). Should the Tribunal hold that

these “standards” prohibit the use of child labor, RESPONDENT submits that this obligation is

restricted to the production of the shirts in question, which were not produced using child labor

(Proc. Order No. 1 § 8). Any conclusion to the contrary would result in an indefinite and

unreasonably onerous obligation, contradicting Art. 74 CISG.

108 Art. 74 CISG guarantees that the seller can foresee and calculate the possible liabilities

that could result from the contract at the time of its conclusion (MAGNUS in Staudinger


22

Art. 74 § 31; PILTZ § 5-544). If Sec. 12 related to more than the specific shirts, they could be

rendered non-conforming by any behavior of RESPONDENT not even remotely connected with

the instant contract. The risk RESPONDENT would have taken by agreeing to such an obligation is

incalculable and therefore not in accordance with the idea of Art. 74 CISG.

109 Finally, RESPONDENT would not have agreed to such an all-encompassing obligation as

that would have been onerous and economically unviable. Effectively, CLAIMANT would have

dictated how RESPONDENT has to run even those parts of its business CLAIMANT has no

connection with whatsoever.

110 Thus, Sec. 12 can only be interpreted as to refer to the specific shirts of the instant

contract. In accordance with Sec. 12, these shirts were produced under the observance of highest

ethical standards, in particular without the use of child labor (Proc. Order No. 1 § 8).

111 Hence, the contract stipulated conclusive requirements as it not only specifically set forth

all physical requirements of the shirts but also specified how the shirts were to be produced.

RESPONDENT adhered to all of these requirements and delivered shirts in conformity with the

contract. Thus, RESPONDENT did not breach the contract under Art. 35 (1) CISG. CLAIMANT is

barred from asserting a breach under Art. 35 (2) (b) CISG.

2. CLAIMANT cannot invoke Art. 35 (2) (b) CISG

112 CLAIMANT alleges that the shirts’ particular purpose, namely resale in Oceania, was

frustrated since RESPONDENT was associated with child labor, thereby breaching

Art. 35 (2) (b) CISG (Cl. Memo. § 85). This provision requires a seller to deliver goods fit for the

particular purpose made known to the seller, except where the circumstances show that it was

unreasonable for the buyer to rely on the seller's skill and judgement. Liability is also excluded

where the buyer knew or could not have been unaware of the lack of conformity,

Art. 35 (3) CISG. Even if the Tribunal considered a breach under Art. 35 (2) (b) CISG,

CLAIMANT could not rely on RESPONDENT’s skill and judgement to infer from the particular

purpose that the manufacturer of the shirts may not be brought in any connection with child

labor (a). Liablity is in any case excluded under Art. 35 (3) CISG since CLAIMANT knew or could

not have been unaware that RESPONDENT was associated with child labor (b).

(a) RESPONDENT could not reasonably infer that it may not be associated with child

labor in order for the goods to be resalable in Oceania

113 Conceding that CLAIMANT made the particular purpose of the shirts known to be the

resale in Oceania (cf. Cl. Memo. §§ 86 et seqq.) it could not reasonably rely on RESPONDENT’s skill

and judgment to infer from this purpose that it may not be associated with child labor.


23

114 To support its contention that RESPONDENT should have inferred that in the particular

country of Oceania customers would not buy products associated with child labor CLAIMANT

refers to case law (Cl. Memo. §§ 92 et seqq.). However, this case law affirms that RESPONDENT did

in fact take into account all compulsory factors influencing the resalability of the shirts in Oceania

(i). In any case, since CLAIMANT was an expert in the Oceanian market, its reasonable reliance on

RESPONDENT’s skill and judgment was excluded (ii).

(i) RESPONDENT took into account all compulsory factors to have the shirts be resalable in Oceania

115 CLAIMANT tries to substantiate its contention that RESPONDENT needed to ensure the

resalability of the shirts in Oceania by reference to case law (Cl. Memo. §§ 92 et seqq.). These cases

clarify that codified public law standards (aa) rather than the political ideologies of the targeted

market (bb) are decisive.

(aa) RESPONDENT only had to adhere to public law standards

116 The case law CLAIMANT cites (Cl. Memo. §§ 92 et seqq.) shows that goods whose purpose it

is to be resold in a particular country only lack conformity where domestic public law prohibits

certain qualities of the goods.

117 The Cour d’appel de Grenoble held that if the seller knew the goods were to be delivered

to France, they had to comply with French market regulations (Cour d’appel de Grenoble 13

September 1995 (France); Cl. Memo. § 92). Similarly, in the Pepper Potts case, the seller delivered

spices that contained an amount of ethylene-oxide that exceeded the limits set forth by German

Food Safety standards (LG Ellwangen 21 August 1995 (Germany); Cl. Memo. § 93). In the last case,

the seller delivered wine that contained 9 % water violating a Directive of the European

Community (LG Trier 12 October 1995 (Germany); Cl. Memo. § 96).

118 The record is silent on public law standards requiring the polo shirts to be generated in a

child labor free production environment. Particularly, ILO Convention No. 182 does not

constitute such regulation. By itself it neither prohibits the use of child labor in the ratifiying

country nor the sale of goods produced with child labor. Contrary to CLAIMANT’s contention

(Cl. Memo. § 94), the prime minister’s call for actions does not constitue a binding public law

standard either (cf. Statement of Claim § 21). In so far, the polo shirts were resalable in Oceania.

(bb) A seller is not required to investigate into the political ideology of customers in a certain market

119 What the seller cannot reasonably be expected to take into account are vague factors

which affect the resalability in the relevant country such as religious beliefs and ethical

convictions (KRÖLL in Kröll et al. Art. 35 § 120; cf. Gerechthof's Arnhem 27 April 1999 (Netherlands);


24

MAGNUS in Honsell, Art. 35 § 19). If a seller delivers juice to an Islamic country, which is widely

known for its religiously indorsed alcohol prohibition, he cannot be held accountable if the juice

cannot be sold due to its natural alcohol concentration if there was no state endorsed prohibition

in force (SCHLECHTRIEM/BUTLER p. 118).

120 Accordingly, RESPONDENT did not need to have the shirts conform to vague factors like

the Oceanian public’s ethical convictions.

(ii) Since CLAIMANT was an expert in the Oceanian market, it could in any case not reasonably rely on

RESPONDENT’s skill and judgment

121 CLAIMANT seems to argue that it reasonably relied on RESPONDENT’s skill and judgement

to infer from the particular purpose of the shirts that they could not be brought in any

connection with child labor (Cl. Memo. §§ 95 et seq.). RESPONDENT rejects this notion. CLAIMANT

did not reasonably rely on RESPONDENT’s skill and judgment since it is an expert in the Oceanian

market.

122 A buyer’s reliance is excluded if the buyer is more knowledgeable than the seller

(HYLAND p. 321; MALEY p. 119; SCHWENZER in Schlechtriem/Schwenzer (German) Art. 35 § 23) or

even where they have equal knowledge (LG Coburg 12 December 2006 (Germany); MAGNUS in

Staudinger Art. 35 § 32). According to CLAIMANT, both parties had equal experience in the trade

sector concerned (Cl. Memo. § 95). It concedes itself that it is “an equally skilled and experienced

actor in the trade” (ibid.).

123 In fact, CLAIMANT was even more knowledgeable than RESPONDENT in the resale of

clothes in the Oceanian market. CLAIMANT regularly supplies its Oceania based sister company

Doma Cirun with clothes (cf. Statement of Claim § 7). In addition it supplies clothes to various other

Oceania Plus subsidiaries in Oceania (ibid.). CLAIMANT was thus highly familiar with the ethically

sensitive clientele in Oceania. RESPONDENT on the other hand only ever delivered clothes

destined for Oceania on three earlier occasions (Proc. Order No. 2 § 15). Considering that

RESPONDENT is a major producer of clothing (cf. Statement of Claim § 9), three deliveries to a

certain market do not make it an expert in this market.

124 CLAIMANT has therefore an equal if not greater expertise in the Oceanian market. It had a

higher degree of awareness that clothes destined for Oceania may not be associated with child

labor. Consequently, it was not entitled to rely on RESPONDENT’s skill and judgment.

RESPONDENT’s liability is thus excluded.


25

(b) CLAIMANT knew or in any case could not have been unaware of RESPONDENT’s

association with child labor

125 Contrary to CLAIMANT’s assertion (Cl. Memo. § 96), RESPONDENT’s liability is in any case

excluded under Art. 35 (3) CISG. This provision sets forth that the seller is not liable for a failure

to deliver goods fit for their particular purpose if at the time of the conclusion of the contract the

buyer knew or could not have been unaware of such lack of conformity. CLAIMANT knew (i) or in

any case could not have been unaware (ii) of the fact that RESPONDENT was associated with child

labor.

(i) CLAIMANT knew that RESPONDENT is associated with child labor

126 CLAIMANT positively knew that RESPONDENT had been associated with child labor in the

past. Prior to the conclusion of a previous contract between the parties in 2008, CLAIMANT had

audited RESPONDENT in regards to labor issues and particularly the use of child labor (Statement of

Claim § 9). In the course of this audit it had learned that one of RESPONDENT’s suppliers had

used child labor (ibid.). CLAIMANT thus positively knew that it would contract with a company

associated with child labor when contracting with RESPONDENT.

(ii) At least, CLAIMANT could not have been unaware of RESPONDENT’s association with child labor

127 In any case, CLAIMANT could not have been unaware of RESPONDENT’s production

methods. Despite RESPONDENT’s history of child labor CLAIMANT did not conduct another audit

and gladly accepted a suspisciously low price.

128 The standard for determining whether a buyer could have been aware of the lack of

conformity is gross negligence (FERRARI in Ferrari et al. Art 35 § 29; BRUNNER Art. 35 § 20;

GRUBER in MüKo Art. 35 § 36; MAGNUS in Staudinger Art. 35 § 47). When it comes to ethical

standards in particular, a buyer acts in gross negligence if he assumes the goods to be produced

ethically even though their price is so low that an adherence to ethical standards cannot

reasonably be expected (cf. SCHWENZER/LEISINGER p. 264).

129 CLAIMANT did not verify that RESPONDENT had cut its ties to child labor by conducting

another audit. Normally, CLAIMANT would have done so “had [it] not been for the rush order”

(Proc. Order No. 2 § 2). CLAIMANT should have become particularly suspicious when

RESPONDENT offered a very low price barely covering the production costs (cf. Proc. Order No. 2

§ 6). CLAIMANT must therefore have been aware that at this rate it could not expect particularly

ethical circumstances.

130 In light of RESPONDENT’s prior association with child labor and the low price, CLAIMANT

was grossly negligent when assuming that RESPONDENT would not be associated with child labor.


26

RESPONDENT’s liability for the shirts not being resalable in Oceanian Doma Cirun stores is thus

excluded under Art. 35 (3) CISG.

131 RESPONDENT did not breach its contractual obligations under Art. 35 (1) CISG. Since

these obligations were conclusive, CLAIMANT cannot invoke the shirts’ particular purpose under

Art. 35 (2) (b) CISG. Any liability for the purported breach under Art. 35 (2) (b) CISG is

excluded since RESPONDENT did not have to investigate into the peculiarities of the Oceanian

market and CLAIMANT was more knowledgeable of that market. Liability is in any case excluded

since CLAIMANT knew about RESPONDENT’s association with child labor under Art. 35 (3) CISG.

B. The Purported Breach of Contract Is in Any Case Not Fundamental

132 CLAIMANT argues that RESPONDENT did not only breach the contract but committed a

fundamental breach (Cl. Memo. §§ 99 et seqq.). Even if RESPONDENT had in fact breached the

contract, such a breach would in any case not be fundamental in terms of Art. 25 CISG. This

provision stipulates that a breach is fundamental if it results in such detriment to the other party

as to substantially deprive it of what it was entitled to expect under the contract.

133 Contrary to CLAIMANT’s assertions (Cl. Memo. §§ 101 et seqq.), it was not its reasonable

expectation to receive shirts not associated with child labor (1.). RESPONDENT’s breach was in

any case not fundamental as CLAIMANT was able to resell the shirts (2.).

1. It was not CLAIMANT’s reasonable expectation to receive shirts not associated with

child labor

134 CLAIMANT argues that it was “significantly disadvantaged when incurring liability

associated with the enormous drop in sales and corresponding loss of reputation” (Cl. Memo.

§ 99). This allegedly constituted a substantial detriment.

135 The seriousness of a breach is, however, not to be determined by the extent of damages

or liabilities of the non-breaching party (BG 15 September 2000 (Switzerland); SCHROETER in

Schlechtriem/Schwenzer Art. 25 § 22; NEUMAYER/MING Art. 25 §§ 4, 7; BENICKE in MüKo Art. 25

§ 8). Rather it is decisive whether the seller adhered to the obligations the buyer attached

particular importance to according to the contract and the circumstances (OGH 21 June 2005

(Austria); BGH 3 April 1996 (Germany); SCHROETER in Schlechtriem/Schwenzer Art. 25 § 23)

136 It was not determinable that CLAIMANT attached particular importance to the fact that

RESPONDENT would comply with highest ethical standards in its entire business conduct (cf. Cl.

Memo. §§ 101 et seqq.). Allegedly this can be derived from Sec. 12 of the contract when read in

light of an audit CLAIMANT had conducted in 2008 (ibid.). However, since CLAIMANT had


27

conducted this audit more than two years prior to the conclusion of the contract at hand it

cannot affect the reading of Sec. 12 (a). In any case did the prior audit not indicate that

CLAIMANT attached particular importance to the prohibition of child labor (b).

(a) The outdated audit does not affect the reading of Sec. 12

137 When reading a contractual clause, the parties’ previous conduct has to be taken into

account unless such conduct dates back more than two years. This particular time limit originates

in Art. 39 (2) CISG and extends to the entire CISG, establishing that prior conduct loses its

impact after two years (cf. SCHWENZER in Schlechtriem/Schwenzer Art. 39 § 22; SCHROETER in

Schlechtriem/Schwenzer Art. 14 § 52). RESPONDENT did therefore not have to take account of the

audit CLAIMANT had conducted more than three years ago.

138 Not read in connection with the 2008 audit, Sec. 12 remains one random clause out of

twenty (Cl. Exh. No. 1). It is a standard clause in CLAIMANT’s contract template it uses for all of

its contractual relationships (Proc. Order No. 2 § 4). RESPONDENT could thus not discern that

CLAIMANT attached particular importance to the requirement that the shirts not be brought in

any connection with child labor.

(b) The prior audit did not indicate that CLAIMANT attached particular importance to the

prohibition of child labor

139 With the audit in 2008 CLAIMANT intended to ensure that RESPONDENT adhered to

Oceania Plus’s entire policy (Statement of Claim § 9). This policy includes broad ethical and

environmental standards (Proc. Order No. 2 § 4). To RESPONDENT the audit therefore only

indicated that CLAIMANT was interested in these broad standards, not a particular issue like child

labor (cf. Cl. Memo. § 104). The audit revealed that one of RESPONDENT’s suppliers had used child

labor. CLAIMANT nevertheless contracted with RESPONDENT (Statement of Claim § 9; Proc. Order

No. 2 § 5). From this RESPONDENT had to deduce that child labor was not an issue of such

particular importance that CLAIMANT would not contract with RESPONDENT.

2. In any case, the breach is not fundamental since CLAIMANT could still sell the shirts

140 A breach is not fundamental as long as the buyer can still resell the goods in his ordinary

course of business, even at a lower price (BGH 3 April 1996 (Germany); BG 28 October 1998

(Switzerland); MÜLLER-CHEN/PAIR; cf. CIETAC 2000/17). Particularly a wholesaler with access to

various markets has a broad opportunity to resell the goods (CISG AC-OP No. 5 § 4.3;

SCHWENZER in Avoidance of the Contract in Case of Non-Conforming Goods p. 438). If a buyer even has

several lines of business for goods of different quality he could use the non-conforming goods in


28

a line for lower quality (OLG Köln 14 October 2002 (Germany); CISG AC-OP No. 5 § 4.3; HUBER in

Huber/Mullis p. 232). CLAIMANT could have sold the shirts within the group of its parent

companies and actually managed to sell them externally.

141 CLAIMANT regularly delivers clothes to its parent companies Oceania Plus and Atlantica

Megastores (Statement of Claim § 5; Proc. Order No. 2 § 15). They do not only supply high-end

fashion stores like Doma Cirun but also own supermarkets and megastores (Statement of Claim

§§ 5 et seq.). CLAIMANT’s business therefore extended to a lower market segment, receptive to the

shirts.

142 CLAIMANT in fact effortlessly sold the remaining 99,000 shirts externally to Pacifica

Trading (Statement of Claim § 24). RESPONDENT’s purported breach was thus in any case not

fundamental in terms of Art 25 CISG.

CONCLUSION: The shirts RESPONDENT delivered were in conformity with the contract. Any

alleged breach of contract was not fundamental. CLAIMANT is thus not entitled to avoid the

contract. It cannot claim reimbursement of the purchase price.

In any case, avoidance of contract would require CLAIMANT to return the polo shirts. Since it

already sold them, the profit CLAIMANT gained by this sale has to be deducted from the purchase

price, reducing it from USD 550,000 to USD 80,000.

V. CLAIMANT IS NEITHER ENTITLED TO THE SPECIFIED SUM NOR DAMAGES

143 Even if RESPONDENT Breached the contract in any of the ways alleged by CLAIMANT,

Contrary to CLAIMANT’s assertion (Cl. Memo. §§ 110 et seqq.), CLAIMANT is still neither entitled to

the specified sum (A.) nor to damages (B.).

A. CLAIMANT Is Not Entitled to the Specified Sum

144 Even if RESPONDENT had delivered the shirts too late it would be exempt from liability

due to a strike at its supplier (1.). In any case, Sec. 10 violates the principles of good faith and fair

treading and is therefore invalid (2.). Alternatively, RESPONDENT respectfully requests the

Tribunal to reduce the sum to a reasonable amount, as Sec. 10 grants CLAIMANT a grossly

excessive benefit over RESPONDENT (3.).


29

1. RESPONDENT is exempt from liability due to a strike at its supplier

145 CLAIMANT is not entitled to the specified sum for late delivery in Sec. 10 of the contract.

RESPONDENT is exempt from liability since a strike at its supplier’s factory delayed its

performance (Proc. Order No. 2 § 12). The issue of specified sums is not governed by the CISG

(DJORDJEVIC in Kröll et al. Art. 4 § 26; HACHEM pp. 140, 144). Therefore the subsidiarily

applicable law determines whether an exemption from liability extends to these sums (RUMMEL in

Hoyer/Posch p. 192; TALLON in Bianca/Bonell Art. 79 § 2.10.1). The parties have agreed for the

UPICC to supplement the CISG (supra § 98). Therefore, contrary to CLAIMANT’s allegation that

RESPONDENT’s exemption from liability is governed by Art. 79 (1) CISG (Cl. Memo. §§ 42 et seqq.)

it is governed by the equivalent Art. 7.1.7 UPICC. These provisions exempt the seller from

liability in case of force majeure.

146 Art. 7.1.7 (4) UPICC exhaustively lists the remedies the buyer may invoke despite the

seller’s exemption from liability. While the UPICC, other than the CISG, does provide for

specified sums in Art. 7.4.13 UPICC, they are not included in this exhaustive list. The exemption

of Art. 7.1.7 UPICC therefore extends to the sum specified in Sec. 10 of the contract.

147 Art. 7.1.7 UPICC stipulates that a party is not liable for a failure to perform if this failure

was due to an unforeseeable impediment beyond its control and it could not have overcome or

avoided this impediment. The strike at RESPONDENT’s supplier’s factory was an unforeseeable

impediment beyond RESPONDENT control (a). RESPONDENT could not have overcome the strike

or its consequences (b).

(a) The strike was an unforeseeable impediment beyond RESPONDENT’s control

148 RESPONDENT agrees that the seller generally bears the risk for its suppliers (Cl. Memo.

§ 54). Nevertheless, the seller is not responsible for a manufacturer or supplier to the same extent

as for a sub-contractor or own staff (Award of 21 March 1996 (HCC)). While a strike which a party

is responsible for is not an unforeseeable impediment beyond a party’s control, labor

disturbances which the party has no influence on are (ATAMER in Kröll et al. Art. 79 § 46;

BRUNNER Art. 79 § 17; ENDERLEIN/MASKOW p. 323). RESPONDENT had no influence on the

strike as it took place at its supplier’s factory and not its own (Proc. Order No. 2 § 12). The strike

thus constituted an unforeseeable impediment for RESPONDENT, which was beyond its control.

(b) RESPONDENT could not reasonably overcome the strike’s consequences

149 In order to overcome an impediment a seller is expected to take reasonable measures

(TALLON in Bianca/Bonell Art. 79 § 2.6.4.; SCHWENZER in Schlechtriem/Schwenzer Art. 79 § 14).

When RESPONDENT learned about the strike at its supplier it immediately investigated with other


30

suppliers in order to overcome the lack of material for producing the shirts (Proc. Order No. 2

§ 13). However, these suppliers were twice as expensive as the original supplier and not able to

guarantee timely delivery (ibid). Contracting with one of these suppliers would therefore not have

overcome the impediment.

150 Investigating for alternative suppliers was all RESPONDENT could have been reasonably

expected to do in order to overcome the impediment. RESPONDENT is thus exempt from liability

for the specified sum according to Art. 7.1.7 UPICC.

2. Sec. 10 of the contract is invalid

151 CLAIMANT argues that under Sec. 10 of the contract (Cl. Exh. No. 1 § 10) it is entitled to

5 % of the purchase price, amounting to USD 27,500 (Statement of Claim § 37; cf. Cl. Memo. §§ 110

et seqq.). RESPONDENT rejects this notion since Sec. 10 of the contract contradicts the principle of

good faith and fair dealing and is therefore invalid under Art. 1.7 (1) UPICC.

152 Since the CISG does not decide on the validity of contractual provisions (Art. 4 (a) CISG)

the UPICC as the subsidiarily applicable law determine the validty of the specified sum (cf. supra

§ 98). Pursuant to Art. 1.7 (1) UPICC each party must act in accordance with good faith and fair

dealing in international trade. If a party includes a certain contractual term contrary to these

principles this clause does not apply (VOGENAUER in Vogenauer/Kleinheisterkamp Art. 1.7 § 40).

153 CLAIMANT acted in bad faith since it was impossible for RESPONDENT to receive the

incentives stipulated in Sec. 10. In Sec. 10 a), payment of 0.5 % of the purchase price is granted

per week of early delivery (Cl. Exh. No. 1 § 10). However, the order was a rush job (Statement of

Claim § 9; Cl. Exh. No. 2 § 2) and delivery an entire week early was therefore virtually impossible.

Despite being aware of RESPONDENT’s tight schedule (Cl. Exh. No. 2 § 2), CLAIMANT included

this clause in the contract (Proc. Order No. 2 § 7), promising a bonus only at first glance. Such

conduct contradicts the principles of good faith and fair dealing.

154 In addition, the hidden unlimited character of the clause also violates good faith.

Sec. 10 b) is limited but only deals with deliveries not exceeding 15 days. However, letter c)

stipulates that 2 % of the purchase price can be deduced for any further day of delay. The

specified sum is thus not limited to any maximum amount. In the worst case, CLAIMANT could

reduce the purchase price to nothing and still demand delivery of the polo shirts. This means that

after two months it would get the polo shirts for free (cf. Cl. Exh. No. 1 § 10).

155 This shows that Sec. 10 is contrary to the principles of good faith and fair dealing. Under

Art. 1.7 (1) UPICC the clause should therefore not be given any effect in the first place.


31

3. In any case, the sum should be reduced to a reasonable amount

156 Even if the Tribunal found that the clause was valid, RESPONDENT respectfully requests

the Tribunal to make use of its discretion under Art. 7.4.13 (2) UPICC and reduce the sum to a

reasonable amount, i.e. the actual damages suffered (cf. case).

157 Pursuant to Art. 7.4.13 (2) UPICC a specified sum may be reduced where it is grossly

excessive in relation to the actual harm suffered and the circumstances. The claimed sum of

USD 27,500 equals the price of 5,000 polo shirts. In the month between the start of sale on

20 March 2011 and the drop in sales on 20 April 2011 only 1,000 shirts could be sold (cf. Statement

of Claim § 24). For the delay of only five days, CLAIMANT would be granted a sum it would have

normally needed five months worth of sold polo shirts to achieve, provided that the polo shirts

remained as profitable as in the first month. This would be a grossly excessive benefit over

RESPONDENT.

158 This result is supported by case law. In a similar case where a clause only granted 0.5 % of

the purchase price per day and was also not limited it was held that the sum was grossly excessive

(Award of 5 June 1997 (ICAC)). All the more should the unlimited sum under Sec. 10 be reduced,

as it grants a deduction of 1 % per day and after 15 days a deduction of even 2 % (Cl. Exh.

No.1 § 10). It is thus grossly excessive and has to be reduced.

159 In conclusion, CLAIMANT is not entitled to the sum stipulated in Sec. 10 of the contract.

B. CLAIMANT Is Not Entitled To Damages

160 In repudiation of CLAIMANT’s assertion (Statement of Claim § 37) RESPONDENT submits that

CLAIMANT is neither entitled to damages due to the alleged late delivery (1.) nor can it recover

the losses it incurred due to the shirts’ purported lack of conformity (2.).

1. CLAIMANT is not entitled to damages for late delivery

161 In its Statement of Claim, CLAIMANT demands both the sum stipulated in the contract and

damages for late delivery to Doma Cirun (Statement of Claim §§ 26, 37). However, CLAIMANT

cannot have the cake and eat it.

162 Should the Tribunal consider a breach of contract, RESPONDENT’s liability is not only

exempt for the specified sum under Art. 7.1.7 UPICC (supra §§ 154 et seqq.) but, according to the

equivalent Art. 79 (1) CISG, also for damages due to late delivery under Art. 74 CISG.


32

163 In any case, contractually agreed sums such as Sec. 10 and damages under Art. 74 CISG are

mutually exclusive (ZELLER p. 7). If CLAIMANT was entitled to the specified sum, it is thus barred

from claiming damages for late delivery.

2. CLAIMANT is neither entitled to damages due to the purported lack of conformity

164 CLAIMANT asserts that it is “entitled to recover all damages caused due to [RESPONDENT’s]

breach” (Cl. Memo. § 111). RESPONDENT contests this allegation.

165 Art. 74 CISG grants damages consisting of a sum equal to the loss suffered by a party as a

consequence of a breach. The loss has to be foreseeable at the time of contract conclusion.

RESPONDENT can neither be held liable for the loss CLAIMANT suffered due to the settlement

with Doma Cirun (a) nor for the loss that CLAIMANT incurred due to the settlement with

Oceania Plus (b).

(a) RESPONDENT is not liable for CLAIMANT’s loss due to the settlement with Doma

Cirun

166 CLAIMANT is not entitled to compensation for the loss it incurred when it had to pay a

settlement to Doma Cirun. A large part of the originally claimed sum this settlement was based

on was the “reimbursement […] of the purchase price of the polo shirts” (Statement of Claim § 26).

CLAIMANT also demands this reimbursement as a consequence of the alleged fundamental

breach, thereby asking for the reimbursement twice. However, CLAIMANT cannot be put in an

economically better position than it would be in if the contract had been performed properly

(cf. CISG-AC Op. No. 6 § 9; WITZ in Witz et al. Art. 74 § 14; Secretariat Commentary Art. 70 § 3).

CLAIMANT is thus not entitled to recover a major part of the settlement, namely the purchase

price as damages.

167 The rest of the settlement constitutes a payment for the lost sales and the loss of reputation

Doma Cirun had suffered (Statement of Claim § 26). These losses incurred after a television

broadcast on the issue of child labor had been aired and a newspaper article had followed up on

the issue (Statement of Claim §§ 18 et seq.).

168 Even conceding that these losses were caused by RESPONDENT being associated with child

labor, Doma Cirun’s losses were not foreseeable for CLAIMANT (i), let alone RESPONDENT (ii).

(i) Doma Cirun’s losses were not foreseeable to CLAIMANT

169 CLAIMANT itself did not foresee the results of RESPONDENT’s alleged breach. Contrary to its

assertion (Cl. Memo. § 97), it did not avoid the contract “immediately after […] CLAIMANT learned

of the use of child labor” (cf. ibid.). Rather, it avoided three days later, not before Doma Cirun had


33

avoided the contract (Cl. Exh. Nos. 6, 7). When CLAIMANT learned that RESPONDENT was

associated with child labor it did not itself foresee that this would result in a drop of sales for

Doma Cirun since otherwise it would have avoided the contract right away.

(ii) By no means were Doma Cirun’s losses foreseeable to RESPONDENT

170 If CLAIMANT itself which is an expert in the Oceanian market (supra § 121 et seqq.) could not

have foreseen the result of the media coverage, RESPONDENT could not forsee it either.

171 At the time of contract conclusion RESPONDENT could not even foresee that its association

with child labor would be covered in the media at all (Cl. Exh. No. 7). Even when the issue was

covered it could not have foreseen that this would result in a drop of sales of the “Yes Casual”

brand.

172 Neither the television broadcast nor the following newspaper article condemned CLAIMANT,

let alone mentioned any polo shirts. The children shown in the broadcast were manufacturing

pants, not polo shirts (Proc. Order No. 2 § 17). It was not alleged that the polo shirts in question or

any other products of the “Yes Casual” brand were produced with child labor (ibid.). Since the

media coverage associated neither CLAIMANT nor the “Yes Casual” brand with child labor there

was no way for RESPONDENT to foresee that the Oceanian Doma Cirun customers would stop

buying the shirts.

173 As a conclusion, CLAIMANT cannot invoke reimbursement of the purchase price both out of

its avoidance and as damages comprised in the settlement with Doma Cirun. The other part of

the settlement was not foreseeable for CLAIMANT, let alone RESPONDENT.

(b) RESPONDENT is not liable for the loss CLAIMANT incurred due to the settlement with

Oceania Plus

174 Contrary to its allegation (Cl. Memo. § 110), CLAIMANT is further not entitled to damages due

to the settlement with Oceania Plus. Oceania Plus is Doma Cirun’s and CLAIMANT’s mother

company and listed on the stock market (cf. Statement of Claim § 21). As a result of the adverse

media coverage (supra § 172) the public condemned Oceania Plus for profiting from child labor,

leading to a drop in its stock value (Statement of Claim § 21). Its investors then sued for this loss

which Oceania Plus in turn sued CLAIMANT for (Statement of Claim § 29). CLAIMANT voluntarily

complied with this suit and paid the full amount claimed (ibid.).


34

175 Contrary to CLAIMANT’s contention (Cl. Memo. § 111), RESPONDENT does not bear the risk

of loss of goodwill to a third party like Oceania Plus (i) and could not have foreseen the occurred

loss (ii).

(i) RESPONDENT does not bear the risk of Oceania Plus’s loss of goodwill

176 Art. 74 CISG determines the distribution of risks (KAROLLUS p. 218). Without an explicit

agreement, the seller cannot be ascribed responsibility for unusually high risks (MAGNUS in

Staudinger Art. 74 § 36, SAIDOV p. 105; STOLL p. 263; cf. ENDERLEIN in Enderlein et al. Art. 74 § 8).

Where the buyer’s liability to third parties is excessive, losses following therefrom are not

recoverable (SAIDOV p. 109).

177 Since Oceania Plus is listed on the stock market (cf. Statement of Claim § 21), its loss in

goodwill becomes measurable immediately through its loss in stocks. The lawsuits by its investors

due to the drop in stock value totaled USD 15,000,000 (Statement of Claim § 21).

178 Compared to the polo shirts’ value of USD 550.000 (Cl. Exh. No. 1 § 2) the loss of goodwill

suffered by Oceania Plus is more than 27 times higher. This constitutes an unusually high risk

which RESPONDENT has not agreed to take.

(ii) CLAIMANT’s loss resulting from the settlement with Oceania Plus was not foreseeable

179 Oceania Plus is a large multinational group supplying clothes to e.g. Neyekey, Adundas, Ruff

Lawrence and leading supermarket chains such as Curry4, Seemsboro’s and Tusko and other

buyers from around the world (Statement of Claim § 1). Doma Cirun is only one subsidiary

amongst many. RESPONDENT could not have foreseen that the delivery of the allegedly non-

conforming shirts to only one of the subsidiaries would affect the mother company at all, let

alone could it predict that its mother company’s share price would drop by 25 %.

180 It was not foreseeable that the Oceanian public would react so agitatedly, particularly not for

RESPONDENT which was not an expert in the Oceanian market (supra §§ 121 et seqq.). Generally,

even customers of higher-end clothing such as the “Yes Casual” brand assume that the items

they are purchasing are made in sweatshops alongside cheap clothing (The Market for Ethical and

Sustainable Fashion Products § 9). They are not bothered as long as the products have a designer

label and are stylish (ibid.). It was thus not foreseeable to RESPONDENT that the Oceanian

customers would refuse the polo shirts, let alone the “Yes Causal” brand, Doma Cirun or even its

mother company Oceania Plus (cf. Statement of Claim §§ 20 et seq.; Proc. Order No. 2 § 17).


35

181 Even considering that Oceania was a market sensitive to ethical issues, it was not foreseeable

that the Oceanian Prime Minister would get involved, further contributing to Oceania Plus’s loss

of reputation (cf. Statement of Claim § 21). A political involvement on the highest level concerning a

delivery of a few thousand polo shirts cannot be anticipated.

182 CLAIMANT cannot recover its payment to Oceania Plus since RESPONDENT neither bears the

risk for Oceania Plus’s loss of goodwill nor was this loss foreseeable. It is not entitled to damages

for the polo shirts’ purported lack of conformity.

CONCLUSION: CLAIMANT is neither entitled to the specified sum nor to any damages.

REQUEST FOR RELIEF

In light of the above submissions, counsel for RESPONDENT respectfully requests the Tribunal to

find that

(1) Mr. Short’s written witness statement is admissible to the further proceedings by itself;

(2) the CISG applies without regard to national reservations;

(3) RESPONDENT delivered the polo shirts on time;

(4) CLAIMANT is not entitled to reimbursement of the purchase price since the polo shirts

RESPONDENT delivered were in conformity with the contract;

(5) CLAIMANT is neither entitled to the specified sum nor damages.


XXVIII

Munich, 17 January 2013

We hereby confirm that this Memorandum was written only by the persons who signed

below. We also confirm that we did not receive any assistance during the writing process from

any person that is not a member of this team.

______________ ________________ _____________

Felix Aiwanger Clara Freißmuth Ronja Schregle

______________ _______________ _____________

Sophie Schröter Luise Seidel Michael Strecker

Documents

MEMORANDUM FOR RESPONDENT · TWENTIETH ANNUAL WILLEM C. VIS INTERNATIONAL COMMERCIAL ARBITRATION MOOT 22 TO 28 MARCH 2013 MEMORANDUM FOR RESPONDENT LUDWIG-MAXIMILIANS-UNIVERSITÄT