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Team Code: 13R: 3 Nliu Justice R.K. Tankha Memorial International Moot Court Competition, 2018
Team Code: 13R: 3 Nliu Justice R.K. Tankha Memorial International Moot Court Competition, 2018
Before
THE INTERNATIONAL ARBITRAL TRIBUNAL,
LAKE CITY, CENTRAL PROVINCE
v.
CASE CONCERNING
THE CONTRACT FOR SALE OF GOODS BETWEEN ANTARIA INTERNATIONAL Inc. AND
RACONIAN DEFENCE TECHNOLOGIES Ltd.
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TABLE OF CONTENTS
ISSUES RAISED...................................................................................................................... 11
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TABLE OF ABBREVIATIONS
Art. Article
Cit. Cited
Co. Company
i.e. That is
Inc. Incorporated
Ltd. Limited
No. Number
Pg. Page
PO Procedural Order
pp. Pages
Pvt. Private
r. w. Read with
U. K. United Kingdom
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v. Versus
Vol Volume
Govt. Government
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INDEX OF AUTHORITIES
1. UNCITRAL Digest of Case Law on the United Nations Convention on Contracts for the
International Sale of Goods
2. Passing of Property Under Contracts for the International Sale of Goods:Should the CISG
Regulate the Transfer of Property? Tran Quoc Thang
3. The Seller's Obligations Under the United Nations Convention On Contracts for the
International Sale of Goods by Peter Schlechtriem
4. CLOUT Case No. 171 [Bundesgerichtshof, Germany, 3 Apr. 1996] (CISG-online 135)
5. CLOUT Case No. 171 [Bundesgerichtshof, Germany, 3 Apr. 1996] (CISG-online 135)
7. The Seller's Obligations Under the United Nations Convention on Contracts for the
International Sale of Goods by Peter Schlechtriem.
8. Art. 9, CISG
11. CLOUT case No. 303 [Court of Arbitration of the International Chamber of Commerce,
1994 (Arbitral award no. 7331)]
12. United Nations Conference on Contracts for the International Sale of Goods, Vienna, 10
March-11 April 1980, Official Records, Documents of the Conference and Summary
Records of the Plenary Meetings and of the Meetings of the Main Committee, 1981
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16. The Concept of Fundamental Breach and Avoidance under CISG Amir Al-Hajaj
17. Case Law on the Concept of "Fundamental Breach" in the Vienna Sales Convention
Leonardo Graffi
19. The Concept of Fundamental Breach of Contract under the United Nations Convention on
Contracts for the International Sale of Goods (CISG) Robert Koch
20. Uniform Sales Law - The UN-Convention on Contracts for the International Sale of Goods
Univ. Prof. Dr. Peter Schlechtriem
23. Uniform Sales Law - The UN-Convention on Contracts for the International Sale of Goods
Univ. Prof. Dr. Peter Schlechtriem
24. Switzerland 5 February 1997, Handelsgericht [Commercial Court] Zürich [CLOUT no.
214]
25. Remedies Under the New International Sales Convention: The Perspective from Article 2
of the U.C.C.
27. ICC Court of Arbitration, January 1997, award No. 8786,ICC International Court of
Arbitration Bulletin 2000
28. 2012 UNCITRAL Digest of case law on the United Nations Convention on the
International Sale of Goods
29. CLOUT case No. 427 [AUSTRIA Oberster Gerichtshof 28 April 2000]
30. 2008 UNCITRAL Digest of case law on the United Nations Convention on the
International Sale of Goods
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case No. 214 [SWITZERLAND Handelsgericht des Kantons Zürich 5 February 1997
],CLOUT case No. 138 [UNITED STATES U.S. Court of Appeals for the Second Circuit
6 December 1995]
32. CLOUT case No. 168 [GERMANY Oberlandesgericht Köln 21 May 1996]
33. CLOUT case No. 166 [GERMANY Schiedsgericht der Handelskammer Hamburg 21
March 21 June 1996]
34. CLOUT case No. 427 [AUSTRIA Oberster Gerichtshof 28 April 2000]
35. CLOUT case No. 217 [SWITZERLAND Handelsgericht des Kantons Aargau 26
September 1997]
36. CLOUT case No. 631 [AUSTRALIA Supreme Court of Queensland 17 November 2000
(Down Investments Pty Ltd. v. Perjawa Steel SDN BHD)]
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STATEMENT OF JURISDICTION
The arbitral tribunal has jurisdiction in this matter under Clause 15 of the contract read with ICC
Arbitration Rules 2017. Clause 15 of the contract reads as follows:
“15.Arbitration: All disputes arising out of or in connection with the present contract shall be
finally settled under the Rules of Arbitration of the International Chamber of Commerce subject
to application of the Expedited Procedure Provisions. The tribunal will consist of a sole
arbitrator as specified under Schedule I of this contract. The seat of the arbitration will be Lake
City, Central Province. The language to be used in the arbitral proceedings will be English.
Judgment upon the award rendered by the arbitrator may be entered by court having jurisdiction
thereof.”
The Respondent has also approached this tribunal to decide on the application of expedited
procedure in the dispute referred.
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STATEMENT OF FACTS
Antaria International Inc. [hereinafter ‘CLAIMANT’] is incorporated under the laws of country of
Antaria. AI is a multinational Conglomerate company with its primary product being AI OPTRA
which is a ballistic material using proprietary technology. Raconian Defence Technologies Ltd
[hereinafter ‘RESPONDENT’] is company in Raconia with Government of Raconia, its majority
shareholder. Government of Raconia undertakes 90% of its procurement through RDT.
JUNE 21, 2016 : The RESPONDENT requests to place an order with the CLAIMANT for 8000
rolls of 45.8 kg roll weight, of 63 inches minimum width AI Optra to be reach them by the way of
shipment by beginning of February and remaining shipment by March, 2017.
JUNE 23, 2016: The CLAIMANT confirms that the order can be placed of above listed material
that can be supplied by February,10 and remaining shipment by March,10.
JULY 20, 2016: The standard terms of contract as attached in the previous communication is
completed which gives details about shipment, payment, arbitration clause, obligation of buyer
and seller including arbitration clause in case a dispute arises.
JANUARY 20, 2017: Government of Raconia, Ministry of Finance issues a notification according
to which Exporter Certificate is required is to be filed by the manager of the foreign exporter for
the goods in contention.
FEBRUARY 16, 2017: The CLAIMANT appoints Antony Martyr as their authorised
Representative who files the exporter certificate on their behalf.
FEBRUARY 25, 2017: The RESPONDENT conveys to the CLAIMANT another communication
by the Customs authorities according to which the goods were confiscated by the authorities due
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to lack of proper compliance with the notification issued earlier. The RESPONDENT notifies the
avoidance of the contract.
FEBRUARY 27, 2017: The CLAIMANT in a communication states that the avoidance of the
contract is illegal, the transfer of the property has already taken place and payment for the shipment
cannot be withheld.
MARCH 13, 2017: The RESPONDENT in a communication asserts that the avoidance of the
contract is legally valid and therefore they are under no obligation to make payment to custom
authorities.
MARCH 20, 2017: The CLAIMANT in its communication to Customs authorities requests them
to return the goods as an unpaid seller and file remedied exporter certificate signed by the manager.
MAY 15, 2017: The CLAIMANT in its communication to the Customs authorities reiterate request
to re-export goods to origin and goods should not be disposed while under their care.
July 14, 2017: The RESPONDENT communicates to the CLAIMANT another communication
from the Customs Authorities that the goods will be disposed of in accordance with the law and to
pay US$ 5000 as storage fees to custom authorities.
AUGUST 02, 2017: The CLAIMANT requests for arbitration and submits arbitral claim against
the RESPONDENT claiming US$2,680,000 and payment of US$5000for administrative fee.
AUGUST 20, 2017: The RESPONDENT in its communication referring to the communication
made by the Secretariat of the International Court of Arbitration acknowledges the appointment of
the arbitrator and challenges the applicability of Expedited Procedures under Article 30 of ICC
Arbitration rules 2017 and asserted that the avoidance was valid due to the gross negligence of the
CLAIMANT and asserts that RESPONDENT is entitled for compensatory damages amounting to
US$150000. Both the parties have appointed Mr. Duke Nukelam (14 Advocate Way, Lake City,
Central Province) as the sole arbitrator.
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ISSUES RAISED
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SUMMARY OF ARGUMENTS
1. The Expedited Procedure provisions are not applicable under Article 30 of the ICC
Arbitration Rules in the facts and circumstances arising out of the claim as EPP came in
existence on March 1’17 while the contract was concluded on July 20’16. Also, the
amount in dispute exceeds US$ 2000000 in case of ICC Expedited Procedure Provisions
doesn’t apply mandatorily unless opted for by parties to dispute by express provison or
agreement.
2. The testimony of Mr. Antony Martyr shall be recorded in this case to follow due process
and allow the Respondent to present its case fully. The testimony of the authorized
representative of the Claimant is essential in light of the relevant fact that there was gross
negligence by the Claimant and lack of participation in spite of the fact that the essence
of timeline was laid down a special emphasis by the Respondent owing to civil unrest.
3. The respondent has legally avoided the contract owing to fundamental breach of
obligation by the seller to deliver the goods on time and reasonably assist the buyer in
procedural formalities pertaining to custom clearance due to gross negligence excercised
by the claimant and lack of participation.
4. That the storage cost is recoverable from the claimant pursuant to demand raised by the
Raconian custom authorities as the respondent had already avoided the contract and also
no delivery or use of such goods was accepted by respondent.
5. The respondent is entitled to compensatory damages from the claimant as the timeline
was laid emphasis upon by the Respondent at the formation of the contract and the seller
id not abide by its obligation to assist the buyer.
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ARGUMENTS ADVANCED
Article 30 of the ICC Arbitration Rules 2017 dealing with Expedited Procedure as mode of
arbitral proceedings states
1 By agreeing to arbitration under the Rules, theparties agree that this Article 30 and the Expedited
Procedure Rules set forth in Appendix VI (collectively the “Expedited Procedure Provisions”)
shall take precedence over any contrary terms of the arbitration agreement.
2 The Expedited Procedure Rules set forth in Appendix VI shall apply if:
a) the amount in dispute does not exceed the limit set out in Article 1(2) of Appendix VI at the
time of the communication referred to in Article 1(3) of that Appendix; or
b) the parties so agree.
3 The Expedited Procedure Provisions shall not apply if:
a) the arbitration agreement under the Rules was concluded before the date on which the Expedited
Procedure Provisions came into force;
b) the parties have agreed to opt out of the Expedited Procedure Provisions; or
c) the Court, upon the request of a party before the constitution of the arbitral tribunal or on its
own motion, determines that it is inappropriate in the circumstances to apply the Expedited
Procedure Provisions.
Appendix VI of the ICC Arbitration Rules deals with rules pertaining to Expedited Procedure
Article 1 Application of the Expedited Procedure Rules
1 Insofar as Article 30 of the Rules of Arbitration of the ICC (the “Rules”) and this Appendix VI
do not provide otherwise, the Rules shall apply to an arbitration under the Expedited Procedure
Rules.
2 The amount referred to in Article 30(2), subparagraph a), of the Rules is US$ 2,000,000.
3 Upon receipt of the Answer to the Request pursuant to Article 5 of the Rules, or upon expiry of
the time limit for the Answer or at any relevant time thereafter and subject to Article 30(3) of the
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Rules, the Secretariat will inform the parties that the Expedited Procedure Provisions shall apply
in the case.
4 The Court may, at any time during the arbitral proceedings, on its own motion or upon the
request of a party, and after consultation with the arbitral tribunal and the parties, decide that the
Expedited Procedure Provisions shall no longer apply to the case. In such case, unless the Court
considers that it is appropriate to replace and/or reconstitute the arbitral tribunal, the arbitral
tribunal shall remain in place.
Article 2 Constitution of the Arbitral Tribunal
1 The Court may, notwithstanding any contrary provision of the arbitration agreement, appoint a
sole arbitrator.
2 The parties may nominate the sole arbitrator within a time limit to be fixed by the Secretariat.
In the absence of such nomination, the sole arbitrator shall be appointed by the Court within as
short a time as possible.
Article 3 Proceedings
1 Article 23 of the Rules shall not apply to an arbitration under the Expedited Procedure Rules.
2 After the arbitral tribunal has been constituted, no party shall make new claims, unless it has
been authorized to do so by the arbitral tribunal, which shall consider the nature of such new
claims, the stage of the arbitration, any cost implications and any other relevant circumstances.
3 The case management conference convened pursuant to Article 24 of the Rules shall take place
no later than 15 days after the date on which the file was transmitted to the arbitral tribunal. The
Court may extend this time limit pursuant to a reasoned request from the arbitral tribunal or on
its own initiative if it decides it is necessary to do so.
4 The arbitral tribunal shall have discretion to adopt such procedural measures as it considers
appropriate. In particular, the arbitral tribunal may, after consultation with the parties, decide not
to allow requests for document production or to limit the number, length and scope of written
submissions and written witness evidence (both fact witnesses and experts).
5 The arbitral tribunal may, after consulting the parties, decide the dispute solely on the basis of
the documents submitted by the parties, with no hearing and no examination of witnesses or
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experts. When a hearing is to be held, the arbitral tribunal may conduct it by videoconference,
telephone or similar means of communication.
Article 4 Award
1 The time limit within which the arbitral tribunal must render its final award is six months from
the date of the case management conference. The Court may extend the time limit pursuant to
Article 31(2) of the Rules.
2 The fees of the arbitral tribunal shall be fixed according to the scales of administrative
expenses and arbitrator’s fees for the expedited procedure set out in Appendix III.
Article 5 General Rule
In all matters concerning the expedited procedure not expressly provided for in this Appendix,
the Court and the arbitral tribunal shall act in the spirit of the Rules and this Appendix.
In light of paragraph 15 of the contract there is a clear intention to arbitrate by the
Respondent.
“All disputes arising out of or in connection with the present contract shall be finally settled
under the Rules of Arbitration of the International Chamber of Commerce subject to application
of the Expedited Procedure Provisions. The tribunal will consist of a sole arbitrator as specified
under Schedule I of this contract. The seat of the arbitration will be Lake City, Central Province.
The language to be used in the arbitral proceedings will be English. Judgment upon the award
rendered by the arbitrator may be entered by any court having jurisdiction thereof.”
However in the said matter the EPP didn’t come into existence at the time of formation of
contract on July 20, 2016 but rather in March 1, 2017. Also, the amount in dispute exceeds
US$ 2000000 and thus no mandatory application of the Expedited Procedure Provisions.
Article 19(1) of the UNCITRAL Model Law on International Commercial Arbitration
confers rights to the parties to the dispute to determine rules of procedure for the conduct of
arbitral proceedings. In the instant matter there is so much agreement by the Respondent to
conduct the arbitral proceedings under Expedited Procedure Provisions and hence the request
for such arbitration to be conducted under EPP is unilateral.
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1
Fernando Eduardo Serec , ‘Evidence Production in Arbitration in Brazil: What to expect?’
2
Michael Bühler and CarrollDorgan, 'Witness Testimony Pursuant to the 1999 IBA Rules of Evidence in
International Commercial Arbitration - Novel or Tested Standards?', Journal of International Arbitration, (© Kluwer
Law International; Kluwer Law International 2000, Volume 17 Issue 1) pp. 0003 - 0030
3
Harry Ormsby,Judicial fact finding and the south china sea arbitration ,Sep 6, 2016
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3.1 WHETHER THE SELLER HAS FULFILLED HIS OBLIGATION ARISING OUT OF
CONTRACT AND CONVENTION?
ARTICLE 30 The seller must deliver the goods, hand over any documents relating to them and
transfer the property in the goods, as required by the contract and this Convention.
Although the Convention “is not concerned with the effect which the contract may have on the
property in the goods sold” (article 4 (b)), the seller’s principal obligation under article 30 is to
transfer the property in the goods to the buyer. Whether the property in the goods has in fact
been transferred to the buyer is not a question governed by the Convention; it must be determined
by reference to the law designated by the rules of private international law of
4
Baumbach, Lauterbach, Albers and Hartmann, Zivilprozessordnung, 57th edition, § 51, ¶ 10 et seq. Übers§ 373
5
Judge Virally's comment on this point, quoted in Aldrich, as note 24, above, at p. 351.
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the forum.6
The 'transfer of property' issue, in most all cases, falls into gaps intra legem which domestic law
of a certain country (as referred to by the rules of private international law) should govern. When
the applicable law to an international sale contract is the CISG, the transfer of property under that
contract is normally not governed by the CISG but by a certain domestic law.7
Article 30 not only obliges the seller to deliver, but also to hand over all documents relating to the
goods and to transfer the property in them. How exactly this obligation to transfer the property is
to be met lies beyond the scope of the Convention and is thus governed by domestic law. Domestic
law, therefore, determines whether the property passes when the contract is concluded, which
documents may be necessary for the transfer of property, and so on.8
If exporter’s certificate is not filed within 15 days of import, the goods shall be treated in
accordance with the customs law of Raconia.(Claimant’s exhibit no. 4) and further since the goods
are in the nature of scheduled goods, the same are liable to be confiscated forthwith in terms of
notification no. 14/2017- custom dated January 20,2017, after 15 days of import. Accordingly, the
same have been confiscated and is now the property of Government of Raconia. (Claimant's exhibit
no 6). Both the facts concurrently imply that according to domestic law of Raconnia if the goods
are not cleared in 14 days, the goods will be the property of Government of Raconnia and property
will not have been transferred to the respondent in violation of article 30.
3.3 Whether in accordance with Article 30 the seller has handed over the documents relating
to the goods?
In the case of accompanying documents, the question of whether the buyer may avoid the contract
must be decided by resorting to the general mechanisms of the Convention already established for
determining a fundamental breach.9
6
UNCITRAL Digest of Case Law on the United Nations Convention on Contracts for the International
Sale of Goods
7
Passing of Property Under Contracts for the International Sale of Goods:Should the CISG Regulate the Transfer of
Property? Tran Quoc Thang
8
The Seller's Obligations Under the United Nations Convention On Contracts for the International Sale of Goods by
Peter Schlechtriem
9
CLOUT Case No. 171 [Bundesgerichtshof, Germany, 3 Apr. 1996] (CISG-online 135)
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Thus, initially, what is decisive is whether the defective documents limit the buyer in reselling the
goods or using them according to his plans. If they do not, a fundamental breach can never be
assumed. If they do limit him, the seriousness of the defect depends upon whether the buyer can
still use the goods in a reasonable way even with unclean documents, or, if not, whether he can
easily acquire clean documents himself.10
The contract will often determine which documents relate to the goods. This is especially true for
documents which do not, like bills of lading, warehouse receipts or other shipping documents,
represent the goods, but are ancillary documents like certificates of origin, test reports and the like;
whether and to what extent these are to be supplied is a question that can only be answered by the
contract, not by the Convention.11. The seller’s obligation to hand over documents relating to the
goods is further particularized in Art. 34, CISG. According to Art. 34 If the seller is bound to hand
over documents relating to the goods, he must hand them over at the time and place and in the
form required by the contract. Art. 34 addresses the seller’s duty to deliver documents relating to
the goods being sold, where such an obligation exists. The provision does not create such an
obligation, but presupposes it. The obligation can follow from the contract, practices between the
parties or trade usages.12 Paragraph 14(b) of the contract excerpt states that the seller shall
reasonably assist the buyer in regard to any procedural requirements that may arise during the
delivery of goods.
Delivery is giving or yielding possession or control of something to other.13
For the purposes of this Convention statements made by and other conduct of a party are to be
interpreted according to his intent where the other party knew or could not have been unaware
what that intent was. 14According to both legislative history and case law,15 Art. 8, CISG governs
10
AVOIDANCE OF THE CONTRACT IN CASE OF NON-CONFORMING GOODS (ARTICLE 49(1)(A)
CISG) Ingeborg Schwenzer
11
The Seller's Obligations Under the United Nations Convention on Contracts for the International Sale of Goods
by Peter Schlechtriem.
12
Art. 9, CISG
13
Black Law’s Dictionary
14
Art. 8(1), CISG
15
CLOUT case No. 303 [Court of Arbitration of the International Chamber of Commerce, 1994 (Arbitral
award no. 7331)]
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not only the interpretation of unilateral acts of each party but is also “equally applicable to the
interpretation of ‘the contract’, when the document is embodied in a single document”.16
According to one court, it is possible to derive a General duty from article 8 (in conjunction with
article 7), pursuant to which, in performing one’s own obligation, one has to take into account the
interests of opposing party.17
Thus it was the obligation of the seller in light of Art. 30, 34, CISG and para 14 of the contract
and article 8 to provide reasonable assistance till the buyer yields the control of the goods which
the buyer could not have because the export certificate was not provided.
A breach of contract committed by one of the parties is fundamental if it results in such detriment
to the other party as substantially to deprive him of what he is entitled to expect under the contract,
unless the party in breach did not foresee and a reasonable person of the same kind in the same
circumstances would not have foreseen such a result.18
In the negotiations to the contract in accordance with the article CISG, time of possession can be
construed to be the essence of the contract and finds clear mention in Claimant’s own submission
hence, With regard to express stipulations, it is up to the parties to stipulate what they consider to
be the essence of the contract. If the seller then fails to deliver in accordance with the express
stipulations given, he cannot argue that he did not foresee any detriment that occurs to the buyer.
In the absence of express stipulations, regard should be had to the purpose for which the goods in
16
United Nations Conference on Contracts for the International Sale of Goods, Vienna, 10 March-11 April 1980,
Official Records, Documents of the Conference and Summary Records of the Plenary Meetings and of the Meetings
of the Main Committee, 1981
17
CLOUT case No. 877 [Bundesgericht, Switzerland, 22 December 2000]
18
Art. 25, CISG
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question were bought. Whether or not the goods actually fulfil this purpose will be relevant in
determining whether there is a fundamental breach.19
The CISG’s doctrine has come to the conclusion that the term detriment ‘had to be interpreted in
a broader sense’.68 Any narrow construction must be excluded; detriment does not equal damage
nor does it equal loss or any similar international or national technical term.20
In spite of that, it should be noted that the party's special interest in receiving performance is also
a key element for establishing whether a breach is substantial. This interest belongs to the
subjective sphere of contractual expectation, which largely depends on the agreement between the
parties.When the contract expressly states that performance of an obligation is of essence, there
will be little room for proving that the breach caused an unforeseeable detriment. This may be the
case of goods that must be delivered within a fixed term, indicated by the buyer as essential.21
Although delay in time is not generally considered as a fundamental breach of contract, it can
constitute a fundamental breach if delivery within a specific time is of special interest to the buyer,
which must be foreseeable at the time of the conclusion of the contract.22 and therefore even if no
additional term for delivery was fixed
Where documents are necessary in order to dispose of the goods or take delivery of the goods at
their place of destination, e.g., a bill of lading, the delivery of defective and incomplete documents
constitutes a fundamental breach.
Where the parties, for instance, expressly or implicitly agreed that strict compliance with the
contract terms is essential and any deviation from those terms is to be regarded as fundamental,
the party in breach cannot invoke non-foreseeability. Under such circumstances, substantial
detriment is foreseeable to a reasonable person of the same kind and in the same circumstances.
19
AVOIDANCE OF THE CONTRACT IN CASE OF NON-CONFORMING GOODS (ARTICLE 49(1)(A) CISG)
Ingeborg Schwenzer
20
The Concept of Fundamental Breach and Avoidance under CISG Amir Al-Hajaj
21
Case Law on the Concept of "Fundamental Breach" in the Vienna Sales Convention Leonardo
Graffi
22
Oberlandesgericht Hamburg 28 February 1997
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The same is true where the importance of the obligation breached follows from the terms of
contract or from the negotiations between the parties, which preceded the formation of the
contract.23
A party may terminate the contract where the failure of the other party to perform an obligation
under the contract amounts to a fundamental non-performance. (2) In determining whether a
failure to perform an obligation amounts to a fundamental non-performance regard shall be had,
in particular, to whether (a) the non-performance substantially deprives the aggrieved party of what
it was entitled to expect under the contract unless the other party did not foresee and could not
reasonably have foreseen such result;25
The claimant in his own submission has admitted to the time factor.
Also the contract expressly mentions the time in which the goods need to be delivered.
23
The Concept of Fundamental Breach of Contract under the United Nations Convention on Contracts for
the International Sale of Goods (CISG) Robert Koch
24
Uniform Sales Law - The UN-Convention on Contracts for the International Sale of Goods
Univ. Prof. Dr. Peter Schlechtriem
25
UNIDROIT ARTICLE 7.3.1(2)(A).
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In further communication i .e claimant exhibit no 1 the respondent has much emphasised on the
urgency of matter and clearly stated that the goods are required to be cleared from customs to be
any use to RDT.
3.5 Whether the respondent is entitled to legally avoid the contract under Art. 49(1)(A)
CISG?
Under article 49 (1) (a) any fundamental breach as defined in article 25 justifies the avoidance of
the contract. Thus in order for the buyer to have proper grounds to avoid the contract under article
49 (1) (a), the seller must have failed to perform an obligation (i.e., have breached), and the seller’s
non-performance must substantially deprive the buyer of what he was objectively entitled to expect
under the contract. The respondent in this case has express.
Article 49(1)(a) CISG provides that avoidance is possible, and only possible, “if the failure by the
seller to perform any of his obligations under the contract or this convention amounts to a
fundamental breach of contract.” According to Article 25 CISG, a breach is fundamental “if it
results in such detriment to the [buyer] as substantially to deprive him of what he is entitled to
expect under the contract, unless the [seller] did not foresee and a reasonable person of the same
kind in the same circumstances would not have foreseen such a result.”
The typical situation in which the buyer may declare the contract avoided is where the failure by
the seller to perform any of his obligations amounts to a fundamental breach. The concept of
fundamental breach is defined in Art. 25, CISG.If there has been a fundamental breach of contract,
the buyer has an immediate right to declare the contract avoided. He need not give the seller any
prior notice of his intention to declare the.contract avoided or any opportunity to remedy the breach
under Art. 44, CISG. 26
As a rule, the contract may be avoided only when the failure to perform amounts to a "fundamental
breach of contract" under Article 25. The option provided by ULIS to the buyer to extend the date
for performance and thereby to clarify whether a breach is fundamental has been retained only for
26
The Secretariat Commentary is on the 1978 Draft of the CISG
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MEMORIAL FOR RESPONDENT
the case where there is no delivery at all. (Article 49(l)). By analogy, the provision also applies to
the failure to transfer documents of title.27
The buyer's right to avoid the contract is also lost, according to Article 49(2), where the rule is set
forth in detail, if the buyer waits too long after delivery to declare his intent to avoid,
In a case, a German buyer had entered into a contract with a French seller for the delivery to
Romania of 2 to 4 million liters of sunflower oil per month at a specified price. Although the buyer
had paid a timely instalment for the first delivery, the seller did not ship the goods to Romania.
The buyer declared the contract avoided and sued the seller for restitution of the first instalment
and for damages. The Swiss court held that the buyer had a right to declare the contract avoided
as the seller did not deliver the goods and this failure to perform its obligation gave reason to
believe that a fundamental breach of contract was to be expected for further instalments (article
49(1)(b), 73(1) and (2) CISG). 28
Delivery after the date or period for delivery is a breach of contract to which the Convention’s
rules on remedies apply. If timely delivery was of the essence of the contract, late delivery amounts
to a fundamental breach, and the contract can be avoided as provided in article 49.30
27
Uniform Sales Law - The UN-Convention on Contracts for the International Sale of Goods Univ. Prof. Dr. Peter
Schlechtriem
28
Switzerland 5 February 1997, Handelsgericht [Commercial Court] Zürich [CLOUT no. 214]
29
Remedies Under the New International Sales Convention: The Perspective from Article 2 of the U.C.C.
Harry M. Flechtner
30
ICC Court of Arbitration, January 1997, award No. 8786,ICC International Court of Arbitration Bulletin
2000
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MEMORIAL FOR RESPONDENT
A contract is avoided only when the buyer provides notice of avoidance (article 26) notice given.
According to Article 26, A declaration of avoidance of the contract is effective only if made by
notice to the other party, In this case valid notice was given to the claimant, pursuant to which the
contract was avoided.
Article 72 entitles a seller or a buyer to avoid the contract if it becomes clear before the date for
performance that the other party will commit a fundamental breach. However, article 49 rather
than article 72 applies if, at or after the date for performance, a party’s failure to perform or
nonconforming performance occurs and amounts to a fundamental breach. Uncitral
According to article 45(1)(b) If the seller fails to perform any of his obligations under the contract
or this Convention, the buyer may Claim damages as provided in articles 74 to 77
According to Art. 74, damages for breach of contract by one party consist of a sum equal to the
loss, including loss of profit, suffered by the other party as a consequence of the breach.
The first sentence of article 74 provides for the recovery of all losses, including loss of profits,
suffered by the aggrieved party as a result of the other party's breach. The second sentence limits
recovery to those losses that the breaching party foresaw or could have foreseen at the time the
contract was concluded. The formula applies to the claims of both aggrieved sellers and aggrieved
buyers.31 An aggrieved party may choose to claim under article 74 even if entitled to claim under
31
2012 UNCITRAL Digest of case law on the United Nations Convention on the International Sale of
Goods
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MEMORIAL FOR RESPONDENT
articles 75 and 76.32The latter provisions explicitly provide that an aggrieved party may recover
additional damages under article 74.33
The first sentence of article 74 expressly states that damages for losses include lost profits. Many
decisions have awarded the aggrieved party lost profits.34
On the other hand, several decisions have explicitly found that claimed damages were foreseeable.
One decision states that the seller of goods to a retail buyer should foresee that the buyer would
resell the good,35 while an arbitration tribunal found that a breaching seller could have foreseen
the buyer’s losses because the parties had corresponded extensively on supply problems.36 Another
decision concluded that a breaching buyer who failed to pay the price in advance, as required by
the contract, could foresee that an aggrieved seller of fungible goods would lose its typical profit
margin.37 A majority of another court awarded 10 per cent of the price as damages to a seller who
had manufactured the goods to the special order of the buyer;the majority noted that a breaching
buyer could expect such a seller’s profit margin.38 It has also been held that a buyer could foresee
that its failure to establish a letter of credit as required by the sales contract would leave the seller
with a chartered vessel, intended to transport the goods, that it could not use; the loss the seller
incurred in sub-chartering that vessel was thus recoverable under article 74.39
Article 74 does not exclude losses arising from damage to non-material interests, such as the loss
of an aggrieved party’s reputation because of the other party’s breach. Some decisions have
implicitly recognized the right to recover damages for loss of reputation or goodwill. 40
32
CLOUT case No. 427 [AUSTRIA Oberster Gerichtshof 28 April 2000]
33
2008 UNCITRAL Digest of case law on the United Nations Convention on the International Sale of
Goods
34
RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of
Commerce and Industry 6 June 2000 (Arbitral award No. 406/1998,CLOUT case No. 214
[SWITZERLAND Handelsgericht des Kantons Zürich 5 February 1997 ],CLOUT case No. 138 [UNITED
STATES U.S. Court of Appeals for the Second Circuit 6 December 1995]
35
CLOUT case No. 168 [GERMANY Oberlandesgericht Köln 21 May 1996]
36
CLOUT case No. 166 [GERMANY Schiedsgericht der Handelskammer Hamburg 21 March 21 June
1996]
37
CLOUT case No. 427 [AUSTRIA Oberster Gerichtshof 28 April 2000]
38
CLOUT case No. 217 [SWITZERLAND Handelsgericht des Kantons Aargau 26 September 1997]
39
CLOUT case No. 631 [AUSTRALIA Supreme Court of Queensland 17 November 2000 (Down
Investments Pty Ltd. v. Perjawa Steel SDN BHD)]
40
[FINLAND Helsingin hoviokeus 26 October 2000]
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MEMORIAL FOR RESPONDENT
In the light of the above submissions, Counsel respectfully requests that the Honorable Tribunal
to find and declare
1. The expedited procedure provisions under the rules does not apply;
2. The testimony of Mr. Antony Martyr should be allowed to be recorded;
3. The Claimant has fundamentally breached the contract under Article 25 of the CISG
And order that
4. The storage costs of US$ 5000 payable to Raconian Custom authorities is to be recovered
from the Claimant.
5. Claimant to pay a sum of US$ 150,000 to Respondent as compensatory damages.
6. All costs of arbitration, including costs incurred by the parties is liable to be paid by the
Claimant.
Signed
s/- Counsel for the Respo
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