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Fifteenth AnnualWillem C. VIS (East) International Commercial Arbitration Moot
Hong Kong, 2018
UNCITRALArbitration Nr. 200/2018/SEC7
MEMORANDUM FOR RESPONDENT
XIAMENUNIVERSITY
On Behalf of AgainstRESPONDENT CLAIMANT
Tel. (0) 241 77 32 Tel. (0) 146-9845Telefax (0) 214 77 33 Telefax (0) 146-9850Email Langweiler@lawyer Email [email protected]
COUNSEL
CHEN Lifan CHEN Sijie LIANGQingyi SHEN PeiWANG Ya ZHANGQifei ZHANG Sihua
DELICATESY WHOLE FOODS SP39 Marie-Antoine CaremeAvenueOceansideEquatoriana
COMESTIBLES FINOS LTD75 Martha Stewart DriveCapital CityMediterraneo
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
I
TABLE OF CONTENT
INDEX OFABBREVIATIONS······························································· V
INDEX OFAUTHORITIES·································································VII
INDEX OF RULES···········································································XIV
INDEX OFARBITRALAWARDS·························································XV
INDEX OF CASES··········································································XVII
STATEMENT OF FACTS······································································ 1
SUMMARYOFARGUMENT·································································3
ARGUMENT ON ISSUES······································································5
ISSUE I: The Tribunal Has the Power to Decide on the Challenge on Mr. Prasad
without Mr. Prasad’s Participation.·························································· 5
A. The Tribunal has the power to decide on the challenge of Mr.Prasad.··················5
1. Art. 13(4) UNCITRAL Rules should be excluded.······································ 5
2. Under Art. 13(2) Model Law the challenge should be decided by the Tribunal.····7
B. The decision should be made without Mr.Prasad’s participation.······················· 7
ISSUE II: Mr. Prasad Should Be Removed from the Arbitral Tribunal.············· 8
A. The Tribunal should refer to the IBA-Guidelines when deciding the challenge.······8
B. Mr. Prasad Should Be Removed Due to the Existence of “Justified Doubts”towards
His Impartiality And Independence.··························································· 10
1. The challenge was raised within the time limit.········································ 10
2. Findfunds LP and its subsidiaries’ past and present relationships with Mr. Prasad
give rise to justifiable doubts to Mr. Prasad’s independence and impartiality.········11
a. The ongoing commercial relationship between Mr. Prasad’s law firm and
Findfunds LP give rise to justifiable doubts to Mr. Prasad’s independence and
impartiality.···················································································11
(a) The ongoing commercial relationship of Mr. Prasad’s colleague should be
attributed to him under the “law firm conflicts” theory.···························· 11
(b) As long as the relationship is still ongoing, further conflicts of interests are
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
II
likely to appear.··········································································· 12
b. Mr. Prasad's previous appointments by Findfunds’ subsidiaries give rise to
justifiable doubts to Mr. Prasad’s independence and impartiality.··················· 13
3. Mr. Prasad's previous appointments by Mr. Fasttrack’s law firm constitute
problematic “repeat appointments”.·························································13
4. Mr. Prasad’s previous publication gives rise to justifiable doubts to his
independence and impartiality. ····························································· 14
5. Mr. Prasad violated his duty to identify conflict of interest according to IBA-
Guidelines.······················································································ 15
ISSUE III: RESPONDENT’s General Conditions of Contract Govern the
Contract.·························································································· 16
A. RESPONDENT’s General Conditions of Contract are legally binding.············· 16
1. CLAIMANT Has Accepted RESPONDENT’s General Conditions of Contract by
its Letter of Acknowledgement on 17th March 2014.···································· 16
2. CLAIMANT incorporated RESPONDENT’s General Conditions of Contract in
its offer.·························································································· 18
B. CLAIMANT’s General Conditions of Sale have not been incorporated in the
Contract.····························································································18
1. CLAIMANT failed to give clear reference to its General Conditions of Sale when
concluding the Contract.······································································ 19
2. Neither CLAIMANT nor RESPONDENT intended to be bound by
CLAIMANT’s General Conditions of Sale.················································20
C. Even if CLAIMANT’s General Conditions of Sale were incorporated in the
Contract, they should not govern the Contract.·············································· 21
1. CLAIMANT’s General Conditions of Sale should not govern the Contract due to
the lack of conflict between the two general conditions.·································21
2. CLAIMANT’s General Conditions of Sale should not govern the Contract
because of the knock-out rule.······························································· 22
ISSUE IV: Based on the Application of RESPONDENT’s General Conditions,
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
III
CLAIMANT Failed to Deliver Conforming Goods as Required by the Contract
pursuant to Art.35 CISG Because CLAIMANT Failed to Guarantee Its
Supplier’s Compliance with the Relevant Ethical Standards.·························23
A. The ethical standards stipulated in RESPONDENT’s General Conditions are part
of the requirements for the product quality under Art. 35(1) CISG.······················ 24
B. Even if the Tribunal holds that ethical standards do not fall into the scope of
“quality” under 35(1) CISG, they constitute a particular purpose which CLAIMANT’s
goods should be fit for under Art. 35(2)(b) CISG.···········································25
1. RESPONDENT has made the particular purpose known to CLAIMANT during
the negotiation and conclusion of the contract without any ambiguity.················26
a. RESPONDENT has more than once expressly shown its strict and special
requirements for CLAIMANT’s suppliers during the negotiation proceeding.···· 26
b. The ethical requirements have been directly set forth in the contract.············28
c. CLAIMANT could not have been unaware of such particular purpose because
it has accepted it by performance and without any objection.························ 29
2. RESPONDENT relies on CLAIMANT’s skill and judgment to guarantee the
cocoa supplier’s compliance with ethical standards.······································30
3. It is reasonable for RESPONDENT to rely on CLAIMANT with regard to
CLAIMANT’s supplier’s adherence to the sustainable standards.····················· 30
a. It has been established in practice that seller assumes the responsibility for any
defects with few exceptions where it receives raw materials from independent
suppliers.······················································································31
b. CLAIMANT’s skills and capabilities indicate that it is able to inspect and
guarantee its supplier’s compliance.······················································32
c. The details of the negotiation proceedings indicate that it is reasonable for
RESPONDENT to rely on CLAIMANT to guarantee the supplier’s compliance
with ethical standards.······································································ 33
C. CLAIMANT failed to guarantee its supplier’s compliance with ethical standards,
thus making the cakes delivered non-conforming goods under Art. 35 CISG.·········· 34
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
IV
REQUEST FOR RELIEF····································································· 36
SIGNATURE····················································································· 37
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
V
INDEX OF ABBREVIATIONS
ABBREVIATION FULL FORM
¶ / ¶¶ Paragraph / Paragraphs
Sec. Section / Sections
et al. Et alii (And others)
Art. / Arts. Article / Articles
CLAIMANT Delicatesy Whole Foods SP
RESPONDENT Comestibles Finos Ltd
Cl. Ex. CLAIMANT’s Exhibit
Re. Ex. RESPONDENT’s Exhibit
The parties Delicatesy Whole Foods Sp and Comestibles
Finos Ltd
The Contract Contract No. 1257 between Delicatesy Whole
Foods Sp and Comestibles Finos Ltd
CISGUnited Nations Convention on Contracts for the
International Sale of Goods
CISGA-C Opinion CISGAdvisory Council Opinion
UNCITRALModel Law UNCITRAL Model Law on International
Commercial Arbitration 1985 with amendements
as adopted in 2006
UNCITRALRules UNCITRAL
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
VI
Arbitration Rules
ICSID Convention Convention on the Settlement of Investment
Disputes Between States and Nationals of Other
States
IBA-Guidelines IBAGuidelines on
Conflicts of Interest
in International
Arbitration
Adopted by
QM/WC Queen Mary University of London and White and
Cae LLP 2012 International Arbitration Survey:
Current and Preferred Practice in the Arbitral
Process
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
VII
INDEX OF AUTHORITIES
AUTHOR SOURCE CITED AT
PARA:
Alfonso
Gomez-Acebo
Party-Appointed Arbitrators in Internationl
Commercial Arbitration
International Arbitration Law Library, Kluwer
International 2016, Vol.34, p. 113
Cited as: Alfonso, p. 113
46
BB C.M.
Bianca/M.J.Bonell
Commentary on the International Sales Law,
The 1980 Vienna Sales Convention, Milan
1987, p.272
Cited as: Bianca/BB, p. 272
84
Born, Gary International Commercial Arbitration
Kluwer Law International
The Hague 2009
p. 1840; p. 1842; p. 1914
Cited as: Born, p. 1840; Born, p.1842; Born, p.
1914
30, 32, 39
Born, Gary International Commercial Arbitration
2nd Edition
Kluwer Law International 2014
p. 2781; p. 1564
Cited as: Born, p. 2781; Born, p. 1564
31
Christoph Brunner Force Majeure and Hardship under General
Contract Principles: Exemption for
Non-performance in International Arbitration
Kluwer Law International 2008
81, 100, 103
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
VIII
pp. 167 - 206
Cited as: Christoph, pp. 167-206
Daele, Karel Challenge and Disqualification of Arbitrators
in International Arbitration
International Arbitration Law Library, Kluwer
Law International 2012, Vol. 24
p.1; p. 9
Cited as: Daele, p. 1; Daele, p. 9; Daele, p. 166
26, 36, 47
Darmstadter
Howard
Shall&Will: Who Makes the Rules
Legal-Ease,
Business Law Today 7 (1997-1998)
Cited as: Darmstadter
82, 89
Domitille Baizeau,
Anne-Marie Loong
Domitille Baizeau and Anne-Marie Loong,
Chapter 13, Part X: Multi-tiered and Hybrid
Arbitration Clause', in Manuel Arroyo
(ed), Arbitration in Switzerland: The
Practitioner's Guide
Kluwer Law International 2013, pp. 1451-
1461
Cited as: Domitille & Anne, pp. 1451-1461
82
Farnsworth, A. Interpretation of the Contract,
Bianca-Bonell Commentary, 1987, Vol.. 5, p.
99
Cited as: Farnsworth, p. 99
74
Farnsworth, E. On trying to keep one's promises: The duty of
best efforts in contract law
University of Pittsburgh Law Review
1984, Vol. 46(1), pp. 1-20.
99
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
IX
Cited as: Farnworth, pp. 1-20
Fatima-Zahra
Slaoui
The Rising Issue of 'Repeat Arbitrators': A
Call for Clarification
Arbitratoon International, LCIA 2009, Vol. 25,
No.1
p. 111
Cited as: Slaoui, p. 111
43, 46
Folsom, Gordon &
Spanogle
International Business Transactions in a Nut
Shell
3d ed., West (1988), p. 88.
Cited as: Folsom & Spanogle, p. 88
96
Frans J.A. van der
Velden
The Law of International Sales: The Hague
Conventions 1964 and the UNCITRAL
Uniform Sales Code 1980 -- Some Main
Items Compared,
Voskuil & Wade eds.,
Hague-Zagreb Essays 4 on the Law of
International Trade, 1983, note 2, p. 52
Cited as: van der Velden, p. 52
99
Freiburg Einheitliches Kaufrecht und nationales
Obligationenrecht,
Referate und Diskussionen der Fachtagung
Einheitliches Kaufrecht, Freiburg im Breisgau
am 16./ und 17.2.1987, Baden-Baden, 1987
Cited as: Freiburg, p. 338
84
Fritz Enderlein The Vienna Sales Convention: History and
Perspective,
Sarcevic & Volken eds.
105
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
X
Oceana (1986) p. 157
Cited as: Enderlein, p. 157
Ghith, Aburima
Abdullah
"Exemption of Non-Performance of the
Seller's Contractual Obligations (Comparative
Study)." Arab Law Quarterly 20 (2006), p.
287.
Cited as: Ghith, p. 287
100
Giuffre International Sales Law, Reproduced with
permission of Dott. A Guiffre Editore.
Milan, 1987, pp.268-283
Cited as: Giuffre, pp. 268-283
81
Golsong Heribert A Guide to Procedural Issues in International
Arbitration, 18 Int'l L. 633, 644 (1984)
p. 11
Cited as: Golsong, p. 11
27
Helen Anderson Australian Accounting Review No. 61 Vol. 22
Issue 2 2012 p.12
Cited as: Anderson
95
John O. Honnold Uniform Law for International Sales Under
the 1980 United Nations Convention,
3rd Edition,
Kluwer Law International, 1999, p.101
Cited as: Honnold, p. 101
99
Jelena Vilus In Homenaje a Jorge Barrera Graf,
2nd Edition,
Universidad Nacional Autóma de Mexico,
1989, pp.1440-1441
Cited as: Vilus, pp. 1440-1441
97
Nathalie Voser, NATHALIE VOSERANDANGELINA 52
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
XI
Angelina M.Petti M. PETTI, 'THE REVISED IBA
GUIDELINES ON CONFLICTS OF
INTEREST IN INTERNATIONAL
ARBITRATION', ASA BULLETIN,
ASSOCIATION SUISSE DE
L'ARBITRAGE; KLUWER LAW
INTERNATIONAL 2015, VOLUME 33
ISSUE 1), p.20
Cited as: Voser & Petti, p. 20
Paulo Nalin International Fair Trade (Fair Trade in
International Contracts and Ethical Standard)
in Ingeborg Schwenzer (ed), 35 Years CISG
and Beyond (Eleven International Publishing
2016), p. 333.
Cited as: Paulo, p. 333
81
Peter Schlechtriem ‘Uniform Sales Law in the Decisions of the
Bundesgerichtshof’, in 50 Years of the
Bundesgerichtshof, s. III.3.
Cited as: Schlechtriem
100
Peter Schlechtriem,
Ingeborg
Schwenzer
Commentary on the UN Convention on the
International Sale of Goods (CISG)
2nd (English) Edition
Oxford University Press, June 16, 2005, Art
14 paras 39&56-57, Art 19 paras 35-38
Cited as: Schlechtriem & Schwenzer
75
Pietro Ferrario Pietro Ferrario, 'The Group of 41
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
XII
Companies Doctrine in
International Commercial
Arbitration: Is There any
Reason for this Doctrine to Exist?', Journal of
International Arbitration
Kluwer Law International 2009, Vol. 26, p.
567
Cited as: Ferrario, p. 567
Schwarz, Franz T.,
Konrad, Christian
W.
The Vienna Rules: A Commentary on
International
Arbitration in Austria,
Kluwer Law International
The Hague 2009, p. 415
Cited as: Schwarz & Konrad, p. 415
30
Schwenzer,
Ingeborg
"Avoidance of the Contract in Case of
Non-Conforming Goods (Article 49(1)A)
CISG)." Journal of Law and Commerce 25.1
(2005)
pp. 437-442.
Cited as: Schwenzer, pp. 437-472
81
Summers Robert S. ‘Good Faith’ in General Contract Law and the
Sales Provisions of the Uniform Commercial
Code.
Virginia Law Review
1968, vol. 54, no. 2, pp. 195–267
Cited as: Summers, pp.195–267
59
Survey of School 2012 International Arbitration Survey: 31
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
XIII
of International
Arbitration, Centre
for Commercial
Law Studies,
Queen
Mary University
Current and Preferred Practices in the Arbitral
Process
Cited as: QM/WC
Tunc, A. Commentary of the Hague Convention on
International Sale of Goods,
The Hague, 1966, p. 26.
Cited as: Tunc, p. 26
99
Varv, Age; Karu,
Piia.
"The Seller's Liability in the Event of Lack of
Conformity of Goods." Juridica
International 16 (2009), p. 86
Cited as: Varv&Karu, p. 86
107
Zimmermann
Reinhard
Savigny's Legacy: Legal History,
Comparative Law and the Emergence of a
European Legal Science
Law Quarterly Review
1996.112, p.577
Cited as: Zimmermann, p. 577
59
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
XIV
INDEX OF RULES
ABBREVIATION FULL FORM
UNCITRAL
Arbitration Rules
UNCITRALArbitration Rules(with new article 1, paragragh
4, as adopted in 2013)
UNCITRAL Model
Law
UNCITRAL Model Law on International Commercial
Arbitration with amendments as adopted in 2006
UNIDROIT Principles UNIDROIT PRINCIPLES of International Commercial
Contract, 2016
IBA-Guidelines IBA Guidelines on Conflicts of Interest in International
Arbitration, 2014
CISG United Nations Convention On Contracts For The
International Sale Of Goods,1980
UNCITRAL Model
Law
UNCITRAL Model Law on International Commercial
Arbitration with the 2006 amendments
German Arbitration
Act
Article 1, No. 7 of the Arbitral Proceedings Reform Act:
Tenth Book of the Code of Civil Procedure
Arbitration Procedure
Sections 1025 - 1066
DIS-Arbitration Rules DIS-Arbitration Rules 98
(in force as of July 1, 1998)
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
XV
INDEX OF ARBITRAL AWARDS
INSTITUTION SOURCE CITED AT
PARA:
ICSIDInternational Centre for Settlement of
Investment Disputes (ICSID)
Alpha Projektholding GmbH v. Ukraine
ICSID Case No. ARB/07/16
19 March 2010
Cited as: ICSID Case No. ARB/07/16
31
PCAPermanent Court of Arbitration
ICS Inspection and Control Services Limited
(United Kingdom) v. The Republic of
Argentina
December 17, 2009
Cited as : ICS case
42
LCIALondon Court of International Arbitration
(LCIA)
LCIA Reference No. 81160
28 August 2009
Cited as: LCIA Reference No. 81160
31
LCIADecision in LCIA Ref. No. UN96/X15 of 29
May 1996
Case No. Ref. No. UN96/X15
London Court of International Arbitration
(LCIA)
29 May 1996
Cited as : Case UN96
40
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
XVI
German Institution
of Arbitration
Case No. DIS
Award No. SV-217/02
DIS Award No. SV-217/02, BB (2003),
Beilage No. 8, 24 et seq.,
Cited as: Case Beilage
40
ICC ICC Case No. 8128 of Jan. 1995
Cited as: ICC Case No. 8128
100
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
XVII
INDEX OF CASES
JURISDICTION SOURCE CITED AT PARA:
Belgium N.V. G. v. N.V. H.P.
Rechtbank van Koophandel [District Court
for Commercial Matters] Mechelen
18 January 2002
Cited as: Tomatoes case
France S.a.r.l. Pelliculest / S.A. Rhin et Moselle
Assurances v. GmbH Morton International /
Société Zurich Assurances
Cour d'appel de Colmar
24 October 2000
Cited as: Pelliculest v. Morton International
Finland 30.06.1998
Country:Finland
Number:19067
Court:Helsinki Court of Appeals
Parties: EP S.A. v. FP
Cited as: Case 19067Germany Germany 31 October 2001 Supreme Court
(Machinery case)
Bundesgerichtshof [Federal Supreme Court]
31 October 2001
VIII ZR 60/01
Cited as: Machinery case
Germany Germany 23 October 2000 Appellate Court
Dresden (Powdered milk case)
OLG Dresden [OLG = Oberlandesgericht =
Appellate Court]
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
XVIII
23 October 2000
2 U 1181/00
Cited as: Powdered milk case
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
1
STATEMENT OF FACTS
1. CLAIMANT (Delicatesy Whole Foods Sp) is a medium sized manufacturer of fine
bakery products registered in Equatoriana. RESPONDENT (Comestibles Finos Ltd) is
a gourmet supermarket chain in Mediterraneo.
2. On 3-6 March 2016, Kapoor Tsai (CLAIMANT’s Head of Production) and Annabella
Ming (RESPONDENT’s Head of Purchasing) met and approached each other in the
yearly Danubian food fair, during which they exchanged the basic information of their
companies and showed the inclination to establish commercial relationship.
3. On 10 March 2014, CLAIMANT received from RESPONDENT the Invitation to
Tender and the attached Tender Document.
4. On 17 March 2014, CLAIMANT submitted the requested Letter of Acknowledgement
to inform RESPONDENT that it would tender according to the specified requirements,
i.e. RESPONDENT’s General Conditions and its Code of Conduct. But it was on 27
March 2014 that CLAIMANT formally tendered, with some minor modifications to
the Tender Document concerning only the size of the cake and mode of payment. And
on 7 April 2014, RESPONDENT accepted CLAIMANT’s offer, which meant that the
Contract was concluded between the Parties.
5. On 1 May 2014, CLAIMANT made the first delivery and everything went smoothly
until 27 January 2017 when RESPONDENT demanded confirmation on the
compliance of CLAIMANT’s cocoa supplier to the ethical and environmental
production process after learning a bribery and deforestation scandal in Ruritania. Also
in this e-mail, RESPONDENT objected to any further delivery or payment until the
situation was clarified.
6. Immediately on 27 January 2017, CLAIMANT replied to RESPONDENT,
confidently suggesting that its cocoa supplier is qualified due to its best efforts to
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
2
supervise while promising to make further investigation. Moreover, CLAIMANT
pointed out that there was no ground for RESPONDENT to reject the payment of the
cakes delivered.
7. On 10 February 2017, CLAIMANT informed RESPONDENT that its cocoa supplier
was unfortunately involved in the bribery scandal and admitted that some of the cocoa
used in the cakes have not been produced in accordance with the relevant standards. It
meant that CLAIMANT failed to perform its obligation of guarantee and thus
constitutes a fundamental breach of contract as provided in RESPONDENT’s General
Conditions of Contract. Consequently, on 12 February 2017, RESPONDENT rejected
CLAIMANT’s discount offer and wanted to terminate the contract and seek for
damages.
8. On 30 June 2017, CLAIMANT sent Notice of Arbitration to RESPONDENT, together
with Mr. Prasad’s declaration of Impartiality and Independence and Availability.
9. On 31 July 2017, RESPONDENT made the Response to Notice of Arbitration.
10. On 29 August 2017, RESPONDENT requested CLAIMANT to disclose the
information about its third-party funder. On 7 September 2017, CLAIMANT revealed
the name of the funder (Funding 12 Ltd, whose main shareholder is Findfunds LP)
while requesting RESPONDENT to disclose how it got to know the information of the
third-party funding.
11. On 11 September 2017, Mr. Prasad revealed his previous experience with Findfunds
LP and the merger of his law firm with Slowfood.
12. On 14 September 2017, RESPONDENT made the Notice of Challenge of Arbitrator to
request Mr. Prasad removed from the Arbitral Tribunal.
13. On 21 September 2017, Mr. Prasad responded to RESPONDNENT’s challenge on him
and refused to withdraw from the Tribunal.
14. On 29 September 2017, CLAIMANT refuted RESPONDNET’s grounds in terms of
the challenge on Mr. Prasad.
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
3
SUMMARY OFARGUMENT
15. ISSUE I: Both CLAIMANT and RESPONDENT have agreed about the exclusion of
institution in dispute resolution clause. If the parties resort to the appointing authority
to decide on the challenge of Mr. Prasad, there will be a great possibility that
institutions may get involved. According to the parties’ intent, Art. 13(4) UNCITRAL
Rules was excluded. Pursuant to the lex arbitri, which is Art. 13(2) UNCITRAL Model
Law, the Tribunal has the power to decide on the challenge. Mr. Prasad should not be
his own judge and thus the challenge should be decided by the two remaining
arbitrators rather than the whole Tribunal.
16. ISSUE II:Mr. Prasad should be removed from the Arbitral Tribunal. First, the Tribunal
should refer to the IBA-Guidelines because they are accepted by as international
arbitral practice. Second, Mr. Prasad should be removed from the Tribunal due to the
existence of justifiable doubts to his independence and impartiality.
17. ISSUE III: RESPONDENT’s General Conditions govern the contract because it is
accepted by and incorporated into the contract by CLAIMANT. CLAIMANT’s General
Conditions of Sale do not govern the contract because RESPONDENT’s General
Conditions of Contract are legally binding and CLAIMANT’s General Conditions of
Sale has not been incorporated in the contract. Even if CLAIMANT’s General
Conditions of Sale were incorporated in the contract, CLAIMANT’s General
Conditions of Sale should not govern the Contract because the last shot rule should not
be applied and CLAIMANT’s General Conditions are knocked out.
18. ISSUE IV: The cakes delivered by CLAIMANT are non-conforming goods under Art.
35 CISG because CLAIMANT failed to guarantee its cocoa supplier’s compliance with
the relevant standards. Ethical standards are part of the requirements for the product
quality under Art. 35(1) CISG. Alternatively, to guarantee the cocoa supplier’s
compliance with the relevant standards constitute a particular purpose under Art.
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
4
35(2)(b) CISG because all the requirements for setting a particular purpose have been
met. Therefore, CLAIMANT’s obligation concerning its cocoa supplier’s compliance
is to achieve the specific result. CLAIMANT’s failure to do so renders the cakes
non-conforming goods under Art. 35 CISG.
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
5
ARGUMENT ON ISSUES
ISSUE I: The Tribunal Has the Power to Decide on the Challenge on Mr. Prasad
without Mr. Prasad’s Participation.
19. During the negotiation on the contract drafting, RESPONDENT emphasized that they
wanted as few people as possible to know about the arbitration and explicitly wrote in
the contract that institutions should be excluded. Such position was accepted by
CLAIMANT. In the present case, Mr.Prasad is challenged. RESPONDENT submits
that the challenged should be decided by the Tribunal [A] and Mr.Prasad should not
participate in the decision making [B].
A. The Tribunal has the power to decide on the challenge of Mr.Prasad.
20. According to the dispute resolution clause, arbitral institution may involved if Art. 13(4)
UNCITRAL Rules is applied. RESPONDENT submits that Art. 13(4) UNCITRAL
Rules should be excluded [1]. Pursuant to the lex arbitri, which is Art. 13(2) Model
Law, the challenge to Mr.vPrasad should be decided by the Tribunal [2].
1. Art. 13(4) UNCITRALRules should be excluded.
21. Art.13 UNCITRAL Rules is about the challenge proceedings and it provides that the
appointing authority has the power to decide the challenge to an arbitrator. Under Art. 6
UNCITRAL Rules, an appointing authority could be a person or an institution. When
an appointing authority steps into an ad hoc arbitral proceedings, it means there might
be institutions get involved. The dispute resolution clause states that ”any disputes,
controversy or claim arising out of or relating to this contract, or the breach,
termination or invalidity thereof, shall be settled by arbitration in accordance with the
UNCITRAL Arbitration Rules without the involvement of any arbitral institution…”
[Cl. Ex. C2, p. 9], which shows parties’ hope to resolve disputes or controversies
without any institutions involved. CLAIMANT shows no objection to the dispute
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
6
resolution clause when it was concluded. If Art. 13(4) is applied, there will be a great
possibility that arbitral institutions may get involved in the arbitration as the appointing
authority, which absolutely conflicts with parties autonomy on the exclusion of arbitral
institutions. In the present case, CLAIMANT’s allegation that “the Addition” , which
states that “ …without the involvement of any arbitral institution”, did not affect the
applicability of Art. 13(4) and was only intend to exclude institutional involvement for
selection of arbitrators [Memo of Cl., ¶¶. 26-43]. RESPONDENTS submits that
CLAIMANT’s allegation is pure speculation and groundless because “the Addition”
was drafted in the foreword of the dispute resolution clause and the provision about
selection of arbitrators only appeared in paragraph a of the clause, which means that
“the Addition” should be applied to the entire process of the arbitration, not only to the
selection of arbitrators.
22. RESPONDENT shows the concern for the confidentiality of arbitral proceedings
multiple times. RESPONDENT has suffered a serious reputation damage during an
institutional arbitration [Re. Ex. R5, p. 41]. An important information was leaked during
the arbitral proceeding and RESPONDENT assumed that the staff of the arbitral
institution was involved in the leakage. Whereupon, RESPONDENT includes in all its
contracts a very strict confidentiality clause with a high penalty for breaches [Re. Ex.
R5, p. 41]. And such an unpleased experience is also the reason why RESPONDENT
firmly against the involvement of arbitral institutions and choose the ad hoc arbitration.
RESPONDENT’s intent to make the arbitration confidential is explicitly stated in the
contract and expressed to CLAIMANT during the negotiation, CLAIMANT is aware
of such intent. If Art. 13(4) is applied in the present arbitration, the involvement of the
appointing authority may affect the confidentiality, which is RESPONDENT concerns
the most.
23. Further, instead of claiming the application of Art. 13(4) before the contract was
concluded, CLAIMANT alleged that Art. 13(4) should be applied after RESPONDENT
challenged Mr. Prasad. Such allegation should not be supported. During the negotiation,
RESPONDENT frequently emphasized that they did not want institutions get involved
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
7
and their past experience of information leakage in the institutional arbitration. Based
on the above, RESPONDENT drafted the arbitration agreement to exclude institutions
and chose an ad hoc arbitration. RESPONDENT intended to exclude Art. 13(4) as well.
In the present case, RESPONDENT communicated with CLAIMANT multiple times
that they wanted as few people as possible to know about the arbitration [Prob, p. 39].
CLAIMANT should be aware of the possibility of more people will get involved in this
arbitration if they resort to an appointing authority to decide on the challenge. If
CLAIMANT wanted Art. 13(4) to be applied, they had to propose to add an extra
provision about the application of Art. 13(4) earlier rather than the time when
Mr.Prasad has already been challenged. Therefore, Art. 13(4) UNCITRAL Rules
should be excluded in this arbitration.
2. UnderArt. 13(2) Model Law the challenge should be decided by the Tribunal.
24. Given the exclusion of Art. 13(4) UNCITRAL Rules, the appropriate gap filler should
be the lex arbitri, which is the Danubian arbitration law, the verbatim of UNCITRAL
Model Law. It is undisputed between the Parties that Equatoriana, Mediterraneo,
Ruritania and Danubia are Contracting States of the CISG. The general contract law of
all four states is a verbatim adoption of the UNIOROIT Principles on International
Commercial Contracts. All states have adopted the UNCITRAL Model Law on
International Commercial Arbitraion with the 2006 amendments [The Problem, p. 49].
25. According to Art. 13(2) Model Law, unless the challenged arbitrator withdraws from
his office or the other party agrees to the challenge, the tribunal shall decide on the
challenge. Thus in the present case, the Tribunal shall decide on the challenge of Mr.
Prasad.
B. The decision should be made without Mr.Prasad’s participation.
26. First, there is no doubt that grave injustice would be done if an arbitrator was allowed
to continue serving on a tribunal despite the existence of good reasons to disqualify the
person [Daele, p. 1]. Given that the integrity and the impartiality of Mr. Prasad are being
challenged, whatever the outcome of challenge, Mr. Prasad should not be included in
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
8
the arbitral tribunal before the challenging procedure come to an end. Considering that
the arbitral tribunal has power to decide on the challenge. Mr. Prasad-----excluded from
the arbitral tribunal----should not participate in his own challenge.
27. Second, a challenged arbitrator should in no case be judge in his own cause both in
theories and practices. The examination of a disqualification proposal should be left to
the two fellow arbitrators or the chairman to decide [Golsong, p. 11]. “No one should be
athlete and referee at the same time “, otherwise the devices on challenging an
arbitrator could not properly function. Challenging procedure is not for one’s likes and
dislikes prejudice. The judge on challenge must be remained neutral, however the
objective judgment could hardly be expected since the result of challenge refers to the
interest of a judge himself. In the present case, Mr. Prasad was challenged by
RESPONDENT and the challenge should be decided by two remaining arbitrators. If
Mr. Prasad participates in the decision making, he will inevitably be biased and have
great possibility to vote himself for not being removed from the tribunal, which is
absolutely unfair to RESPONDENT.
28. Conclusion: The Tribunal has the power to decide on the challenge. Pursuant to
UNCITRAL Rules and UNCITRAL Model Law as well as natural justice, Mr. Prasad
should not participate into the decision making.
ISSUE II: Mr. Prasad Should Be Removed from the Arbitral Tribunal.
29. According to UNCITRAL Rules Article 12(1), any arbitrator may be challenged if
circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality
and independence. However, it is difficult to judge the existence of relevance
circumstances with the general standard. To solve this, it has become a common
practice for the arbitral tribunal to refer to IBA-Guidelines to decide whether there are
conflicts of interest [A]. In this case, Mr. Prasad should be removed due to the
existence of conflicts of interest according to IBA-Guidelines and UNCITRAL Rules
[B].
A. The Tribunal should refer to the IBA-Guidelines when deciding the challenge.
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
9
30. IBA-Guidelines will apply to international commercial arbitration proceedings if the
parties agree or the Tribunal so orders [Schwarz & Konrad, p. 415]. Parties in practice
virtually never incorporate IBA-Guidelines into their arbitration agreements. These
mean that the Tribunal can decide whether to apply IBA-Guidelines despite of the
parties' disagreement [Born, p. 1840]. In the present case, there are abundant reasons for
the Tribunal to apply IBA-Guidelines.
31. Firstly, IBA-Guidelines are accepted as international arbitral practice. International
practice refers to a common practice which is widely known to and regularly observed
by the parties. A detailed 2012 survey of international arbitration practice shows that
IBA Rules were adopted in 60% of arbitrations, whereas 85% of the participants in the
survey consider IBA Rules useful [QM/WC]. These figures imply that IBA-Guidelines
are widely recognized to be useful in arbitrations. In an LCIA case, the Division
accepted that, to a considerable degree, IBA-Guidelines might be seen to reflect actual
practice in significant parts of the international arbitration community [LCIA Reference
No. 81160]. What’s more, in the case Alpha Projektholding GmbH v. Ukraine, the
Tribunal sought guidance from IBA-Guidelines when deciding the conflicts of interests
[ICSID Case No. ARB/07/16]. These surveys and cases provide ground for the Tribunal
to apply them.
32. Secondly, IBA-Guidelines provide an extensive and detailed treatment of issues of
arbitrator's impartiality and independence [Born, p. 1842]. This makes great sense when
the applicable arbitral law and rules do not provide detailed provisions on conflicts of
interest. In this case, the applicable UNCITRAL Rules only provide a general standard
of “justifiable doubts” to decide challenge in Art.12 without detailed contents. This
makes it difficult for the Tribunal to decide whether there are justifiable doubts. Hence,
the Tribunal should apply IBA-Guidelines as a supplement to national law and ad hoc
rules [Schwar z/ Konrad, p. 415].
33. Therefore, given that IBA-Guidelines can help solve the dispute on conflict of interests
and enjoy wide acceptance in international arbitration community, the Tribunal should
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
10
not hesitate to apply them.
B. Mr. Prasad should be removed due to the existence of “justified doubts” towards
his impartiality and independence.
34. Based on the facts that give rise to justifiable doubts to Mr. Prasad’s independence and
impartiality, RESPONDENT challenged Mr. Prasad within the time limit [1].
RESPONDENT submits that Findfunds LP and its subsidiaries’ past and present
relationship with Mr. Prasad gives rise to justifiable doubts towards him [2]. Mr.
Prasad’s previous appointments by Mr. Fasttrack’s law firm constitute problematic
“repeat appointments” that provide ground for challenge [3]. What’s more, Mr.
Prasad’s previous publication gives rise to justifiable doubts towards his impartiality
and independence [4]. Mr. Prasad violated his duty to identify conflict of interest
according to IBA-Guidelines General Standard 7(d) [5].
1. The challenge was raised within the time limit.
35. RESPONDENT sent notice of challenge based on the relationship between the funder
and Mr. Prasad within the 15-day time limit. UNCITRAL Rules set forth that a party
that intends to challenge an arbitrator shall send notice of its challenge within 15 days
after the circumstances mentioned in articles 11 and 12 became known to that party. It
was not until 11 September 2017 that RESPONDENT knew the relationships between
the funder and Mr. Prasad [The problem, p. 36]. And RESPONDENT sent the Notice of
Challenge of Arbitrator on 14 September 2017, which is within the time limit. Thus,
the challenge based on the relationship between the funder and Mr. Prasad was made
within the fifteen-day period of Article 11(1) of the UNCITRAL Rules.
36. With regards other circumstances that contribute to Mr. Prasad’s lack of independence
and impartiality, RESPONDENT submits that the time-limit requirement for the
challenge should be interpreted flexibly, rather than apply the 15-day limit strictly.
Scholars have stated that absent strategic maneuvers, the requirement that a challenge
be made promptly must be interpreted flexibly [Daele, p.166]. Cases also support this
flexible approach: A good example is the Carnegie v. Gambia challenge decision in
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
11
which a challenge, filed seven months after the allegedly disqualifying facts occurred,
was considered timely because of the constructive and professional way in which the
challenging party had conducted the challenge procedure. Therefore, although the
challenge of Mr. Prasad was not made within the 15 days, the Tribunal may still
consider this flexibly and find the challenge made in time.
37. Even if the challenge seemingly passed the 15-day limit, the failure to object shall not
be deemed as a waiver. Art. 32 UNCITRAL Rules provides that if a party can show
that under the circumstances, its failure to object is justified, a failure by the party to
object promptly shall not be deemed to be a waiver of the right to make such an
objection. In the present case, before RESPONSENT find the potential relationship
between the funder and Mr. Prasad, the circumstances of Mr. Prasad’s appointments by
Mr. Fasttrack’s law firm and the reservation on his colleagues did not raise doubts to
Mr. Prasad’s independence and impartiality. However, after finding the new fact which
provides grounds for the challenge, the known facts also became doubtful. Therefore,
RESPONDENT’s failure to object is justified and shall not be deemed to be a waiver,
and the substance of the challenge should be considered by the Tribunal.
2. Findfunds LP and its subsidiaries’ past and present relationships with Mr. Prasad
give rise to justifiable doubts to Mr. Prasad’s independence and impartiality.
38. As Mr. Prasad has disclosed, with the merger of his law firm, a present colleague of
him is representing a case funded by Findfunds LP [Email, p.36, ¶3]. Therefore, there is
an ongoing relationship between Mr. Prasad’s law firm and Findfunds LP, which will
result in his disqualification as the arbitrator in this case.
a. The ongoing commercial relationship between Mr. Prasad’s law firm and Findfunds
LP give rise to justifiable doubts to Mr. Prasad’s independence and impartiality.
(a) The ongoing commercial relationship of Mr. Prasad’s colleague should be
attributed to him under the “law firm conflicts” theory.
39. Arbitrators are often members of law firms. Although the arbitrator himself may not
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
12
have represented either of the parties, his partners or other colleagues may have. That’s
what is called law firm “conflicts”. It appears settled that the arbitrator’s law firm’s
conflicts will presumptively be relevant to assessing his impartiality [Born, 1914]. In the
present case, though Mr. Prasad does not represent the case funded by Findfunds LP,
his present partner does so. So the present representation should be considered to
assess Mr. Prasad’s qualification.
40. It is a common practice in international arbitration that arbitrator’s fellow partners’
representation of parties should be attributed to the arbitrator. In a DIS (German
Institution of Arbitration) case, the tribunal declared that a client relationship of a
partner of the arbitrator's law firm with a party of the arbitration or one of its
subsidiaries must be attributed to the arbitrator, irrespective of the size of the law firm
and of whether that arbitrator was aware of that client relationship or not [Case Beilage].
In a similar LCIA case, the tribunal made a decision to uphold the challenge to an
arbitrator where the arbitrator’s law partners had done work for company associated
with party, the tribunal commented: “a partner in a law firm had to be identified with
his partners, at least insofar as their professional activities were concerned” [Case
UN96]. Therefore in the present case, the representation of Mr. Prasad’s fellow partner
should be identified to that of Mr. Prasad. The present circumstances then fall into 1.1
of IBA-Guidelines, which will cause Mr. Prasad’s disqualification as the arbitrator.
(b) As long as the relationship is still ongoing, further conflicts of interests are likely toappear.
41. As long as the representation of Mr. Prasad’s colleague is ongoing, Mr. Prasad’s law
firm will always be rendering services to Findfunds LP. These circumstances fall into
the 3.2.1 of IBA-Guidelines, which is of the orange list, and further conflicts of
interests will always appear.
42. In the an ICS case where the challenged arbitrator’s law firm is representing a series of
cases against the challenging party, the appointing authority upheld the challenge and
noted that possible conflicts of interests will always be envisaged with the law firm’s
continued representation [ICS Case]. By analogy, in this case, there are justifiable
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
13
doubts towards Mr. Prasad’s impartiality and independence with his law firm’s ongoing
representation for Findfunds.
b. Mr. Prasad's previous appointments by Findfunds’ subsidiaries give rise to
justifiable doubts to Mr. Prasad’s independence and impartiality.
43. Firstly, based on Findfunds’ connection with the three appointments, reasonable doubts
can be concluded that Mr. Prasad may incline to CLAIMANT to pursue a benefit.
Arbitrators may begin to expect to be reappointed by the same party and consequently
except regular fees as a result of repeat appointments [Slaoui, p. 111]. In the present case,
Mr. Prasad has acted as arbitrator in two cases which were funded by other subsidiaries
of Findfunds [The problem, p.36]. Thus, Mr. Prasad may incline to CLAIMANT to expect
more benefit from being reappointed by parties funded by Findfunds.
44. Secondly, when subsidiaries are closely connected with their parent company, they
should be deemed equal. In the present case, Findfunds LP owns 100% share of the
subsidiaries and is the main shareholder of Funding 12 Ltd., which gives rise to
justifiable doubts that it may affect the appointment of the arbitrator based on its stock
rights. Thus, the appointments by the party funded by the subsidiaries and Funding 12
Ltd can be deemed equivalent to appointments by the party funded by Findfunds LP.
45. Thirdly, third-party funder’s repeat appointments give rise to justifiable doubts to
arbitrator’s independence and impartiality. Pursuant to 3.1.3 in IBA-Guidelines, the
situation in which the arbitrator was appointed by one of the parties on two or more
occasions within the past three years is listed in the Orange List, which means that this
may give rise to reasonable doubts. IBA-Guidelines set forth that third-party funders
may have a direct economic interest in the award, and as such may be considered to be
equal to the funded party. In this case, Findfunds, as the third party funder, should be
deemed as a party. Hence, Funding 12 Ltd. and Findfunds’ subsidiaries’ repeat
appointments may equally be problematic based on their connections with Findfunds.
3. Mr. Prasad's previous appointments by Mr. Fasttrack’s law firm constitute
problematic “repeat appointments”.
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
14
46. According to IBA-Guidelines, situation of repeat appointments is listed in the Orange
List [IBA-Guidelines, para.3.3.8] that may give rise to justifiable doubts as to the
arbitrator’s impartiality and independence [IBA-Guidelines Part II (3)]. Given that many
parties leave the choices of arbitrators to their counsels, the situation in which a
counsel unilaterally appoints the same arbitrator can be regarded as repeat
appointments [Alfonso, p. 113]. As a result of repeat appointments, the arbitrator may
begin to expect to be reappointed by the same party and consequently expect regular
fees [Slaoui, p. 111], which casts doubts on the arbitrator’s impartiality. In the present
case, this ongoing arbitration is the third time for which Mr. Prasad is appointed by Mr.
Fasttrack’s law firm, which provides grounds to doubt that he may incline to
CLAIMANT to pursue a benefit. Therefore, Mr. Fasttrack’s law firm’s previous
appointments can be regarded as repeat appointments in IBA-Guidelines which raise
reasonable doubts to Mr. Prasad’s independence and impartiality.
4. Mr. Prasad’s previous publication gives rise to justifiable doubts to his
independence and impartiality.
47. An arbitrator’s previous publication may give rise to “justifiable doubts” towards his
impartiality since the conflict of interests includes any sort of interest, direct or indirect,
of the arbitrator in the outcome of the dispute or in the legal issues that are being
arbitrated in the case [Daele, p.9] Thus, if an arbitrator has taken a position on certain
legal opinions, the outcome of the arbitration may be influenced by the author’s
previous positions on certain legal opinions.
48. In the present arbitration, Mr. Prasad has taken a position against the modern trend in
the understanding of the conformity concept in Art.35 CISG. Such positions are
reflected in his publication: the conformity of goods does not depend on their
compliance with the very broad and general statements in CSR-Codes [Re. Ex. R4, p.40]
In the arbitration, one main contention between parties is about whether the goods (the
chocolate cake) are in conformity with the ethical standards in CSR-Code of
RESPONDENT. However, from Mr. Prasad’s clear position expressed before,
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
15
RESPONDENT has sufficient reason to suspect that its high ethical standards towards
the products may be seen as a broader understanding of the concept of conformity and
would be rejected by Mr. Prasad.
49. Actually, CLAIMANT also admitted that Mr. Prasad’s expressed views in this article
are a major reason for his appointment. Mr. Fasstrack, CLAIMANT’s lawyer, directly
stated that, given Mr. Prasad’s view expressed in an article on the irrelevance of CSR
on the question of the conformity of goods, he is the perfect arbitrator for their case.
[Notice of Challenge, p.38, ¶3]
50. Hence, Mr. Prasad’s participation in the case may lead to an inequitable award of the
arbitration in favor of CLAIMANT. Mr. Prasad should be removed from tribunal
because his impartiality cannot be assured.
5. Mr. Prasad violated his duty to identify conflict of interest according to IBA-
Guidelines.
51. RESPONDENT submits that it is just Mr. Prasad’s conduct that resulted in his
violation of his duty under IBA-Guidelines. However, as will be stated below, the
concealment of the involvement of the third-party funder will cause RESPONDENT’s
justifiable doubts towards the arbitrator appointed by CLAIMANT.
52. In order for arbitrators to fully satisfy their duty of disclosure, IBA-Guidelines also
impose on them a duty of enquiry: An arbitrator is under a duty to make reasonable
enquiries to identify any conflict of interest, as well as any facts or circumstances that
may reasonably give rise to doubts as to his or her impartiality or independence [General
Standard 7(d), IBA-Guidelines]. The word “identify” means that an arbitrator needs to not
only check those conflicts which may or may not be in the forefront of his or her mind,
but also to identify, i.e. search for, additional potential conflicts of interest, thereafter
disclosing any such conflicts of interest which may exist [Voser & Petti, p. 20].
53. From what we have known, however, Mr. Prasad did not make any enquiries to check
whether CLAIMANT has been funded by a third-party funder. Non-disclosure of an
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
16
indirect relationship, which is unknown to a prospective arbitrator, should not be a
ground for disqualification unless it could have been ascertained by making reasonable
inquiries [Berger]. In the present arbitration, the relationships about conflicts of interest
could have been ascertained if Mr. Prasad had made some reasonable enquiries like
whether CLAIMANT has been funded by a third-party funder. Thus, the failure of Mr.
Prasad’s fulfilling the duty under General Standard 7(d) is a ground for his
disqualification.
54. Conclusion: The Tribunal should refer to IBA-Guidelines. Mr. Prasad should be
removed due to the existence of justifiable doubts as to his independence and
impartiality.
ISSUE III: RESPONDENT’s General Conditions of Contract Govern the Contract.
55. CLAIMANT’s General Conditions of Sale do not govern the contract because
RESPONDENT’s General Conditions of Contract are legally binding [A] and
CLAIMANT’s General Conditions of Sale has not been incorporated in the contract
[B]. Even if CLAIMANT’s General Conditions of Sale were incorporated in the
contract, CLAIMANT’s General Conditions of Sale should not govern the Contract
because of the lack of conflict and knock-out rule [C].
A. RESPONDENT’s General Conditions of Contract are legally binding.
56. RESPONDENT’s General Conditions of Contract are legally binding because
CLAIMANT has accepted RESPONDENT’s General Conditions of Contract by its
Letter of Acknowledgement on 17th March 2014 [1] and CLAIMANT incorporated
RESPONDENT’s General Conditions of Contract in its offer [2].
1. CLAIMANT Has Accepted RESPONDENT’s General Conditions of Contract by
its Letter of Acknowledgement on 17th March 2014.
57. Pursuant to Art. 8 CISG, 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 of what that intent was. Otherwise, they should be interpreted according to the
understanding that a reasonable person of the same kind as the other party would have
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
17
had in the same circumstances. In determining the intent of a party or the
understanding a reasonable person would have had, due consideration should is to be
given to all relevant circumstances of the case including the negotiations, any practices
established between themselves, usages and any subsequent conduct of the parties.
58. In this case, the Letter of Acknowledgement on 17th March 2014 is a statement made
by CLAIMANT, so it should be interpreted according to Art.8 CISG. RESPONDENT
could never anticipate that CLAIMANT would derail from RESPONDENT’s General
Conditions after it promised in the Letter of Acknowledgement that it would “tender in
accordance with the specified requirements” [Re. Ex. R1, p.24], which are
RESPONDENT’s General Conditions of Contract and its Code of Conduct. Therefore,
a reasonable person’s understanding should be adopted and all relevant circumstances
of this case should be considered. During the negotiations between the parties,
RESPONDENT frequently emphasized the importance of its General Conditions and
Code of Conduct and they are a major part of the Tender Documents. CLAIMANT
clearly promised in the LOA that it would “tender in accordance with the specified
requirements” [Re. Ex. R1, p.24]. Also, CLAIMANT’s subsequent conduct shows its
agreement on the adoption of RESPONDNET’s General Conditions. For example, after
the dispute arose, CLAIMANT referred to Clause 20 of the General Conditions to
resort to arbitration. If CLAIMANT did not agree to apply the General Conditions, it
would not quote it on its notice of arbitration [p.6 of the problem]. Therefore, pursuant
to Art. 8 CISG, the Letter of Acknowledgement indicates that CLAIMANT has agreed
on the application of RESPONDENT’s General Conditions and should be bound by
them thereafter.
59. Furthermore, according to Art. 7(2) CISG, questions which are not expressly settled in
CISG are to be settled in conformity with the general principles. Art.1.3 UNIDROIT
provides the “pacta sunt servanda” principle. It implies the parties are free to
determine the content of their obligations and are bound by their agreement
[Zimmermann, p. 577]. In addition, Art. 7(1) CISG and Art.1.7 UNIDROIT 2016 stipulate
the “good faith” principle. The “good faith” principle functions as an “excluder”,
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
18
which serves to exclude many heterogeneous forms of bad faith [Summers,
pp.195–267].
60. In this case, CLAIMANT has already acknowledged that it read RESPONDENT’s
General Conditions of Contract, and would tender accordingly. Therefore, it is
reasonable for RESPONDENT to believe that CLAIMANT, in line with the “good
faith” and “pucta sunt servanda” principle, will act as it promised, which in this case is
to comply with RESPONDENT’s General Conditions of Contract, and will not act
against its own words.
2. CLAIMANT incorporated RESPONDENT’s General Conditions of Contract in its
offer.
61. On 27th March 2014, CLAIMANT made its offer following RESPONDENT’s
invitation to tender. In its offer, CLAIMANT itself stated that it only made some minor
amendments to RESPONDENT’s tender documents, primarily relating to the size of
the goods and the mode of payment [Cl. Ex. C3, p. 15]. In addition, CLAIMANT
verbatim copied RESPONDENT’s Dispute Resolution Clause contained in its General
Conditions [The Problem, p.6; The Problem, p.12, Sec. V].
62. Art. 8 (1) CISG provides that a party’s statements are to be interpreted according to his
intent. And, in determining the intent of a party, Art. 8(3) requires due consideration of
all relevant circumstances of the case, such as the negotiations and any practices. Also,
according to Art. 4.5 UNIDROIT, contract terms shall be interpreted so as to give
effect to all the terms rather than to deprive some of them of effect.
63. In this case, CLAIMANT has already read and made changes to RESPONDENT’s
tender documents. This means CLAIMANT has accepted all the other terms in the
tender documents, including RESPONDENT’s General Conditions of Contract, with
the intention to be bound by them [Cl. Ex. C3, p. 15]. Therefore, RESPONDENT’s
General Conditions of Contract have been successfully accepted and incorporated into
the contract by CLAIMANT.
64. To recapitulate, RESPONDENT’s General Conditions of Contract have been accepted
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
19
by CLAIMANT and subsequently incorporated into its own offer, thus making it
legally binding thereafter.
B. CLAIMANT’s General Conditions of Sale have not been incorporated in the
Contract.
65. CLAIMANT’s General Conditions of Sale were not incorporated in the Contract
because CLAIMANT failed to give clear reference to it [1], and neither CLAIMANT
nor RESPONDENT intended to be bound by CLAIMANT’s General Conditions of
Sale [2].
1. CLAIMANT failed to give clear reference to its General Conditions of Sale when
concluding the Contract.
66. According to Art. 5 CISG Advisory Council No.13, in order to be binding, a reference
to the inclusion of standard terms and the standard terms themselves must be clear to a
reasonable person of the same kind as the other party and in the same circumstances.
Art. 6 CISG further provides that references are clear if readable and understandable by
a reasonable person, and the standard terms are clear if available in a language that the
other party could reasonably be expected to understand.
67. In addition, the reference to the incorporation of standard terms should not be hidden
away or printed in such a manner that it is easy to overlook. The obligation should be
on the party relying on them to ensure that they are set out in a manner and at a place
where a reasonable contractual party would notice them. In other words, there should
be a reasonable attempt to make the other party aware of the incorporation [Schlechtriem
& Schwenzer]. The German Machinery case holds that it is generally required that the
recipient of a contract offer that is supposed to be based on general terms and
conditions have the possibility to become aware of them in a reasonable manner
[Machinery case]. If this requirement is not met, those general conditions contravene the
good faith in international trade and will not be deemed as part of the offer. A case to
reinforce this argument is the French case “Pelliculest v. Morton International”, in
which a number of conditions were drafted in small print and the forum selection
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
20
clause is buried among them. This forum selection clause was set aside by the Court of
First Instance [Pelliculest v. Morton International]. Similarly, in the Belgium Tomatoes case,
general conditions were in German and in very small print. Despite that the two parties
have frequent business relations, the court held those unreadable terms as not
incorporated, and reduced the price of the goods [Tomatoes case].
68. In this case, in CLAIMANT’s sales offer on 27th March 2014, the references to
CLAIMANT’s standard terms are not clear: the offer contained an enlarged, underlined,
and blackened section “Specific Terms and Conditions”. However, under this
outstanding section, it stated “not applicable”. In stark contrast, the words “subject to
the General Conditions of Sale” were concealed in the bottom of this contract in fine
prints [Cl. Ex. C4, P.16]. Moreover, in the email sent on 27th March 2014, CLAIMANT
merely mentioned the changes about the goods and the mode of payments, without
mentioning the incorporation of its own standard terms [Cl. Ex. C3, p. 15]. Therefore,
since neither did CLAIMANT mention the inclusion of its General Conditions of Sale
in the email, nor did CLAIMANT clearly mention it in the offer, CLAIMANT has
failed obligation to give clear reference to the incorporation of its General Conditions
of Sale.
2. Neither CLAIMANT nor RESPONDENT intended to be bound by CLAIMANT’s
General Conditions of Sale.
69. CLAIMANT’s General Conditions of Sale were not incorporated into the contract
because neither RESPONDENT nor CLAIMANT expressed the intention to be bound
by it, and naturally, no agreement concerning the incorporation of CLAIMANT’s
General Conditions of Sale was made between the parties. Based on the rules for the
formation and interpretation of contracts under CISG, the CISG Advisory Council
offers articles with respect to “Inclusion of Standard Terms under the CISG”. Art.2
CISG Advisory Council Opinion No.13 states that standard terms are included in the
contract where the parties have expressly or impliedly agreed to their inclusion at the
time.
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
21
70. In this case, for the whole time, RESPONDENT has stuck to its own General
Conditions of Contract, beginning as sending the invitation to tender, and only came to
knowledge about CLAIMANT’s General Conditions of Sale on the email of 10th
February 2017 [Cl. Ex. C2, p. 9; The Problem, p.26, ¶18]. Therefore, RESPONDENT
never intended to be bound by CLAIMANT’s General Conditions of Sale.
RESPONDENT only intends to adhere to its own General Conditions of Contract and
this is not negotiable. CLAIMANT argues that RESPONDENT has silently agreed
CLAIMANT’s General Conditions because RESPONENT has downloaded
CLAIMANT’s Codes of Conduct out of curiosity and made no objection. However, in
this case, the Codes of Conduct and General Conditions are two separate documents
[Cl. Ex. C4, p. 16]. Even though RESPONDENT noticed CLAIMANT’s Codes of
Conduct, this does not necessarily mean that RESPONDENT acknowledged
CLAIMANT’s General Conditions.
71. On the part of CLAIMANT, it did not show any intention to include its own General
Conditions of Sale either. In the email CLAIMANT sent on 27th March 2014, it
claimed that it made some minor amendments to the invitation to tender and these
changes related primarily to the goods and the mode of payment [Cl. Ex. C3, p. 15]. In
addition, under the column “Specific Terms and Conditions”, it did not mention the
application of its own General Conditions of Sale [Cl. Ex. C4, p. 16]. Clearly, the only
reason why CLAIMANT never mentioned its own General Conditions of Sale is that it
never intended to do so.
72. In short, RESPONDENT, of course, intended to be bound by nothing but its own
General Conditions of Contract. Meanwhile, CLAIAMNT never showed any intention
to be bound by its General Conditions of Sale. Therefore, CLAIMANT’s General
Conditions were not incorporated into the contract.
C. Even if CLAIMANT’s General Conditions of Sale were incorporated in the
Contract, they should not govern the Contract.
73. CLAIMANT’s General Conditions of Sale should not govern the Contract due to the
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
22
lack of conflict between the two General Conditions [1]. Even if there is conflict,
CLAIMANT’s General Conditions of Sale should not govern the Contract because of
the knock-out Rule [2].
1. CLAIMANT’s General Conditions of Sale should not govern the Contract due to
the lack of conflict between the two general conditions.
74. Even if the tribunal finds that both CLAIMANT and RESPONDENT’s General
Conditions were incorporated in the contract, which is not the case, CLAIMANT’s
General Conditions of Sale should not govern the contract because there is no conflict
between those General Conditions. As a matter of fact, they resemble each other,
because they share the same values and are both committed to ensure the goods
produced and sold fulfill the highest standard of sustainability [Cl. Ex. C5, p. 17]. As to
the key issue of ethical standards, CLAIMANT argues that the two general conditions
impose different obligations, and it only bears the best effort obligation arising from its
own General Conditions. However, according to Art. 5.14 UNIDROIT, the duty of best
effort and the duty of specific result may co-exist. They are compatible. In effect, they
are the same kind of obligation with different degrees of performance required.
According to the “enactment overlapping” rule, each traditional obligation to achieve a
specific result can be thought of as containing within it a lesser obligation to use best
efforts to achieve that result [Farnsworth, p. 99]. Thus, the duty of specific results
encompasses the duty of best effort, or the duty of best effort is absorbed by the duty of
specific results. Namely, the duties in CLAIMANT’s General Conditions of Sale are
embodied in RESPONDENT’s General Conditions of Contract, but not vice versa.
Therefore, only when RESPONDENT’s General Conditions of Contract govern the
contract can both duties be fulfilled.
2. CLAIMANT’s General Conditions of Sale should not govern the Contract because
of the knock-out rule.
75. Even if the two General Conditions were in conflict somehow, the knock-out rule
should be applied instead of the last shot rule proposed by the opposing party. The last
shot rule often leads to results which are random, casuistic, unfair and very difficult to
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
23
foresee for the parties. The knock-out rule however, is favored by the majority of
commentators and case law [Schlechtriem & Schwenzer].
76. In reality, the parties tend to refer to their standard terms more or less automatically,
and there is no reason to allow the parties to question the existence of the contract.
According to Art. 2.1.22.3 UNIDROIT, that is when the knock-out rule comes into play,
unless it is explicitly excluded. To be more specific, the knock-out rule concludes that
the parties are in agreement on the main terms and that all standard terms which are not
in conflict will form part of the agreement. Conflicting terms are excluded and replaced
by the dispositive or residual law applicable Schlechtriem & Schwenzer]. In the German
Powdered Milk case, the court selected this rule and justified it as follows: “According
to the (probably) prevailing opinion, partially diverging general terms and conditions
become an integral part of a contract (only) insofar as they do not contradict each other.
Whether there is such a contradiction that impedes the integration cannot be
determined only by an interpretation of the wording of individual clauses, but only
upon the full appraisal of all relevant provisions” [Powdered milk case].
77. In the present case, CLAIMANT attached its General Conditions of Sale in its footnote,
and this is a practice for CLAIMANT. Hence, CLAIMANT did not include its general
conditions on purpose, but rather automatically, which satisfied the conditions of the
knock-out rule. This means the conflicting general conditions are not an integrate part
of the contract, and should be knocked out from the contract for the sake of the whole
picture.
78. In short, CLAIMANT should not apply its General Conditions of Sale herein because
of the knock-out rule.
79. Conclusion: RESPONDENT’s General Conditions of Contract were incorporated in
the contract, and are therefore legally binding; while CLAIMANT’s General
Conditions of Sale were not incorporated in the contract, therefore invalid. Assuming
CLAIMANT’s General Conditions of Sale were incorporated somehow, which is not
the case, in the battle of forms, CLAIMANT’s General Conditions of Sale cannot
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
24
govern the contract because they are either absorbed by or knocked out together with
RESPONDENT’s General Conditions of Contract. Based on all these factors,
CLAIMANT’s General Conditions of Sale don’t Govern the contract.
ISSUE IV: Based on the Application of RESPONDENT’s General Conditions,
CLAIMANT Failed to Deliver Conforming Goods as Required by the Contract
pursuant to Art.35 CISG Because CLAIMANT Failed to Guarantee Its Supplier’s
Compliance with the Relevant Ethical Standards.
80. CLAIMANT alleges that the cakes only need to be suitable for consumption and other
ordinary purposes, so it has delivered conforming goods under Art.35 CISG [Memo of
Cl., ¶¶. 117-120]. RESPONDENT submits that the cakes should not only meet those
physical and ordinary purposes, but should also satisfy the ethical standards required
by the contract under Art. 35 CISG. That is because the ethical standards stipulated in
RESPONDENT’s General Conditions are part of the requirements for the product
quality under Art. 35(1) CISG [A]. Even if the Tribunal holds that ethical standards do
not fall into the scope of “quality”, CLAIMANT’s supplier’s sustainable and ethical
production of the cocoa beans constitutes a particular purpose according to Art.35(2)(b)
CISG [B]. However, CLAIMANT failed to guarantee its supplier’s compliance with
ethical standards, thus making the cakes delivered non-conforming goods under Art. 35
CISG [C].
A. The ethical standards stipulated in RESPONDENT’s General Conditions are part
of the requirements for the quality quality underArt. 35(1) CISG.
81. It is unjustifiable and strange for CLAIMANT to skip RESPONDENT’s General
Conditions and directly quote the the Global Compact Principles as the standards to
determine its degree of obligation [Memo of Cl., ¶¶.105-110]. The decisive factor for
determining whether the goods conform to the contract is the contractual description of
the goods. The characteristics are therefore not based on objective standards of quality
but rather on the denomination and description of the required quality in the contract
[Schlechtriem; Christoph, pp. 167-206; Case 19067]. Quality, apart from the traditional
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
25
understanding of physical features of the goods, also comprises “all factual and legal
circumstances concerning the relationship of the goods to their surroundings”
[Schlechtriem & Schwenzer, P.596]. Nowadays, international trade has gone far beyond
traditional sales. Particularly, under the influence of Global Compact, many sales
contracts emphasize not only the physical features of the goods, but also some relevant
ethical standards, which are of high economic value. For most companies, they usually
incorporate their general conditions or code of conduct into the contract so as to
achieve the goals related with ethical standards. [Schwenzer, p.122–131; Giuffre, pp.
268-283]. If such express conditions and codes have been agreed to and incorporated
into the contract by the parties, they fall into the scope of “the quality or description
required by the contract” under Article 35(1) of the CISG [Paulo, p. 333 & Schwenzer, pp.
437-472].
82. In this case, RESPONDENT’s General Conditions and its Code of Conduct for
Suppliers, which are part of the contract, expressly stipulate its high standards about
ethics, integrity and sustainability. RESPONDENT’s Code of Conduct for Suppliers
clearly states, in principles C and E, that “(Delicatesy) will make sure that they
(Delicatesy’s suppliers) comply with the standards agreed upon to avoid that goods or
services delivered are in breach of Comestibles Fino’s General Business
Philosophy”[The Problem, p. 14]. Thus, CLAIMANT is required not only to comply itself
with the values under the Code of Conduct but also to ensure compliance of its own
suppliers with such principles. That is an obligation of guarantee rather than best
efforts alleged by CLAIMANT because the word “will” used in this principle is of
mandatory nature [Black’s Law Dictionary (8th ed. 2004), 4934; Darmstadter; Domitille & Anne,
pp. 1451-1461]. What’s more, Clause 4 of the General Conditions stipulates that “[a]ny
breach of some relevance of Comestibles Fino’s General Business Philosophy or its
Code of Conduct for Suppliers shall be considered to constitute a fundamental breach
entitling Comestibles Fino to terminate the contract with immediate effect and claim
damages”[The Problem, p. 12]. Such express and strict wording indicates that
CLAIMANT’s obligation to guarantee its supplier’s compliance with ethical standards
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
26
is result-oriented instead of a matter of best efforts.
83. Consequently, the cakes in this case have to conform to ethical standards.
CLAIMANT’s guarantee of its suppliers’ compliance with sustainable production
process constitutes part of the obligations under Art.35 (1) CISG. That is to say,
CLAIMANT has to guarantee its supplier’s compliance just as to guaranteeing other
contractual obligations under Art. 35(1) CISG.
B. Even if the Tribunal holds that ethical standards do not fall into the scope of
“quality” under 35(1) CISG, they constitute a particular purpose which
CLAIMANT’s goods should be fit for underArt. 35(2)(b) CISG.
84. Art.35 CISG has set forth two dimensions of seller’s obligations: one is about the
general provisions concerning quality, quantity and description of the goods, which is
provided in Art.35(1) CISG; the other, according to Art.35(2) CISG, is about specific
requirements which may be deduced from purpose, usage or circumstances of the
contract [Bianca/BB, p. 272] and shall be complied with whenever the parties have not
agreed otherwise [Hyland & Freiburg, p. 338].
85. RESPONDENT does not deny that the cakes delivered by CLAIMANT satisfy the
ordinary purposes under Art.35(2)(a) CISG, which CLAIMANT has tried to prove
[Memo of Cl., ¶¶. 131-133]. However, that is not the point of this case. The focus of the
present case is whether the cakes delivered conform to ethical standards, which is a
particular purpose under Art. 35(2)(b) CISG.
86. CLAIMANT is obliged to deliver goods which are fit for the particular purpose
because the following conditions are satisfied: the buyer, RESPONDENT, has made
the particular purpose known to the seller, CLAIMANT, (expressly or impliedly) at and
before the conclusion of the contract [1], RESPONDENT also relies on CLAIMANT's
skill and judgment in this regard[2], and such reliance is reasonable [3].
1. RESPONDENT has clearly and expressly made the particular purpose known to
CLAIMANT during the negotiation and conclusion of the contract without any
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
27
ambiguity.
87. Contrary to CLAIMANT’s allegation that the guarantee provisions are ambiguous and
unclear [Memo of Cl., ¶110], RESPONDENT has clearly made the particular purpose
known to CLAIMANT during the negotiation [a] and directly set forth it in the
contract [b]. CLAIMANT was aware of such particular purpose and accepted it by
performance [c].
a. RESPONDENT has more than once expressly shown its strict and special
requirements for CLAIMANT’s suppliers during the negotiation proceeding.
88. At the very first beginning, aiming at finding an appropriate cake supplier who shared
the same value for the ethical and sustainable production, RESPONDENT’s Head of
Purchasing, Ms. Ming, approached to CLAIMANT’s Head of Production, Mr. Tsai, at
the Danubian food fair, Cucina, in March 2014. To ensure that RESPONDENT’s
ethical and sustainable production business philosophy could be accepted by its
suppliers, Ms.Ming had discussed a lot with Mr.Tsai about the cost versus the benefit
of ethical and environmentally sustainable production [Sta. of Cl., P. 4, ¶.3].
89. On 10 March 2014, RESPONDENT sent CLAIMANT an email to show its willingness
to build up business relationship, in which it emphasized its requirements for
CLAIMANT’s suppliers by saying that “it is very important for us that we can be sure
that also your suppliers adhere to Comestibles Finos’ Philosophy and our Code of
Conduct for Suppliers”. Attached in this email are RESPONDENT’s Invitation to
Tender and Tender Documents, in which the sustainable and ethical production
requirements were also listed expressly without any ambiguity. At the second
paragraph of the Invitation to Tender, RESPONDENT put its contract purpose at the
first place and stated that it was CLAIMANT’s strict adherence to the principle of
ethical and sustainable production and its membership of Global Compact that made it
a potential supplier for RESPONDENT[Cl. Ex. C1, p. 8]. Without this prerequisite,
RESPONDENT would never consider approaching to CLAIMANT and list it as a
potential partner, let alone establish a business relationship. Besides, in the Tender
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
28
Document, RESPONDENT had not only emphasized its ethical and sustainable
production purpose more than once, but also listed several specific and concrete
obligations for suppliers to conform to. Especially, in Section IV. “Whereas Clause”,
Section V. Clause 4 and Section XXVI, some ethical and sustainable production
obligations were provided directly and expressly and such provisions adopted words
like “shall” and “must” [Cl. Ex. C2, p. 9], which are of mandatory nature to set forth the
production obligations [Black’s Law Dictionary (8th ed. 2004), p. 4288; Darmstadter]. Faced
with such concise and straightforward words and provisions, an experienced
businessman could not have been unaware of the particular purpose of
RESPONDENT.
90. After reading the Tender Documents, CLAIMANT did not raise any objection
concerning RESPONDENT’s requirement that CLAIMANT has to guarantee its
supplier’s compliance with ethical standards. Instead, in its offer on 27 March 2014, it
merely made some amendments to the Tender Documents relating to the size of the
cake and the mode of payment. In the acceptance letter of 7 April 2014,
RESPONDENT stressed the production requirements again, emphasizing that a
decisive element for it to confer CLAIMANT the contract was CLAIMANT’s
convincing commitment to sustainable production [Cl. Ex. C5, p. 17].
91. Therefore, during the whole negotiation proceeding, RESPONDENT expressly made
the particular purpose known to CLAIMANT, put the ethical and sustainable
production requirement at the first place all the time and made it as an essential
element for reaching the contract, which by no means granted CLAIMANT an excuse
to avoid such obligation.
b. The ethical requirements have been directly set forth in the contract.
92. Clause 4 of RESPONDENT’s General Conditions of Conduct in conjunction with
Principle E of RESPONDENT’s Code of Conduct expressly and clearly imposes on
CLAIMANT an obligation to guarantee the specific result. Principle E of
RESPONDENT’s Code of Conduct requires CLAIMANT to guarantee that its
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
29
suppliers should also adhere to comparable standards so as not to breach
RESPONDENT’s General Business Philosophy. As clearly stated during the
conclusion of the contract and reflected in Section IV of the Tender Documents [The
Problem, p. 11], RESPONDENT has a “zero tolerance” policy when it comes to
unethical business behavior. In order to show its seriousness for ethical and
environmentally friendly standards, RESPONDENT reiterates and emphasizes in
Clause 4 of its General Conditions of Conduct that any noncompliance with the Code
of Conduct will constitute a fundamental breach of the contract [The Problem, p. 12]. The
clear wording and strict penalty in case of noncompliance mean that CLAIMANT has
to guarantee its supplier’s observance. As a prudent businessman, it is impossible that
CLAIMANT should neglect such particular purpose.
c. CLAIMANT could not have been unaware of such particular purpose because it has
accepted it by performance and without any objection.
93. Firstly, in CLAIMANT’s tender letter, CLAIMANT had confirmed that it guaranteed
the ingredients complying with Global Compact Principles for sustainable production
and expressed its willingness to consult with RESPONDENT for any further
requirements concerning sustainability strategy [Cl. Ex. C3, p. 15]. That means,
CLAIMANT had clearly known such particular purpose, otherwise, it would not make
such commitment and bear relevant obligations to RESPONDENT.
94. Secondly, CLAIMANT’s LETTER OF ACKNOWLEDGEMENT also indicated
CLAIMANT had known such particular purpose, which told that CLAIMANT would
tender in accordance with the specified requirements [Re. Ex. R1, p. 28].
95. Thirdly, CLAIMANT displayed maps showing the source of its ingredients, indicating
that it had known its obligation to guarantee its supplier’s compliance with relevant
standards [The Problem, p.25, ¶.11]. .
96. Fourthly, as an experienced businessman, CLAIMANT should have been aware of the
contracting party’s basic information and contractual purpose. Even if CLAIMANT
had not done such necessary research, indeed RESPONDENT had emphasized a lot.
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
30
Especially, both RESPONDENT and CLAIMANT are members of Global Compact,
whose principles have set forth its members shall produce sustainably. Besides,
RESPONDENT had expressed its intent to become a Global Compact LEAD company
and its advertising campaign which stated its food was part of a healthy and green
world [Response To Notice, p. 25, ¶.6]. All of these had indicated that RESPONDENT
particularly focused on sustainable production and had made great efforts to achieve its
purpose and such contractual purpose were all communicated to CLAIMANT and
reconfirmed by it. CLAIMANT, also as a member of Global Compact, could not have
been unaware of such requirements.
2. RESPONDENT relies on CLAIMANT’s skill and judgement to guarantee the
cocoa supplier’s compliance with ethical standards.
97. Contrary to CLAIMANT’s allegation that both parties are responsible and should
cooperate with each other to inspect the cocoa supplier and guarantee its compliance
with relevant standards [Memo of Cl., ¶. 108], it is only CLAIMANT that bears the
guarantee obligation and RESPONDENT has always relied on CLAIMNAT in this
regard. It is reflected during both the negotiation and the conclusion of the contract
because it is a prerequisite and indispensable requirement for the conclusion of the
contract.
98. The afterwards conduct of both parties further proves such reliance. For the years of
trade, RESPONDENT never directly inspected the production process of the supplier.
It is CLAIMANT that signed relevant agreement with the cocoa supplier and instructed
professional institute to scrutinize the production of the supplier [Cl. Ex. C8, p. 20].
Therefore, RESPONDENT has always relied on CLAIMANT to guarantee the cocoa
supplier’s compliance and thus it is unjustifiable for CLAIMANT to deny such reliance
only after problems arose.
3. It is reasonable for RESPONDENT to rely on CLAIMANT with regard to
CLAIMANT’s supplier’s adherence to the sustainable standards.
99. To set a particular purpose, Art. 35(2)(b) also requires that the buyer’s reliance on the
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
31
seller should not be unreasonable, which is also met in this case. Reasonableness is a
general and fundamental principle of CISG [Albert H. Kritzer]. Many scholars have
made comments on it. Concerning the conception of reasonableness, it must be
judicious and fair [van der Velden, p. 52] and can appropriately be determined by
ascertaining what is normal and acceptable in the relevant trade [Honnold, p. 101]. There
are three aspects concerning reasonableness which are relevant to this case [Art.8 CISG;
Art. 1:302 PECL; Tunc, p. 26]: the usages and practices of the trades, the parties’ own
situations and abilities and the details of contract-conclusion proceedings. It has been
established in practice that seller assumes the responsibility for any defects with few
exceptions where it receives raw materials from independent suppliers [a].
CLAIMANT’s skills and capabilities indicate that it is able to inspect and guarantee its
supplier’s compliance [b]. The details of the negotiation proceedings indicate that it is
reasonable for RESPONDENT to rely on CLAIMANT to guarantee the supplier’s
compliance with ethical standards [c].
a. It has been established in practice that seller assumes the responsibility for any
defects with few exceptions where it receives raw materials from independent
suppliers.
100.The risk of non-conforming components made by suppliers is part of the seller's
procurement risk and therefore part of its sphere of risk [ICC Case No. 8128]. The seller
may not be excused by the mere existence of hidden defects which could not have been
discovered by a reasonable person in the seller's situation [Christoph, pp. 167-206; Ghith, p.
287; Schwenzer]. It is not only based on the control over the sphere in which damages
could arise, but also on the basis of economic reasons because the seller is perceived as
the best suited to avoid, and therefore to bear, the risk of the occurrence of an event
bringing about the non-conformity of the goods [Schlechtriem]. In the present case,
CLAIMANT is the party that has direct connection with the supplier and therefore it
should bear the obligation to make sure its supplier complies with the contractual
requirements, i.e. the ethical and environmentally friendly standards.
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
32
101.Contrary to CLAIMANT’s allegation that the seller itself had no skill to identify fraud
and consequently RESPONDENT should not rely on CLAIMANT [Memo of Cl., ¶.136],
the truth is that, compared to RESPONDENT, CLAIMANT indeed has more methods
and abilities to perform such obligations. REPONDENT, the buyer, has extreme
difficulties to get to know and inspect every supplier of CLAIMANT and their
production process. Besides, it was CLAIMANT who set up a business relationship
with its own cocoa suppliers. It was improper and illegal for RESPONDENT to skip
CLAIMANT and directly interfere ingredient suppliers with whom RESPONDENT
has no contractual relationship. Thus, RESPONDENT has to rely on CLAIMANT’s
skill and judgement to guarantee the ingredients are from sustainable farms.
b. CLAIMANT’s skills and capabilities indicate that it is able to inspect and guarantee
its supplier’s compliance.
102.Firstly, CLAIMANT is able to predict the possibility of its supplier’s non-compliance
and take precautionary measures to guarantee the result. Contrary to CLAIMANT’s
allegation that it has actually done everything possible and could do nothing more,
RESPONDENT submits that it is not a justifiable reason for CLAIMANT to deny its
obligation to guarantee the specific result. It is hard to prove that CLAIMANT has
adopted all possible measures. What RESPONDENT expects is the result that the
supplier complies with ethical standards rather than what CLAIMANT has done. If
CLAIMANT fails to guarantee, it will need to bear the consequence as contracted.
103.In the context of the increasingly global and complicated commercial world, the
obligor must organize its business in an orderly manner. In commercial dealings, it may
generally be expected that each party organizes its firm so as to avoid or overcome
events which may disrupt the ordinary function of the firm, regardless of whether such
events are specifically unforeseeable or whether the event occurs without the fault of
the obligor or its personnel [Christoph, pp. 167-206].
104.As an experienced manufacturer in its field, CLAIMANT is believed to have the ability
to cater for different buyers’ need and control the commercial risk arising therefrom. In
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
33
fact, CLAIMAN has shown such capacity in the present case. Specifically, it has
included in its Supplier Code of Conduct standards comparable to those set forth in
RESPONDENT’s Code of Conduct and made them part of the contract between itself
and its cocoa supplier. The supplier’s non-compliance constitutes a breach of contract
towards CLAIMANT and thus entitles CLAIMANT to seek for damages from its
supplier [Cl. Ex. C9]. That is to say, RESPONDENT’s requiring CLAIMANT to
undertake the guarantee obligation does not cause CLAIMANT an unreasonable
burden because once the supplier derails from the ethical and sustainable standards,
CLAIMANT has the right to request damages from the supplier.
105.Secondly, contrary to CLAIMANT’s allegation that the reliance on CLAIMANT is
unreasonable because it was an intermediary [Memo of Cl., ¶.135], actually CLAIMANT
was an independent seller in the trade of cocoa cakes. An intermediary and an
independent seller play totally different roles in commercial trade and separately have
their own legal obligations. An intermediary is a person or organization that helps other
people or organizations to make an agreement by being a means of communication
between them [Oxford dictionary]. To be specific, an intermediary is just a negotiator or
trader in the business and the buyer did not rely on his judgment [Enderlein, p. 157]. As a
seller who produced goods by itself, he shall be obliged to guarantee the goods because
of the reliance of buyer. In the present case, CLAIMANT did not sell the cakes that
others produced already. Instead, it just bought cocoa beans from others and produced
cakes by itself rather than merely resell cakes [Sta. of Cl., p. 6, ¶¶.8-9]. Therefore, as a
producer, CLAIMANT has the skills and obligations to guarantee that the components
it purchases satisfy RESPONDENT’s requirements.
c. The details of the negotiation proceedings indicate that it is reasonable for
RESPONDENT to rely on CLAIMANT to guarantee the supplier’s compliance with
ethical standards.
106.Firstly, during the negotiation proceedings, as a response to RESPONDENT’s
particular sustainable production requirement to suppliers, CLAIMANT had displayed
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
34
its ingredient sources to RESPONDENT and stated that it had regularly audited its
suppliers production facility, built its own supervision mechanism and had good
reputation in sustainable production, which formed an impression that it was a
competitive suppliers, and thus RESPONDENT reasonably believed in and relied on it
[Response To Notice, p. 25, ¶.11].
107.Additionally, the provision of a guarantee presumes a relevant agreement or other
circumstances based on which one may infer that the seller has given a guarantee, for
example, previous advertising of the goods[Varv&Karu, p. 86; Lucjan]. Consequently,
the expression “Sustainably Sourced Cocoa” in the advertisement for the King’s
Delight cake indicates that CLAIMANT intends to undertake the obligation of
guarantee[Re. Cl. R2, p. 29].
108.Such a series of behaviors induced RESPONDENT to set up an expectation that
CLAIMANT could guarantee its supplier’s compliance with the relevant standards and
thus reasonably relied on it.
109.To sum up, during the whole negotiation proceeding and the conclusion of the contract,
RESPONDENT has expressly made its particular purpose for sustainable production
known to CLAIMANT. While CLAIMANT responded actively and showed that it had
sufficient capability to satisfy such requirements, thus making it reasonable for
RESPONDENT to rely on CLAIMANT.
C. CLAIMANT failed to guarantee its supplier’s compliance with ethical standards,
thus making the cakes delivered non-conforming goods underArt. 35 CISG.
110.CLAIMANT insists that it has already used its best efforts to make sure of the cocoa
supplier’s compliance. RESPONDNET appreciates that, but it is not the point of the
case because as stated above, CLAIMANT’s obligation concerning its supplier’s
compliance with ethical and sustainable production process is result-oriented, which is
as onerous as that the failure to achieve the specific result regardless of the efforts
made will lead to the breach of the contract [Comment on the UNIDROIT Principles (2016),
p.158]. Since CLAIMANT failed to guarantee its supplier’s compliance with relevant
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
35
standards as it admitted in the email on 10 Feb 2017 [Cl. Ex. C9, p.21], the cakes
delivered were not fit for the requirements set forth in the contract and hence they are
non-conforming goods under Art.35 CISG.
111.Conclusion: Ethical standards are part of the requirement for “quality” of Art. 35(1)
CISG. Alternatively, sustainable production standards constitute a particular purpose
which the cakes delivered should be fit for. CLAIMANT failed to guarantee its
supplier’s compliance with relevant standards, so it did not deliver conforming goods
under Art. 35 CISG.
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
36
REQUEST FOR RELIEF
In light of the foregoing arguments, RESPONDENT respectfully requests the Tribunal to
adjudge and declare that:
(1) The Arbitral Tribunal decide on the Challenge on Mr. Prasad without his participation.
(2) Mr. Prasad should be removed from the Arbitral Tribunal.
(3) The Contract between the parties is governed by RESPONDENT’s General Conditions
of Sale.
(4) CLAIMANT has not delivered conforming goods because it failed to perform the
obligation to guarantee its cocoa supplier’s compliance with ethical and envirnmentally
friendly standards as provided in the Contract.
XIAMENUNIVERSITY MEMORANDUM FOR RESPONDENT
37
SIGNATURE
422 South Siming Road
Xiamen
China25 January 2017
In light of the Tribunal’s Procedural Orders, the prior pleadings were written by Counsel
who signed below.
On behalf of RESPONDENT, Counsel hereby submits this Memorandum pursuant to
Procedural Order No. 1.
Respectfully Signed and Submitted by COUNSEL
CHEN Lifan CHEN Sijie LIANG Qingyi SHEN PeiWANGYa ZHANG Qifei ZHANG Sihua