I AM ME - Memorandum for Respondent

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HANOI LAW UNIVERSITY

HLU COMMERCIAL ARBITRATION MOOT 2015

November 2015 – March 2016

VIETNAM INTERNATIONAL ARBITRATION CENTRE

MEMORANDUM FOR RESPONDENT[TEAM I AM ME]

ON BEHALF OF AGAINST

Rosen Ltd.

123 Victoria Road

Oceania, AlphaRESPONDENT

Locus Ltd.

88 Longman Road

Leisure, BetaCLAIMANT

COUNSELS

Le Tra Giang

Nguyen Cam Tu

Nguyen Thi Ngoc Bich


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MEMORANDUM FOR CLAIMANT i

TABLE OF CONTENTS


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MEMORANDUM FOR CLAIMANT | ii

INDEX OF ABBREVIATIONS

AC Op CISG Advisory Council Opinion

ADR Alternative Dispute Resolution

Art. Article

CISG United Nations Convention on Contracts for the International Sale ofGoods, Vienna, 1980

Cl. Memo. Claimant‟s Memorandum

cmt. Comment

e.g. Exemplum gratia (for example)

et seq. et sequentes (and following)

Ex. Exhibit

i.e. Id est (that is)

Model Law UNCITRAL Model Law on International Commercial Arbitration

NYC Convention on the Recognition and Enforcement of Foreign ArbitralAwards, New York, 1958

p. Page

pa. Paragraph

pp. Pages

PO1 Procedural Order 1

PO2 Procedural Order 2

RFA Request for Arbitration

SOD Statement of Defense

Vienna I.A.C. Vienna International Arbitration Centre

Vietnam I.A.C. Vietnam International Arbitration Centre


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MEMORANDUM FOR CLAIMANT | iii

INDEX OF AUTHORITIES

CITED AS CITATION

AC Op 5 SCHWENZER, Ingeborg,CISG Advisory Council Opinion No. 5, The buyer‟s right to avoid thecontract in case of non-conformity of the goods or documentsAvailable at: http://www.cisg.law.pace.edu/cisg/CISG-AC-op5.html

Babiak Babiak, Andrew,Defining "Fundamental Breach" Under the United Nations Conventionon Contracts for the International Sale of Goods6 Temple Int. and Comparative Law J. (1992) 113-143Available at: http://www.cisg.law.pace.edu/cisg/biblio/babiak.html

Berger Klaus Peter Berger,Law and Practice of Escalation Clauses (2006) 22 ArbitrationInternational 1-17

Bianca/Bonell Bianca, Cesare/ Bonell, Michael Joachim (Eds.),Commentary on the International Law of Sales:The 1980 Vienna Sales ConventionGuiffre, Milan, 1987

Born Born, Gary,International Commercial Arbitration,

3rd ed, Kluwer Law International: Alphen aan den Rijn (2009)

Cremades Cremades, Bernardo M.,Multi-tiered Dispute Resolution Clauses

New York: CPR Institute for Dispute Resolution, 2004

Enderlei/ Maskow Enderlein, Fritz/ Maskow, Dietrich,International Sales Law United States of America: Oceana Publications,1992Available at:http://www.cisg.law.pace.edu/cisg/biblio/enderlein.html#pref

EÖRSI EÖRSI, Gyula,General Provisions, in Nina M. Galston & Hans Smit eds., InternationalSales: The United Nations Convention on Contracts for the InternationalSale of Goods, Matthew Bender (1984) Ch. 2, pp. 1-34

Ferrari Ferrari, Franco,Fundamental Breach of Contract Under the UN Sales Convention – 25Years of Article 25 CISG (Spring 2006) 25 J. Law and CommerceAvailable at: http://www.cisg.law.pace.edu/cisg/biblio/ferrari14.html

Honnold Honnold, John,

http://www.cisg.law.pace.edu/cisg/CISG-AC-op5.htmlhttp://www.cisg.law.pace.edu/cisg/CISG-AC-op5.htmlhttp://www.cisg.law.pace.edu/cisg/CISG-AC-op5.htmlhttp://www.cisg.law.pace.edu/cisg/biblio/babiak.htmlhttp://www.cisg.law.pace.edu/cisg/biblio/babiak.htmlhttp://www.cisg.law.pace.edu/cisg/biblio/babiak.htmlhttp://www.cisg.law.pace.edu/cisg/biblio/enderlein.html#prefhttp://www.cisg.law.pace.edu/cisg/biblio/enderlein.html#prefhttp://www.cisg.law.pace.edu/cisg/biblio/ferrari14.htmlhttp://www.cisg.law.pace.edu/cisg/biblio/ferrari14.htmlhttp://www.cisg.law.pace.edu/cisg/biblio/ferrari14.htmlhttp://www.cisg.law.pace.edu/cisg/biblio/ferrari14.htmlhttp://www.cisg.law.pace.edu/cisg/biblio/enderlein.html#prefhttp://www.cisg.law.pace.edu/cisg/biblio/babiak.htmlhttp://www.cisg.law.pace.edu/cisg/CISG-AC-op5.html


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MEMORANDUM FOR CLAIMANT | iv

Uniform Law for International Sales Under the 1980 United NationsConvention (3rd ed, Kluwer Law International: 1999)Available at: http://www.cisg.law.pace.edu/cisg/biblio/honnold.html

Huber/Mullis Huber, Peter/ Mullis, Alastair,

The CISG: A new text book for students and practitionersSellier. European Law Publisher, Munich, 2007

Jolles Jolles, Alexander,Consequences of Multi-tier Arbitration Clauses: Issues of Enforcement(2006) 72 Arbitration 329-338

Keily Keily, Troy,Good Faith and the Vienna Convention on Contracts for the Internation-al Sale of Goods (CISG), thesis: Deakin (1999) Pace essay submission =3 Vindobona Journal of International Law and Arbitration, Issue 1

(1999) 15-40Available at: http://www.cisg.law.pace.edu/cisg/biblio/keily.html

Magnus Magnus, Ulrich,Remarks on Good Faith: The United Nations Convention on Contractsfor the International Sale of Goods and the UNIDROIT Principles ofInternational Commercial Contracts, Pace International Law Review,Vol. X (1998) 89-95Available at:http://www.cisg.law.pace.edu/cisg/principles/uni7.html#um

Magnus Magnus, Ulrich,The Remedy of Avoidance of Contract under CISG – General Remarksand Special Case (2005-06) 25 J. of Law and Commerce, pp.423-436Available at: http://www.cisg.law.pace.edu/cisg/biblio/magnus2.html

Model Law Digest UNCITRAL Digest of Case Law on the Model Law on InternationalCommercial Arbitration 2012

Oxford Oxford Dictionay of Law, 5th Ed. (2003)

Saidov Saidov, Djakhongir,The Law of Damages in International Sales: the CISG and other Interna-tional Instruments (Portland, Hart: 2008)

Scanlon Scanlon, Kathleen,Country re port for US, in “Enforcement of Multi-tiered Dispute Resolu-tion Clauses”, IBA Newsletter of Committee D (Arbitration and ADR),Vol.6 No.2, October 2001

Schlechtriem Schlechtriem, Peter,Uniform Sales Law: The UN-Convention on Contracts for the Interna-

tional Sale of Goods, Vienna: Manz (1986)

http://www.cisg.law.pace.edu/cisg/biblio/honnold.htmlhttp://www.cisg.law.pace.edu/cisg/biblio/honnold.htmlhttp://www.cisg.law.pace.edu/cisg/biblio/honnold.htmlhttp://www.cisg.law.pace.edu/cisg/biblio/keily.htmlhttp://www.cisg.law.pace.edu/cisg/biblio/keily.htmlhttp://www.cisg.law.pace.edu/cisg/biblio/keily.htmlhttp://www.cisg.law.pace.edu/cisg/principles/uni7.html#umhttp://www.cisg.law.pace.edu/cisg/principles/uni7.html#umhttp://www.cisg.law.pace.edu/cisg/biblio/magnus2.htmlhttp://www.cisg.law.pace.edu/cisg/biblio/magnus2.htmlhttp://www.cisg.law.pace.edu/cisg/biblio/magnus2.htmlhttp://www.cisg.law.pace.edu/cisg/biblio/magnus2.htmlhttp://www.cisg.law.pace.edu/cisg/principles/uni7.html#umhttp://www.cisg.law.pace.edu/cisg/biblio/keily.htmlhttp://www.cisg.law.pace.edu/cisg/biblio/honnold.html


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MEMORANDUM FOR CLAIMANT | v

Schlechtriem/Schwenzer

Schlechtriem, Peter/ Schwenzer, Ingeborg (Eds.),Commentary on the UN Convention on the International Sale of Goods(CISG), 3rd Ed. New York: Oxford University Press, 2010

Ramberg Ramberg, J.,

International Commercial Transactions,3rd ed, ICC Publication N°691: Stockholm (2004)

UNCITRAL Digest UNCITRAL Digest of Case Law on the United Nations Convention onContracts for the International Sale of Goods 2010 EditionAvailable at: https://www.uncitral.org/pdf/english/clout/CISG-digest-2012-e.pdf

Zeller Zeller, Bruno,The Remedy of Fundamental Breach and the United Nations Conven-tion on the International Sale of Goods (CISG) – A Principle Lacking

Certainty, 11 Vindobona Journal of International Commercial Law &Arbitration (2/2007) pp. 219-236Available at: http://www.cisg.law.pace.edu/cisg/biblio/zeller15.html

https://www.uncitral.org/pdf/english/clout/CISG-digest-2012-e.pdfhttps://www.uncitral.org/pdf/english/clout/CISG-digest-2012-e.pdfhttps://www.uncitral.org/pdf/english/clout/CISG-digest-2012-e.pdfhttps://www.uncitral.org/pdf/english/clout/CISG-digest-2012-e.pdfhttp://www.cisg.law.pace.edu/cisg/biblio/zeller15.htmlhttp://www.cisg.law.pace.edu/cisg/biblio/zeller15.htmlhttp://www.cisg.law.pace.edu/cisg/biblio/zeller15.htmlhttp://www.cisg.law.pace.edu/cisg/biblio/zeller15.htmlhttps://www.uncitral.org/pdf/english/clout/CISG-digest-2012-e.pdfhttps://www.uncitral.org/pdf/english/clout/CISG-digest-2012-e.pdf


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MEMORANDUM FOR CLAIMANT | vi

INDEX OF CASES AND ARBITRAL AWARDS

CASES

Australia

Aiton Aiton Australia Pty. Ltd. v. Transfield Pty. Ltd. [1999] NSWSC 996 Elizabeth Bay Elizabeth Bay Developments Pty. Limited v. Boral Building Ser-

vices Pty. Limited [1995] 36 NSWLR 709

EnglandPaul Smith Paul Smith Ltd. v. H & S International Holding Inc. [1991] 2

Lloyd‟s Reports 127

Germany

Café inventory case Appellate Court Hamburg, 25 January 2008

Available at:http://cisgw3.law.pace.edu/cases/080125g1.html

Chemical substancecase

Appellate Court Koblenz, 11 September 1998Available at: http://cisgw3.law.pace.edu/cases/980911g1.html

Cobalt sulphate case Federal Supreme Court, 3 April 1996Available at: http://cisgw3.law.pace.edu/cases/960403g1.html

OLG Namburg 21February 2002

Oberlandesgericht Naumburg, Germany, 10 Sch 08/01, 21 Febru-ary 2002

Available at: http://www.dis-arb.de/de/47/datenbanken/rspr/olg-naumburg-az-10-sch-08-01-datum-2002-02-21-id166.

OLG Stuttgart 16July 2002

Oberlandesgericht Stuttgart, Germany, 1 Sch 08/02, 16 July 2002Available at: http://www.dis-arb.de/de/47/datenbanken/rspr/olg-stuttgart-az-1-sch-08-02-datum-2002-07-16-id187

SpainMetallic covers case Appellate Court Barcelona, Spain 28 April 2004

Available at: http://cisgw3.law.pace.edu/cases/040428s4.html

SwitzerlandMeat case Supreme Court, 28 October 1998

Available at: http://cisgw3.law.pace.edu/cases/981028s1.html

United States of America

Terra Intern Terra Intern., Inc. v. Mississippi Chemical CorpU.S. Court of Appeals, 8th Circuit [U.S.], 11 July 1997Available at Westlaw

ABITRAL AWARDS

http://cisgw3.law.pace.edu/cases/080125g1.htmlhttp://cisgw3.law.pace.edu/cases/080125g1.htmlhttp://cisgw3.law.pace.edu/cases/980911g1.htmlhttp://cisgw3.law.pace.edu/cases/980911g1.htmlhttp://cisgw3.law.pace.edu/cases/980911g1.htmlhttp://cisgw3.law.pace.edu/cases/960403g1.htmlhttp://cisgw3.law.pace.edu/cases/960403g1.htmlhttp://cisgw3.law.pace.edu/cases/960403g1.htmlhttp://www.dis-arb.de/de/47/datenbanken/rspr/olg-naumburg-az-10-sch-08-01-datum-2002-02-21-id166http://www.dis-arb.de/de/47/datenbanken/rspr/olg-naumburg-az-10-sch-08-01-datum-2002-02-21-id166http://www.dis-arb.de/de/47/datenbanken/rspr/olg-naumburg-az-10-sch-08-01-datum-2002-02-21-id166http://www.dis-arb.de/de/47/datenbanken/rspr/olg-naumburg-az-10-sch-08-01-datum-2002-02-21-id166http://www.dis-arb.de/de/47/datenbanken/rspr/olg-stuttgart-az-1-sch-08-02-datum-2002-07-16-id187http://www.dis-arb.de/de/47/datenbanken/rspr/olg-stuttgart-az-1-sch-08-02-datum-2002-07-16-id187http://www.dis-arb.de/de/47/datenbanken/rspr/olg-stuttgart-az-1-sch-08-02-datum-2002-07-16-id187http://www.dis-arb.de/de/47/datenbanken/rspr/olg-stuttgart-az-1-sch-08-02-datum-2002-07-16-id187http://cisgw3.law.pace.edu/cases/040428s4.htmlhttp://cisgw3.law.pace.edu/cases/040428s4.htmlhttp://cisgw3.law.pace.edu/cases/040428s4.htmlhttp://cisgw3.law.pace.edu/cases/981028s1.htmlhttp://cisgw3.law.pace.edu/cases/981028s1.htmlhttp://cisgw3.law.pace.edu/cases/981028s1.htmlhttp://cisgw3.law.pace.edu/cases/981028s1.htmlhttp://cisgw3.law.pace.edu/cases/040428s4.htmlhttp://www.dis-arb.de/de/47/datenbanken/rspr/olg-stuttgart-az-1-sch-08-02-datum-2002-07-16-id187http://www.dis-arb.de/de/47/datenbanken/rspr/olg-stuttgart-az-1-sch-08-02-datum-2002-07-16-id187http://www.dis-arb.de/de/47/datenbanken/rspr/olg-naumburg-az-10-sch-08-01-datum-2002-02-21-id166http://www.dis-arb.de/de/47/datenbanken/rspr/olg-naumburg-az-10-sch-08-01-datum-2002-02-21-id166http://cisgw3.law.pace.edu/cases/960403g1.htmlhttp://cisgw3.law.pace.edu/cases/980911g1.htmlhttp://cisgw3.law.pace.edu/cases/080125g1.html


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MEMORANDUM FOR CLAIMANT | vii

International Chamber of Commerce [ICC]

ICC 10256 ICC International Court of Arbitration Case No. 10256, 1999


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MEMORANDUM FOR CLAIMANT | viii

INDEX OF LEGAL SOURCES

New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958

(New York Convention)

Vietnam International Arbitration Centre Rules 2012 (VIAC Vietnam Rules)

UNCITRAL Model Law on International Commercial Arbitration 1985 with 2006 amend-

ments (UNCITRAL Model Law)

UNIDROIT Principles of International Commercial Contracts (PICC 2010)

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


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MEMORANDUM FOR CLAIMANT | 1

STATEMENT OF FACTS

CLAIMANT is a subsidiary of Locus Group and specialized in one of its parent company ac-

tivities of purchasing rare flower seeds to grow into flowers and supply for events in Beta

(RFA, pa. 1). CLAIMANT, in order to promote its brand name in The Annual Flower Festival

(“The Festival”), one of the most influential events in the international flower market and

taking place in February 2015 (RFA., pa. 3), has ordered 5,000 seeds of Phoenix Tulips, a ra-

re and extraordinary flower kind from RESPONDENT, a reputable supplier and one of a few

companies capable of developing and cultivating Phoenix Tulips (SOD, pa. 2, 3).

Despite the young relationship of the two parties and former dispute between RESPONDENT

and Locus Group, CLAIMANT‟s parent company (PO2, pa. 8), RESPONDENT was still

willing to provide CLAIMANT with a large quantity of Phoenix Tulips seeds that had beenhoped to help CLAIMANT in its promotion at the Festival. However, the needs for Phoenix

Tulips seeds have been drastically increasing during recent years, and thus, RESPONDENT

was deficient in available seeds and could only deliver 3,000 ones, as stated during the con-

tractual negotiation of 15 July 2014 (RFA, pa. 6 ).

The Parties concluded a contract on the sale of 3,000 Phoenix Tulips seeds (“The Contract”)

on 20 August 2014 (RFA, pa. 8). In The Contract, RESPONDENT was obliged for providing

CLAIMANT with cultivating instructions, yet, was not imposed any obligations to give spe-cific ones (Ex.C2, Art. 4). The goods was delivered to CLAIMANT on 20 October 2014

(RFA, pa. 8), and RESPONDENT has also provided a planting guidance as promised

(Ex.C3). CLAIMANT had checked the quantity of the seeds and claimed to have found no

abnormalities (PO2, pa. 17 ).

On 20 November 2014, Mr. White, an agricultural engineer of CLAIMANT, made a phone

call to Mr. Black, the head of Seeding Department of RESPONDENT, to ask for the nutri-

tional ingredients of soil and appropriate fertilizers for the Phoenix Tulip seeds (SOD, pa. 5).

Additionally, on 30 November 2014, Mr. Black also met Mr. White in an international scien-

tific conference on rare flowers and was asked about the ideal environmental conditions for

the growth and development of the seeds. During both encounters, Mr. Black has discussed

and given proper answers to the issues Mr. White concerned about. However, Mr. White was

fired from CLAIMANT on 30 November 2014 and RESPONDENT was not made known

neither the reason for this dismissal nor whether Mr. White had told CLAIMANT about the

conversations (Ex. R 3).


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According to CLAIMANT, there were 25% of the seeds that could not bloom and 50% shriv-

eled and faded (RFA, pa 10). RESPONDENT strongly believes that these were due to an ex-

traordinary weather phenomenon called “Red Dragon”, which happened from late December

2014 to mid-January 2015. This kind of unusually hot weather occurs in Beta once in a while

and is said to have unpredictable frequency (Ex. R 4). Even though CLAIMANT had notified

RESPONDENT about this phenomenon during negotiation, since it has already happened the

previous year and RESPONDENT had not been made known until 4 January 2015 (PO.2,

pa. 23), RESPONDENT was unaware of the effects of the Red Dragon on CLAIMANT‟s cul-

tivating results.

In the belief that it held no responsibilities for CLAIMANT‟s defective flowers, RESPOND-

ENT rightfully turned down the refund request from CLAIMANT on 22 January 2015, and

was astonished when receiving the Declaration of Contract Avoidance from CLAIMANT on

25 January 2015 terminating the Contract, without any further negotiations (RFA., pa. 11,

12). CLAIMANT also stated that it would enforce its rights in arbitration (Ex. C 4) and sub-

mitted an application to Vietnam International Arbitration Centre on 5 October 2015.


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ARGUMENTS

I. THE TRIBUNAL HAS NO JURISDICTION OVER THE DISPUTE

1. RESPONDENT respectfully asserts that the Tribunal does not have the jurisdiction to hear the

merits of the dispute.

2. RESPONDENT does not dispute that Art. 10 of the Contract is a valid arbitration agreement

governed by the UNCITRAL Model Law on International Commercial Arbitration with

amendments adopted in 2006 (“Model Law”). Also, RESPONDENT does not challenge the

Tribunal‟s authority to determine its own jurisdiction under the competence-competence prin-

ciple [Cl. Memo., pa.15].

3. CLAIMANT contended that the arbitration agreement is valid, the parties chose arbitration as

a mean of dispute settlement and Ms. Thorne‟s letter forms an arbitration agreement which is

valid and incorporated in the Contract [Cl. Memo., pa.16-21]. However, RESPONDENT did

not attack the existence and validity of the arbitration agreement but objected to the jurisdic-

tion of the Tri bunal to hear the merits of the dispute on two grounds: CLAIMANT‟s Request

for Arbitration is inadmissible since the first tier of the dispute resolution proceeding was not

fulfilled (A.); and the parties‟ common intention of choosing the arbitration institution was

Vienna I.A.C. instead of Vietnam I.A.C as CLAIMANT alleged (B.).

A. CLAIMANT‟S CLAIM IS INADMISSIBLE SINCE CLAIMANT FAILED TO

COMPLY WITH AMICABLE SETLLEMENT

4. CLAIMANT may argue that the email dated 22 Jan 2015 itself was a good faith act whereas

RESPONDENT‟ refusal was a clear manifestation of the amicable settlement failure, render-

ing CLAIMANT resort to arbitration. However, it will be shown that CLAIMANT‟s claim is

inadmissible on the following grounds: amicable settlement is a mandatory condition prece-

dent to arbitration (1); the Tribunal should consider CLAIMANT‟s Request for Arbitration

inadmissible (2); RESPONDENT‟s objection was made without undue delay (3); the Tribunalshould close or alternatively stay the proceeding (4).

1. Amicable settlement is an enforceable and binding precondition to arbitration

5. Amicable settlement under Art. 10 of the Contract is a compulsory precondition to arbitration.

It is not merely a vague “agreement to agree” [ Elizabeth Bay; Paul Smith]. CLAIMANT

could argue that amicable settlement is only enforceable if it is a sufficiently clear and manda-

tory obligation [ Born, p.847; Cremades, p.5-9; Berger, p.4-5]. That certainty can be proven

on the grounds of the wording of Art. 10 of the Contract (a), and the certainty of „Good faith‟ term (b)


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a. The wording of Art.10 of the Contract explicitly sets forth that the first tier of the dis-

pute resolution proceeding is binding and enforceable

6. The clause stipulates that disputes “shall be finally settled amicably and in good faith” [ Ex.

C2]. The term “finally” explicitly requires that amicable settlement is conditio sine qua non of

the dispute resolution proceeding.

7. Instead of the permissive “may”, the mandatory term “shall” was used, suggesting that

amicable settlement is binding [Cremades, pp.7, 9]. When such “soft” language like “may” is

used, it is obvious that parties do not intend to impose any obligation, it rather gives a party

right to use this contractual tool upon its own consideration [ Berger, p.1; ICC 10256 ].

8. Amicable settlement was a clear precondition to arbitration “if no agreement can be reached

[by amicable and in good faith settlement] the dispute shall be decided by arbitration”

[ Ex.C2]. “If” and “shall” together establish unequivocally a binding prerequisite to arbitration

[ Berger, p.5]. This wording shows the escalation sequence of a multi-tiered dispute resolution

clause, which means that if the parties do not comply with the first level of the escalation

there is no chance for it to move forward to the second one.

b. „Good faith‟ does not make the first tier unenforceable

9. CLAIMANT could challenge the enforceability of the first tier settlement for the ascertaina-

bility of “good faith”. It used to be the stand of the courts that the good faith element in

agreements to mediate or conciliation was fatal to their enforceability, as courts could not tell

if the element was satisfied. This was successfully challenged by Einstein J in the Supreme

Court of New South Wales in Aiton case.

10. The courts should strive to give effect to the expressed agreements and expectations of those

engaged in business, notwithstanding that there are areas of uncertainty and notwithstanding

that particular terms have been omitted or not fully worked out [Vroon BV v Foster’s Brewing

Group Ltd ]. The court or arbitration hence cannot be too ready in striking down a contractual

clause as void if it is possible to attribute a meaning to an apparently vague term that corre-sponds with the parties‟ intentions [ Lye/Lee, p.200; Aiton case].

11. “amicably and in good faith” here shall be interpreted the good f aith obligation which serves

to compel one to participate in a negotiating process, which may or may not achieve a satis-

factory outcome in the end. The concept is therefore determinable, It was also ruled that an

obligation to act in good faith was distinct from an obligation to negotiate in good faith to

achieve a satisfactory outcome. The good faith obligation in the former instance only serves to

compel one to participate in a negotiating process, which may or may not achieve a satisfacto-ry outcome in the end.


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2. Accordingly, CLAIMANT‟s claim should be considered inadmissible due to the fail-

ure to comply with the first tier of the dispute resolution proceeding

12. A tribunal should consider a request for arbitration inadmissible if the parties agreed in a

binding and unequivocal manner to first engage in other steps to resolve their dispute (negoti-

ation, mediation, etc.). It must be clear from the wording of the agreement that this is not

merely a permissive or non-mandatory provision. The dispute resolution clause in the case at

hand satisfies this condition [ supra pa.7-9].

13. Case law affirms the inadmissibility of any claim filed before court or arbitration in the

disputes where the first tier in a multi-tiered dispute resolution clause is not complied with. In

a decision concerning a clause under which the parties had agreed to attempt to resolve dis-

putes by settlement negotiations before commencing court proceedings [German Federal Su-

preme Court (Bundesgerichtshof) of 1998], the court held that any claim brought against one

of the parties by the other before the courts would be inadmissible if the settlement negotia-

tions had not been commenced and completed. The court confirmed that, if the parties agreed

on a mandatory settlement clause, both parties were obliged to co-operate in carrying out the

settlement negotiations. An action brought before the courts prior to completion of an agreed

settlement procedure was inadmissible.

14. This decision was in line with an earlier decision of the same court, in which the parties had

agreed that in case of dispute the parties would first present their controversy to their local

professional organization for conciliation prior litigation. The claimant failed to do so and ar-

gued that in the circumstances conciliation was a futile exercise, given that the respondent had

shown no willingness to settle the matter in earlier negotiations. The court held that such pre-

litigation conciliation clauses are valid and must be respected by the parties and the courts.

Thus, as long as a party invoking the pre-trial conciliation clause had a legitimate interest in

conciliation, the courts had to treat an action filed prior to the agreed conciliation as inadmis-

sible3. RESPONDENT‟s objection was made without undue delay

15. RESPONDENT did not waive its right to object. Under Art.4 Model Law, waiver exists when

REPSONDENT proceeded with arbitration knowing of the non-compliance without objecting

“without undue delay”. This term has been interpreted that a party must state its objection ei-

ther at the next scheduled oral hearing or, if no such hearing is scheduled, in an immediate

written submission [OLG Namburg 21 February 2002] or at the latest with the closing plea

[OLG Stuttgart 16 July 2002]. In the case at hand, u pon receiving CLAIMANT‟s Request for


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Arbitration filed on 5 Oct. 2015, RESPONDENT‟s Statement of Defense was a proper chal-

lenge of CLAIMANT‟s arbitration on 22 Oct. 2015.

4. The Tribunal ought to close or alternatively stay the proceedings

16. As amicable settlement is a binding first-tier commitment as a condition precedent to arbitra-

tion, the Tribunal ought to require CLAIMANT to settle amicably prior to commencing a new

arbitration [ Born, p.847 ]. The preferable consequence would be to close the proceedings since

maintaining a Tribunal on the expectation that amicable settlement will fail adds unwelcome

pressure in first-tier settlement [ Jolles, p.337 ].

17. Alternatively, the Tribunal may stay the proceedings pending the first-tier amicable settle-

ment. As the order may prescribe conditions and deadlines for the amicable settlement, there

is no risk of the parties being indefinitely precluded from arbitration [ Jolles, p.337; Lye/Lee,

p.11]. The Tribunal should not permit the two tiers to occur in parallel. That would result in

unnecessary costs, contradicting the parties‟ interest in saving-cost settlement [ Ex.R2; PO2,

pa.6 ], and frustrate any chance of the parties maintaining amicably and non-adversarial posi-

tions.

18. To conclude, amicable settlement was binding and enforceable but not complied with, render-

ing CLAIMANT‟s claim inadmissible.

B. PARTIES CHOSE VIENNA INTERNATIONAL ABITRATION CENTRE

The intention of choosing Vienna I.A.C. shall prevail on the following grounds: the principle

of Estoppel does not suffice to interpret that the institution chosen was Vietnam I.A.C. (1);

RESPONDENT‟s intention shall prevail under the principle of interpretation in good faith (2);

contra proferentem principle is not applied in this case; if the Tribunal made an award in ac-

cordance with CLAIMANT‟s intention, the award may be set aside or refused enforcement

(4).

1. The principle of Estoppel does not suffice to interpret that the institution chosen was

Vietnam I.A.C.

19. Estoppel occurs when a party reasonably relies on the act, statement or promise of another

party, and because of the reliance is injured or damaged. CLAIMANT alleged the defense that

Vietnam I.A.C. does not have the jurisdiction over the dispute is an inconsistent behavior,

contradicting RESPONDENT‟s previous silence and inactivity, i.e. no reply to CLAIMANT‟s

letter of 25 Jan 2015 in which Vietnam I.A.C. was mentioned [Cl. Memo. pa.17 ]. However,silence or inactivity does not itself amount to agreement. Silence is not an abandonment of


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rights merely because RESPONDENT‟s efforts could have been more energetic [White v.

Kampner ]. That RESPONDENT‟s silence means consent is just a groundless presumption of

CLAIMANT.

20. Besides, estoppel is also based on good faith principle. CLAIMANT only counted on the

silence to a statement by CLAIMANT but made no effort to obtain RESPONDENT‟s consent

after sending the Termination of Contract. This explicitly shows that CLAIMANT did not

reasonably rely in good faith on RESPONDENT‟s silence to its detr iment [ Amco; Cable &

Wireless p.1328].

21. Also, that RESPONDENT challenged the issue of jurisdiction in the Statement of Defense on

22 Oct 2015 is not a late objection under Art.16 (2) Model Law, i.e. a plea that the arbitral

tribunal does not have jurisdiction shall be raised not later than the submission of the state-

ment of defense.

2. Under the Principle of Interpretation in Good Faith, CLAIMANT‟s intention of

choosing Vietnam I.A.C shall not prevail

22. The arbitration agreement must be interpreted with the consequences that the parties reasona-

bly and legitimately envisaged [ Amco; Fouchard/Gaillard/Goldman, pa.477 ]. An arbitration

agreement shall be interpreted in accordance with the general principles governing interna-

tional commercial contracts, first and foremost with the principle of interpretation in goodfaith [ Fouchard/Gaillard/Goldman, pa.476; ICC Award No. 2291]. Under this principle, the

tribunal must look for the parties' actual intention, rather than simply restrict to examining the

literal meaning of the terms used [ Fouchard/Gaillard/Goldman, pa. 477; ICSID Case No.

ARB/81/1]. Thus, although the standard term in the former dispute stated the name of arbitra-

tion institution “the Tribunal of Vienna International Arbitration Centre” and it is controve r-

sial that the arbitration agreement in the present contract only stated the abbreviation “VIAC”,

RESPONDENT‟s intention of choosing Vietnam International Arbitration Centre shall pr e-

vail.

23. Applying this principle, attitude of the parties after the signature of the contract and up until

the time when the dispute arose should also be taken into account, as that attitude will indicate

how the parties themselves actually perceived the agreements in dispute [ Fou-

chard/Gaillard/Goldman, pa.477 ]. This rule is sometimes referred to as “practical and quasi -

authentic interpretation” or “contemporary practical interpretation” and is commonly applied

in arbitral case law [Saudi Arabia v. Aramco]. No objection to CLAIMANT‟s statement (in

the Declaration of Avoidance) that Vietnam I.A.C. was chosen as agreed in the Contract but


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subsequently challenged that intention of CLAIMANT not only contradicts the Estoppel doc-

trine [ supra pa. ] but also violates good faith interpretation.

24. It was an attitude revealing how CLAIMANT actually perceive the arbitration institution in

the arbitration agreement, i.e. it chose Vienna I.A.C initially, not Vietnam I.A.C.

25. Neither party had any questions or discussions about the content of the arbitration clause

during the negotiations or after the contract conclusion while it is reasonable to rely that

CLAIMANT cannot have been unaware of the dispute between its parent company and RE-

SPONDENT since the representatives of the parties had a short conversation about it during

their first negotiation [ Ex.R2]

26. Arbitration agreements have to be interpreted according to the common intent of the parties

and also the understanding of reasonable third persons of the same kind [ Fou-

chard/Gaillard/Goldman, pa.477; PICC Art.4.1]. CLAIMANT invoked the longstanding rela-

tionship between Locus Group and RESPONDENT and their dispute resolved by arbitration

in the past as a fact in the Request for Arbitration [ RFA, pa.5]. Therefore, even if the parties

had not discussed about the former dispute in their negotiation, the possibility that CLAIM-

ANT did not know about the arbitration institution chosen to resolve that dispute – Vienna

I.A.C. would have been excluded.

27. It is reasonable to interpret that Vienna I.A.C. was the common intention of the parties in lieu

of Vietnam I.A.C.. There is no relation between CLAIMANT and Vietnam I.A.C whereas it

was not CLAIMANT cannot have been unexposed to the information about Vienna I.A.C. in

the former dispute [ supra pa. ]. Hence, it is unreasonable that Vietnam I.A.C. was chosen by

CLAIMANT.

28. With respect to RESPONDENT and Vienna I.A.C., RESPONDENT was the winning party in

the dispute with Locus Group, the mother company of CLAIMANT [ Ex.R2; PO2, pa.8], re-

solved by the Tribunal of the Vienna I.A.C. RESPONDENT is in favor of Vienna I.A.C. and

has never intended to choose any other arbitration institutions for dispute resolution [ Ex.R2].Henceforth, the relation between RESPONDENT and Vienna is clear.

29. Regarding RESPONDENT with Vietnam I.A.C., it once was merely a third party having

interest involved voluntarily joined in the arbitral proceedings before arbitral tribunal of Vi-

etnam I.A.C. [PO2, pa.7]. The relation between RESPONDENT and Vienna I.A.C. definitely

outweighs the one between it and Vietnam I.A.C.

3. The fact that RESPONDENT supplied the dispute resolution clause does not call for

an interpretation against RESPONDENT


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30. CLAIMANT could further argue that the contra proferentem rule requires interpretation

against RESPONDENT since it was RESPONDENT that supplied the arbitration agreement

from the former contract into the current Contract. Under this rule, if contract terms drafted or

supplied by one party are unclear, an interpretation against that party shall be adopted [Fou-

chard/Gaillard/Goldman, pa.479; PICC Art.4.6 ].

31. The rule applies if a possible lack of clarity of the formulation is attributable to one of the

parties only [Sykes, p.68; Ramberg, p.34]. The reasoning behind the rule is that the party

drafting or supplying the ambiguous term is in a better position to write clear language or

know more about the term. Hence, the rule should not be applied where both parties have

relatively equal bargaining power or are experienced businesspersons, since both parties have

the opportunity to review the agreement to prevent ambiguity [ Duhl, p. 96-97; Lord, pa.

32:12; Terra Intern., Inc. v. Mississippi Chemical Corp.]. Accordingly, in the current case, in

respect of the information about the former dispute in which RESPONDENT was a party,

both parties were in an equal position [ supra pa. ].

32. Besides, even though it was RESPONDENT that provided the standard term, CLAIMANT‟s

role during the negotiation was not passive. As a receiver, CLAIMANT though had none

questions concerning the arbitration clause [ Ex. R2]. Moreover, CLAIMANT cannot assert

that during about 5 months, i.e. from the contract conclusion (20 Aug 2014) to the Declaration

of Avoidance (25 Jan 2015), it has not directed its attention to Art.10 of the Contract. Thus,

CLAIMANT must be deemed in part responsible for the existence of the ambiguity of the ar-

bitration clause.

33. In the light of the above, it does not suffice to apply the contra proferentem rule to interpret

Art.10 against RESPONDENT.

4. If the Tribunal made an award in accordance with CLAIMANT‟s intention, the

award may be set aside or refused enforcement

34. Once an award has been made, the courts take care to ensure that the intentions of the parties

are observed. They will not set aside an award if the constitution of the arbitral tribunal com-

plies with the parties' agreement or with the chosen arbitration rules.

35. In contrast, the courts will not hesitate to set aside or refuse enforcement of an award made by

an arbitral tribunal which was not constituted in accordance with the parties' agreement. That

will be the case where the agreement of the parties is not complied with and where nothing in

the subsequent attitude of the parties can be construed as a waiver of such non-compliance

[ Fouchard/Gaillard/Goldman pa 781, 782].


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36. To conclude, the jurisdiction of the Arbitral Tribunal shall be based on an interpretation of the

common intent of the parties as an agreement on the Vienna I.A.C.

CONCLUSION: CLAIMANT‟s claim is inadmissible due to the failure to comply with ami-

cable settlement. Also, the common intention of the parties is choosing Vienna I.A.C insteadof Vietnam I.A.C. Therefore, the Tribunal does not have jurisdiction to hear the merits of the

dispute.

II. CLAIMANT WRONGFULLY AVOIDED THE CONTRACT

37. RESPONDENT did not breach its obligations under the contract (A.). RESPONDENT did not

commit a fundamental breach within the meaning of Art.25 CISG (B.). CLAIMANT did not

duly inform RESPONDENT of the lack of conformity and declared the Contract avoided (C.).

A. RESPONDENT did not breach its obligations under the Contract

38. CLAIMANT alleged that RESPONDENT has committed two breaches: delivered the goods

not conforming to the Contract and not provided CLAIMANT with specific instructions for

the flower planting under the environmental conditions of Beta [ RFA, pa.16 ]. However, it will

be demonstrated in the following that: RESPONDENT deliver the seeds in conformity with

the Contract and the defects caused to the flowers were not RESPONDENT‟s fault but due to

“Red Dragon” (1); also, RESPONDENT fulfilled its obligation to provide instructions (2)

1. The seeds delivered by RESPONDENT conformed to the Contract

39. CLAIMANT could have argued that RESPONDENT delivered the seeds not fit for its par-

ticular purpose of purchasing 3,000 seeds RESPONDENT knew before the contract conclu-

sion and it was reasonable for CLAIMANT to rely RESPONDENT‟s skill and judgment,

which renders RESPONDENT liable for delivering non-conformity goods under Art.35(2)(b)

CISG. RESPONDENT denies this allegation. In the following it will be shown that the goods

to a certain extent still fit for the particular purpose that RESPONDENT was made known to

at the time of contract conclusion (a). Besides, it was not reasonable for CLAIMANT to relyon RESPONDENT‟s skill and judgment (b).

a. RESPONDENT was under no obligation via Art.35(2)(b) CISG to deliver the seeds of

the

40. Under the CISG, the conformity of goods is to be assessed primarily on the basis of the

parties‟ agreement [ Honnold, pa.224]. In this current case, the Contract did not expressly

stipulate the description or quality but only the name and quantity of the goods, namely 3,000

Phoenix Tulip flowers [ Ex.C2]. Also, there was no negotiation, no further or supplementedagreement about the quality of the seeds [ PO2, pa.10]. Though CLAIMANT informed RE-


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SPONDENT of its purposes relating to the Festival and the sale to Mineo Group in the Order

[ Ex.C1], CLAIMANT never informed RESPONDENT of any precise requirement of the

seeds. Analogously, in Metallic covers case, the seller was not made known to any specifica-

tions that had to be met and the seller‟s certified high quality standard did not suffice that it

ought to have been aware of the buyer‟s specific needs. Hence, there was no express or i m-

plicit agreement on what extent of the standard of the seed quality that RESPONDENT was

obliged to satisfy to fit for CLAIMANT‟s purposes.

41. Besides, the particular purpose must be made known sufficiently clearly so that RESPOND-

ENT has an opportunity to decide whether or not it wishes to take on the responsibility of se-

lecting goods appropriate for the purpose for which CLAIMANT intends to use them [ Hu-

ber/Mullis, p.138]. Such general wording like „promotion‟, „gain access to the international

flower market‟ or „expand business activities‟ as given in the Order [ Ex.C1] is common pur-

poses of businessmen in most international commercial transactions. Accordingly, the prom-

ise to help CLAIMANT to compete in the international flower market is not sufficient to be

construed as an implied agreement on delivering the Phoenix Tulip seeds of the highest-

standard quality, i.e., special scent, blood-red flares or flames vividly streaked on a white

ground [ RFA, pa.4]. It only shall be interpreted as an act of good faith showing the eager to

cooperate in a deal.

42.

Also, RESPONDENT respectfully requires the Tribunal should consider that even if the 75%

of the seeds was truly lacked conformity with the Contract, CLAIMANT‟s purpose was still

satisfied to some extent. 25% of the flowers blooming beautifully were displayed at the Festi-

val, appraised and sold out [ PO2, pa.32]. The first purpose of CLAIMANT relating to the

Festival thus in fact was achieved, rendering CLAIMANT get its further purpose, i.e. for

promotion, enhance CLAIMANT‟S images; and expand its business activities throughout the

world [ RFA, pa. 3].

b. CLAIMANT unreasonably relied on RESPONDENT‟s skill and judgment 43. At any rate, the circumstances show that CLAIMANT unreasonably counted on RESPOND-

ENT‟s skill and judgment to ensure that the seeds were fit for its particular purposes. A buyer

is not deemed to have relied on the seller's skill and judgment where the buyer possessed skill

concerning and knowledge of the goods equal to or greater than that of the seller [UNCITRAL

Digest, Art.35 pa.12; Chemical substance case]. While RESPONDENT is truly a highly ex-

perienced and reputable supplier of Phoenix Tulip seeds [SOD, pa.2], CLAIMANT fails to

note that it also specializes in purchasing rare flower seeds to grow into flowers and then sellthe flowers to customers [ RFA, pa.1]. Therefore, it is not sufficient to conclude that RE-


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SPONDENT prevails in respect of skills and knowledge of Phoenix Tulip seeds, rendering the

ground for CLAIMANT‟s reliance is not with sufficient clarity.

2. In any case, any non-conformity is due to „Red Dragon‟ an exemption under Art.79

CISG, RESPONDENT thus is excused from liability

44. RESPONDENT maintains that it did not breach the Contract. The cause of the defects of the

flowers is the defective seeds but the extraordinarily hot weather „Red Dragon‟ occurring in

Beta. RESPONDENT is excused from liability as all preconditions set forth in Art.79 CISG

are fulfilled. „Red Dragon‟ is an impediment beyond RESPONDENT‟s control (a). R E-

SPONDENT could not reasonably be ex pected to have taken „Red Dragon‟ into account at the

time of contract conclusion (b). Also, RESPONDENT made every effort to support CLAIM-

ANT to avoid and overcome the consequences of „Red Dragon‟ (c).

a. RESPONDENT could not reasonably have foreseen the occurrence of „Red Dragon‟

45. CLAIMANT could have argued that „Red Dragon‟ was foreseeable at the contract conclusion

because during the negotiations, RESPONDENT was made known of „Red Dragon‟ which

had occurred several times in Beta [ PO2, pa.23]. However, „Red Dragon‟ is hard to be pr e-

dicted due to its unstable frequency, i.e. 2-4 years [ PO2, pa.21; Ex.R4]. Also, while Beta went

through a warmer and wetter winter last year, this phenomenon has come back this year

[ Ex.R4]. Thus, it was unreasonable for RESPONDENT to foresee the occurrence of „Red

Dragon‟.

b. RESPONDENT could not reasonably be expected to avoid or overcome the conse-

quences of „Red Dragon‟

46. CLAIMANT could argue that the deviation between the temperature and humidity of „Red

Dragon‟ (17-27 Celsius degree, 75-85%) and the ideal ones for the growth and development

of the seeds (18-24 Celsius degree, 70-80%) is not substantial, only a few degrees or percents.

However, based on the research done by RESPONDENT‟s engineers, the further the condi-

tions go from the ideal ones, the worse the flowers get [ PO2, pa.15], especially with such asensitive species like Phoenix Tulip [ PO2, pa.14], it is comprehensible that only a small

change of environmental condition could create a huge difference in the blooming.

47. „Red Dragon‟ was from 29 Dec 2014 to 13 Jan 2015 [ PO2, pa.20], lying within the last 03

weeks of the planting process – the most important time to form the flowers‟ beauty [ PO2,

pa.16 ].

48. RESPONDENT even though could not have reasonably foreseen the occurrence of „Red

Dragon‟, RESPONDENT made sufficient efforts to support CLAIMANT to avoid or over-come its consequences. Mr. Black from RESPONDENT gave Mr. White from CLAIMANT


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the important information concerning the ideal environment conditions for the blooming of

the flowers and emphasized that they are the most important factors for the blooming stage

[ Ex.R3]. On the basis of such information, CLAIMANT could have adjusted the planting pro-

cess to make sure that the ideal conditions were always maintained despite any weather

change.

49. CLAIMANT could insist on the defects of the seeds on the ground that it followed all the

instructions from RESPONDENT but the flowers still bloomed defectively. Nonetheless, it

should be noted that even though CLAIMANT complied with the General Guidance [ RFA,

pa.10; PO2, pa.26 ], it is not evident that CLAIMANT also strictly followed any other instruc-

tion given by RESPONDENT. If CLAIMANT was made known of such information, there is

no fact or evidence showing that CLAIMANT adjusted the planting stage to avoid or over-

come „Red Dragon‟. Accordingly, it is not sufficient to conclude that the seeds are defective

instead of

50. If CLAIMANT did not know about such information, RESPONDENT still fulfilled its

obligation to provide instruction and CLAIMANT cannot invoke that RESPONDENT did not

make any effort to support CLAIMANT to avoid or overcome the consequences of „Re d

Dragon‟.

c. RESPONDENT does not lose its right to invoke the „Red Dragon‟ as the cause of the

defective flowers

51. CLAIMANT' alleged that weather did not prevent the seeds from growing merely on the

ground that the temperature at which the Phoenix Tulips stop growing or die does not lie

within the temperature of „Red Dragon‟, [Cl. Memo., pa.23]. However, CLAIMANT fails to

note that the defective manifestations of the flowers are shriveling, fade color and seeds not

blooming, not stopping growing or dying. The possibility that „Red Dragon‟ caused the flow-

ers to be defective thus is not excluded.

52.

Therefore, RESPONDENT is entitled to invoke „Red Dragon‟ to not be liable for the defec-tive of the flowers.

3. RESPONDENT was not obligated to provide specific instructions under the Contract

and even if it was, it fulfilled such obligation

53. CLAIMANT asserted that RESPONDENT only provided a General Planting Guidance and

requested for specific instructions for the flower planting under the environmental conditions

of Beta [RFA, pa.16]. RESPONDENT denies this allegation on the following grounds: RE-

SPONDENT was under no obligation to provide specific planting instructions (a); in the al-


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ternative, RESPONDENT supplied CLAIMANT with specific instructions in accordance with

good faith (b).

a. RESPONDENT was not obliged to provide specific planting instructions under the

Contract

54. Art. 4 of the Contract explicitly sets forth that RESPONDENT is obligated to give instruc-

tions to CLAIMANT for the cultivation of the seeds and the instructions shall be provided at

all time during the planting stage [ Ex.C2]. There is no wording in the Contract or any agree-

ment imposing the obligation to supply CLAIMANT with specific instructions for the flower

planting under the environmental conditions of Beta. Also, there were no specific require-

ments agreed by the parties about the form of giving instructions [ PO2, pa.11]. Delivering the

General Guidance ipso facto was a fulfillment of the obligation to provide instructions under

the Contract. Therefore, the obligation to provide specific obligations is not binding on RE-

SPONDENT under the Contract.

55. Accordingly, RESPONDENT was under the obligation to actively ask whether CLAIMANT

was encountering any problem in the whole planting process and then support relevant infor-

mation for CLAIMANT. Besides, the letter of Art.4 requires RESPONDENT to give notice to

CLAIMANT about any factor that might affect the growth and development of the seeds.

b. Even if such obligation was binding on RESPONDENT, RESPONDENT fulfilled it in

good faith

56. CLAIMANT could rely on good faith principle under Art.7 CISG, Art.7.1 PICC or as a

general legal principle to require RESPONDENT to give specific instructions. It will be

shown in the following that it was unreasonable for RESPONDENT to be obliged to such ob-

ligation (i); in fact RESPONDENT acted in accordance with good faith and provided specific

information for CLAIMANT (ii)

i. It was unreasonable for RESPONDENT to be obliged to provide specific instructions

57.

It does not suffice to oblige RESPONDENT to provide specific instructions, especially for the planting under the environmental conditions of Beta, merely on the basis of „good faith‟. It is

not easy to ascertain the requirement of good faith, and it is too ambiguous, a "protein phrase"

meaning "different things to different people in different moods at different times and in dif-

ferent places [ Bridge, p.407 ].

58. CLAIMANT could contend that the maxim of good faith requires the parties to cooperate

with each other [ PICC Art.5.1.3] and the obligation to provide specific instructions to be an

implied contractual obligation [ PICC Art.5.1.2]. Nonetheless, pursuant to Art.5.1.3 PICC,each party shall cooperate with the other party when such co-operation may reasonably be


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expected for the performance of that party‟s obligations. The reasonable expectation is a cer-

tain limit that the duty of cooperation must be confined within so as not to upset the allocation

of duties in the performance of the contract [ PICC Art.5.1.3 cmt.]. Good faith requires fair

and reasonable behavior [ Huber/Mullis, p.8], not an obligation to act altruistically [ Keily].

CLAIMANT‟s request for specific instructions for the flower planting under the environmen-

tal conditions of Beta was unreasonable, rendering the disproportion in the scale of obliga-

tions of the parties.

ii. Alternatively, RESPONDENT acted in accordance with good faith and provided spe-

cific instructions for CLAIMANT

59. Even if RESPONDENT was obligated to provide specific information, RESPONDENT

fulfilled this obligation in good faith. „Good faith‟ can be defined as „Honesty‟ [Oxford,

p.221], which stresses on the obligations of the parties to honestly respect either the mutual

benefits or the individual benefits of each other and henceforth, adjust their own activities ac-

cordingly. RESPONDENT performed the contract within the scope of „good faith‟ principle.

60. Good faith requires that the parties conduct themselves according to the standard of the

„reasonable person‟ [Schlechtriem, p. 39; Eörsi, pp.2-9]. Other than providing the General

Planting Guidance, RESPONDENT also promised to give CLAIMANT necessary assistance

in planting process whenever CLAIMANT needed support, which was explicitly a reasonable

behavior showing RESPONDENT‟s good faith.

61. In fact, RESPONDENT fulfilled the duty to cooperate and exchange specific information with

CLAIMANT. RESPONDENT kept its promise and was eager to provide any information

CLAIMANT needed. When asked by Mr. White form CLAIMANT, Mr. Black from RE-

SPONDENT gave the information about the nutritional ingredients of soil and appropriate

fertilizers needed for developing the seeds [SOD pa.5; Ex. R3] and about the ideal conditions

for the growth and development of the seeds [ Ex. R3].

62.

Besides, cooperation is mutual, requiring CLAIMANT to exchange information by activelyasking RESPONDENT. Moreover, RESPONDENT emphasized that RESPONDENT would

assist CLAIMANT whenever CLAIMANT needed support. However, CLAIMANT did not

informing RESPONDENT of the weather change.

63. To conclude, RESPONDENT did not commit any breach under the Contract. The defects of

the flowers were caused by „Red Dragon‟, not by the defective seeds. RESPONDENT was

also under no obligation to provide specific instructions and even if it was, such obligation

was fulfilled.


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B. Even if there was a breach of contract, it did not amount to a fundamental breach

under Art.25 CISG

64. Assuming RESPONDENT breached the Contract, CLAIMANT must further demonstrate that

this breach amounted to a fundamental breach within the meaning of Art.25 CISG before it is

entitled to avoid the Contract under Art.49 CISG.

65. CLAIMANT has alleged that RESPONDENT breached the contract under Art.35 CISG. In

response, RESPONDENT submits that even if CLAIMANT succeeds in establishing the al-

leged breach, it did not amount to a fundamental breach since CLAIMANT did not suffer

substantial deprivation of its expectations under the Contract (1). In the alternative, RE-

SPONDENT did not foresee and a reasonable person in RESPONDENT‟s position would not

have foreseen the consequences of the alleged breach (2). In any case, the Tribunal should not

confirm a fundamental breach since avoidance of the contract is only a last resort remedy (3).

1. CLAIMANT was not substantially deprived of what it was entitled to expect under

the Contract

66. CLAIMANT only established the fundamental breach on the ground that it the delivered

goods were not fit for the purpose for which they were purchased [Cl. Memo., pa.25-28].

Nonetheless, CLAIMANT‟s allegation is insufficient to prove the existence of a fundamental

breach. RESPONDENT submits that CLAIMANT cannot claim fundamental breach since

CLAIMANT‟s expectation was not what it was entitled to expect under the Contract (a), the

purpose of the contract was not frustrated by the breach (b), CLAIMANT could still have rea-

sonable used or resold the goods (c).

a. CLAIMANT‟s expectation was not what it was entitled to expect under the Contract

67. Under Art.25 CISG, to determine a fundamental breach, CLAIMANT first must suffer such

detriment as to substantially deprive it of „what it was entitled ‟ to expect under the contract.

The breach must therefore nullify or essentially depreciate CLAIMANT's justified contract

expectations [UNCITRAL Digest, Art.25 pa.3]. A party‟s expectations under a contract are to be discerned from the terms of the contract and other circumstances preceding the contract,

such as contractual negotiations [ Enderlein/Maskow, p.112; Ferrari, p.497 ]. It is also crucial

to objectively establish what the parties themselves have made important in their contract

[ Magnus2 , p.426 ].

68. In this case, the terms of the Contract itself and the facts about the negotiations strongly

suggest that delivering the seeds of highest quality, i.e. having special scent, unique and vivid-

ly blood-red color like flares or flames [RFA, pa.4] was not expected of RESPONDENT. The promise to help CLAIMANT to compete in the international flower market [ PO2, pa. 10] was


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just fit for CLAIMANT‟s purpose of purchasing the goods. It does not suffice as a guarantee

for the highest quality of the goods [ see supra pa. ]. To sum up, this expectation of

CLAIMANT was not reasonable under the Contract.

b. CLAIMANT‟s purpose or main benefit of concluding the contract was not frustrated

69. CLAIMANT asserted that there was deprivation of the main benefit of, or interest in, the

Contract [Cl. Memo., pa.25]. A fundamental breach will be determined by the factor, inter

alia, whether the purpose of the contract is frustrated by the breach [ Huber/Mullis p. 214;

Koch p.302]. In the case at hand, CLAIMANT‟s main benefit, or purpose of contracting with

RESPONDENT was generally to promote and compete in the international flower market.

Even if 75% of the seeds were defective, by displaying and selling the remaining 25% of the

flowers, CLAIMATN to a cer tain extent still achieved its purposes. Thus, CLAIMANT‟s pur-

pose or main benefit of entering into the Contract in fact was not much frustrated.

c. It was reasonable that CLAIMANT could reasonably be expected to use or

resell the defective flowers

70. A non-conformity concerning quality remains a mere non-fundamental breach of contract as

long as the buyer can use or resell the goods even at a discount without unreasonable incon-

venience (e.g.: in the buyer‟s ordinary course of business) [UNCITRAL Digest Art.25 pa.8;

Cobalt sulphate case; Meat case]. If the defective flowers are “totally” [Schlechtri-

em/Schwenzer, p.427 ] or “practically” [Café inventory case] useless, it fails to rise to the

level of a fundamental breach. Nevertheless, there is no evidence showing any of CLAIM-

ANT‟s effort to resell 1,500 flowers that shrivel and are faded in color.

71. Besides, whether the buyer can reasonably be expected to sell or use the defective goods, a

decisive factor is whether the buyer is a professional reseller (trader), dealer, producer or ul-

timate buyer of the goods. Usually, the usability or retailability of sub-standard goods will

have to be denied for producers or ultimate buyers who do not deal in such goods. It is not

within the context of this case where CLAIMANT is a supplier specializing in planting rare

flower seeds and then selling the flowers to customers [ RFA, pa.1]. Therefore, it was reasona-

ble to expect that CLAIMANT could resell the defective flowers.

2. Alternatively, the consequences of the alleged breach were not foreseeable

72. Pursuant to Art.25 CISG, there was no fundamental breach of contract as it was unreasonable

for RESPONDENT to have foreseen the consequences of the alleged breach. Foreseeability

has to be determined in light of the facts and matters known at the time of the contract conclu-

sion [UNCITRAL Digest, Art.25 pa.4]. Also, the question of whether RESPONDENT actually


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foresaw the consequences of the breach must be evaluated by reference to RESPONDENT‟s

“knowledge of the facts surrounding the transaction” [ Babiak, p.120]. At the time of contract

conclusion, RESPONDENT only knew the purposes of purchasing 3,000 seeds were for the

Festival in February 2015 and for the contract with Mineo. Regarding the contract with

Mineo, RESPONDENT was not aware of any other specific information such as the expected

delivery date. Hence, it was not possible for RESPONDENT to have foreseen that the non-

conforming goods (even if the seeds delivered were defective) could have led to CLAIM-

ANT‟s loss in its deal with the third party. Besides, CLAIMANT‟s expectation about the

goods of highest quality cannot be reasonably expected by RESPONDENT. Based on the

above, CLAIMANT‟s assertion of fundamental breach must fail as a result of unreasonable

foreseeability.

3. In any case, the Tribunal should not confirm a fundamental breach since avoidance is

only a last resort remedy

73. CLAIMANT could contend that a fundamental breach should be confirmed as avoidance is

the only remedy that fully compensates CLAIMANT‟s detriment. However, the threshold for

establishing a fundamental breach is a high one since avoidance is a remedy of last resort un-

der the CISG [ Zeller, p.; Magnus2 , p.423]. This remedy should only be granted to the buyer if

his legitimate interests cannot be satisfied by any other means [ Huber/Mullis, p.209; AC Op 5,

pa.3.2]. However, it was strongly proven otherwise [ supra pa. ],

74. In the alternative, CLAIMANT could have exercised other relevant remedies (e.g.: price

reduction under Art.50 CISG) that could compensate CLAIMANT‟s detriment to a certain

extent.

75. To conclude, all elements of a fundamental breach were not satisfied.

C. CLAIMANT did not duly notify RESPONDENT of the lack of conformity and de-

clared the Contract avoided

76.

Even if the seeds delivered were defective as CLAIMANT argued, under Art. 39(1) CISG,CLAIMANT lost the right to rely on non-conforming goods since the notice specifying the

nature of the lack of conformity was not given to RESPONDENT within a reasonable time

after CLAIMANT ought to have discovered it.

77. CLAIMANT may allege that the email of 22 Jan 2015 informing about the defective seeds

was a justifying notice of the lack of conformity as it was sent to CLAIMANT only a few

days after 75% of the flowers was discovered defective (17-20 Jan 2015) [ PO2, pa.26 ]. How-

ever, RESPONDENT challenged this allegation. CLAIMANT should have discovered thenon-conformity manifestation and notified RESPONDENT when it took notice of some


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leaves of around 73 Phoenix Tulip flowers shriveling from the middle of December 2014

[ PO2, pa.26 ].

78. Also, CLAIMANT inspected the seeds after receiving them from the carrier and found no

abnormalities from their surface [ PO2, pa.17 ]. CLAIMANT may note that quality defects

such as blooming possibility are hidden and latent defects, CLAIMANT thus cannot have dis-

covered the lack of conformity at the time of examination. Nonetheless, considering the fact

that CLAIMANT specializes in purchasing and growing rare flower seeds [ RFA, pa.1], it was

not groundless to require that CLAIMANT ought to have found out the defects when under-

taking inspection.

79. Accordingly, in any case, CLAIMANT lost its right to declare the Contract avoided as

CLAIMANT failed to do it within a reasonable time after he knew of the breach under Art.49

(2) CISG.

CONCLUSION: CLAIMANT did not rightfully avoid the Contract.

III. RESPONDENT IS NOT LIABLE FOR ALL CLAIMED DAMAGES

80. As a direct consequence of RESPONDENT‟s breach, CLAIMANT has no bases to claim for

damages (A.).

A. CLAIMANT has no bases to claim for damages under Art.74 CISG

81.

Under Art.74 CISG, Art.7.4.2 (1) PICC, CLAIMANT is entitled to full compensation for the

harm it has sustained as a result of the non-performance of the contract. However, as submit-

ted above, there is no breach of the Contract at all. The damages CLAIMANT claimed did

not have a reasonable degree of certainty (1). RESPONDENT cannot have reasonably fore-

seen the losses (2).

1. The damages CLAIMANT claimed does not have a reasonable degree of certainty and

falls out of the core scope of Art.74 CISG

2. RESPONDENT cannot have reasonably foreseen the losses

B. CLAIMANT failed to mitigate the losses

82. CLAIMANT alleged that it was not in a reasonable situation to duly mitigate the losses [ Cl.

Memo., pa.40]. This allegation is unjustified since even if purchasing substitute flowers from

Lincoln Ltd. was unreasonable, CLAIMANT could and should have found other ways of mit-

igating damages. Instead, CLAIMANT did not make reasonable effort. Under Art.77 CISG,

CLAIMANT is obliged to take reasonable measures to mitigate the loss resulting from any

alleged non-conformity of the goods. Otherwise, RESPONDENT can claim a reduction indamages.


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83. Cover purchases are a reasonable and typical measure of mitigation [Saidov, p.133].

CLAIMANT should have entered into a cover purchase to save the contract with Mineo

Group. As a prudent businessperson, CLAIMANT should have been more vigilant and started

to search for alternative goods on the market to fulfill its contractual obligation to Mineo

Group. Other than RESPONDENT, there are some other suppliers that develop and plant

Phoenix Tulips [SOD, pa.2]. From the time at which 75% of the flowers were discovered de-

fective (17-20 Jan 2015) [ PO2, pa.26 ] to the expected date of delivering 2,000 flowers to

Mineo Group (28 Feb 2015) [ RFA, pa.9] was about 01 month, which was not impossible for

CLAIMANT to make an effort to look for another supplier. CLAIMANT could allege that the

planting process of Phoenix Tulip seeds normally takes 03 months [ PO2, pa.16 ], CLAIM-

ANT thus still did not have the flowers for Mineo Group even if it bought substitute goods.

However, CLAIMANT could purchase the substitute flowers instead of seeds to have the

goods for due delivery.

84. Overall, instead of taking reasonable mitigation measures under Art.77 CISG, CLAIMANT

chose to remain passive.

CONCLUSION: The prerequisites of Art. 74 CISG are not met. Also, in light of all the facts

of the case, CLAIMANT violated the mitigation principle under Art. 77 CISG. Thus,

CLAIMANT‟s claim must be rejected or at least reduced.


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REQUEST FOR RELIEF

In the light of the above submissions, RESPONDENT respectfully requests the Tribunal to

find that:

1. The Tribunal has no jurisdiction over the dispute:

a. CLAIMANT‟s Request for Arbitration is inadmissible since the amicable dispute

settlement was not complied with under Art. 10 of the Contract.

b. The Parties agreed to choose Vienna International Arbitration Centre, not Vietnam

International Arbitration Centre, for resolving the dispute.

2. CLAIMANT did not rightfully avoid the Contract:

a. RESPONDENT did not breach its obligation under the Contract

b. Even if it did, the breaches did not amount to a fundamental breach

c. Alternatively, CLAIMANT did not duly notify RESPONDENT of the lack of con-

formity and declared the Contract avoided

3. RESPONDENT is not liable to damages claimed by CLAIMANT or the damages

shall be reduced:

a. CLAIMANT had no bases to claim damages under Art.74 CISG

b. The mitigation duty was not complied with under Art.77 CISG

Documents

I AM ME - Memorandum for Respondent