DAV - Memorandum for Respondent

8/17/2019 DAV - Memorandum for Respondent

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FIRST ANNUAL

HLU COMMERCIAL ARBITRATION MOOT

Hanoi, 6 November 2015 to 1 March 2016 MEMORANDUM FOR RESPONDENT

DIPLOMATIC ACADEMY OF VIETNAM

FACULTY OF INTERNATIONAL LAW

ON BEHALF OF

Rosen Ltd.

123 Victoria Road, Oceania

Alpha

RESPONDENT

AGAINST

Locus Ltd.

88 Longman Road, Leisure

Beta

CLAIMANT

Counsels

Do Duy Hung ● Tran Ha Uyen ● Do Minh Ngoc



Diplomatic Academy of Vietnam

ii

TABLE OF CONTENT

INDEX OF ABBREVIATIONS................................................................................................. v

INDEX OF AUTHORITIES AND CASES .............................................................................. vi

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

SUMMARY OF ARGUMENTS ................................................................................................ 3

APPLICABLE LAW .................................................................................................................. 5

ARGUMENTS............................................................................................................................. 6

Jurisdiction issues

A. The Tribunal has no jurisdiction to hear the current dispute ........................................... 6

I. The precondition to arbitration was not sufficiently fulfilled ........................................... 6

1.

The amicable settlement procedure was a mandatory pre-arbitral stage .............. 6

2. Nonetheless the good faith requirement was not met ........................................... 6

a.

There was no effort in setting finally and amicably ................................. 7

b. The good faith requirement was not met .................................................. 7

3. Sending the Parties back to dispute settlement would not be futile ...................... 8

II. Vietnam International Arbitration Centre is not the institution that the Parties intended

to use in the Contract ........................................................................................................ 8

1. Mutual intent is the dispute settlement provision of the contract between

Locus Group and Rosen Ltd ................................................................................. 8

2. The contra proferentem rule cannot be applied in the present case ..................... 9

III. RESPONDENT did not waive its right to object jurisdiction of the Tribunal ................. 10

IV. If the Tribunal adjudges that it has jurisdiction and continues with the arbitration, the

award is at risk of being set aside or denied recognition and/or enforcement. ................. 10

Merits

B. The defect suffered by the Phoenix Tulip flowers was caused by Red Dragon, not

faulted quality of seeds ............................................................................................................... 11




iii

I. Weather conditions in Beta during “Red Dragon” were unfavorable for Phoenix

Tulips to bloom ................................................................................................................. 11

II.

CLAIMANT’s logic behind its argument should be dismissed........................................ 13

III. It is an extremely low probability that CLAIMANT received such large quantity of

unqualified goods .............................................................................................................. 14

IV.

Lily Ltd. and CLAIMANT were not experiencing Red Dragon to the same extent. ....... 14

C. RESPONDENT fulfilled its obligation to provide instructions ......................................... 15

I. The General Planting Guidance was a legitimate document ............................................ 15

II.

RESPONDENT did perform its obligation to assist CLAIMANT during the planting

stage .................................................................................................................................. 15

1. Only when CLAIMANT expressed its need for assistance would

RESPONDENT be obliged to offer help .............................................................. 15

a. CLAIMANT needed to speak up first ...................................................... 15

b. Mr. Black readily gave detailed instructions when Mr. White requested . 16

2.

There was negligence in the planting process....................................................... 17

D. CLAIMANT unlawfully declared the contract avoided..................................................... 18

I.

There was no fundamental breach of contract, so Art. 49 CISG is inapplicable .............. 18

II. CLAIMANT loses the right to rely on the lack of conformity in accordance with Art.

39 CISG ............................................................................................................................ 19

E. RESPONDENT is not entitled to compensating any damages; should the Tribunal

decide otherwise, the amount should be much lower .............................................................. 20

I. USD 300,000 Loss of profit .............................................................................................. 20

II.

USD 200,000 Loss of reputation ...................................................................................... 20

1. RESPONDENT did not violate the Contract, so it is not supposed pay for

CLAIMANT’s loss of reputation .......................................................................... 20

2. CLAIMANT was under the obligation to mitigate damages ................................ 21

a.

Loss mitigation is compulsory for the party who relies on a breach ........ 21

b. If RESPONDENT can successfully point out one reasonable measure,

then the amount of damages must be reduced .......................................... 21




iv

3. A substitute purchase from Lincoln Ltd. was an accessible and reasonable

measure to mitigate losses, but CLAIMANT showed no endeavor at all ............ 22

a. A substitute purchase from Lincoln Ltd. would save CLAIMANT USD

160,000+ ................................................................................................... 22

b. Dealing with Lincoln Ltd. is not unreasonable ......................................... 22

PRAY FOR RELIEF .................................................................................................................. 24




v

INDEX OF ABBREVIATIONS

¶ / ¶¶ Paragraph / Paragraphs

Art. / Arts. Article / Articles

e.g. exempli gratia (for example)

Exh. C Exhibit from Claimant

Exh. R Exhibit from Respondent

IAC International Arbitration Centre

i.e. id est (that is)

Int. International

Ltd. Limited

Memo. C Memorandum for Claimant

No. Number

p. / pp. Page / Pages

Proc. Order Procedural Order

Re. Arb. Request for Arbitration

St. Def. Statement of Defense

Supra see above, earlier in this writing

The Contract Contract on the purchase of Phoenix Tulip

Seeds between Locus Ltd.

(Buyer/CLAIMANT) and Rosen Ltd.

(Seller/RESPONDENT)

The Festival The Annual Flower Festival in Beta, 10-14

February 2015

The Tribunal The arbitral tribunal in the current dispute

v. Versus (against)

Vol Volume




vi

INDEX OF AUTHORITIES AND CASES

STATUTES & TREATIES Cited in ¶

CISGUnited Nations Convention on Contracts for the International

Sale of Goods (Vienna 1980)

UNCITRAL

Model Law

UNCITRAL Model Law on International Commercial

Arbitration 1985, with amendments as adopted in 2006

New York

Convention

Convention on the Recognition and Enforcement of Foreign

Arbitral Awards (New York 1958)

Vienna

Convention Vienna Convention on the Law of Treaties (Vienna 1969)

PICC 2010UNIDROIT Principles of International Commercial Contracts

2010

LAW & RULES

VIAC Rules Vietnam International Arbitration Centre Rules

Law on Commerce of Alpha

Lamia National Arbitration Law

AUTHORITIES

ASTA

Insights into seed quality management. From the American

Seed Trade Association.

http://www.amseed.org/resources/guide-to-seed-quality-

management/

BornGary Born, International commercial arbitration, 3rd edition,

Wolters Kluwer Law & Business (2009)

37

Bühler /

Webster

Michael W. Bühler / Thomas H. Webster, Handbook of ICC

Arbitration: Commentary, Precedents, Materials, 3rd edition

Sweet & Maxwell: London (2005).

37

Bühring-Uhle

Christian Bühring-Uhle, Arbitration and Mediation in

International Business (2nd edition), Kluwer Law

International, 2006. Part Three: Alternative to Arbitration,

pp.129-244

Available at: www.kluwerarbitration.com

24

http://www.amseed.org/resources/guide-to-seed-quality-management/



http://www.kluwerarbitration.com/









vii

Chalk / Choong

Richard Chalk & John Choong, Dispute Settlement Options:

An Overview, in Michael J. Moser, Managing Business

Disputes in Today's China: Duelling with Dragons, Kluwer

Law International, 2007.

Available at: http://tinyurl.com/jjoqxaj

24

Davis

Kenneth R. Davis, A Model for Arbitration Law: Autonomy,

Cooperation and Curtailment of State Power , in 26 Fordham

Urban Law Journal 167, (1999), pp. 167-208.

Available at: http://ir.lawnet.fordham.edu/

31

DiMatteo

Larry A. DiMatteo, Lucien Dhooge, Stephanie Greene,

Virginia Maurer & Marisa Pagnattaro, The Interpretative Turn

in International Sales Law: An Analysis of Fifteen Years of

CISG Jurisprudence, Northwestern University School of Law.

34 Northwestern Journal of International Law and Business

Winter (2004), p. 299-440

http://cisgw3.law.pace.edu/cisg/biblio/dimatteo3.html

69, 80

Duhl

Gregory M. Duhl, Conscious Ambiguity: Slaying Cerberus in

the Interpretation of Contractual Inconsistencies, University

of Pittsburgh Law Review, Vol. 71, (2009), pp. 71-116.

Available at: University of Pittsburgh Law Review

32

Enderlein /

Maskov

Fritz Enderlein & Dietrich Maskov, Commentary by

Enderlein and Maskow on Article 77 CISG.

http://www.cisg.law.pace.edu/cisg/biblio/enderlein.html

80

Ferrari

Franco Ferrari, Contracts for the International Sale of

Goods: Applicability and Applications of the 1980 United

Nations Convention, Martinus Nijhoff Publishers, 2011

Available at Google Books

69, 70

Figueres

Dyalá Jiménez Figueres, Multi-Tiered Dispute Resolution

Clauses, in ICC Arbitration, ICC International Court of

Arbitration Bulletin, Vol 14 No 1 (Spring 2003), pp. 71-88.

16

HonnoldJohn O. Honnold, Uniform Law for International Sales under

the 1980 United Nations Convention, 3rd edition, Kluwer Law

68, 69

http://tinyurl.com/jjoqxaj



http://ir.lawnet.fordham.edu/





http://lawreview.law.pitt.edu/ojs/index.php/lawreview/article/view/131/131





https://books.google.com.vn/books/about/Contracts_for_the_International_Sale_of.html?id=S4qp5ClhuwIC&redir_esc=y












viii

International 1999.

Horvath

Günther J. Horvath, The Duty of the Tribunal to Render an

Enforceable Award , Journal of International Arbitration, Vol.

18 Issue 2, (2001), pp. 135-158

Available at:

kluwerlawonline.com/abstract.php?area=Journals&id=317806

37

Kirby

Michael Kirby, Towards a Grand Theory of Interpretation:

The Case of Statutes and Contracts, 24 Statute Law Review

95, (2003).

http://www.itsunderstood.com/lawyers/HJMKirby.pdf

31

Knapp

Victor Knapp, Bianca-Bonell Commentary on the

International Sales Law, Giuffrè: Milan (1987) pp. 559-567.

http://www.cisg.law.pace.edu/cisg/biblio/knapp-bb77.html

80, 87

LewJulian D. M. Lew, The Law Applicable to the Form and

Substance of the Arbitration Clause (1999), pp. 114-145.

37

Lookofsky

Joseph M. Lookofsky, Understanding the CISG in the USA: A

Compact Guide to the 1980 United Convention on Contracts

for the International Sale of Goods, Kluwer Law

International, 2004

Available at: http://tinyurl.com/z88droj

20

Lye

Kah Cheong Lye, Agreements to Mediate: The Impact of

Cable & Wireless plc v IBM United Kingdom Ltd [2003] BLR

89, Singapore Academy of Law Journal, Vol 16 (2004), pp.

530-540

Available at http://www.sal.org.sg/

20, 23

Pryles

Michael Pryles, Multi-Tiered Dispute Resolution Clauses, in

Journal of International Arbitration, Vol 18 No 2 (2001), pp.

159-176.

16

RambergJan Ramberg, International Commercial Transactions, 3rd

edition, ICC Publication N°691 : Stockholm (2004)

32

Redfern /

Hunter 2004

Alan Redfern, David M. Hunter, Nigel Blackaby &

Constantine Parasides, Law and Practice of International

Commercial Arbitration (Fourth edition), Thomson Sweet &

37





http://tinyurl.com/z88droj



http://www.sal.org.sg/










ix

Maxwell, London, England (2004)

Redfern /

Hunter 2009

Redfern and Hunter on International Arbitration, 5th edition,

Oxford University Press, December 2009

19

Riznik

Peter Riznik, Some Aspects of Loss Mitigation in InternationalSale of Goods, 14 Vindobona Journal of International

Commercial Law and Arbitration (Feb 2010), p.267-282

http://www.cisg.law.pace.edu/cisg/biblio/riznik1.pdf

80, 82, 85

Rubino –

-Sammartano

Mauro Rubino-Sammartano, International Arbitration Law

and Practice, 2nd edition, Kluwer Law International, The

Hague (2001)

Available at: http://tinyurl.com/hu5cdrd

23

(Author in)

Schlectriem

Peter Schlectriem, Commentary on the UN Convention on the

International Sale of Goods (CISG), 2nd edition, Oxford

University Press, New York 1998.

68

Schwenzer

Ingeborg Schwenzer, National Preconceptions that Endanger

Uniformity, Pace International Law Review Issue 1 Vol 19

(Spring 2007)

Available at Pace.edu

69

Sykes

Andrew Sykes, The Contra Proferentem Rule and the

Interpretation of International Commercial Arbitration

Agreements, in Vindobona Journal of International

Commercial Law & Arbitration, Vol 8 No 1 (2004), pp. 65-

79.

31, 32

UNCITRAL

2012 Digest

United Nations Commission on International Trade Law,

UNCITRAL 2012 Digest of Case law on the Model Law on

International Commercial Arbitration

36

CASES

Australia

Aiton v.

Transfield

Supreme Court of New South Wales, NSWSC 996, No

55020/99, 1 October 1999, Aiton Australia Pty Ltd. v.

Transfield Pty Ltd.

16



http://tinyurl.com/hu5cdrd



http://digitalcommons.pace.edu/cgi/viewcontent.cgi?article=1062&context=pilr









x

Austria

Garden Flowers

case

Appellate Court Innsbruck Dansk, Blumsterexport A/s

(Denmark) v. Frick Blumenhandel (Austria), No. 4 R 161/94,

1 July 1994.

http://cisgw3.law.pace.edu/cases/940701a3.html

65, 67

Rolled metal

sheet case

Arbitral Tribunal – Vienna, Claimant (Austria) v. Respondent

(German), No. SCH-4366, 15 June 1994


85

Belgium

Namur-

Kreidverzekering

v. Wesco

Rechtbank [District Court] van koophandel Kortrijk, Numur-

Kreidverzekering (France) v. Wesco (Belgium), No. A.R.

4328/93, 16 December 1996

http://cisgw3.law.pace.edu/cases/961216b1.html

70

France

Pressure cooker

case

Case No. 2002/18702, Cour d’Appel de Paris, 4 July 2004

Available at: http://cisgw3.law.pace.edu/cases/040604f1.html

66

Caito v. Sociétécase

Cour d’Appel de Grenoble, Caito Roger (Italy) v. Société

francaise de factoring (France), No. 93/4126, 13 September

1995

http://cisgw3.law.pace.edu/cases/950913f1.html

27, 69

Germany

CLOUT case

No. 659

CLOUT case No. 659, Oberlandesgericht Naumburg,

Germany, 10 Sch 08/01, 21 February 2002

36

Clothes case

District Court Kassel, Plantiff (Italy) v. Defendant (Germany),

No. 11 O 4187/95, 15 February 1996.

http://cisgw3.law.pace.edu/cases/960215g2.html

27

Flowers case

Appeallate Court (OLG) Saarbrücken, Plantiff (Germany) v.

Defendant (Italy), No. 1 U 703/97-143, 3 June 1998


70

Used Car case

Appellate Court (OLG) Köln, Plaintiff (Germany) v.

Defendant (Italy), No. 22 U 4/96, 21 May 1996


78





























xi

Vacuum

Cleaners case

Appellate Court Celle, Plaintiff (Netherlands) v. Defendant

(Germany), No. 3 U 246/97, 2 September 1998


78

Video

Recorders case

District Court Darmstadt, Plantiff (Germany) v. Defendant

(Switzerland), No. 10 O 72/00, 9 May 2000


77

Russia

CLOUT Case

No. 474

Tribunal of International Commercial Arbitration at the

Russian Federation Chamber of Commerce and Industry,

Claimant (USA) v. Respondent (Russia), No. 54/1999, 24

January 2000.

http://cisgw3.law.pace.edu/cases/000124r1.html

76

Switzerland

Packaging

machine case

Appellationsgericht (Appeallate Court) Basel-Stadt, Plaintiff

(buyer/Spain) v. Defendant (seller/Switzerland), No.

16/2007/MEM/chi, 26 September 2008.

http://cisgw3.law.pace.edu/cases/080926s1.html

27

United Kingdom

Scott v. AveryHouse of Lords, No [1843-1860] All ER Rep 1, 10 July 1856,

Scott v Avery (and others).

16

Cable &

Wireless case

Queen’s Bench Division, No [2003] EWHC 316 (Comm), 27

February 2003, Cable & Wireless PLC v IBM United

Kingdom Ltd.

16

United States of America

Atwood v.

Newmont

U.S. Court of Appeals, 9th Circuit, No 93-15811, 18 Jan

1995, Richard Atwood v. Newmont Gold Co, Inc.

Available at:

http://caselaw.findlaw.com/us-9th-circuit/1115756.html

30

Terra Intern. v.

Mississippi

Chemical

U.S. Court of Appeals, 8th Circuit, No. 96-2140, 11 July

1997, Terra Intern., Inc. v. Mississippi Chemical Corp.

Available at:


32






















1

STATEMENT OF FACTS

CLAIMANT, Locus Ltd., a young flower supplier based in Beta is a subsidiary of Locus

Group. Ms. Emily Thorne is the director of CLAIMANT, the head of the negotiating team to

conclude a transaction with RESPONDENT. Mr. Silver White is an agricultural engineer in

Locus Ltd and also a negotiating team member.

RESPONDENT, Rosen Ltd., is a leading worldwide flower and seed supplier headquartering

in Alpha. Mr. Daniel Grayson is the director of RESPONDENT. Mr. William Black is the

head of Seeding Department of RESPONDENT.

20 August 2014 CLAIMANT and RESPONDENT signed the Contract, in which

RESPONDENT agreed to sell 3000 Phoenix Tulip seeds. The

contract value was USD 150,000.

20 October 2014 RESPONDENT provided the General Planting Guidance along

with the seeds to CLAIMANT on time, promised to give necessary

assistance during the planting stage whenever CLAIMANT

needed.

22 October 2014 CLAIMANT started planting the seeds

20 November 2014 Mr. White made a phone call to Mr. Black for 15 minutes

30 November 2014 Mr. White and Mr. Black met at an international scientific

conference. Later in the afternoon, Mr. White was fired from Locus

Ltd. The reason for such dismissal is kept confidential.

Mid-December 2014 Some leaves of around 73 Phoenix Tulip were discovered

shriveling.

29 December 2014 to13 January 2014

People in Beta witnessed an unusual phenomenon - the RedDragon. Estimated rise of the outdoor temperature ranged from 3 to

5 Celsius degrees. RESPONDENT believes it’s “Red Dragron”

that caused the defective flowers.

17 - 20 January 2015 CLAIMANT found out that 75% of the flowers were defective.

50% shriveled and their colors were faded; 25% could not bloom at

all.

22 January 2015 CLAIMANT sent an email to RESPONDENT to inform about the




2

defective seeds and request for refund of the Contract value.

However, RESPONDENT rejected liabilities for such result and

declined reimbursement.

25 January 2015CLAIMANT sent a Declaration of Contract Avoidance to

RESPONDENT. In addition, CLAIMANT said the dispute would

be submitted to Vietnam International Centre. This email was the

final communication between two Parties.

10-14 February 2015 The Annual Flower Festival took place. CLAIMANT sold out the

remaining 25% of Phoenix Tulip flowers to show at the Festival

and received great accolade, though less than 1000 flowers as

previously planned. Lincoln Ltd., the largest competitor of

CLAIMANT in Beta’s flower market also sold Phoenix Tulips at

the Festival, USD 220 per one.

CLAIMANT now claims damages upon the fundamental breach of the Contract including the

losses of profit from the failed contract with Mineo Group, and of reputation which amount to

USD 300,000 and USD 200,000 correspondingly.

Explanatory note: This Memorandum responds directly to the CLAIMANT’s Memorandum

of the team “Chukenper” from Hanoi Law University (HLU). Due to the nature of the moot

competition, this writing will also address arguments that may go beyond the content found

in that memorandum.




3

SUMMARY OF ARGUMENTS

1. The Tribunal has no jurisdiction to hear the current dispute for several reasons.

2. First of all, the Parties failed to conform with the compulsory pre-arbitral dispute

settlement clause stipulated in Art. 10 of the Contract. Arbitration should only come last

after desperate effort from both sides without arriving at any mutual agreement. An

amicable settlement conducted in good faith requires CLAIMANT and RESPONDENT

to convene and exchange positions with open minds, which are willing to deliberate

about what can be compromised and what can't. However, CLAIMANT hastily

terminated the Contract merely after few insufficient emails with doubtful allegations. As

not until the prerequisite to arbitration is properly fulfilled does it give rise to the power

and intervention of arbitral tribunal, the Tribunal should rescind CLAIMANT's request

for arbitration, then send the Parties back to bilateral settlement process. Such one final

chance shall bring about lots of advantages, especially maximizing individual interests as

well as preserving business relationship between Locus and Rosen Ltd.

3. Second, CLAIMANT has filed its request to the wrong address since Vietnam IAC is not

the institution agreed during negotiation process. It should be Vienna IAC in accordance

with the content of the dispute resolution provision from another contract between Rosen

Ltd. and Locus Group. Such sampling had been clearly established as a mutual intent and

practice. As a matter of jurisprudence, if mutual intent and practice render a sufficiently

clear interpretation, then the contra proferentem rule should not be considered at all.

4. Next, despite its silence for a few months, RESPONDENT hasn't lost the right to object

to jurisdictional issue because its objection was made in time in its Statement of Defense

pursuant to Art. 4 Model Law.

5.

Taking all into consideration, if the Tribunal mistakenly disregards RESPONDENT's

findings then there are grounds that warrant denial to both recognition and enforcementof the award under New York Convention and Model Law.

6.

Should the Tribunal on the contrary still adjudges that it has jurisdiction over the dispute,

then in the matter of merits all claims to damages from CLAIMANT should be

dismissed. RESPONDENT respectfully insists the Tribunal to find that CLAIMANT has

not rightfully avoided the Contract by Ms. Thorne's declaration on 25 January 2014,

since there was no fundamental breach committed by RESPONDENT at all. Evidently

the weather abnormality Red Dragon caused the defects to 75% of 3000 flowers. It

created very unfavorable conditions for the blooming stage of Phoenix Tulips.




4

7. Such phenomenon is the only logical explanation. RESPONDENT has been developing

rare flower seeds for years, therefore quality control cannot be an unfamiliar task.

RESPONDENT never possessed any vicious intention to harm CLAIMANT's business,

so it distributed the seeds in a very normal manner. Compared to Lily Ltd.'s successful

result, it is an extremely low probability that CLAIMANT randomly received such large

quantity of unqualified goods.

8. Further, on each inquiry made by CLAIMANT, RESPONDENT duly fulfilled its

obligation to provide detailed instructions to help CLAIMANT with its planting process.

However with hindsight it can be seen that there were plenty of times in which

CLAIMANT should have asked for instructions, especially to tackle with "Red Dragon"

during its surprising comeback in Beta, but CLAIMANT instead remained silent. Thus it

cannot be excluded that such negligence partly contributed to the deficiency of flowers.

9. Although aware of the imminent failed contract and loss of reputation with Mineo

Group, CLAIMANT never attempted any mitigating measures in order to lower possible

damages. A substitute contract with Lincoln Ltd. would have been an undeniably

reasonable exit, which not only could have saved significant amount of money but also

future potential customers.

10. All being said, RESPONDENT is certainly not entitled to compensating USD 500,000

losses that CLAIMANT asserts to have suffered. Still, if the Tribunal votes in favor of

CLAIMANT and state that RESPONDENT is (partly) responsible for the defects of

Phoenix Tulips, the Tribunal should also reduce the amount of compensations to rational

degree.




5

APPLICABLE LAW

11. In terms of procedural applicable law, the Parties have based their submissions on the

assumption that the place of arbitration for this arbitration is in Vinland, Lamia [Proc.

Order 1, p.22].

12. Accordingly, under lex loci arbitri, the arbitration rules in Lamia, which adopts the

UNCITRAL Model Law on International Commercial Arbitration (with amendments in

2006) (hereafter referred to as “Model Law”), will be applicable in the light of Article 1

of Model Law. Alternatively, the Parties are free to agree on the procedure to be

followed by the Tribunal pursuant to Art 19.1 of Model Law as they had done in Article

10 of the Contract [Exh. C 2, p.6]. However the fact that such arbitration clause itself -

the Rules of “International Arbitration Tribunal (VIAC)” – is ambiguous causes

difficulty to derive any particular law from. Still since the present dispute is sent to

Vietnam International Arbitration Centre, the Rules of this body are also applicable.

13. In terms of substantive applicable law, Alpha, Beta and Lamia are all Contracting states

of the United Nations Convention on International Sale of Goods (shortly “CISG”),

which without dispute governs the international sale contracts between states. The

Contract provides a law clause that “the Contract is governed by the law of Alpha”. The

Law on Commerce of Alpha simply is a verbatim adoption of UNIDROIT Principles of

International Commercial Contracts 2010 (“PICC 2010”). Moreover, New York

Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New

York 1958”) and UCP 600 are also applied in this case.




6

ARGUMENTS

Jurisdiction issues

A. The Tribunal has no jurisdiction to hear the current dispute.

14. With due respect to expertise and shrewdness of the Tribunal, RESPONDENT insists on

the finding that the Tribunal does not have jurisdiction over the present dispute based on

three submissions: the Parties failed to comply with the compulsory amicable dispute

resolution clause in the Contract (I); Vietnam International Arbitration Centre is not the

institution agreed to file the dispute to, instead it’s Vienna IAC (II); RESPONDENT has

not waived its right to object to jurisdictional issues under Art. 4 Model Law (III). By

these virtues, if the Tribunal unlawfully keeps on affirming its jurisdiction, there are

grounds to challenge both recognition and enforcement of the award (IV).

I. The precondition to arbitration was not sufficiently fulfilled.

15. Article 10 of the Contract says that before any dispute is decided by arbitration, “it shall

be finally settled amicably and in good faith between the parties” [Exh. C 2, p.6].

Arbitration would be the last resort to resolve conflicts of interests between parties after

desperate endeavor without reaching mutual agreement. Instead as a matter of fact,

CLAIMANT hastily rushed to terminate the Contract without bilateral acceptance.

RESPONDENT submits that the two Parties did not comply with this compulsory

contractual agreement finally, amicably (1) and in good faith (2). As a result, the present

case is inadmissible. Sending two Parties back to settlement would not be in vain (3).

1. The amicable settlement procedure was a mandatory pre-arbitral stage.

16. The “good faith” settlement tier must be reflected in the phrasing of the clause to be a

mandatory pre-arbitration requirement [Figueres, pp. 72-73; Pryles, p. 168; Aiton v.

Transfield; Scott v. Avery; Cable & Wireless case] . It is evident that in the Contract the

Parties used the imperative word “shall”, which indicates a clear obligation, as opposed to

a permissive “may”. In addition, arbitration cannot begin unless no agreement can be

reached between the Parties. Active discussions with a view to resolving dispute is

beyond any doubt an inherent prerequisite.

2. Nonetheless the good faith requirement was not met.

17.

In this case, before the dispute was filed to arbitration, the settlement tier must have been

finally conducted amicably (a) and in good faith (b). But the Parties did not act according

to these elements.




7

a. There was no effort in setting finally and amicably.

18. Both emails CLAIMANT sent to RESPONDENT on 22 January 2015 and 25 January

2015 only served to report the defective seeds as well as an impulsive demand for refund

and later avoidance of the Contract; there was no mention about amicable dispute

resolutions before arbitration. With reference to initial requirements for dispute-settling

procedure, CLAIMANT failed to provide serious offers in order for RESPONDENT to

understand its severe circumstances and effort to dissolve impediments. The word

“finally” reinforces this view as it is defined as “in such a way as to put an end to doubt

and dispute” [Oxford Dictionaries, Oxford University Press, n.d. Web. 20 January 2016].

Never did the Parties dialogue with each other “finally” enough: at the time Ms. Thorne

avoided the Contract, both Parties were overwhelmingly doubtful over the real underlying

cause of defects.

19. Art. 10 purports to seek mutual understanding between the parties, either directly by

discussing themselves or indirectly with assistance of a third-party through non-binding

procedures such as negotiation, mediation, conciliation, mini-trial, expert evaluation and

dispute board [Redfern/Hunter 2009, pp. 9-10, ¶ 2.83]. It refers to Alternative Disputes

Settlement (hereinafter “ADS”) to settle the dispute amicably without the interference of

judicial organs, wherein both Parties have to make efforts in dealing with a dispute by

exchanging extensive information. However CLAIMANT’s Memorandum mostly

highlights the unilateral participation of CLAIMANT without noticing that views must be

exchanged from both sides.

b. The good faith requirement was not met.

20. The general duty of good faith includes a duty to take reasonable measures to contemplate

the other party’s interests and attend settlement with an open mind [Lookofsky, p. 138,

footnote 320; Lye, p.538]. The principle of good faith plays an integral role in

international commerce that influences parties’ commercial behaviors. Unfortunately,

RESPONDENT’s interest was not considered when CLAIMANT unilaterally terminated

the Contract without genuine, legitimate grounds.

21. From RESPONDENT’s viewpoint, CLAIMANT was not earnest to generate

opportunities for both parties to exchange views and achieve mutual visions. On the

contrary CLAIMANT was clearly hasty to terminate the contract and jump to arbitration

phase. That sequence of precipitate acts left RESPONDENT in a passive, confused

position.




8

22. RESPONDENT is known as a renowned leading worldwide flower and seed supplier that

has never received complaints about the quality of its Phoenix Tulip seeds. [St. Def., ¶2,

p.10]. CLAIMANT’s complaint has been the very first; the serious extent of blight and

abrupt accusation that the seeds themselves were not competent came as a complete

shock to RESPONDENT. As a result, with regard to CLAIMANT’s request for refund of

the contract price, the rejective response of RESPONDENT was comprehensible,

especially when Ms. Thorne’s allegation seemed to originate from a merely visceral

belief with no logical explanation to back up. It was disappointed for RESPOENDENT

when CLAIMANT refused to exchange positions to compromise for mutual benefits.

3. Sending the Parties back to dispute settlement would not be futile.

23. Until the procedural conditions precedent to arbitration are fulfilled, the commencement

of arbitration is considered as premature, and so the Tribunal lacks jurisdiction to decide

the case [Lye, p. 538; Rubino-Sammartano, p. 254].

24. The main purpose of multi-tiered dispute settlement clauses is to facilitate dispute

resolution as rapidly and cost-efficiently as possible. Clearly this purpose suits both

parties’ intention. It also enables dialogue with a plethora of viable consensual solutions

while individual interests can still be maximized [Chalk/Choong pp. 8-15; Bühring-Uhle

- Part Three: Alternatives to Arbitration, pp. 129-244] . The information exchange is very

dynamic. The opportunity to preserve business relationships is better.

25. In this case, two parties has neither attempted properly ADRs “amicably and in good

faith” nor indicated that “no agreement is reached” at all. As much, the parties should be

sent back to pre-arbitral phase and be given a final chance to reach agreement.

II. Vietnam International Arbitration Centre is not the institution that the

Parties intended to use in the Contract.

26. Ms. Thorne’s interpretation of “VIAC” in her email has no value because it cannot defeat

prior agreement that the provision in the contract between Locus Group and Rosen Ltd.

would be used (1). Also, the Tribunal should recourse to the contra proferentem principle

to call for interpretation against RESPONDENT (2).

1. Mutual intent is the dispute settlement provision of the contract between

Locus Group and Rosen Ltd.

27. It is both mutual intent and established practice that the arbitration clause would be

adopted verbatim from another contract between Rosen Ltd. and Locus Group. Mr.

Grayson did notice Ms. Thorne about such usage. The precise content of the sample




9

agreement reads “International Arbitration Tribunal of Vienna International Arbitration

Centre (VIAC)” [Exh. R 2, p. 13]. Not only in PICC 2010 but also Art. 9 CISG 1980 state

that “the parties are bound by any usage to which they have agreed and by any practices

which they have established between themselves”. If during negotiations, one party

clearly expresses its intent and the other party does not object, an agreement will be

presumed [Packaging machine case; Clothes case; Caito v. Société case].

28. A decisive point is that the Parties’ subjective knowledge or belief about the actual

content of the sample provision does not affect its independent and objective existence.

Its application hence cannot be impeded.

29. During negotiation process, Mr. Grayson and Ms. Thorne even had a prompt discussion

about a past dispute resolved at Vienna IAC between RESPODENT and CLAIMANT’s

parent company, Locus Group. As arbitration institution is a key information concerning

any dispute, Ms. Thorne could not mistake the letter “V” in “VIAC” for Vietnam, unless

she did so on negative purpose.

2. The contra proferentem rule cannot be applied in the present case.

30. CLAIMANT asserts that Art. 10 in the Contract should be interpreted against

RESPONDENT according to the contra proferentem rule, which is codified in Art. 4.6

PICC 2010 [Memo. C, ¶¶ 18-21, p.4]. However, it should be noted that this principle

does not apply to “terms that are merely vague or indefinite” [Atwood v. Newmont].

31. First of all the contra proferentem rule is a rule of last resort that should only be applied

when an ambiguity cannot be resolved by other means of interpretation [Sykes, p. 68;

Davis, footnote 203, p. 206; Kirby, p. 105]. Albeit Chapter 4 on Interpretation in PICC

2010 does not provide a hierarchy to indicate which rule should be applied in which

order, the fact that “intentions of the parties” or “practices established between the

parties” always appear first does suggest the “last resort” characteristic of contra

proferentem. As shown above, mutual agreement and practice between CLAIMANT and

RESPONDENT both point directly to the sample agreement, which as a result, the

Tribunal has solid grounds to interpret in favor of.

32. Secondly, contra proferentem applies only if the possible lack of clarity of the

formulation is attributed entirely to one of the parties [Sykes, p. 68; Ramberg, p. 34].

Otherwise where both parties have reasonably equal bargaining power or opportunity to

review the contractual agreement to prevent vagueness, the rule is not applicable [Duhl,

pp. 96-97; Terra Intern. v. Mississippi Chemical].




10

33. In the current case, even though CLAIMANT only started business in 2013, it was ready

to purchase 5000 Phoenix Tulip seeds at first proposal (yet due to limited storage

RESPODENT could only allocate 3000). Moreover, Ms. Emily Thorne had been

introduced to the content of arbitration agreement before it was attached to the Contract

[Proc. Order 2, ¶ 6, p. 25]. The fact that she did not discuss or raise any question well

amounts to tacit consent after review. All in all, Art. 10 of the Contract cannot be

interpreted against RESPONDENT based on the contra proferentem rule.

III. RESPONDENT did not waive its right to object jurisdiction of the Tribunal

34.

CLAIMANT argues in its Memorandum that during some 9 months after the final

communication between two Parties, i.e. Ms. Thorne’s email dated 25 January 2015,

RESPONDENT showed no concern or objection to CLAIMANT’s intent to arbitrate at

Vietnam IAC, so the Tribunal should interpret in favor of that intent based on the so-

called “reasonable test” [Memo. C, ¶ 16, pp. 3-4]. RESPODENT would like to discredit

such thinking because the right to challenge arbitrability has still been preserved.

35.

The arbitration agreement embodied in the Contract or Ms. Emily Thorne’s email do not

establish any timeline for the commencement of arbitration. If there had been a deadline,

RESPONDENT would have been obliged to raise a dissenting opinion within that time

limit. However the absence of such information should lead to the application of rules

which governs the arbitration proceeding, in particular Art. 4 Model Law:

“Any party who knows that… any requirement under the arbitration agreement has

not been complied with yet proceeds with the arbitration without stating his objection

to such non-compliance without undue delay … shall be deemed to have waived its

right.” (Emphasis added)

36. The phrase “without undue delay” means a party must state its objection either at the next

scheduled oral hearing or in an immediate written submission [UNCITRAL 2012 Digest

of Case law on the Model Law, Art. 4, p. 18; CLOUT case No. 659] . Indisputably

RESPONDENT was vocal about the flaws of both amicable settlement and interpretation

of “VIAC” in its Statement of Defense, the very first written document submitted to the

Tribunal. Such timely objection retains RESPODENT’s right in case at hand.

IV. If the Tribunal adjudges that it has jurisdiction and continues with the

arbitration, the award is at risk of being set aside or denied recognition and/or

enforcement.




11

37. To arrive at an enforceable award constructed on accurate application of legal rules is the

ultimate goals for all arbitration proceedings [Lew, p. 119; Born, p. 2192; Horvath, p.

135; Bühler/Webster, p. 155]. Nevertheless in the present case if the Tribunal disregards

RESPONDENT’s arguments and insists on its jurisdiction, RESPONDENT has

possibility to challenge the award made by the Tribunal before competent courts under

the grounds provided in Model Law and New York Convention [Redfern/Hunter 2004,

¶¶ 9.02, 9.18].

38. According to Art. V.1(c) New York Convention, Art. 34.2(a)(iii) and Art. 36.1(a)(iii)

Model Law, a ground for refusing recognition and enforcement is that the award deals

with a difference not falling yet within the scope of the submission to arbitration. It has

been argued above that not until the pre-arbitral procedure is complied with properly, the

arbitration is premature and the tribunal lacks jurisdiction to decide the case [supra ¶ 23].

By continuing proceedings, the Tribunal would thus exceed its power as stipulated by

Art. 10 in the Contract. The subsequent award may so be refused.

Merits

B. The defect suffered by the Phoenix Tulip flowers was caused by Red

Dragon, not faulted quality of seeds.

39.

RESPONDENT strongly believes “Red Dragon” was the dominant element that caused

flowers damaged. Analysis into weather statistics illustrates that weather conditions in

Beta during “Red Dragon” were not favorable for the blooming stage of Phoenix Tulips

(I). On the contrary CLAIMANT has argued that if weather was to blame, then 100% of

the flowers should have been defective, not 75%. Such assertion is illogical (II).

Furthermore, it is unfathomable that suddenly CLAIMANT received such large quantity

of unqualified goods when RESPONDENT had never been complained about. (III).

Finally, Lily Ltd. and Locus Ltd. suffered from “Red Dragon” to different extent, which

justified opposite outcomes each company arrived at (IV).

I. Weather conditions in Beta during “Red Dragon” were unfavorable for Phoenix

Tulips to bloom.

40. The following table provides in detail all environmental information submitted before the

Tribunal.




12

Temperature (oC) Humidity (%)

Ideal for blooming 18 – 24 70 – 80

Stop growing t < 12 OR t > 30

Die t ≥ 39 Beta’s average 15 – 22 73 – 82

Beta in “Red Dragon” 17 – 27 75 – 85

Maximum variation 3 5

41. As the Tribunal observes, the weather conditions in Beta, whether on annual average

basis or in “Red Dragon”, at some moments go beyond the ideal zone, either in terms of

temperature or humidity. Phoenix Tulips are without doubt much more sensitive to

environmental variation than other species of tulips [Proc. Order 2, ¶ 14, p. 26]. The

comeback of “Red Dragon” happened all too sudden: out of the blue on 29 December

2014 outdoor temperature rose by 3 to 5oC [Exh. R 4, p.15]. Furthermore, the last three

weeks of the planting process is the most important and decisive phase to formulate

flowers’ beauty. Yet “Red Dragon” lasted in Beta from 29 December 2014 to 13 January

2015, the penultimate two weeks before harvest [Proc. Order 2, ¶¶ 16+20, p.26]. It is so

likely such influence was the factor that rendered the flowers badly devastated. The

trauma that happened to 75% of 3000 flowers corresponds exactly with Mr. Black’s

words: Lacking ideal environment, the seeds cannot bloom or obtain its vivid appearance.

[Exh. R 3, p.14].

42. CLAIMANT may rely on one record which has shown that when temperature turned

under 12 or above 30oC, Phoenix Tulips stopped growing. [Proc. Order 2, ¶15, p. 26].

Indeed the range of temperature in Beta was never beyond tolerable limits; however it is

critical to acknowledge that the humidity level was not mentioned such record. Those twoweather conditions are indispensable to each other in determining flower development,

and understandably when both diverge from the ideal zone it will create a more harmful

situation. Due to the lack of humidity information, that record is thus not credible enough.

Plus “stop growing” does not necessarily imply wilting or fading in colors of flower

pedals.




13

II. CLAIMANT’s logic behind its argument should be dismissed.

43. It is argued that if environment was to blame then 100% of flowers should have suffered

from deficiency, not only 75% [Memo. C, ¶ 28, pp. 6-7]. But such is an illogical

assertion.

44.

It would be absurd to say that each and every single seed resembles the others precisely in

all aspects: innate quality, fertilizers received, irrigation, sunlight, etc. Even the position

of each flower in the garden makes a difference. Regarding conformity of goods, it is

common knowledge that there is always variation in quality, but most importantly there is

a minimum standard too. RESPONDENT has developed and planted Phoenix Tulips for

several years – an accomplishment that only a few companies are capable of [St. Def., ¶

2, p. 10]. Seed quality control thus is in no way an unfamiliar task. If Rosen Ltd. did not

impose strict regulations on purity of materials, then it would not have enjoyed all credits

as it does now.

45. As delineated on the graph, “acceptable” variation in quality can lead to variation in

adaptability to challenging external conditions. The parabola-shaped correlation is

conspicuous and common in nature: the majority should have medium adaptability, while

the others should either possess slightly lesser or higher. In short, the varying symptoms

seen on 3000 flowers are normal.

Minimum standard

Quantity

Quality (Adaptability)

50%

25% 25%




14

III. It is an extremely low probability that CLAIMANT received such large quantity

of unqualified goods.

46.

CLAIMANT was not the only customer that RESPONDENT sold Phoenix Tulip seeds to.

Lily Ltd. was another. The contract between RESPONDENT and Lily Ltd. was

concluded on 15 August 2014 [Exh. R 1, p.12], which was merely 5 days earlier than the

contract between CLAIMANT and RESPONDENT. When CLAIMANT sent its initial

offer to buy 5000 seeds, RESPONDENT had to turn down on account of limited storage,

difficulties in collecting and other customers’ reservation. There are grounds to say that

the seeds provided for these 2 companies (Lily and Locus Ltd.) were of the same batch.

47. Therefore, if CLAIMANT said the faulted quality of seeds was the reason why the

planting did not render expected results, then in contrast why in reality did all 2000 seeds

Lily received give birth to “fabulously gorgeous flowers”? [Exh. R 1, p. 12] Furthermore

in its history of business, RESPONDENT has never received any complaints from

customers. It is unfathomable that suddenly CLAIMANT is allocated with approximately

2250 faulted seeds. RESPONDENT had no vile intention to harm CLAIMANT; instead

regardless of the young relationship between two Parties, RESPONDENT always wanted

to help its customer to achieve great success [St. Def., ¶ 1, p.9]. At receipt of the goods,

CLAIMANT performed examination and found no abnormalities from their surface

[Proc. Order 2, ¶ 17, p.26]. The odds would be too minute if over 2000 seeds were

deemed to be faulted.

IV. Lily Ltd. and CLAIMANT were not experiencing Red Dragon to the same extent

CLAIMANT

started

planting

Leaves of 73

Tulips discovered

shriveling RED DRAGON in Beta

RED DRAGON

in Crostia

Lily Ltd. started

planting

75% of flowers

discovered

defective

22 Oct 2014 Mid-Dec 2014 29 Dec 2014 – 13 Jan 2015 17-20 Jan 2015

Early Nov 2014 12 – 20 Jan 2015




15

48. It must be emphasized that although Beta and Crostia have analogous weather conditions,

“Red Dragon” phenomenon occurred in Crostia for over a week while in Beta for 16

days. So in CLAIMANT’s case, the phenomenon befell for more than two-thirds of the

last paramount three weeks in the period of three-month planting process. In addition, the

intensity of impact differs unpredictably in each geographic area [Proc. Order 2, ¶ 21, p.

26]. How “Red Dragon” affected Crostia may not be as severely as Beta. The opposite

outcome at which Lily and Locus Ltd. arrived is justifiable.

C. RESPONDENT fulfilled its obligation to provide instructions.

I. The General Planting Guidance was a legitimate document.

49. RESPONDENT was obliged to give instructions to CLAIMANT to support the planting

period, and the General Planting Guidance is a concrete evidence. During negotiations

precedent to the contract conclusion, CLAIMANT was familiar with such Guidance and

agreed that this document would be attached to 3000 seeds at delivery [Proc. Order 2, ¶

12, p. 25]. 6 steps in the General Planting Guidance satisfactorily enabled CLAIMANT

to cultivate flowers at normal weather condition. It would have been very difficult and

unnecessary to depict and incorporate into this document specific instructions which

aligns with natural environment in Beta because covering all possibilities of weather

conditions was excessively burdensome, and the Parties could always contact each other

immediately. All in all, general planting guidance was absolutely legitimate.

II. RESPONDENT did perform its obligation to assist CLAIMANT during the

planting stage.

50. The Contract bound RESPONDENT to provide instructions at all time during planting

stage. The phrase “at all time” should be understood as at every occasion when

CLAIMANT expressed its need; certainly RESPONDENT duly fulfilled such obligation

(1). On the other hand, a number of events proved that CLAIMANT overlooked majorhurdles during planting process, which likely contributed to its’ flowers’ deficiency (2).

1. Only when CLAIMANT expressed its need for assistance would

RESPONDENT be obliged to offer help.

51. Generally speaking, a person in need has to speak up in order for others to know what

deeds they can do to assist. This too applies with CLAIMANT (a). And when

CLAIMANT made a request, RESPONDENT always give careful instructions as

required in Art. 4 of the Contract (b).

a. CLAIMANT needed to speak up first.




16

52. According to Article 4 of the contract between CLAIMANT and RESPONDENT, the

instruction shall be provided at all time during the planting stage [Exh. C 2, p. 6]. The

term “all the time” here purports to the obligation and promise of RESPONDENT to

provide assistance whenever CLAIMANT needed support [Proc. Order 2, ¶ 12, p.

26]. In other words, CLAIMANT would itself waiver its rights if it does not raise its

voice when in need of help. RESPONDENT was not obliged to actively keep track of

every phrase of CLAIMANT’s planting process. Rosen Ltd., as a large worldwide

flower and seed supplier, was also having many customers from different countries all

over the world apart from Locus Ltd. CLAIMANT and RESPONDENT in particular are

situated in two separate nations, Beta and Alpha. Therefore, it is irrational for

RESPONDENT to be bound to acquire per se knowledge of specific planting conditions

and weather variations that happened in a foreign country. Had the Contract expressly

demanded a regular supervision from Rosen Ltd., it would have been different. In sum,

when CLAIMANT did not exercise its right, there gave rise to no related obligation of

RESPONDENT.

b. Mr. Black readily gave detailed instructions when Mr. White requested.

53. Having received the General Planting Guidance, CLAIMANT twice sought for further

guidance from RESPONDENT. The first time was via telephone for 15 minutes wherein

Mr. William Black discussed about the nutritional ingredients of soil and appropriate

fertilizers until Mr. Silver White satisfied [Exh. R 3, p. 14]. The second (also more

pivotal) was in person at an international conference on rare flowers; Mr. Black then

talked about key factors for the blooming stage of Phoenix Tulips - ideal temperature and

humidity, along with possible consequences if such conditions were not met.

54. The Parties did not stipulate any requirements about the form of giving instructions;

hence as long as communication was effective, conversations whether via telephone or

outside workplace was totally acceptable.

55. In response to inquiry, Mr. Black as a RESPONDENT’s representative willingly gave

CLAIMANT essential instructions for the planting, and as a consequence, Mr. Black

accomplished duly his assigned obligations. How CLAIMANT applied that information

in its own circumstances was of volition. Additionally, Mr. Black was not entitled to give

extra information when CLAIMANT’s leading agricultural engineer only addressed such

specific topics. In reality, it was impossible for Mr. Black to cover all scenarios

CLAIMANT might encounter when cultivating flowers in Beta.




17

2. There was negligence in the planting process.

56. There were several occasions which CLAIMANT should have reached out to

RESPONDENT but it instead chose silence.

57. First of all was Mr. Silver White’s dismissal from Locus Ltd. As the former leader of the

team accountable for taking care of 3000 Phoenix Tulips, Mr. White more than anyone

played a vital role in managing this project. For whatever reason, firing such valuable

employee with eminent expertise and experience (twice “best employee of the year”) was

a major change in personnel. This incident ought to oblige CLAIMANT to exploit

information from Mr. White before he left.

58. Firing Mr. White, who was also a part of the team in charge of receiving instructions, was

entirely CLAIMANT’s internal affair, so in case any previous information provided by

RESPONDENT did not reach CLAIMANT, it was not RESPONDENT’s fault. Mr. Black

had fulfilled obligation to give required instructions to a qualified employee since the

conversation at the international conference occurred before Mr. White was fired, so by

then Mr. White had still held his work title at Locus Ltd. and acted on behalf of his

company.

59. RESPONDENT was not entitled to supplying repeated information when CLAIMANT

dismissed any employees and did not make further contact. There were also many other

people in CLAIMANT’s negotiating team which was in charge of receiving instructions,

especially Ms. Thorne as the leader. So if it seemed that the information were not enough

then they always could have conducted their right to ask then RESPONDENT would

fulfill their obligation. It was CLAIMANT’s (and especially Ms. Thorne’s) mistake to

keep silent, to decline asking.

60. Second, there was no contact or report recorded between CLAIMANT and

RESPONDENT relating to wrinkling leaves of around 73 Phoenix Tulips at the middle

of December 2014 [Proc. Order 2, ¶ 26, p. 27].

61. Finally, CLAIMANT never informed about “Red Dragon”. CLAIMANT cannot

disavow not having known about this phenomenon since its commencement (29

December 2014) because there were daily weather records in Beta. Not until 4 January

2015 (a week later) was RESPONDENT aware of its existence indirectly through a

weather forecast news [Proc. Order 2, ¶¶ 19-23, pp. 26-27].

62.

Despite reference to “Red Dragon” during contract negotiation [Proc. Order, ¶ 23,

p.27], this weather abnormality still came as an absolute surprise for citizens and even




18

experienced forecasters in Beta. Previously it was believed to happen once every 2 to 4

years, plus in winter 2013-2014 it already did [Exh. R 4, p. 15]. Perhaps that was what

both Parties at time of contract conclusion relied on; therefore CLAIMANT did not

request for specific guidance to confront this phenomenon at contract conclusion date.

However when “Red Dragon” actually happened, CLAIMANT never sought for advice

or help from RESPONDENT at all. Such silence made RESPONDENT reasonably

believe its customer was capable of handling the situation; therefore CLAIMANT is

estopped from relying on the contention that RESPONDENT did not send adequate

instructions [Comment 2, Art. 1.8 PICC 2010, Art. 80 CISG].

63. With such high expectation for perfect quality of flowers, CLAIMANT should have

informed RESPONDENT of any abnormalities in order to make appropriate timely

adjustment. It was the first time CLAIMANT had ever planted Phoenix Tulips, so the

possibility that CLAIMANT itself did not give the plants optimal treatment due to

insufficient experience cannot be excluded. Its silence about abnormal weather changes

or flowers’ symptoms categorically indicated CLAIMANT’s recklessness.

64. In sum, it was not RESPONDENT’s fault causing the defects of the flowers. Of all the

reasons for the defects of the flowers was the negligence of CLAIMANT.

D. CLAIMANT unlawfully declared the contract avoided.

I. There was no fundamental breach of contract, so Art. 49 CISG is inapplicable.

65. Since Ms. Thorne’s email to terminate the Contract, CLAIMANT has overlooked that a

defect does not exclusively result from inferior quality of seeds. If the undesirable

appearance of flowers was caused by wrong treatment on the part of CLAIMANT itself,

which cannot be excluded according to the logic stated above, it does not constitute a lack

of conformity of the goods. CLAIMANT bears the burden of proof for non-conformity of

goods as a prerequisite for contract avoidance under Art. 49.1(a) CISG [Garden Flowers

case]. However, both proofs CLAIMANT presented at ¶¶ 27-28 in its Memorandum are

weak and have been contested in supra Section B.

66. Still, RESPONDENT still feels the urge to address one point vulnerable to being

challenged by CLAIMANT: the shriveling leaves of 73 flowers at mid-December 2014.

This symptom was discovered roughly two weeks before “Red Dragon” befell. So if there

existed any intrinsic lack of conformity within seeds at all, it could only have existed

among the said 73 plants. In no way 73 out of 3000 (2.43%) can amount to a fundamental




19

breach, as CLAIMANT has asserted itself that the substantial number should be at least

one-third of the total sale [Memo. C, ¶ 44, p. 9; Pressure cooker case].

67.

It is therefore irrelevant whether CLAIMANT declared contract cancellation in a

sufficiently clear manner or not [Memo. C, ¶¶ 58-61, Garden Flowers Case]

II. CLAIMANT loses the right to rely on the lack of conformity in accordance with

Art. 39 CISG.

68. Art. 39.1 CISG requires the buyer to inform the seller of a non-conformity within a

“reasonable time” after it “knew or ought to have known” of the non-conformity. When a

buyer fails to notify within a reasonable time, it loses its right to all remedies claimed out

of the non-conformity [Honnold, p. 259; Schwenzer in Schlectriem 1998 p. 319].

69. There are two approaches to determine the length of a “reasonable time” . The most

popular is a “flexible” analysis with “regard to the circumstances of each case” [Ferrari

p.223; DiMatteo p. 365; Honnold p.280]. Still some courts, specifically in Germany,

apply a presumptive notice period of one month [Schwenzer; Caito v. Société case], as

CLAIMANT has also discussed [Memo. C, ¶ 54, p.10]. However a weakness lies within

that same paragraph 54: “Perishable or seasonal goods is a factor to consider”.

70. The “flexible” calculation must base on “the nature of the goods, the nature of the defect,

the situation of the parties and relevant trade usages”. A reasonable time for perishable or

seasonal goods is shorter than for durable goods, e.g. T-shirts [Ferrari p.228]. Similarly,

a reasonable time is shorter (even immediate) if the nature of the defect is easy to

identify [Namur-Kreidverzekering v. Wesco; Flowers case]. Flower is both perishable

and seasonal. Plus, the defect of flower quality could be easily spotted through visual

inspection. One month then appears too comfortable an interpretation.

71. Mid-December 2014 when some leaves of 73 flowers were found shriveling marked the

starting date of notice period. Notwithstanding not till over a month later, on 22 January

2015, did Ms. Emily Thorne send the first email specifying the nature of defects.

CLAIMANT has created a wrong impression that the clock started to tick only when

“CLAIMANT fully discovered the defects” [Memo. C, ¶ 55, p.11]. Such impression

even contradicts directly with its earlier arguments that the buyer needed to inform “at

the moment the buyer discovered the defects” [Memo. C, ¶ 52, p.10].

72. In conclusion, by virtue of late notice and non-existence of a fundamental breach, Art. 39

along with Art. 49 CISG bar CLAIMANT from relying on non-conformity of goods to

declare the Contract avoided.




20

E. RESPONDENT is not entitled to compensating any damages; should

the Tribunal decide otherwise, the amount should be much lower.

73.

Both the loss of profit and loss of reputation CLAIMANT asserted based only on the

failed contract with Mineo Group for the sale of 2000 Phoenix Tulips. Hence the

relationship between CLAIMANT and Mineo Group will play a vital role in determining

the extent of damages. These two types of losses shall be viewed separately.

I. USD 300,000 Loss of profit

74. As aforementioned, it was not RESPONDENT’s fault that caused the defects in 75% of

the flowers; RESPONDENT did not violate fundamentally any obligations so it was

unreasonable for RESPONDENT to take responsibility for CLAIMANT’s USD 300,000

profit loss. The only likelihood RESPONDENT admits is unhealthy development of 73

Phoenix Tulip plants as described in previous sections. Accordingly, RESPONDENT

might only be bound to pay 150 × 73 = 10950 (USD). The remnant USD 289,050

basically falls out of the scope of Art. 74 CISG.

75. Furthermore, the loss of profit pointed out by CLAIMANT was unforeseeable. From the

beginning although it referred to its distribution plan, CLAIMANT never revealed the

exact price at which they would sell the flowers to Mineo Group [Exh. C 1, p.5]. By such

virtue, RESPONDENT had no knowledge about USD 300,000 of profit which would

result from the resale to Mineo Group.

II. USD 200,000 Loss of reputation

1. RESPONDENT did not violate the Contract, so it is not supposed pay for

CLAIMANT’s loss of reputation.

76. Pursuant to Art. 74 CISG, if loss of reputation existed, it should belong to damages that

the aggrieved party was assumed to suffer from as a consequence of the breach ofcontract caused by the party in breach. However, once again RESPONDENT reiterates

that it duly complied with the Contract and guaranteed the quality of Phoenix Tulip seeds;

CLAIMANT has no right to claim compensation of its loss of reputation. [CLOUT Case

No. 474: Russia v. United States].

77.

Loss of reputation should be of legal significance only when it leads to loss of future

profit as a result of sale decrease [Video Recorders case]. In fact, CLAIMANT did not

supply adequate evidence about real sales quotas harmed by damaged reputation.




21

78. The failed contract with Mineo Group was not concrete enough to perform significant

degradation in sales of goods because that was the very first transaction between

CLAIMANT and its potential customer. Additionally, the fact that CLAIMANT failed to

provide statistically-detailed damages calculation makes the amount of USD 200,000

appear really arbitrary, as well as putting CLAIMANT on the verge of losing the right to

claim damages under Art. 74 CISG [Vacuum cleaners case]. In view of this matter, the

foreseeability of the damages could be rejected if the damages would have to be

considered as so exceptionally high that RESPONDENT did not have to reckon it. [Used

Car case].

79. Consequently the basis of USD 200,000 claim for loss of reputation is frailly founded.

2. CLAIMANT was under the obligation to mitigate damages.

a. Loss mitigation is compulsory for the party who relies on a breach

80. The aggrieved party who relies on a breach (fundamental or not) of contract by the other

party cannot wait passively for the loss to incur and accumulate, then sue for damages and

expect to be entitled to recover what could have been avoided. Instead it must become

active so as to minimize the loss or to prevent it wholly [Riznik, p. 268; Knapp, pp. 595-

560; DiMatteo p. 442; Commentary by Enderlein and Maskow on Article 77 CISG]. In

other terms, when aware of threatening damages, CLAIMANT was immediately under

obligation to make reasonable steps to prevent subsequent losses or mitigate damages.

These normative duties served to protect commercial benefits of aggrieved party and be

used for compensation mechanism before judicial organs.

b. If RESPONDENT can successfully point out one reasonable measure,

then the amount of damages must be reduced.

81. RESPONDENT was not in a position to help CLAIMANT to come up with an idea to

avert its damages, especially when CLAIMANT abruptly avoided the Contract. Still, as

long as the idea proposed was rational and CLAIMANT was capable of foreseeing such

measure, then the compensable amount of damage must be reduced to whichever number

the loss should have been mitigated by.

82. With scrutiny into the way of vocabulary choice in Art. 77 of CISG rules, “Article 77

may require the aggrieved party to conclude a substitute transaction, especially in a

situation where a substitute transaction would avoid consequential losses following the

non-performance or defective performance of the contract” [Riznik, p. 273].




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3. A substitute purchase from Lincoln Ltd. was an accessible and reasonable

measure to mitigate losses, but CLAIMANT showed no endeavor at all.

83.

Though aware of the prospect of failed contract with Mineo Group, CLAIMANT never

attempted to perform transaction with Lincoln Ltd., who also appeared at the Festival

with 5000 available flowers for sale. The Festival took place from 10-14 February 2015,

over 3 weeks after CLAIMANT discovered that it could not supply enough flowers, so

there must have been plenty of time for CLAIMANT to reserve flowers from Lincoln.

CLAIMANT’s inactivity yet proved no effort to take countermeasures.

a. A substitute purchase from Lincoln Ltd. would save CLAIMANT USD

160,000+

84. At the Festival, Lincoln Ltd. sold Phoenix Tulips at USD 220 per one.

Payment for Lincoln Ltd.: 440,000

Payment from Mineo Group: 400,000

Total loss: 40,000

85.

“When a party undertakes measures to mitigate the loss it will likely suffer additional

costs” [Riznik, p. 279]. Though the price per flower offered by Lincoln Ltd. was USD 20

higher than that offered by CLAIMANT in the contract with Mineo Group, it should be

considered additional cost “as a loss suffered as a consequence of the breach of contract”

pursuant to Art. 74 CISG [Rolled metal sheets case].

86. Moreover, the price gap, in fact, should not be seen as unreasonably wide if reputation of

CLAIMANT was under threat of being ruined in the eyes of its big potential customer,

Mineo Group. Had CLAIMANT made the substitute purchase, it would suffer from zero

dollar loss of reputation now; instead it would have had to give up only USD 40,000.

USD 160,000 reduction is decisively significant. More than that, future revenues could

even increase thanks to enhanced brand image and possibly greater business deal with

Mineo Group.

b. Dealing with Lincoln Ltd. is not unreasonable.

87. Practically, CLAIMANT could have taken preventive approach by concluding a cover

contract with Lincoln Ltd. as the last resort. “If the injured party was in a position to take

more effective measures and could be reasonably expected to do so in the circumstances,

he will be subject to the sanction of the second sentence of Article 77” [Knapp, p. 560, ¶

2.4].




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88. There is a close connection between the purpose of transaction in issue and the obligation

of mitigation. CLAIMANT asserts that a purchase from Lincoln Ltd. – its biggest rival in

the flower market of Beta - is irrational [Memo. C, ¶ 77, p. 15]. However, the Tribunal

should take two observations into account.

89. First of all, in spite of having less than 1000 flowers, CLAIMANT already succeeded

greatly at the Festival after having received much accolade and sold out all available

Phoenix Tulips. Thus to certain extent, CLAIMANT satisfied its motive when

participating in the Festival – to compete with Lincoln in the flower market of Beta.

[Proc. Order 2, ¶ 32, pp. 27-28].

90. Now in terms of the contract with Mineo Group, among 3 intentions CLAIMANT made

known in its Request for Arbitration, gaining access to international flower market and

expanding its business activities unquestionably overweighed competing with Lincoln.

Nationality of Mineo Group is unidentified; however whether this business entity is in

Beta or not, the transaction with Lincoln Ltd. would still not have deprived CLAIMANT

of any market share or blocked its way to a broader market. If Mineo Group is in Beta,

CLAIMANT would have got a huge advantage, i.e. a big potential partner, over Lincoln

Ltd - a competitor in the flower market of Beta. If Mineo Group is not in Beta, then the

Tribunal should bear in mind the distinction between international market and domestic

market . Furthermore, CLAIMANT definitely could have made an incognito purchase if it

wanted to protect its brand name from other companies’ badmouthing.

91.

In conclusion, pursuant to Art. 77 of CISG rules, it was CLAIMANT’s duty to take

reasonable measures to mitigate its loss of reputation, which could have been reduced to

merely USD 40,000 if a cover contract with Lincoln Ltd., a prompt and necessary exit

under the circumstances, had been concluded.




PRAY FOR RELIEF

RESPONDENT respectfully requests the Tribunal:

1.

To rule that the Arbitral Tribunal has no authority over the dispute and thus

incapability to proceed to substantive issues.

In case the Tribunal rules that it has such authority:

2. To reject the right to declare the contract avoided of CLAIMANT as RESPONDENT

did not fundamentally violate the Contract;

3. To reject the claim for damages of CLAIMANT which is USD 500,000 or to reduce

its damages to reasonable extent, which can be divided into three scenarios: Scenario 1: RESPONDENT is completely innocent - USD 0 loss of profit; USD 0

loss of reputation.

Scenario 2: RESPONDENT is responsible for only 73 flowers – USD 10,950 loss

of profit; 0 loss of reputation.

Scenario 3: RESPONDENT is found to have committed a fundamental breach –

USD 300,000 loss of profit; 40,000 loss of reputation.

DO DUY HUNG TRAN HA UYEN

DO MINH NGOC

Documents

DAV - Memorandum for Respondent