Professional Documents
Culture Documents
AGAINST
Locus Ltd.
88 Longman Road, Leisure
Beta
CLAIMANT
Counsels
Do Duy Hung
Tran Ha Uyen
Do Minh Ngoc
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.
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
ii
Weather conditions in Beta during Red Dragon were unfavorable for Phoenix
Tulips to bloom ................................................................................................................. 11
II.
III.
IV.
Lily Ltd. and CLAIMANT were not experiencing Red Dragon to the same extent. ....... 14
II.
iii
160,000+ ................................................................................................... 22
b. Dealing with Lincoln Ltd. is not unreasonable ......................................... 22
iv
INDEX OF ABBREVIATIONS
/
Paragraph / Paragraphs
Art. / Arts.
Article / Articles
e.g.
Exh. C
Exh. R
IAC
i.e.
Int.
International
Ltd.
Limited
Memo. C
No.
Number
p. / pp.
Page / Pages
Proc. Order
Procedural Order
Re. Arb.
St. Def.
Statement of Defense
Supra
The Contract
The Festival
The Tribunal
v.
Versus (against)
Vol
Volume
Cited in
UNCITRAL
Model Law
New York
Convention
Vienna
Convention
PICC 2010
AUTHORITIES
Insights into seed quality management. From the American
ASTA
Born
Bhler /
Webster
37
Bhring-Uhle
37
24
24
Davis
31
69, 80
Duhl
32
Enderlein /
Maskov
80
69, 70
Figueres
16
Honnold
vii
68, 69
37
Kirby
31
Knapp
80, 87
Lew
37
20
20, 23
Cable & Wireless plc v IBM United Kingdom Ltd [2003] BLR
Lye
Pryles
16
Ramberg
Redfern /
Hunter 2004
32
37
Hunter 2009
19
Rubino
-Sammartano
Hague (2001)
23
Schwenzer
68
69
31, 32
UNCITRAL
2012 Digest
36
CASES
Australia
Aiton v.
Transfield
ix
16
case
1 July 1994.
65, 67
http://cisgw3.law.pace.edu/cases/940701a3.html
Rolled metal
sheet case
85
Belgium
Rechtbank [District Court] van koophandel Kortrijk, NumurNamurKreidverzekering
v. Wesco
70
France
Pressure cooker
case
Caito v. Socit
case
66
27, 69
Germany
CLOUT case
No. 659
Clothes case
36
27
Flowers case
70
78
Vacuum
Cleaners case
Video
Recorders case
78
77
Russia
Tribunal of International Commercial Arbitration at the
CLOUT Case
No. 474
76
Switzerland
Appellationsgericht (Appeallate Court) Basel-Stadt, Plaintiff
Packaging
machine case
27
http://cisgw3.law.pace.edu/cases/080926s1.html
United Kingdom
Scott v. Avery
Cable &
Wireless case
16
16
Newmont
Available at:
30
http://caselaw.findlaw.com/us-9th-circuit/1115756.html
Terra Intern. v.
Mississippi
Chemical
xi
32
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
20 October 2014
22 October 2014
20 November 2014
30 November 2014
Mid-December 2014
29 December 2014 to
13 January 2014
17 - 20 January 2015
22 January 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 Betas 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 CLAIMANTs 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.
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.
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.
3
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.
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.
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.
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 its 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.
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.
26. Ms. Thornes 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
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. Thornes email dated 25 January 2015,
RESPONDENT showed no concern or objection to CLAIMANTs intent to arbitrate at
Vietnam IAC, so the Tribunal should interpret in favor of that intent based on the socalled 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 Thornes 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 RESPODENTs 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.
10
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).
Weather conditions in Beta during Red Dragon were unfavorable for Phoenix
I.
Tulips to bloom.
40. The following table provides in detail all environmental information submitted before the
Tribunal.
11
Humidity (%)
18 24
70 80
Stop growing
t < 12 OR t > 30
Die
t 39
Betas average
15 22
73 82
17 27
75 85
Maximum variation
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. Blacks
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 two
weather 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.
12
II.
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.
Quantity
50%
25%
25%
Quality (Adaptability)
Minimum standard
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.
13
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
planting
Leaves of 73
Tulips discovered
shriveling
22 Oct 2014
Mid-Dec 2014
started
75% of flowers
discovered
defective
17-20 Jan 2015
12 20 Jan 2015
RED DRAGON
in Crostia
14
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.
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 major
hurdles during planting process, which likely contributed to its flowers deficiency (2).
1.
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.
15
16
17
65. Since Ms. Thornes 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
18
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. Socit 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.
19
74. As aforementioned, it was not RESPONDENTs 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 CLAIMANTs 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.
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 of
contract 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.
20
21
440,000
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].
22
23
DO DUY HUNG
TRAN HA UYEN
DO MINH NGOC
24