2011 ALSA CONFERENCE INTERNATIONAL COMMERCIAL ARBITRATION MOOT
8 - 9 JANUARY 2011
MEMORANDUM FOR RESPONDENT
ALSA INDONESIA
On Behalf of:
PROMPT PAY INC.
Deeerveer 55-23,
Rotterdam Postbus 63000 Rotterdam,
The Netherlands
(RESPONDENT)
Against:
BEST DEAL EDIBLE OIL
INDUSTRIES PTE LTD
488 Wonder Bridge Road #04-01
Singapore 586721
Singapore
(CLAIMANT)
COUNSELS:
Beatrice Eka Putri Simamora Sarah Eliza Aishah Tiyana Sigi Pertiwi
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | i
TABLE OF CONTENTS
TABLE OF CONTENTS .............................................................................................................. i
TABLE OF AUTHORITIES ....................................................................................................... ii
STATEMENT OF FACTS ........................................................................................................... 1
SUMMARY OF ARGUMENTS .................................................................................................. 3
ARGUMENT ON JURISDICTION ............................................................................................ 4
I. THIS TRIBUNAL HAS NO JURISDICTION TO ENTERTAIN THE
PRESENT CASE ................................................................................................................... 4
A. CLAIMANT and RESPONDENT Are Not Bound by The Arbitration
Agreement ......................................................................................................................... 4
B. Even If CLAIMANT and RESPONDENT Are Bound by The Arbitration
Agreement, Both Parties Had Not Fulfilled The Condition Precedent to
Arbitration ......................................................................................................................... 5
ARGUMENT ON MERITS ......................................................................................................... 9
II. CLAIMANT COULD NOT RELY IN ARTICLE 74 CISG FOR
RESPONDENT COULD NOT HAVE FORESEEN SUCH BREACH AT THE
CONCLUSION OF CONTRACT NO. 03162 ..................................................................... 9
A. The Production Cost of Packaging Bags Was Unforeseeable To RESPONDENT
And To Any Reasonable Person ..................................................................................... 10
B. RESPONDENT is Excused from All Damage Claims Due To Force Majeur .............. 11
III. CLAIMANT HAD BREACHED CONTRACT NO. 03162 BY FAILING TO
DELIVER THE GOODS ON TIME (ART.30 AND ART. 33 CISG) ............................. 12
IV. CLAIMANT HAD BREACHED CONTRACT NO. 03162 BY NON-
CONFORMITY GOODS DELIVERY (ARTICLE 35 CISG)Error! Bookmark not defined.
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | ii
TABLE OF AUTHORITIES
TREATIES, CONVENTIONS, AND LAWS
CISG United Nations Convention on Contracts for the
International Sale of Goods, Vienna, 1980
passim
Model Law UNCITRAL Model Law on International Commercial
Arbitration 1985
1
Model Law
UNCITRAL Model Law on International Commercial
Conciliation
5
CASES
Him Portland Llc v.
Devito Builders Inc
United States Court
of Appeals
317 F. 3d 41 - Him Portland Llc v. Devito Builders Inc
United States Court of Appeals, First Circuit
5
641 A.2d 1381 641 A.2d 1381, 1387 (Conn. 1994).
See also Handelsmaatschappij Vekoma BV (Netherlands) v.
Maran Coal Corp. (US), Swiss Federal Court
(Bundesgericht), Civil Division I (August 17, 1995)
5
Chateau des
Charmes Wines Ltd.
v. Sabaté USA, Inc.,
328 F.3d 528
328 F.3d 528 (9th Cir. 2003)
(http://ftp.resource.org/courts.gov/c/F3/328/328.F3d.528.02-
15727.html)
3
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | iii
CLOUT case No.
106
CLOUT case No. 106
Oberster Gerichtshof, Austria, 10 November 1994
4
CLOUT case No.
215
CLOUT case No. 215
Bezirksgericht St. Gallen, Switzerland, 3 July 1997
3
CLOUT case No.
222
CLOUT case No. 222
Federal Court of Appeals for the Eleventh Circuit, United
States, 29 June 1998
3
CLOUT Case No. 23
(CISG-online No.
45)
CLOUT Case No. 23 (CISG-online No. 45) 3
CLOUT case No.
268
CLOUT case No. 268
Bundesgerichtshof, Germany, 11 December 1996
3, 4
CLOUT case No.
313
CLOUT case No. 313
Cour d‟appel Grenoble, France, 21 October 1999
3
CLOUT Case No.
422
CLOUT Case No. 422
Oberster Gerichtshof, Austria, 29 June 1999
2
CLOUT case No.
429
CLOUT case No. 429
Oberlandesgericht Frankfurt, Germany, 30 August
3
Cortem SpA v
Controlmatic Pty Ltd
(2010)
Federal Court of Australia, FCA 852, 13 August 2010
(http://cisgw3.law.pace.edu/cases/100813a2.html)
12
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | iv
FCF S.A. v. Adriafil
Commerciale S.r.l.,
Switzerland, 15 September 2000. FCF S.A. v. Adriafil
Commerciale S.r.l., Supreme Court
4P.75/2000
(http://cisgw3.law.pace.edu/cases/000915s2.html)
11
Filanto, S.p.A. v.
Chilewich
International Corp,
F. Supp. 1229 (S.D.N.Y. 1992). 984 F.2d 58 (2nd Cir. 1993)
(http://vlex.com/vid/filanto-chilewich-international-corp-
37510659)
3
Raw Materials Inc.
v. Manfred
Forberich GmbH &
Co.
No. 03 C 1154, 2004 U.S. Dist.LEXIS 12510 (N.D. Ill. July
6, 2004)
(http://cisgw3.law.pace.edu/cases/040706u1.html)
1
OTHER AUTHORITIES
D. Jason File United States: Multistep Dispute Resolution Clauses
3 Mediation Committee Newsletter 1
(IBA Legal Practice AUTHOR Division), July 2007.
3
David St John Sutton,
Judith Gill &
Matthew Gearing
Russell On Arbitration (2007) 3
Gary B. Born International Commercial Arbitration
(3d ed., 2009)
4
Jennifer M. Bund Force majeure Clauses: Drafting Advice for the CISG
Practitioner. Reproduced with permission of 17 Journal of
Law and Commerce (1998)
9
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | v
COMMENTARY
Huber/Mullis The CISG: A new textbook for students and practitioners
(Baker&McKenzie)
7, 10
Larry A Dimateo
et.al.
A Critical Analysis of CISG Jurisprudence 10
Secretariat
Commentary
9
U.Huber/Widmer
U.Huber/Widmer, in: Schlechtriem/Schwenzer 19
AWARDS
Magnesium case ICC Court of Arbitration, award No. 8324/1995
(http://cisgw3.law.pace.edu/cases/958324i1.html)
4
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | vi
TABLE OF ABBREVIATIONS
ADR Alternative Dispute Resolution
Art. Article
Bger. Bundesgerichtshof (Germany)
Ch. Chapter
Cir. Circuit (U.S. Court of Appeals)
CISG United Nations Convention on Contracts for the International Sales of
Goods, Vienna, 1980
CLOUT Case Law on UNCITRAL Text
Co. Coorporation
Dist. District
Doc. Document
Ed. Edition
et al. and others
FCA Federal Court of Australia
Id., Idem
Inc. Incoorporation
Kg Kilogram
Ltd. Limited
Mt Metric ton
No. Number
p. Page
Para. Paragraph
U.S. United States of America
US$ United State Dollars
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | vii
UN United Nations
UNCITRAL United Nations Commission on International Trade Law
v. Versus (Against)
E.D.N.Y Eastern District of New York
S.A. Société Anonyme
E.U. European Union
Pte. Private
cf Compare
BV Betriebskostenverordnung
LLC. Limited Liability Company
F.Supp. Federal Supplement (District Court Reports)
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | 1
STATEMENT OF FACTS
2008
21 March CLAIMANT and RESPONDENT enter Sales Contract No. 03162.
Early-April CLAIMANT delivers 900 mt to RESPONDENT.
Mid-April Choline Chloride Price fell drastically.
25 April RESPONDENT sends a fax to CLAIMANT to inform that RESPONDENT
may want to postpone taking up the balance. CLAIMANT replies
RESPONDENT’s fax with an email to inform that CLAIMANT is currently
working with his suppliers for raw material.
29 April RESPONDENT send an email to CLAIMANT to cease the business due to
the decreasing market price of Choline Chloride. CLAIMANT replies
RESPONDENT’s email to inform that CLAIMANT‟s factory is discussing the
raw material prices with the major suppliers. CLAIMANT is informed about
RESPONDENT‟s wish to cease the business.
8 May RESPONDENT sends an email to CLAIMANT that the remains quantity
will be cancelled due to because CLAIMANT‟s price is no longer workable.
CLAIMANT replies RESPONDENT’s email to offer RESPONDENT a
$5.00/mt discount. RESPONDENT replies CLAIMANT’s email to rejects
CLAIMANT‟s offer of discount.
21 May CLAIMANT sends an email to RESPONDENT to make further offer of
discount to the RESPONDENTS of US$5.00/mt. CLAIMANT has a
telephone conversation with RESPONDENT.
23 May CLAIMANT has a telephone conversation with RESPONDENT. Both
parties agreed to settle the dispute by discussing it and never let them go to
serious fights in court. Thus, RESPONDENT sends an email to
CLAIMANT to rejects CLAIMANT’s offer of discount again as in
RESPONDENT belief notices that Best Deal‟s office had sent were only meant
as formal records and not intended to form basis of legal action.
26 May CLAIMANT sends a fax to RESPONDENT to inform RESPONDENT that
CLAIMANT has been notified about RESPONDENT‟s cancellation of the
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | 2
entire outstanding contract based on sales contract No. 03162. RESPONDENT
has the time to change his mind whether to complete the contract until 26 May
2008, 1700 hours.
29 May CLAIMANT sends a fax to RESPONDENT attached with Debit Note No.
ARD03/05/5030.
30 June Expires date of contract.
2 July CLAIMANTS submit the payment of unutilized printed packing bags.
3 July CLAIMANT sends a fax to RESPONDENT to warned RESPONDENT
about legal process.
2009
13 August CLAIMANT sends a letter to RESPONDENT to demand payment
immediately. CLAIMANT will commence arbitration proceedings, if
RESPONDENT does not reply within 7 days from date hereof.
13 August CLAIMANT sends a letter to Chairman of SIAC to request for Appointment
of Arbitrator.
20 August RESPONDENT replies CLAIMANT’s letter to refuse CLAIMANT‟s
Arbitration Request and will lodge with the arbitration tribunal counterclaim
arising out of an earlier Contract No 03159 dated 16 January 2008.
22 August CLAIMANT replies RESPONDENT’s letter informing RESPONDENT that
CLAIMANT still lodge to arbitration.
30 October SIAC sends letters to CLAIMANT and RESPONDENT to inform that the
Chairman of the SIAC has appointed Mr. Arbitrator as the sole arbitrator.
1 November Preliminary meeting between Parties and Mr. Arbitrator.
2 December RESPONDENT ask Clarification from Mr. Arbitrator regarding Mr.
Arbitrator‟s relationship with Mr. BEST DEAL Counsel and his wife.
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | 3
SUMMARY OF ARGUMENTS
A. THIS TRIBUNAL HAS NO JURISDICTION AS BOTH PARTIES HAD NOT
FULFILLED THE CONDITIONS PRECEDENT TO ARBITRATION
This tribunal has no jurisdiction to entertain the present case. CLAIMANT alleges that both
parties are bound by the Arbitration Agreement, but even so neither had fulfilled the condition
precedent to arbitration. Therefore, this tribunal should be dismissed.
B. CLAIMANT COULD NOT RELY IN ARTICLE 74 CISG FOR RESPONDENT
COULD NOT HAVE FORESEEN SUCH BREACH AT THE CONCLUSION OF
CONTRACT NO. 03162
Without any means of waiving point, the tribunal when commenced, should not grant
CLAIMANT‟s claim which is allegedly based on article 74 CISG. The production cost of the
packing bags was unforeseeable to RESPONDENT and as to any reasonable person. As to the
provision‟s foreseeability requirement remained unfulfilled, RESPONDENT is excused from all
damage claims due to Force Majeur.
C. CLAIMANT HAD BREACHED CONTRACT NO. 03162 BY FAILING TO DELIVER
THE GOODS ON TIME (Art.30 and Art. 33 CISG)
As said in Contract No. 03162, there would be delivery installed each month even without
confirmation by the RESPONDENT. Thus, Claimant had breached Contract No. 03162 by
failing to deliver the goods on time.
D. CLAIMANT HAD BREACHED CONTRACT BY NON-CONFIRMITY GOODS
DELIVERY (Article 35 CISG)
According to article 35 CISG, CLAIMANT‟s obligations must what is what determined in the
contract. However in fact the goods delivered to RESPONDENT were not in same quality
promised in the contract. Therefore, CLAIMANT had breached the contract by delivering non-
conformity goods and thus liable to RESPONDENT in damages.
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | 4
ARGUMENT ON JURISDICTION
I. THIS TRIBUNAL HAS NO JURISDICTION TO ENTERTAIN THE PRESENT
CASE
1. This arbitral tribunal has no jurisdiction in the present case as there is no arbitration
agreement between the parties. CLAIMANT and RESPONDENT have mutually cancelled
The Sales Contract Number 03162 dated 21 March 2008 (hereinafter “Contract No.
03162”) via telephone on 23 May 2008.1 Subsequentely CLAIMANT and RESPONDENT
agreed to form a New Contract2 in which contain no arbitration agreement.
Consequently
CLAIMANT and RESPONDENT have no obligation to submit this case to arbitration since
there is no arbitration agreement [A]. Additionally, the application of separability doctrine
remains in the present case because the New Contract does not contain arbitration clause. In
any event should the separability doctrine be applied, CLAIMANT and RESPONDENT had
not conducted any negotiation which is the condition precedent to arbitration [B].
A. CLAIMANT and RESPONDENT Are Not Bound by The Arbitration Agreement
2. On 23 May 2008, CLAIMANT and RESPONDENT, via telephone conversation, agreed to
cancel Contract No. 03162 and replaced it with a new contract3 (hereinafter “New
Contract”). The New Contract concerns a deal in which RESPONDENT would sort out the
problems regarding the contaminated products of the January in Contract No. 031594 and
CLAIMANT would in turn sort this contract.5 According Art. 29(1), Model Law
UNCITRAL, it is enough for a modification or termination of Contract No. 03162 to have
the mere agreement of the parties,6 either orally, in writing, by acts, or even by silence or
1 Doc. C/11-13.
2 New contract made by CLAIMANT and RESPONDENT on 23 May 2008 concerning a deal in which RESPONDENT would sort
out the problems regarding the contaminated products of the January in Contract No. 031592 and CLAIMANT would in turn sort this
Contract No. 03162. The New Contract then replaced the applications of Contract No. 03162 ad Contract No. 03159. 3 See Doc. C/11-13.
4 Contract No. 03159 is a contract between CLAIMANT and RESPONDENT dated 16 January 2008.
5 Witness Statement of Filip Van Hauten, para. 12.
6 Raw Materials Inc. v. Manfred Forberich GmbH & Co., No. 03 C 1154, 2004 U.S. Dist. LEXIS
12510 (N.D. Ill. July 6, 2004); Tribunale di Padova, Italy, 31 Mar. 2004, available at http://cisgw3.law
.pace.edu/cases/040331i3.html; Bezirksgericht Sissach, supra note 19.
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | 5
inaction.7 This means the agreement between both parties regarding the New Contract, is
enough to replace both Contract No. 03162 and Contract No. 03159.
3. The New Contract does not contain an arbitration clause. The New Contract only
demonstrates the mutual consent of both parties to solve the problems arising out under
Contract No. 03162 and Contract No. 03159. Nothing is stipulated under the New Contract
that both parties agreed to bring any future disputes to arbitration. Therefore CLAIMANT‟s
assertion regarding the obligation to arbitrate is unfounded.
4. Furthermore, the arbitration clause in Contract No. 03162 can neither be applied in the
present case, because the sentence “any dispute in connection with...”8 which is considered
as broad-form arbitration clause9 was limited only to conditions in connection with Contract
No. 03162 or its execution. On the other hand, the dispute between both parties are
regarding to the application of the New Contract. The New Contract has put new obligations
between both parties with the respect to Contract No. 03162 and Contract No. 03159, thus
its scope is different with the scope of arbitration clause in Contract No. 03162. Hence,
arbitration clause in Contract No. 03162 cannot be applied in this case, since New Contract
and arbitration clause in Contract No. 03162 have different concerns which make different
scopes of application between them.
5. Even if the arbitration clause in Contract No. 03162 can be applied in this case, the problems
arising out of Contract No. 03159 shall be solved as well in the same arbitration with the
problems arising from Contract No. 03612. This is because the New Contract has eliminated
the boundaries between those two Contracts, thus the scope of the New Contract will include
any dispute arising under Contract No. 03162 and Contract No. 03159. Therefore, the
settlement for disputes arose under Contract No. 03162 and Contract No. 03159 shall be
held at the same arbitration since those disputes are related to each other.
B. Even If CLAIMANT and RESPONDENT Are Bound by The Arbitration
Agreement, Both Parties Had Not Fulfilled The Condition Precedent to Arbitration
7CLOUT Case No. 422 [Oberster Gerichtshof, Austria, 29 June 1999], available at http://cisgw3.law.pace.edu/cases/990629a3.html.
8 See the arbitration clause in Doc. A/8.
9 CLAIMANT Memorandum, para. 8.
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | 6
6. The arbitration clause in Contract No. 03162 stated that “Any dispute... shall be settled
through friendly negotiations between two parties, if not... shall be referred to an arbitrator
or arbitrators...” RESPONDENT interprets this clause as a multi-step alternative dispute
resolution clause (hereinafter “multi-step ADR clause”)10
where there is a condition
precedent to arbitration which is friendly negotiations. In essence, if a party wishes to start
arbitration proceedings, it must first negotiate with the other party in order to try to reach an
amicable solution to the dispute.11
7. In cases where Contract No. 03162 is governed by the CISG, the relevant provisions of the
CISG also determine whether the arbitration or forum selection clause was validly agreed
upon.12
Article 8 (1) CISG, provides a guideline in which statements and other conduct of a
party shall be interpreted according to his intent, as long as the other party knew or could not
have been unaware of that intent. The plain language of the Convention, therefore, requires
an inquiry into a party‟s subjective intent as long as the other party to Contract No. 03162
was aware of that intent13
or could not have been unaware of it.14
8. In determining a party‟s intent or the understanding a reasonable person would have had,
due consideration is to be given to all relevant circumstances of the case. Such
circumstances specifically include15
the negotiations, any practices which the parties have
10
See D. Jason File, “United States: Multistep Dispute Resolution Clauses”, 3 Mediation Committee Newsletter 1 (IBA Legal
Practice Division), July 2007, at p. 36. 11
David St John Sutton, Judith Gill & Matthew Gearing, Russell On Arbitration (2007), at p. 48. 12
Filanto, S.p.A. v. Chilewich International Corp, 789 F. Supp. 1229 (S.D.N.Y. 1992), CLOUT Case No. 23 (CISG-online No. 45);
for the same approach in relation to a forum selection clause see Chateau des Charmes Wines Ltd. v. Sabaté USA, Inc., 328 F.3d 528 (9th
Cir. 2003); in favour of such an approach see also WOLFGANG DRASCH, EINBEZIEHUNGS- UND INHALTSKONTROLLE
VORFORMULIERTER GESCHÄFTSBEDINGUNGEN IM ANWENDUNGSBEREICH DES UN-KAUFRECHTS 49 (1999);
BURGHARD PILTZ, INTERNATIONALES KAUFRECHT § 2, ¶ 119 (1993). 13
CLOUT case No. 222 [Federal Court of Appeals for the Eleventh Circuit, United States, 29 June 1998] (internal citation in
quoted material omitted) (see full text of the decision); for other cases in which the part of article 8 (1) referred to in the text was cited,
see CLOUT case No. 313 [Cour d’appel Grenoble, France, 21 October 1999] (see full text of the decision); CLOUT case No. 268
[Bundesgerichtshof, Germany, 11 December 1996]. For an express reference to the “subjective” interpretation, see CLOUT case No. 429
[Oberlandesgericht Frankfurt, Germany, 30 August 2000], http://cisgw3.law.pace.edu/cisg/text/000830g1german.html. 14
For references to this part of article 8, paragraph 1, see CLOUT case No. 215 [Bezirksgericht St. Gallen, Switzerland, 3 July
1997] (see full text of the decision). 15
According to the Official Records of the United Nations Conference on Contracts for the International Sale of Goods, Vienna,10
March-11 April 1980 (United Nations publication, Sales No. E.81.IV.3), 18, the list to be found in article 8, paragraph 3 is not an
exhaustive list of elements to be taken into account in interpreting statements or other conduct by the parties.
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | 7
established between themselves, usages, and any subsequent conduct of the parties.16
Several decisions17
have noted that these criteria should be taken into account when
interpreting a statement or other conduct under the standards of article 8 (1) CISG.18
9. RESPONDENT‟s intention when making this arbitration agreement is to oblige both parties
with a condition precedent to arbitration which is friendly negotiations.19
This can be seen in
the telephone conversation on 23 May 200820
, where RESPONDENT was trying to make
sure that both parties agreed to not bring the dispute between them to arbitration tribunal nor
court, meaning that RESPONDENT wanted to solve the dispute as friendly as possible to
keep their long term business development. RESPONDENT‟s intention can also be seen by
his action in informing CLAIMANT about his situation and asking for reduction in price.
This means RESPONDENT always try to solve the problems with friendly ways.
10. Using the Guaspian21
classification scheme, a series of requirements must be met in order to
implement a negotiation clause that can be applied in this case, such as subjective
requirements22
, formal requirements23
, and requirements to prove compliance with the
obligation to negotiate24
. In this case, CLAIMANT considers telephone converstations
16
Id.; CLOUT case No. 106 [Oberster Gerichtshof, Austria, 10 November 1994]. 17
In arbitration, see ICC Court of Arbitration, award No. 8324/1995, published on the Internet at
http://www.unilex.info/case.cfm?pid=1&do=case&id=240&step=FullText. 18
CLOUT case No. 268 [Bundesgerichtshof, Germany, 11 December 1996], expressly stating that the elements referred to in article
8, paragraph 3 have to be taken into account when interpreting a statement or other conduct by a party in the light of article 8,
paragraph 1 (see full text of the decision). 19
See the arbitration clause in Doc. A/8. 20
Doc. C/11-13. 21
Jaime Guasp Delgado, Chaired Professor of Procedural Law, and author of, among other works: Comentarios A La Ley De
Enjuiciamiento Civil [Comments On The Civil Procedure Act] (1943); El Arbitraje En Derecho Español [Arbitration Under Spanish
Law] (1956), And Derecho Procesal Civil [Civil Procedural Law] (1956) (with Alonso P. Aragoneses, 6th ed. 2006). 22
A request to negotiate must be made by the party that has established the existence of the controversy and seeks to commence
the dispute resolution procedure agreed to by the parties. The request must be made by a representative of the company and addressed to
a duly authorized representative of the other party. However, it is normally sufficient for the request to be sent to the bodies or
individuals with whom contact has been maintained during, performance of the agreement. 23
In such a case, it seems logical that the request be made in writing to inform the receiving party of the exact nature of the
dispute (and to be able to prove compliance with the obligation to negotiate). Nothing prevents the request from being oral, but this
would raise significant problems of proof that negotiation was commenced, which could perhaps be resolved through affidavits or written
statements from the individuals who participated in the negotiation process. In any event, in international practice, parties avoid the use
of a verbal request alone and almost always make a written request. 24
As mentioned above, the request to negotiate is generally made in writing. Logically, one must prove not only that the
negotiation was initiated but also that it actually took place. Given that negotiation usually involves the exchange of letters, emails and
proposals, demonstrating this fact should not be difficult.
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | 8
between CLAIMANT and RESPONDENT on 21 May and 23 May, 2008 as negotiations.25
In fact, those telephone conversations can not be considered as negotiations because those
telephone conversations had not fulfilled the requirements to implement a negotiation
clause, as there were neither oral nor written request to negotiate made by both parties and
also there was no confirmation from both parties that they were negotiating at that time.
11. The multi-step ADR clause has similarly been considered to be a pactum de non petendo, a
temporary waiver of the right to commence arbitration until negotiation has ended.26
By
simply failing to initiate the negotiation phase, a party could avoid arbitration and take the
case to court.27
The arbitral tribunal that rendered the award would be lack of jurisdiction,
thus its decision is void from the outset. In the White v. Kampner case, “the parties were
required to participate in the mandatory negotiation sessions prior to arbitration.”28
In this
case, CLAIMANT and RESPONDENT had not conducted any proper negotiations,
therefore, in the best interests of the both parties, the arbitration proceedings should be
suspended, then send the parties to negotiation and to resume the proceedings if the
negotiations fail.29
12. Even if the telephone conversations are considered as negotiations, CLAIMANT has acted
in contrast with the deal agreed on 23 May 2008. CLAIMANT and RESPONDENT made a
deal not to bring the case to arbitration court. By instituting the arbitration proceeding
CLAIMANT had breached the negotiation outcome. Consequently the arbitration shall not
be proceeding since this tribunal does not have the jurisdiction due to the parties‟ waiver
under the negotiation.
25
CLAIMANT Memorandum, para. 8 26
See KLAUS P. BERGER, “Law and Practice of Escalation Clauses,” 22 ARBITRATION INTERNATIONAL 1 (2006), at p. 5; In
HIM Portland LLC v. DeVito Builders Inc.,26
the First Circuit Court of Appeals held that: “... [u]nder the plain language of Contract No.
03162, the arbitration provision is not triggered until one of the parties requests mediation. Consequently, because neither party ever
attempted to mediate this dispute, neither party can be compelled to submit to arbitration.” 27
Gary B. Born, International Commercial Arbitration (3d ed., 2009), at p. 241. 28
641 A.2d 1381, 1387 (Conn. 1994). See also Handelsmaatschappij Vekoma BV (Netherlands) v. Maran Coal Corp. (US), Swiss
Federal Court (Bundesgericht), Civil Division I (August 17, 1995). 29
Cf. UNCITRAL Model Law on International Commercial Conciliation, art. 13, UN Doc. A/57/71, 2002, Annex I, at p. 6:
“Resort to arbitral or judicial proceedings: Where the parties have agreed to conciliate and have expressly undertaken not to initiate
during a specified period of time or until a specified event has occurred arbitral or judicial proceedings with respect to an existing or
future dispute, such an undertaking shall be given effect by the arbitral tribunal or the court until the terms of the undertaking have been
complied with, except to the extent necessary for a party, in its opinion, to preserve its rights. Initiation of such proceedings is not of
itself to be regarded as a waiver of the agreement to conciliate or as a termination of the conciliation proceedings.”
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | 9
ARGUMENT ON MERITS
II. CLAIMANT COULD NOT RELY IN ARTICLE 74 CISG FOR RESPONDENT
COULD NOT HAVE FORESEEN SUCH BREACH AT THE CONCLUSION OF
CONTRACT NO. 03162
13. In 2008, there was a series of bombing in Iraq and occurring SARs numbers in China. EU
health authorities on January 2008 even declared that the earlier Choline Chloride provided
by CLAIMANT (from earlier contract) were contaminated and partly destroyed.30
CLAIMANT‟s first delivery of 900 metric ton of Goods on early April 2008 incurred a huge
loss to RESPONDENT as the goods were quarantined in many ports31
. This inevitable
condition leaded the Chinese manufacturers to drop their Choline Chloride price drastically
making the original price in the Contract much higher compared with the current market
price. When the contractual price was US$ 575 per metric ton and the market price was US$
510 RESPONDENT had asked CLAIMANT to renegotiate the price. However CLAIMANT
only offered a stringent discount. These bargaining processes were fruitless. Ultimately on
28 May 2008 both parties mutually agreed to cancel the Contract. On 28 May 2008 the
market price for the Goods was US$ 545 per metric ton. At that time, RESPONDENT had
already suffered a damage because of CLAIMANT‟s late delivery for the goods were
supposed to be delivered by early May. Eventually on 3rd of July 2008, CLAIMANT charged
a sum of US$ 90,320 on RESPONDENT‟s behalf for the cost of the printed packaging bags,
which was not said in Contract 03162.
14. If all of the requirements are met article 74 CISG will grant a full compensation to the party
in damaged. In the present case, CLAIMANT is not entitled to full compensation because
the foreseeablity rule under Article 74 CISG is not met32
. For RESPONDENT could not
have foreseen the incidents leading to the occurrence of the breach [A]. Furthermore,
RESPONDENT shall be excused from all damage claims due to force majeur [B].
30
This fact was already known by Claimant according to Thomas Song’s 31
Witness Statetement of Filip van Hauten (Prompt Pay), 3 Ovtober 2010. [Doc C, p. 6] 32
See P. Huber and A. Muis, The CISG, p. 268, para 4.
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | 10
A. The Production Cost of Packaging Bags Was Unforeseeable To RESPONDENT
And To Any Reasonable Person
15. CLAIMANT filed a claim of US$ 90,320 for the cost of packaging bags printed under the
name of Bollyboots B.V., a related company of RESPONDENT.33
CLAIMANT purported
that the RESPONDENT is under obligation to make payment for this cost. As will be
demonstrated below, this claim is unfounded.
16. Contract No. 03162 number 03162 dated on 21 May 2008 addressed that in times of a non
performance of Contract No. 03162, the aggrieved party is entitled to receive the washout
price, which is of 10% of the total contract value.34
This means the total contract value is the
sole factor to determine the washout price is. Consequently CLAIMANT cannot claim for
other expenses such as the packaging cost.
17. Furthermore it is impossible for RESPONDENT to have foreseen the occurrence of the sum
of damage that has been claimed by CLAIMANT. RESPONDENT and CLAIMANT had
never contracted for CLAIMANT to print custom designed packaging bags made purposely
for the purchase under Contract No. 03162, let alone to print it under the name of
RESPONDENT‟s subsidiary. In addition, Contract No 03162 also did not require for
RESPONDENT to pay for the packaging costs. Although there is a notice that a packing list
in two copies will be provided in following35
, Contract No. 03162 never said anything about
printed name on the packing bags. Contract No. 03162 only mentioned that the Goods will
be packed in 25 kg bags. Several Chinese Choline Chloride suppliers such as Cangzhou
Pangoo International Trade Co., Ltd36
; Shandong Levoda Chemical Co., Ltd.37
; and NB
Group Co. Ltd.38
are using the same amount per bags which are 25 kg of PEPA bags with
PE liners. PEPA bags or kraft paper bags is assumed to be the common bags used for
33
Fax from Thomas Song (Claimant) to Mr. Filip van Hauten (Respondent), 3rd of July 2008. [Doc B, p. 24] 34
See Contract No. 03162 between Best Deal Edible Oil Pte Ltd (Claimant) and Prompt Pay Inc (Respondent), dated 21/3/2008,
page 2. Other Terms of Trade, para. 5 35
See Contract No. 03162 between Best Deal Edible Oil Pte Ltd (Claimant) and Prompt Pay Inc (Respondent), dated 21/3/2008,
page 2. Other Terms of Trade, page 1, Unit Price. 36
Website: http://pangoo.en.made-in-china.com/product/roamBSYcgKhA/China-Choline-Chloride.html 37
Their product specifications of Choline Chloride on Corn Cob 60% available at: http://www.alibaba.com/product-
gs/331391531/Choline_chloride_60_corn_cob_feed.html 38
See http://biz.efeedlink.com/Products/110/c02b05cd-d074-4aad-aab0-40806bb62ff7.html
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | 11
shipping Choline Chloride by these Chinese suppliers. However, none of these suppliers
require their buyers to pay for the cost caused by printing a logo on the bags itself.
18. The amount asked by CLAIMANT for these bags are US$ 90,320, which would have been
covered by Contract No. 03162ual washout value. Therefore, RESPONDENT had not
foreseen that these bags would be also classified as damages. This condition is also
unforeseeable to any reasonable person under the same circumstances as RESPONDENT.
19. CLAIMANT shall not claim the costs of the packing bags because first, it is against the
agreed term of Contract No. 03162; And second, in any event, it was unforeseeable for
RESPONDENT know that CLAIMANT had provided the custom-printed packing.
Consequently based on the abovementioned reasons, the packaging cost shall not be
included in the reimbursement.
B. RESPONDENT is Excused from All Damage Claims Due To Force Majeur
20. Under certain circumstances, a party may be excused from performing its obligations in the
occurrence of impediment which is beyond the non-performing party's control.39
This CISG
„Doctrine of Excuse‟ is well recognized.40
This doctrine is contained in article 79 (1) CISG,
whereas it requires the party in breach to prove the unforeseeablility nature of the
consequences of the breach as a result of the impediment.
21. The sudden SARs outbreak leading EU health authorities to destroy a portion of Goods and
the decreasing price of Choline Chloride were unforeseeable by RESPONDENT.
RESPONDENT, as a regular customer to CLAIMANT, would not have expected to
purchase Goods that are said to be contaminated. In addition, RESPONDENT, like any
normal buyer, would not agree to a contract that would eventually cause more loss because
of the existence of huge price discrepancies. All these events were unenforceable.
22. Thus, CLAIMANT could not rely on article 74 CISG for claiming such damages for it does
not fulfill its prerequisites of foresee ability in accordance with article 79(1) CISG,
RESPONDENT shall be excused for not performing its obligations, and RESPONDENT
need not to reimburse all damages claimed by CLAIMANT.
39
Article 79(1) CISG. 40
Jennifer M. Bund, Force majeure Clauses: Drafting Advice for the CISG Practitioner. Reproduced with permission of 17 Journal of Law and Commerce (1998) 381-413. Available online at http://www.cisg.law.pace.edu/cisg/biblio/bund.html
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | 12
III. CLAIMANT HAD BREACHED CONTRACT NO. 03162 BY FAILING TO
DELIVER THE GOODS ON TIME (ART.30 AND ART. 33 CISG)
13. The obligation of CLAIMANT as a seller is governed by article 30 CISG. The “seller‟s
primary obligation is to deliver the goods”.41
As general rules, the delivery obligation can be
performed unilaterally by the seller without the need for the buyer‟s cooperation.42
CLAIMANT might argue that their failure to in making delivery on time was caused by the
absence of fixed schedule provided by RESPONDENT.43
However, CLAIMANT should
have delivered the goods, even though there was no confirmation from RESPONDENT in
accordance with general rule. Moreover, based on the “Contract”, CLAIMANT agreed the
delivery should be installed in each month (April, May, June 2008).44
Delivery terms had
agreed by both parties with the fix period, thus CLAIMANT should automatically delivered
the goods without waiting for a specific order from RESPONDENT. The time of delivery, it
is governed by the article 33 CISG. Under Contract No. 0316245
, there is only the period of
time which was April, May, and June 2008 of which CLAIMANT can deliver at any time
within that period.46
In principle therefore, it is for CLAIMANT to choose when during the
period he wishes to deliver.47
As delivery terms stated clearly, there would be delivery each
month even without confirmation by the RESPONDENT. For the second delivery was May,
thus within May 1th
to May 31th
2008, CLAIMANT should delivered the goods.
14. In any event the absent of fixed schedule from the RESPONDENT was caused by
CLAIMANT. Based on Contract No. 0316248
, the delivery terms do not require the seller to
obtain insurance of the goods during carriage, and then he must nonetheless provide the
buyer with “all available information necessary to enable him to effect such
insurance”.49
When the market price was falling suddenly, RESPONDENT requested
41
Secretariat Commentary, Art.. 29 para.1 42
U. Huber/Widmer, in : Schlechtriem/Schwenzer, Commentary, Art. 31 para.4 43
[Doc C 2/8] 44
[Doc A/7] 45
[Doc A/7] 46
Alastair Mullis, Commentary, Art. 33 (b), page 123, para. 2 47
U.Huber/Widmer, in: Schlechtriem/Schwenzer, Commentary, Art. 33 para. 9. 48
Id., 49
Larry A Dimateo et. all, A Critical Analysis of CISG Jurisprudence, page 103, art. 32 (3) CISG.
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | 13
CLAIMANT regarding price situation by fax on April 25th 2008.50
However CLAIMANT
did not give the information until May 2th 2008.51
Without the information of price
situation, RESPONDENT was not able to order the goods. Thus, at the time RESPONDENT
had insufficient information to provide shipment schedule or take delivery of goods.
15. In the case of FCF S.A. v. Adriafil Commerciale S.r.l.,52 the cantonal Appellate Court
considered that, on 8 July 1994, buyer had noted without protest that the goods would be
deliverable during the month of August 1994. Many tons of cotton Ne 16/1 and 8/1 had been
unloaded in Genoa on 7 August 1994 by the seller; nonetheless, these goods corresponded
only partly to the subject matter of Contract No. 03162, which required the delivery of
cotton Ne 8/1, 12/1, 16/1, 20/1 and 30/1. Seller did not succeed in establishing an offer to
buyer for the cotton that arrived at Genoa, nor did it ask the buyer to take delivery. If this
ruling is to be applied in the present case, CLAIMANT should delivered the next period by
May 1th 2008. In fact, CLAIMANT failed to deliver the goods at that time.
IV. CLAIMANT had breached the contract by non-conformity goods delivery in
accordance with Article 35 CISG (2)(b)
16. The goods that RESPONDENT received from CLAIMANT on the January product 2008 of
shipment did not fit with RESPONDENT‟s particular purpose (A). Therefore CLAIMANT
is liable to pay damages arising out form nonconforming goods (B).
A. The choline silica delivered did not conform with the RESPONDENT’s particular
purposes.
17. Article 35(2)(b) addresses the sale of goods in which the seller is aware of the particular
purpose for which the buyer will use the goods and the buyer is relying upon the seller to use
skill and judgment to provide the goods. In the present case RESPONDENT had made
known its particular purpose to the CLAIMANT upon the conclusion of the contract (1).
Therefore CLAIMANT could not have been unaware of such particular purpose (2). In
50
[Doc B/9] 51
[Doc B/14] 52
See BGer, 15 September 2000, CISG Online No. 4P.75/2000.
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | 14
fulfilling such particular purpose, RESPONDENT relies on CLAIMANT‟s skill and
judgment. (3)
1. RESPONDENT had made known
RESPONDENT‟s particular purpose is to have Choline Silica which can be sold in US
and EU Market. The European Union Health Authorities imposed a regulation which
limit the content of sodium salt for animal consumption. (BERAPA PERSEN??) The
unwanted transformation of Choline Silica into salt showed that the goods delivered were
not fit with the particular purpose as requireed under the contract.53
The nonconforming
products could not be sold to the market. Consequently even until mid April 2008,
RESPONDENT still had some of the January 2008 products unsold.54
Moreover, As at
mid-April 2008, Part of it was destroyed by EU health authorities for contamination and
the balance was sold as salt (for animal consumption) in Africa and Latin American
countries.55
Since some of the goods had been destroyed by EU due to contamination,
then the RESPONDENT could not sell it to Europe nor US as their market target.
2. The CLAIMANT is aware of the particular purpose for which the buyer will use
the goods
In this present case, CLAIMANT is aware or at least could not have been unaware of the
particular purpose for which the RESPONDENT will use the good.. For this trade was a
part of a routine contract.56
Moreover, the contract expressed clearly as to the quality of
the choline and the methode to assay the Choline57
.
3. RESPONDENT relied on CLAIMANT’s skill and judgment
On the contract, it is stated that they agreed to assay the Choline with Gravimetric
Methods which is one of the techniques that only the expert can do. Thus,
RESPONDENT trust that the CLAIMANT knows and is able to supply the qualities
necessary for this particular purpose.
53
[Doc C/12] 54
[Doc C/6 para.9] 55
Idem., 56
Statement of Thomas Song [Doc C/2] 57
[Doc A/7]
ALSA INDONESIA
MEMORANDUM FOR RESPONDENT | 15
B. CLAIMANT is liable to pay damages
18. In the case of Cortem SpA v Controlmatic Pty Ltd,58
Mr Venuti (Buyer) had made
known to Cortem (Seller) that his purpose was to sell the products into the Australian
market by way of wholesale trade. It seems clear that the goods were not fit for that
purpose, because they had not achieved TestSafe certification and, as Buyer later
discovered, they were incapable of certification in their then condition. The judge
decided, therefore, that, by the operation of Art 35(2)(b) of the Vienna Convention, these
products did not conform with the contract pursuant to which they were sold by Seller to
Buyer.
19. In Roland Schmidt GmbH v. Textil-Werke Blumenegg AG case,59
the issue of whether
a Spanish paprika seller had to certify that its product complied with the German Food
Safety Laws demonstrates this nuance. The court found that the seller had prior
knowledge of the laws and, therefore, could not argue that it was ignorant of the
requirement that the goods comply with the German laws. The court held that because
the paprika contained more ethylene oxide than permitted under German law, the goods
failed to conform to the contract and specifically failed to meet the buyer‟s purpose
known to the seller
20. Similiarly with this case, RESPONDENT suffered from the same non-conformity goods
problem. RESPONDENT expected to sell the goods in the EU member‟s countries and
US, while the goods did not pass the test by the EU health authorities. Then
RESPONDENT discovered later that the goods were turn out to be Salt. Thus, it can be
concluded that CLAIMANT had delivered the non-conformity goods in accordance to
Art. 35 (2)(b) Vienna Convention Act (CISG).
21. For the foregoing reasons,CLAIMANT is liable to RESPONDENT in damages
quantified for US$300.000 being the estimated amount RESPONDENT had suffered due
to the contamination in the previous shipment under Contract 03159.
58
CORTEM SPA V CONTROLMATIC PTY LTD [2010] FCA 852 (13 AUGUST 2010) ON HTTP://WWW.AUSTLII.EDU.AU/CGI-
BIN/SINODISP/AU/CASES/CTH/FCA/2010/852.HTML
59 LG Elwangen, 1 KfH O 32/95, available at http://cisgw3.law.pace.edu/cases/950821 g2.html