memorandum for claimant · the arbitration clause found in the contract meets the formal and sub-...

Fourteenth AnnualWillem C. Vis International Commercial Arbitration Moot

30 March - 5 April 2007

Memorandum for Claimant

Rechtswissenschaftliche Fakultät der Universität Bern

Faculty of Law of the University of Berne

On Behalf of: Against:Equatoriana Office Space Ltd Mediterraneo Electrodynamics S.A.415 Central Business Centre 23 Sparkling LaneOceanside Capitol CityEquatoriana MediterraneoCLAIMANT RESPONDENT

Counsel:

Ralph Hauri - Silvia Meier - Martina Nüesch

Stefanie Pfisterer - Andrea Wigdorovits - Piotr Wojtowicz

Contents

Abbreviations IV

Authorities VI

A. Statement of Facts and Summary of Argument 1I. Statement of Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1II. Summary of Argument . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

B. The Tribunal has jurisdiction 3I. The arbitration clause found in the Contract meets the formal and sub-

stantive requirements of the lex arbitri . . . . . . . . . . . . . . . . . . . 41. The UNCITRAL Model Law is the lex arbitri . . . . . . . . . . . 42. The arbitration agreement meets the formal and substantive re-

quirements of Art. 7 UNCITRAL Model Law . . . . . . . . . . . 4II. The arbitration clause found in the Contract refers to the “Arbitration

Rules” of the Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51. The Parties agreed to submit their dispute to institutional arbi-

tration in Bucharest/Romania . . . . . . . . . . . . . . . . . . . . 5a) The Parties made a clear reference to Bucharest/Romania 6b) The Parties referred to institutional arbitration . . . . . 6

2. The Parties referred to the Court . . . . . . . . . . . . . . . . . . 7a) Since the Court is the only organization of its kind in

Bucharest, the arbitration clause can only refer to it . . 7b) The arbitration clause in the Contract must be inter-

preted in a way which renders it effective . . . . . . . . . 9c) The principle of interpretation contra proferentem leads

to no other conclusion . . . . . . . . . . . . . . . . . . . 9

I

3. Since the Parties did not agree on other rules, the “Rules of Arbi-tration” of the Court are applicable . . . . . . . . . . . . . . . . . 10a) The Parties referred to the “Rules of Arbitration” of the

Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10b) Even if the UNCITRAL Arbitration Rules were applica-

ble, the Arbitral Tribunal would still have jurisdiction . 11

C. The fuse boards delivered did not conform with the Contract under Art. 35CISG 12I. The fuse boards had to be equipped with JP type fuses . . . . . . . . . . 12

1. The Contract explicitly called for JP type fuses to be used . . . . 132. The fuse boards delivered did not conform with the Contract . . . 13

II. The fuse boards had to meet Equalec’s standards of connectability . . . . 141. Equalec’s standards of connectability were established as a partic-

ular purpose under Art. 35(2)(b) CISG . . . . . . . . . . . . . . . 142. Respondent was obliged to comply with Equalec’s requirements . 153. Claimant had reason to rely on Respondent’s skill and judgment . 174. The fuse boards delivered did not conform with the Contract . . . 18

D. The Contract was not amended 19I. A change of fuse type calls for an amendment of the Contract . . . . . . 19II. No agreement was reached during the telephone conversation of 14 July

2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201. An amendment must be based on a mutual agreement . . . . . . 202. The telephone conversation must be interpreted in the light of the

circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203. There was no agreement made during the telephone conversation . 21

III. The written form requirement for a valid amendment was not met . . . . 221. There was no written confirmation of the amendment pursuant to

Art. 29(2) CISG . . . . . . . . . . . . . . . . . . . . . . . . . . . 222. The written form requirement was not abandoned by the Parties . 22

IV. Respondent could not rely on Claimant’s conduct . . . . . . . . . . . . . 231. There was no conduct in terms of Art. 29(2) 2nd sentence CISG

that can be attributed to Claimant . . . . . . . . . . . . . . . . . 24

II

a) Claimant did not behave in a way that can be called“conduct” in terms of Art. 29(2) 2nd sentence CISG . . 24

b) In any event, Claimant’s behavior was not contradictory 252. Respondent could not assume Claimant’s behavior to mean ap-

proval of an oral amendment . . . . . . . . . . . . . . . . . . . . . 25a) Claimant’s conduct was not clear enough for Respondent

to rely on it as approval of an oral amendment . . . . . 25b) As only Respondent was interested in an amendment of

the contract, it could not rely on an oral amendment . . 26c) Since Respondent drafted the writing requirement clause

in the Contract, it could not rely on an oral amendment 273. In any event, Respondent could only rely on the agreement to

substitute the fuses to the extent JS type fuses could also be usedfor the intended purpose . . . . . . . . . . . . . . . . . . . . . . . 27

4. Consequently, the requirements of Art. 29(2) 2nd sentence CISGare not fulfilled; in any event Respondent bears the burden ofproving the contrary . . . . . . . . . . . . . . . . . . . . . . . . . 28

E. Claimant’s non-complaining to the Commission does not excuse Respon-dent 28I. Claimant had no obligation to file a complaint with the Commission . . . 30

1. Claimant’s alleged duty to make a complaint cannot be based onthe Contract, a usage, a practice or the principle of good faith . . 30

2. Respondent would in any event have been under a greater obliga-tion to act and make a complaint . . . . . . . . . . . . . . . . . . 30

II. The complaint would not have been objectively suited to make Respon-dent’s performance possible . . . . . . . . . . . . . . . . . . . . . . . . . 321. There are good reasons for Equalec’s policy . . . . . . . . . . . . 322. Due to the time constraints, making a complaint would, in all like-

lihood, not have been suited to make Respondent’s performancepossible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

F. Request for Relief 34

III

Abbreviations

Abbreviation Full Text§(§) paragraph(s)Arb. Int. Arbitration International (London)Art. ArticleBGE Entscheidungen des Schweizerischen Bundesgerichts (Decisions of

the Swiss Supreme Court)BGH Bundesgerichtshof (German Supreme Court)Bull. ASA Bulletin de l’Association Suisse de l’ArbitrageCdA Cour d’AppelCE Chat Electronicscf. conferCISG United Nations Convention on Contracts for the International

Sale of Goods of 11 April 1980Cl. Ex. Claimant’s ExhibitClaimant Equatoriana Office Space LtdCommission Equatoriana Electrical Regulatory CommissionContract contract of 12 May 2005Court Court of International Commercial Arbitration attached to the

Chamber of Commerce and Industry of Romaniae. g. exempli gratia (for example)ERA Equatoriana Electric Service Regulatory Actet al. et alii (and others)etc. et ceteraet seq(q). et sequen(te)s (and the following)fuse boards primary distribution fuse boardsi. e. id est (that is)ICC International Chamber of CommerceJDI Journal du droit international (Paris)

IV

Abbreviation Full TextKG KammergerichtNo. NumberOGH Oberster Gerichtshof (Austrian Supreme Court)p./pp. page(s)PO Procedural OrderQ. QuestionRev. arb. Revue de l’arbitrage (Paris)Rsp. Ex. Respondent’s ExhibitRespondent Mediterraneo Electrodynamics S.A.sent. sentenceSoC Statement of ClaimUN United NationsUNCITRAL United Nations Commission on International Trade LawUNCITRAL ML UNCITRAL Model Law on International Commercial Arbitration

as adopted on 21 June 1985US$ United States DollarUSDC United States District Courtv(s). versus (against)

V

Authorities

Books

Title Cited as

Berger, Klaus Peter, InternationaleWirtschaftsschiedsgerichtsbarkeit, Gruyter:Berlin et al. (1992).

Berger, page

Bernstein, Herbert/Lookofsky, Joseph,Understanding the CISG in Europe, 2nd edi-tion, Kluwer Law International: Cambridge(2003).

Bernstein/Lookofsky, page

Bianca, Cesare Massimo/Bonell,Michael Joachim, Commentary on theInternational Sales Law, Giuffrè: Milan(1987).

Bianca/Bonell, Art. §

Brunner, Christoph, UN-Kaufrecht -CISG. Kommentar zum Übereinkommen derVereinten Nationen über den internationalenWarenkauf von 1980, Stämpfli: Bern (2004).

Brunner, Art. §

Craig, William Laurence/Park,William W./Paulsson, Jan, Inter-national Chamber of Commerce Arbitration,3rd edition, Oceana: Dobbs Ferry (2000).

Craig/Park/Paulsson, §

VI

Title Cited asEnderlein, Fritz/Maskow, Diet-rich/Strohbach, Heinz, InternationalesKaufrecht: Kaufrechtskonvention, Ver-jährungskonvention, Vertretungskonvention,Rechtsanwendungskonvention, Rudolf Haufe:Freiburg/Berlin (1991).

Enderlein/Maskow/Strohbach,Art. §

Fouchard, Philippe/Gaillard, Em-manuel/Goldman, Berthold On inter-national commercial arbitration, Kluwer LawInternational: The Hague (1999).

Fouchard/Gaillard/Goldman, page

Honnold, John O., Uniform Law for Inter-national Sales under the 1980 United NationsConvention, 3rd edition, Kluwer Law Interna-tional: The Hague (1999).

Honnold, Art. §

Lionnet, Klaus, Handbuch der inter-nationalen und nationalen Schiedsgerichts-barkeit, 3rd edition, Boorberg: Stuttgart(2005).

Lionnet, page

Schlechtriem, Peter/Schwenzer, Inge-borg, Commentary on the UN Convention onthe International Sale of Goods (CISG), 2nd(English) edition, Oxford University Press:Oxford/New York (2005).

Schlechtriem/Schwenzer (E), Art. §

Schlechtriem, Peter/Schwenzer, Inge-borg, Kommentar zum Einheitlichen UN-Kaufrecht, 4th edition, Beck: München(2004).

Schlechtriem/Schwenzer (G), Art. §

VII

Title Cited asvon Staudinger, Julius/Magnus, Ul-rich, Julius von Staudingers Kommentar zumBürgerlichen Gesetzbuch; mit Einführungsge-setz und Nebengesetzen, 13th edition, Sellierde Gruyter: Berlin (2005).

Staudinger/Magnus, Art. §

Witz, Wolfgang/Salger, Hanns-Christian/Lorenz, Manuel, Interna-tional einheitliches Kaufrecht: Praktiker-Kommentar und Vertragsgestaltung zumCISG, Recht und Wirtschaft: Heidelberg(2000).

Witz/Salger/Lorenz, Art. §

VIII

Articles

Title Cited asBlessing, Marc, Drafting an ArbitrationClause, in: Blessing Marc, The arbitrationagreement - its multifold critical aspects,ASA Special Series 1994, p. 32.

Blessing, page

Davis, Benjamin G., Pathological Clauses:Frédéric Eisemann’s Still Vital Criteria, Arbi-tration International (Arb. Int.), 1991, No. 4,p. 365.

Davis, page

Eisemann, Frédéric, La clause d’arbitragepathologique, in: Arbitrage Commercial - Es-sais im memoriam Eugenio Minoli, Unionetipografico - editrice torinese: Torino 1974,p. 129.

Eisemann, page

Karrer, Pierre A., Pathological Arbitra-tion Clauses - Malpractice, Diagnosis andTherapy, in: Vogt, Nedim Peter: The Inter-national Practice of Law; Liber Amicorum forThomas Bär and Robert Karrer, Helbing &Lichtenhahn: Basel et al. 1997, p. 109.

Karrer, page

Scalbert, Hugues/Marville, Laurent,Les clauses compromissoires pathologiques,in: Revue de l’arbitrage (Rev.arb.) 1988No. 1, p. 117.

Scalbert/Marville, page

IX

Title Cited asSchlechtriem, Peter, Noch einmal: Ver-tragsgemässe Beschaffenheit der Ware beidivergierenden öffentlich-rechtlichen Qual-itätsvorgaben, in: Praxis des Interna-tionalen Privat- und Verfahrensrecht, Giesek-ing: Bielefeld 2001, pp. 161 - 163.

Schlechtriem 2001, page

Schlechtriem, Peter, Vertragsmässigkeitder Ware als Frage der Beschaffenheitsvere-inbarung, Commenting on BGH 8 March1995, VII ZR 159/94, in: Praxis des Interna-tionalen Privat- und Verfahrensrecht, Giesek-ing: Bielefeld 1996, pp. 12 - 16.

Schlechtriem 1996, page

X

Internet Sources

Title and Website Cited asCommentary on the Draft Convention on Contracts for theInternational Sale of Goods prepared by the Secretariat;UN DOC. A/CONF. 97/5; available on <http://www.cisg-online.ch/cisg/materials-commentary.html>.

Secretariat Com-mentary, Art. §

XI

Case Law and Awards

AustriaOberster Gerichtshof Österreich, 13 April 2000

Case No.:2Ob100/00wcited as: OGH 2000

Oberster Gerichtshof Österreich of 27 February 2003Case No.: 2Ob48/02acited as: OGH 2003

FranceCour d’appel de Grenoble, 13 September 1995

Case No.: 93/4126cited as: CdA 1995

Cour d’appel de Paris, 7 February 2002SA Alfac vs. Société Irmac Importacão, comércia e industria LtdaSource: Rev. arb. 2002 No. 2, p. 413cited as: CdA 2002

GermanyBundesgerichtshof, 8 March 1995

Case No.: BGH VIII ZR 159/94, Miesmuschelfallcited as: Mussels Case

Bundesgerichtshof, 2 March 2005Case No.: BGH VIII ZR 67/03cited as: BGH 2005

XII

Kammergericht Berlin, 15 October 1999Source: Bull. ASA 2000, p. 367Cited as: KG Berlin, 1999

RussiaTribunal of International Commercial Arbitration at the Russian Federation Chamberof Commerce and Industry

Reference: 55/1998Source: http://www.cisg.law.pace.edu/cisg/wais/db/cases2/990610r1.htmlCited as: Russian Federation Chamber of Commerce and Industry, 1998

SwitzerlandBundesgericht, 21 November 2003

BGE 130 III 66Source: Bull. ASA 2004, p. 144Cited as: BGE 130 III 66

ad hoc Award, 30 June 1987Source: Bull. ASA 1997, p. 122Cited as: Interlocutory Award on Jurisdiction, 1987

Zurich Chamber of Commerce, 25 November 1994Europe vs. The Canadian affiliate of a Chinese GroupSource: Bull. ASA 1996, p. 303Cited as: Zurich Chamber of Commerce, 1994

Zurich Chamber of Commerce, 25 March 1996Case No. 287/95Source: Bull. ASA 1996, p. 290Cited as: Zurich Chamber of Commerce, 1996

XIII

Chamber of Commerce and Industry of Geneva, 29 November 1996Case No. 117Source: Bull ASA 1997, p. 534Cited as: Chamber of Commerce and Industry of Geneva, 1996

Chambre de commerce internationale siégant à GenèveICC Case No. 3460, 1980Source : Journal du Droit International (JDI) 1981 No. 1, p. 939Cited as : ICC Case No. 3460

United States of AmericaUnited States District Court, E.D. Louisiana, 17 May 1999

Medical Marketing International, Inc. v. Internazionale Medico Scientifia S.r.L.Case No.: CIV.A. 99-0380cited as: USDC 1999

XIV

A. Statement of Facts and Summary of Argument

I. Statement of Facts

Equatoriana Office Space Ltd (Claimant) is a developer of residential and business prop-1erties in Equatoriana. In the years of 2004 and 2005 it constructed Mountain View OfficePark (Mountain View) in the city of Mountain View, Equatoriana. The leases began on1 October 2005 (Rsp. Ex.No. 1 ).

To connect the buildings of Office Park to the incoming electrical supply, Claimant2needed to purchase five primary distribution fuse boards (fuse boards) designed for acurrent of less than 400 amperes. The fuse boards were to be connected to the electriccurrent by Equalec, the only electrical supplier in the Mountain View area.

On 22 April 2005 Mr. Herbert Konkler, Purchasing Director of Claimant, telephoned3Mr. Peter Stiles, Sales Manager of Mediterraneo Electrodynamics S.A. (Respondent)regarding the fabrication of five fuse boards. Respondent is a manufacturer and distri-butor of electrical equipment to the trade based in Mediterraneo. After having studiedthe design drawings, Mr. Stiles quoted a total price of US$168,000 for five fuse boards.The contract was signed by both parties on 12 May 2005 (Contract; Cl. Ex.No. 1 ).

On 14 July 2005 Mr. Stiles called Claimant. As Mr. Konkler was away on a4business trip and therefore not available, Mr. Stiles was referred to Mr. Steven Hart,Staff of Purchasing Department of Claimant. Mr. Stiles stated that Respondent hadrun out of the JP type fuses from Chat Electronics (CE) as called for in the contract.Respondent would not be able to procure them in time to fabricate the fuse boards forthe contractual delivery date of 15 August 2005 (Cl. Ex.No. 1 ). Mr. Hart explainedthat he did not have a lot of experience in handling electrical equipment for their projects(Rsp. Ex.No. 1 ). According to Mr. Stiles, they had three options: they could wait forCE to resolve its problems; they could use JP type fuses from a different manufacturer;or they could use JS type fuses from CE. A decision had to be made promptly to beable to meet the delivery date since the outside dimensions of JP type and JS type fuseswere slightly different and the fuse boards would have to be constructed differently.

1

A. Statement of Facts and Summary of Argument

As advised by Mr. Stiles, they decided to use JS type fuses from CE as this is thepreferred manufacturer of Claimant. Mr. Hart expected to receive a written request foran amendment of the Contract as called for by Art. 32 of the Contract, but he neverreceived it (Cl. Ex.No. 2 ).

On 22 August 2005 the fuse boards were shipped directly to the building site of5Mountain View. The personnel of General Construction Ltd installed the fuse boardson 1 September 2005. On 8 September 2005 the personnel of Equalec refused toconnect the fuse boards to the current. Their requirements, adopted in July 2003, calledfor JP type fuses to be used for currents with 400 amperes or less (Cl. Ex.No. 4 ).

Mr. Konkler called Mr. Stiles on 9 September 2005 to tell him about Equalec’s6refusal and to request new fuse boards that would comply with Equalec’s requirements.Mr. Stiles stated that they would not be able to procure JP type fuses from CE foranother few months. Mr. Konkler told him that under those circumstances Claimantwould buy elsewhere and hold Respondent responsible for the costs (Cl. Ex.No. 3 ).

Later on 9 September 2005 Mr. Konkler contacted Equatoriana Switchboard Ltd,7and it was able to deliver the correct fuse boards within three weeks for the price ofUS$180,000. The extra work needed to install the new fuse boards led to additionalcosts of US$20,000 (Cl. Ex.No. 3 ).

On 15 August 2006 Claimant submitted its claim to the Court of International8Commercial Arbitration attached to the Chamber of Commerce and Industry of Romania(Court). Claimant requests the payment of US$200,000, calculated on the basis ofUS$180,000 for the new fuse boards and US$20,000 extra costs.

On 4 September 2006 Respondent submitted its Answer challenging the Tribunal’s9jurisdiction. Should the Tribunal find it does have jurisdiction, Respondent requestedthe claim to be dismissed as unfounded.

2

B. The Tribunal has jurisdiction

II. Summary of Argument

The following shall demonstrate in law and fact that:10

• the Tribunal has jurisdiction to consider this dispute under the arbitration clausefound in the Contract [B.]

• Respondent did not deliver distribution fuse boards that were in conformity withthe contract as originally written [C.]

• the Contract was not validly amended to provide that JS type fuses should be usedin the fuse boards [D.]

• Respondent cannot be excused for failing to conform with the Contract becauseClaimant did not complain to the Equatoriana Electrical Regulatory Commission[E.]


Respondent contests the jurisdiction of the Court (Answer, §7) which was constituted11on the basis of the following arbitration clause (Cl. Ex.No. 1 ):

34. Arbitration. All disputes arising out of or in connection with this Con-tract, or regarding its conclusion, execution or termination, shall be settledby the International Arbitration Rules used in Bucharest. The arbitral awardshall be final and binding.

The Arbitral Tribunal shall be composed of three arbitrators.

The arbitration shall be in the English language. It shall take place inVindobona, Danubia.

Respondent puts forth the following objections: First, the meaning of the arbitration12clause is so unclear that it is a nullity (Answer, §15 ). In particular, it is unclear aboutwhich institution the clause refers to (Answer, §15). Second, even if the arbitration

3


clause referred to the Court, it would still be unclear which procedure should be followed,and especially unclear under which rules the Tribunal is to be constituted (Answer, §16 ).Claimant will demonstrate that the Tribunal has jurisdiction to consider this disputeunder the arbitration clause found in the Contract. Claimant submits as follows: First,the arbitration clause meets the formal and substantive requirements of the lex arbitri[B.I.]. Second, the arbitration clause refers to the Court [B.II.2.]. Third, the Partiesreferred to the “Rules of Arbitration” of the Court [B.II.3.].

I. The arbitration clause found in the Contract meets the formal

and substantive requirements of the lex arbitri

1. The UNCITRAL Model Law is the lex arbitri

The validity of the arbitration clause is determined by the lex arbitri. In the present13case this is the UNCITRAL Model Law on International Commercial Arbitration (UNCI-TRAL ML), since it is the law applicable at the seat of the arbitral tribunal, i. e. Danu-bia (SoC, §21 ). Even if the Contract’s choice of law provision referring to the law ofMediterraneo (Cl. Ex.No. 1 ) was intended to also include a choice of law with regard tothe lex arbitri (which, given the principle of autonomy of arbitration clauses, is usuallynot done, cf. Fouchard/Gaillard/Goldman, p. 222 ), the UNCITRAL ML would equallyapply (PONo. 2, Q. 1 ).

2. The arbitration agreement meets the formal and substantive requirements ofArt. 7 UNCITRAL Model Law

First, the formal requirement, i. e. the writing requirement of Art. 7(2) UNCITRAL14ML, is clearly met, since the contract containing the arbitration clause is in writing andsigned by both parties (cf. e. g. Rsp. Ex.No. 1 ).

Second, the substantive requirements of Art. 7(1) UNCITRAL ML are also met. The15intention of both parties to submit to arbitration is apparent from two facts. First thewording of the arbitration clause found in the Contract (“Arbitration”, “arbitral award”,“Arbitral Tribunal” and “arbitration shall. . . ,” cf. Cl. Ex.No. 1 ) is very clear, and secondRespondent first tried to implement its own arbitration clause (Rsp. Ex.No. 1 ). Further,the arbitration clause includes a specification of the legal relationship, which shall be the

4


subject of arbitration (“All disputes arising out of or in connection with this Contract. . . ,”cf. Cl. Ex.No. 1 ).

Conclusion: The arbitration clause found in the Contract meets the formal and16substantive validity requirements of the lex arbitri.

II. The arbitration clause found in the Contract refers to the

“Arbitration Rules” of the Court

The Tribunal has jurisdiction to decide this dispute under the arbitration clause found in17the Contract for the following reasons: First, the Parties agreed to submit their disputeto institutional arbitration [B.II.1.b)]. Second, according to a reasonable interpretation,the arbitration clause must be construed to refer to the Court [B.II.2.]. Third, the Partiesreferred to the Rules of Arbitration of the Court, which are applicable in internationalcommercial arbitration. This means in the absence of any other agreement betweenthe parties, no room is left for the application of the UNCITRAL Arbitration Rules[B.II.3.]. Consequently, Respondent’s challenge that the Tribunal has no jurisdictionmust be rejected.

1. The Parties agreed to submit their dispute to institutional arbitration inBucharest/Romania

Respondent argues that the reference to “International Arbitration Rules” of the arbitra-18tion clause found in the Contract does not refer to any existing set of rules of any arbitralorganization in Bucharest (Answer, §15 ). The simple lack of a verbatim reference to anexisting arbitration organization or to existing arbitration rules, however, does not initself mean that an arbitral procedure cannot take place.

Arbitration clauses that are technically deficient can be rescued if it is possible to19identify the intended institution (Craig/Park/Paulsson, §9.02 ). Where it is possible “toinfer an intention which is sufficiently coherent and effective to enable the arbitration tofunction”, the arbitration can take place (Fouchard/Gaillard/Goldman, p. 263 ). Diffi-culties arising out of technically deficient arbitration clauses can therefore be overcomeif the arbitration clause does not frustrate the harmonious exercise of the functions ofthe arbitration clause (Eisemann, p. 131; Davis, p. 379 ).

According to the practice of arbitral tribunals, arbitration clauses must satisfy three20

5


conditions to be able to be rescued (Zurich Chamber of Commerce, 1994; Zurich Cham-ber of Commerce, 1996; Chamber of Commerce and Industry of Geneva, 1996; Karrer,p. 119 et seqq.): First, the clause must clearly provide for arbitration as opposed tolitigation in ordinary state courts. Second, the arbitration clause must contain a ref-erence to a certain place. And third, the clause must clearly provide for institutionalarbitration as opposed to ad hoc arbitration that is not administered by any arbitralinstitution.

As stated above, the Parties clearly agreed to arbitration [cf. §15]. The clause also21includes a clear reference to a defined place, i. e. Bucharest/Romania [B.II.1.a)] andto an institutional arbitration [B.II.1.b)]. Consequently, the actual agreement of theParties rescues the deficient wording of the arbitration clause found in the Contract.

a) The Parties made a clear reference to Bucharest/Romania

It is clear from the arbitration clause in the Contract that the Parties agreed to arbitra-22tion taking place in Bucharest/Romania. Since the Parties chose Vindobona/Danubiaas the seat of the arbitration (Cl. Ex.No. 1 ), the reference to Bucharest/Romania mustbe referring to the place where the arbitration institution is located.

b) The Parties referred to institutional arbitration

In their Contract the Parties make reference to “International Arbitration Rules”. Usu-23ally, only arbitration institutions have arbitration rules (Rules of Arbitration of theInternational Chamber of Commerce; Swiss Rules of International Arbitration of theChambers of Commerce and Industry of Basel, Bern, Geneva, Ticino, Vaud and Zurich;DIS Arbitration Rules of the German Institution of Arbitration; LCIA Arbitration Rulesof the London Court of International Arbitration). Only the UNCITRAL ArbitrationRules are designed for ad hoc arbitrations (Preamble to the UNCITRAL ArbitrationRules; Berger, p. 42; Craig/Park/Paulsson, §4.04 ). That is why arbitration clausesproviding for arbitration under certain arbitration rules call for institutional arbitration(cf. Lionnet, p. 223 et seqq.).

Since the arbitration clause in the present case provides for “International Arbitration24Rules used in Bucharest”, it calls for institutional arbitration. It explicitly does not callfor the UNCITRAL Arbitration Rules because of the phrase “used in Bucharest”.

Moreover, arbitration clauses for ad hoc arbitration must contain an agreement on the25

6


appointing authority if the respondent fails to appoint an arbitrator (Lionnet, p. 159;Blessing, p. 52 et seqq.). Since that is not the case in the arbitration clause of theContract, there must be an institution administering the appointing mechanism.

2. The Parties referred to the Court

Arbitration clauses that fulfill the conditions of a clear reference to institutional arbitra-26tion in a certain place, but with no exact and verbatim reference to arbitration rules of anexisting arbitration institution, have to be interpreted (Zurich Chamber of Commerce,1994; Zurich Chamber of Commerce, 1996; KG Berlin, 1999; Interlocutory Award onJurisdiction, 1987; also Fouchard/Gaillard/Goldman, p. 254 ). Since the arbitrationclause found in the Contract refers to institutional arbitration in Bucharest/Romania,the exact meaning must be ascertained by means of interpretation.

Arbitration clauses must be interpreted according to well-known international princi-27ples (CdA, 2002; Fouchard/Gaillard/Goldman, p. 256; Berger, p. 118 et seqq.). Theseprinciples include the principle of interpretation in good faith, the principle of effectiveinterpretation and the principle contra proferentem. These principles are discussed inwhat follows.

Since the Court is the only organization in Bucharest, the arbitration clause must28be interpreted in that way [B.II.2.a)]. The arbitration clause in the Contract mustbe interpreted in a way which renders it effective [B.II.2.b)]. Even the principle ofinterpretation contra proferentem leads to no other conclusion [B.II.2.c)].

a) Since the Court is the only organization of its kind in Bucharest, thearbitration clause can only refer to it

First, the principle of interpretation in good faith, as one of the most accepted and most29important principles of interpretation, applies also to arbitration clauses (Zurich Cham-ber of Commerce, 1994; Fouchard/Gaillard/Goldman, p. 257 ). That principle aims atthe common intention of the parties, notwithstanding the contradictory wording of thearbitration clause (Fouchard/Gaillard/Goldman, p. 257 ). The arbitration clause mustthus be interpreted in the same manner as an “average honest and diligent businessman”would interpret it (Zurich Chamber of Commerce, 1994; BGE 130 III 66 ). In addition,the principle of interpretation in good faith requires that the intentions of the partiesshould be examined, taking into account the consequences which the parties reasonably

7


envisaged and the attitude of the parties after the signature of the contract until thetime when the dispute arose (Fouchard/Gaillard/Goldman, p. 257 et seq.).

The arbitration clause at issue calls for the “International Arbitration Rules used in30Bucharest”. The arbitration shall therefore be administered by an arbitration institu-tion which is located in Bucharest/Romania. Since there is no other organization inBucharest than the Court that conducts international arbitration (PONo. 2, Q. 10 ),only the Court can be meant. Likewise, an Internet research with the search engineGoogle (<http://www.google.com/>) looking for the words “International ArbitrationRules used in Bucharest” leads to the homepage of the Court of International Commer-cial Arbitration (<http://arbitration.ccir.ro/>) and to no other arbitration institution.An average honest and diligent businessman in the position of Respondent must thereforeinterpret the arbitration clause of the Contract as referring to the Court of InternationalCommercial Arbitration attached to the Chamber of Commerce and Industry of Roma-nia.

The same conclusion of a reference to the Court results from a consideration of the31Parties’ intentions and their attitudes after the signature of the contract:

By referring to the “International Arbitration Rules used in Bucharest”, the Par-32ties wanted to make sure that disputes would be settled by an arbitration institutionthat conducts international arbitration and that is located in a place where neitherClaimant nor Respondent has its seat. The Court conducts international arbitration(PONo. 2, Q. 10 ); international arbitration make up twenty percent of the arbitrationconducted by it (PONo. 2, Q. 11 ). The Court is located in a neutral place, namelyBucharest/Romania, and therefore fulfills the requirements of the Parties.

Moreover, Mr. Stiles did not reject the arbitration clause: signing the Contract, he33noticed the arbitration clause in paragraph 34, but did not react (Rsp. Ex.No. 1 ). Laterhe asked Mr. Konkler about the arbitration clause, but did not reject it (Rsp. Ex.No. 1 ).An average honest and diligent businessman must conclude from that behavior thatRespondent did not object to the arbitration clause. This can also be deduced from theprevious arbitrations of Respondent. They were not all conducted under one precise setof arbitration rules (PONo. 2, Q. 15 ), which implies that Respondent does not rely onjust one specific arbitration institution.

In summary, the Court is the only institution the Parties can have intended. The34Court is therefore competent to administer the settlement of the Parties’ dispute byarbitration.

8


b) The arbitration clause in the Contract must be interpreted in a way whichrenders it effective

The second principle is the principle of effective interpretation. According to this prin-35ciple, the arbitral tribunal should prefer the interpretation which gives meaning to anarbitration clause, rather than rendering it useless (Fouchard/Gaillard/Goldman, p. 258et seq.; Karrer, p. 118; Scalbert/Marville, p. 118 ). In other words, the Tribunal mustassume that the parties intended to establish an effective machinery for the settlementof their disputes. The arbitration clause must therefore interpreted in a way giving ef-fect to that intention (Fouchard/Gaillard/Goldman, p. 259; ICC Case No. 3460; CdA,2002 ). The said principle is widely accepted as being a “universally recognized rule ofinterpretation” (Fouchard/Gaillard/Goldman, p. 259; ICC Case No. 3460; CdA, 2002 ).

In the present case the Parties clearly stated their intention to settle possible disputes36by arbitration [cf. §15]. Since the Court is the only organization offering the adminis-tration of international arbitration in Bucharest/Romania [cf. §30], the sole possibilityto render the arbitration clause of the Contract effective is to interpret it as meaningthat it provides for arbitration before the Court.

Respondent’s objection that the rules of the Court are not specifically labeled “Interna-37tional” Arbitration Rules is not solid. By using the term “international” in the Contract,the Parties demonstrated their intention to involve an organization that conducts inter-national arbitration, as the Court does [cf. §32]. It would be overly formalistic if theincorrect labeling of the arbitration rules rendered the arbitration clause ineffective inspite of the clear intention of the parties (Fouchard/Gaillard/Goldman, p. 284 et seqq.;Scalbert/Marville, p. 118; BGE 130 III 66 ).

c) The principle of interpretation contra proferentem leads to no otherconclusion

A third principle which may be used to interpret arbitration clauses is the principle of38interpretation contra proferentem (Fouchard/Gaillard/Goldman, p. 259; CdA, 2002 ).Pursuant to this principle, the arbitration clause should be interpreted against the partythat drafted the clause in dispute (Fouchard/Gaillard/Goldman, p. 259; CdA, 2002 ).

The principle of interpretation contra proferentem, however, is less frequently encoun-39tered in arbitral case law (Fouchard/Gaillard/Goldman, p. 259 ). In contract law theprinciple tends to be only applied if the other principles of interpretation do not lead to a

9


clear result (Brunner, Art. 8 §20 ). Since the two paramount principles of interpretationin good faith and of effective interpretation are sufficient to lead to the clear conclusionthat the Court has jurisdiction [B.II.2.a) and B.II.2.b)], the principle of interpretationcontra proferentem is superfluous.

Even if the Tribunal finds that the contra proferentem principle applies, it would40still have to rule that it has jurisdiction. Because in this case, Respondent drafted theContract (Answer, §5 ); the arbitration clause though was drafted by Claimant (An-swer, §5 ). It is therefore not appropriate to identify only one party as the draftingparty. Even if the Tribunal finds that Claimant should be regarded as the draftingparty, the principle of interpretation contra proferentem cannot apply: The Tribunalmust respect the intention of the Parties to settle their dispute by institutional arbi-tration in Bucharest/Romania. Since the Court is the only organization that conductsinternational arbitration in Bucharest/Romania [cf. §30], there is no other possible in-terpretation of the arbitration clause in the Contract than that it provides for arbitrationbefore the Court.

3. Since the Parties did not agree on other rules, the “Rules of Arbitration” ofthe Court are applicable

Respondent contests the applicability of the “Rules of Arbitration” and argues for the41application of the UNCITRAL Arbitration Rules (Answer, §16 ). Respondent’s argu-ment cannot be followed: The Parties referred to the “Rules of Arbitration” of the Court[B.II.3.a)]. Even if the UNCITRAL Arbitration Rules were applicable, the ArbitralTribunal would still have jurisdiction [B.II.3.b)].

a) The Parties referred to the “Rules of Arbitration” of the Court

The Court has adopted its own arbitration rules (Art. 5 J, 11, 13 DECREE-LAW42(Romania) No. 139/1990 ), as have other arbitration institutions [cf. §23]. Arbitrationbefore the Court would therefore normally mean arbitration under the Court’s “Rulesof Arbitration”.

According to Art. 72(2) Arbitration Rules, the parties are free to decide for other rules43of arbitral procedure. Other arbitration rules, however, would not be designed especiallyfor arbitration before the Court. The UNCITRAL Arbitration Rules, which Respondentmentions (Answer, §16 ), are designed specifically for ad hoc arbitration (Preamble to

10


the UNCITRAL Arbitration Rules; Berger, p. 42; Craig/Park/Paulsson, §4.04 ). Anystipulation that different arbitration rules other than the Arbitration Rules apply musttherefore be made in an evident way. This is especially true since the stipulation ofdifferent arbitration rules is an exception and rarely made by parties (PONo. 2, Q. 12 ).

In the present case there is no factual indication that the Parties had agreed, in the44case of a dispute, to apply the UNCITRAL Arbitration Rules. Art. 72(2) ArbitrationRules, however, would require such an agreement: The Parties did not explicitly choosethe UNCITRAL Arbitration Rules (Cl. Ex.No. 1 ). There is also no indication that therewas an implicit stipulation of the UNCITRAL Arbitration Rules, as the Parties agreedon “International Arbitration Rules”. Both arbitration rules in question, the ArbitrationRules and the UNCITRAL Arbitration Rules can be applied to international arbitra-tion (Chapter VIII Arbitration Rules; Preamble to the UNCITRAL Arbitration Rules).Moreover the Parties agreed on rules that are “used in Bucharest”. The UNCITRALArbitration Rules, however, are rarely used in Bucharest/Romania, because the Courtrarely conducts arbitration according to these rules (PONo. 2, Q. 12 ). Therefore, thearbitration clause in the Contract refers to the Rules of Arbitration of the Court.

b) Even if the UNCITRAL Arbitration Rules were applicable, the ArbitralTribunal would still have jurisdiction

Even if the Tribunal finds that the UNCITRAL Arbitration Rules are applicable, the45Tribunal still has jurisdiction. The procedure of appointment of arbitrators is the sameunder the UNCITRAL Arbitration Rules (Art. 7 ) as under the Rules of Arbitration ofthe Court (Art. 75(1) in connection with Art. 21 et seqq.), according to which the Arbi-tral Tribunal was appointed (cf. e. g. Arbitrator 1’s letter of 15 September 2006 ): In thecase where an arbitral tribunal is made up of three arbitrators, each party appoints onearbitrator (Art. 7(1) UNCITRAL Arbitration Rules; Art. 22(1) Rules of Arbitration ofthe Court). These two arbitrators select a presiding arbitrator (Art. 7(1) UNCITRALArbitration Rules; Art. 23 Rules of Arbitration of the Court). The appointment of theArbitral Tribunal would therefore also be correct under the UNCITRAL ArbitrationRules. Thus, even if the Tribunal finds that the UNCITRAL Arbitration Rules shouldapply in this arbitration, the Tribunal still has jurisdiction.

11

C. The fuse boards delivered did not conform with the Contract under Art. 35 CISG

Answer to Procedural Order No. 1, Question 1: The tribunal has jurisdic-46tion to consider this dispute under the arbitration clause found in the Con-tract because: the Parties agreed to submit their dispute to institutionalarbitration; the arbitration clause found in the Contract refers to the Court;and the Parties referred to the Rules of Arbitration of the Court.

C. The fuse boards delivered did not conform with

the Contract under Art. 35 CISG

First, the following substantive law issues are governed by the CISG. Pursuant to47Art. 1(1)(b) CISG, it is applicable if the rules of private international law lead to theapplication of the law of a contracting state. The Contract provides that Mediterraneanlaw is applicable (Cl. Ex.No. 1 ). Since Mediterraneo has ratified the CISG without anydeclarations (PONo. 2, Q. 6 ), it is applicable without restriction. This fact is undisputedbetween the parties.

In the following, Claimant will demonstrate that the fuse boards equipped with JS48type fuses delivered by Respondent were not in conformity with the Contract. First,the Contract explicitly called for fuse boards equipped with JP type fuses accordingto Art. 35(1) CISG [C.I.]. Second, pursuant to Art. 35(2)(b) CISG, Respondent wascontractually obliged to deliver fuse boards that complied with Equalec’s policy, whichcalled for fuse boards equipped with JP type fuses as the circuits were designed for lessthan 400 amperes [C.II.].

I. The fuse boards had to be equipped with JP type fuses

The Contract explicitly called for fuse boards equipped with JP type fuses. According49to Art. 35(1) CISG, the seller must deliver goods that meet the description required bythe contract. The descriptive notes on the engineering drawings read “Fuses to be “ChatElectronics” JP type in accordance with BS 88” (SoC, §9 ). Below it will be shown thatthis note was made part of the Contract and constituted a description of the required

12


fuse type [C.I.1.].Therefore, the fuse boards delivered did not conform with the Contractunder Art. 35(1) CISG [C.I.2.].

1. The Contract explicitly called for JP type fuses to be used

The engineering drawings were explicitly made part of the Contract (Cl. Ex.No. 1 ). The50descriptive notes were not only found on the same sheet of paper, but were also meant toexplain the engineering drawings, and to prevent any ambiguity regarding the fuse typeto be installed. The connection between the notes and the drawings is so strong thatthe notes constitute a part of the drawings. Thus, as part of the engineering drawings,the descriptive notes necessarily became part of the Contract.

Furthermore, the descriptive notes were legally binding, because of the real intentions51of both parties according to Art. 8(1) CISG. Claimant would like to make clear thatRespondent never questioned whether the descriptive notes were part of the Contractor not. It even called Claimant when it learned that it was not able to procure CE JPtype fuses in time and wanted to amend the Contract. This certainly makes it clear thatRespondent must have considered the descriptive notes as part of the Contract.

In addition, even according to the standard of a reasonable person in application of52Art. 8(2) CISG, the descriptive notes would have become part of the Contract. Clearly,such specifications are meant to be complied with or they would not have been made inthe first place. Any reasonable person would acknowledge that notes explaining drawingson the same sheet of paper are intended to be descriptions under Art. 35(1) CISG.

The text of the descriptive note “Fuses to be “Chat Electronics” JP type in accordance53with BS 88” is unambiguous and leaves no scope for either interpretation or misunder-standing. The explicit mention of a certain fuse type on engineering drawings thatconstitute part of the Contract can only be understood as a specific description of thegoods to be delivered.

2. The fuse boards delivered did not conform with the Contract

The descriptive note was part of the Contract and was to be understood as a specified54description of the fuse type. Only goods that are part of this specified category can besaid to conform with the Contract (Brunner, Art. 35 §5 ). Consequently, the deliveryof any type of fuses other than JP type does not meet the description under Art. 35(1)

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CISG. Therefore, the fuse boards delivered equipped with JS type fuses were not inconformity with the Contract.

Conclusion: As the fuse boards delivered were equipped with JS type fuses even55though the Contract explicitly called for JP type fuses, they did not comply with thecontractual description. Consequently, the goods delivered by Respondent were not inconformity with the Contract pursuant to Art. 35(1) CISG.

II. The fuse boards had to meet Equalec’s standards of

connectability

Respondent was obliged to deliver fuse boards equipped with JP type fuses, not only56because this was specifically required by the Contract. The non-conformity of the de-livered fuse boards also results from Art. 35(2)(b) CISG. Accordingly, Respondent wasobliged to deliver goods fit for any particular purpose made known to it at the time ofthe conclusion of the Contract if Claimant could reasonably rely on Respondent’s skilland judgment (Bernstein/Lookofsky, p. 85; Staudinger/Magnus, Art. 35 §26 ).

Claimant will demonstrate, that pursuant to Art. 35(2)(b) CISG, Equalec’s stan-57dards of connectability were established as a particular purpose under Art. 35(2)(b)CISG. That purpose was made known to Respondent at the conclusion of the Contract[C.II.1.]. Respondent was obliged to meet any requirements regarding connectabilityspecified by Equalec [C.II.2.] and Claimant was justified to have reasonable confidencein Respondent’s skill and judgment fulfilling this requirement [C.II.3.]. Consequently,non-compliance with Equalec’s policy constitutes non-conformity with the Contract,because the fuse boards were, in fact, not connectable [C.II.4.].

1. Equalec’s standards of connectability were established as a particularpurpose under Art. 35(2)(b) CISG

To establish a particular purpose pursuant to Art. 35(2)(b) CISG, it is sufficient that the58buyer indicates his or her intention to buy the goods for such a purpose (Bianca/Bonell,Art. 35 §2.5.2.). Claimant will show that, at the time of the conclusion of the Contract,Respondent could not have been unaware of the fact that Claimant was expecting toreceive fuse boards which would be connected by Equalec.

Fuse boards that cannot be connected to the electrical current cannot be used by59

14


Claimant for anything else, as they were especially designed for the circuits at MountainView. In addition, as Claimant is a developer of residential and business properties, Re-spondent, as its business partner, must have known that the fuse boards to be deliveredwere destined to be connected at this building site and were not for re-sale elsewhere.Thus, Respondent must have been aware of the fact that Claimant expected to receivefuse boards that would be connectable.

At the time of the conclusion of the Contract, Respondent knew that the fuse boards60were to be connected by Equalec. The engineering drawings made special reference toit in the descriptive note “To be lockable to Equalec requirements” (SoC, §9 ). Althoughthis phrase only meant that the fuse boards had to be lockable with a padlock (PONo. 2,Q. 21 ), it clearly indicates which electrical company was responsible for connecting thedelivered fuse boards to the current. Consequently, Respondent knew, in order to beconnected to the current, the fuse boards needed to comply with any requirement Equalecmight have.

Even without any explicit reference to Equalec in the drawings, Respondent could not61have been unaware of the fact that the fuse boards were to be connected by Equalec.The fuse boards were to be delivered to the building site of Mountain View, Equatoriana(Cl. Ex.No. 1 ). As Equalec has a monopoly in the region of Mountain View (PONo. 2,Q. 31 ), compliance with Equalec’s policy was the only possible way of connecting thefuse boards. This fact should have been known to Respondent as it has experience inexporting electrical supplies to Equatoriana (Rsp. Ex.No. 1 ).

2. Respondent was obliged to comply with Equalec’s requirements

As Respondent knew that the fuse boards were destined for connection in a region where62Equalec managed the electrical supply, compliance with its standards of connectabilitywas established as a particular purpose under Art. 35(2)(b) CISG. Knowledge of thedestination and any purpose of the goods must be considered as sufficient to oblige theseller to deliver goods in accordance with any requirements applying at this locationand hindering fitness of the established purpose. This opinion is not only supported bylegal commentators (Bernstein/Lookofsky, p. 84; Staudinger/Magnus, Art. 35 §34; sup-portive: Schlechtriem/Schwenzer (G), Art. 35 §17a), but also by Case Law (CdA 1995,OGH 2003, BGH 2005 ). Consequently, Respondent was obliged to find out whether anyof Equalec’s Requirements hindered fulfilling the established purpose (i. e. connectabil-

15


ity by Equalec). If Respondent failed to do so, any resulting non-conformity is at itsown risk (Schlechtriem 1996, p. 15 ).

The Tribunal may disagree with Claimant’s argumentation above that connectabil-63ity to Equalec was established as a particular purpose and be of the opinion that,even if the place of destination has been communicated to the seller, the standard ofthe seller’s country may have to be applied (Mussels Case; Brunner, Art. 35 §10;Witz/Salger/Lorenz, Art. 25 §10 ). Claimant will alternatively demonstrate that, inthe present case, Respondent is nonetheless obliged to comply with any requirementsEqualec may have due to special circumstances.

In the Mussels Case, the BGH elaborated the following rule: The seller is generally64not obliged to supply goods that conform to public laws and regulations enforced at thebuyer’s place of business. However, there are exceptions in three circumstances: first, ifthe public law and regulations of the buyer’s country are identical to those enforced inthe seller’s country; second, if the buyer informed the seller about any such regulations;or third, if due to “special circumstances,” such as the existence of a seller’s branchoffice in the buyer’s country, long-term business relationships, numerous exports to thecountry in question, advertisements in buyer’s country, etc., the seller knew or shouldhave known about the regulations at issue (Mussels Case; also USDC 1999 ).

The rules for public law requirements are also applicable to the policies of private65corporations, since only the factual effects of the non-compliance are decisive and notthe outer form of any requirements (Schlechtriem 1996, p.13 ). Hence, the general rule ofcompliance with public law requirements as elaborated by the German Supreme Court(BGH) and followed by parts of the doctrine (Brunner, Art. 35 §10; Witz/Salger/Lorenz,Art. 35 §10 ) is applicable to Equalec’s policy as well.

The present case is to be subsumed under the third exception “special circumstances”.66As will be explained below [cf. §70], Respondent has great experience in exportingto Equatoriana. This constitutes a “special circumstance” as required under the ex-ception. Numerous exports are explicitly accepted as “special circumstances” (MusselsCase; Witz/Salger/Lorenz, Art. 35 §10 ). In addition, Respondent’s knowledge aboutthe possibility of requirements [cf. §§70 and 71] would have obliged it to inquire whetherEqualec has any such requirements. The extent of this obligation to inquire does nothave to be discussed since the relevant information could be found on Equalec’s home-page (PONo. 2, Q. 24 ), and it is reasonable to expect Respondent would have lookedthere. The facts in the case at hand are clearly distinguishable from those in the Mussels

16


Case. Whereas in the Mussels Case the relevant regulations were neither legally bindingnor generally known, Equalec’s policy was justified and therefore effective, as will bedemonstrated later on [cf. §131], and was also widely communicated as well as easilyaccessible. That is why a different decision from that in the Mussels Case is appropriate.

In addition, the requirements for the assumption of an exception to this BGH rule67have been eased in recent years. It is likely that there will be a change in direction sooneror later, since jurisdiction is tending towards applying the standards in the buyer’s oruser’s country rather than the ones in the seller’s country (USDC 1999; OGH 2000; BGH2005 ). No explicit overruling of the Mussels Case has taken place yet, but exceptionshave been granted more easily and even the BGH itself decided that a seller had tocomply with the public law requirements in the buyer’s country (BGH 2005 ). Thischange in direction makes sense because of the increase in international trade and newinformation technologies. Hence, companies in international trade can be expected toknow about the relevant requirements of the foreign countries they deliver to.

Consequently, Respondent was obliged to deliver goods that complied with Equalec’s68requirements.

3. Claimant had reason to rely on Respondent’s skill and judgment

Respondent could be exempted from its obligation to comply with Equalec’s policy by69Art. 35(2)(b) 2nd sent., which grants the seller an excuse if it was unreasonable of thebuyer to rely on the seller’s skill and judgment. However, unreasonable reliance shouldonly be presumed if the skill or judgment capacity is not common in the seller’s branch(Bianca/Bonell, Art. 35 §2.5.3.).

Respondent had exported to Equatoriana before and quoted the Equatoriana Elec-70tric Service Regulatory Act (ERA). It was therefore aware of the general legislativeframework in Equatoriana. Art. 14 ERA states “There shall be no undue or unjustrequirements for providing such services” (Rsp. Ex.No. 1 ). This obviously means thatelectrical companies in Equatoriana are allowed to release due and just requirements.Thus, knowing the ERA, Respondent should have been aware of the fact that electricalcompanies are allowed to release separate requirements. Knowing that policies mightbe released would oblige it to at least check on what these policies are before produc-ing something destined for that particular area. The policy could have been found onEqualec’s homepage (PONo. 2, Q. 24 ) and was therefore easily accessible to Respondent.

17


It can be expected that a seller with Respondent’s knowledge and experience, would71have a look at the specific supplier’s website. This expectation is not unreasonable. Allthe relevant information is tightly connected with Respondent’s specific area of activity,namely distribution of electrical equipment to the trade.

In addition, reasonable reliance would only be denied if Claimant had more extensive72expert knowledge than Respondent (Schlechtriem/Schwenzer (G), Art. 35 §23 ). Re-spondent is a specialist in the manufacturing and distribution of electrical equipment,whereas Claimant is only a property developer. Thus Respondent can be expectedto have more specialized and broader knowledge than Claimant (Staudinger/Magnus,Art. 35 §33 ).

Accordingly, the need for the protection of Respondent does not outweigh the trust73Claimant was allowed to have in it. Respondent had previously exported to Equatoriana,knew about the general legislative framework in this country and had easy access to therelevant information. For these reasons, Claimant’s confidence in Respondent having theskill and judgment to be aware of any requirements released by Equalec was reasonable.

4. The fuse boards delivered did not conform with the Contract

The fuse boards delivered were equipped with JS type fuses. Equalec refused to connect74the fuse boards to the current because it had adopted a policy of only connecting JPtype fuses to circuits which are designed for 400 amperes or less (Cl. Ex.No. 4 ). Sincethe circuits in Mountain View were all designed for less than 400 amperes, the deliveredfuse boards did not comply with Equalec’s policy and were, therefore, not connectable.Pursuant to Art. 35(2)(b) CISG, the delivered fuse boards were not in conformity withthe Contract, because they were not fit for the particular purpose of being connectableto Equalec’s requirements (Secretariat Commentary, Art. 33 §7 ).

Conclusion: In order to conform with the Contract, Respondent had to deliver goods75that were fit for the particular purpose of meeting Equalec’s standards of connectabilityaccording to Art. 35(2)(b) CISG. As it was against Equalec’s policy to use JS typefuses for circuits designed for less than 400 amperes, the fuse boards delivered did notconform with the Contract.

Answer to PO No. 1, Question 2a: The fuse boards delivered did not con-76form with the Contract as originally written. The Contract explicitly called

18

D. The Contract was not amended

for JP type fuses. Additionally, the fuse boards had to comply with anyrequirement made by Equalec regarding connectability. Respondent hasbreached the Contract regarding both aspects.


Respondent claims that substituting JS type fuses for JP type fuses did not even consti-77tute an amendment (Answer, §§19 and 25a). In the event that the substitution shouldamount to an amendment, Respondent argues that the Contract was validly amendedsince Respondent relied upon Mr. Hart’s decision that JS type rather than JP type fusesshould be used (Answer, §§23 and 25b).

Claimant will show that substituting JS type fuses for JP type fuses constituted a78contractual amendment and would therefore need to be agreed on by the Parties [D.I.].However, there was no such agreement during the phone conversation of 14 July 2005[D.II.]. Moreover, such an amendment would have to be in writing according to theContract, which was not the case [D.III.]. In any event, Claimant is not precluded fromasserting the writing requirement clause pursuant to the Contract [D.IV.]. Consequently,no valid amendment was made and Respondent was still under obligation to deliver fuseboards with JP type fuses.

I. A change of fuse type calls for an amendment of the Contract

According to Art. 29(1) CISG, a contract may be modified. Many of the modifi-79cations envisaged by this provision are technical modifications in specifications (Sec-retariat Commentary, Art. 27 §3 ). Any modification, supplementation, or termina-tion to a contract of sale under the scope of the CISG also constitutes an amendment(Schlechtriem/Schwenzer (E), Art. 29 §2 ). Hence, modifications in specifications con-stitute an amendment in terms of the Contract.

In the present case, the Contract expressively called for JP type fuses (Cl. Ex.No. 1 ).80Using any other fuse type did not conform with the Contract [cf. §55]. Substituting

19


another type of fuse (e. g. JS type fuses) for JP type fuses is an amendment in terms ofArt. 29(1) CISG.

Conclusion: As only JP type fuses conform with the Contract, a change of fuse type81calls for an amendment of the Contract.

II. No agreement was reached during the telephone conversation

of 14 July 2005

A contract can be modified by the mere agreement of the Parties [D.II.1.]. The question82as to whether an agreement was reached must be considered in view of the circumstances[D.II.2.]. In the present case, there was no agreement during the telephone conversationof 14 July 2005 [D.II.3.].

1. An amendment must be based on a mutual agreement

According to Art. 29(1) CISG, a contract may be modified or terminated by the83mere agreement of the parties. The parties therefore have the right to modify a con-tract, but the modification must be based on a mutual agreement (Staudinger/Magnus,Art. 29 §7 ). The formation of a modifying agreement is based on the rules of the CISGregarding the formation of the contract (Staudinger/Magnus, Art. 29 §10; Schlecht-riem/Schwenzer (G), Art. 29 §2 ). An acceptance of an offer must be without anyreservation (Staudinger/Magnus, Art. 18 §7 ). The intention of the accepting party tobe bound by the agreement must be determined according to Art. 8 CISG, especiallyin light of the circumstances (Art. 8(3) CISG).

2. The telephone conversation must be interpreted in the light of thecircumstances

Because substituting JS type fuses for JP type fuses constitutes an amendment of the84Contract, it could only have become binding upon the Parties if it had been mutuallyagreed upon by both Parties. Respondent simply assumes that, during the telephonecall of 14 July 2005, Mr. Hart agreed that JS type fuses could be used (Answer, §25b).However, a closer review of the facts shows that such an assumption is baseless. Thetelephone call of 14 July 2005 must be interpreted in the light of the following circum-stances.

20


First, there is a clear difference in knowledge about electrical equipment between85Mr. Hart and Mr. Stiles. Mr. Stiles called Claimant on 14 July 2005. Mr. Hart,who answered the telephone, clarified that he was not particularly knowledgeable aboutelectrical equipment. Thereupon, Mr. Stiles explained the difference in JS type and JPtype fuses and why both types of fuses could be used. Since Mr. Hart was still not in aposition to decide, he asked Mr. Stiles for his recommendation (cf. Rsp. Ex.No. 1 ).

Second, Mr. Hart was urged to make a decision. Mr. Stiles called Claimant because86Respondent was not able to procure JP type fuses from CE in time to meet the deliverydate of 15 August 2005. Mr. Stiles presented the three possible actions that could betaken as a fait accompli : They could wait for CE to resolve the production problem, useJP type fuses from a different manufacturer or use CE JS type fuses (Rsp. Ex.No. 1 ).Mr. Stiles pointed out that if Claimant wanted to wait for CE JP type fuses, therewould be a delay of several months. Mr. Stiles said that the decision which type of fusesshould be used must be made promptly since the supports for the two types of fuseswere different because of the different fixing centers (Cl. Ex.No. 2 ). Mr. Stiles put Mr.Hart under pressure and urged him to decide there and then.

Third, Mr. Stiles made assurances regarding the usability of JS type fuses. Mr. Stiles87told Mr. Hart that up to 400 amperes either JP type or JS type fuses could be usedsince they were perfectly interchangeable (Rsp. Ex.No. 1 ).

3. There was no agreement made during the telephone conversation

Taking into consideration Mr. Hart’s ignorance and hesitation and that Mr. Stiles was88urging him to make an immediate decision, Mr. Hart’s behavior must be interpreted withcaution. It can not simply be deduced from his behavior that he approved any changein the Contract for which he was not responsible (Cl. Ex.No. 3 ). On the contrary, heactually left the decision to Respondent. Mr. Hart did not want to take responsibility.Respondent could not be unaware of that since Mr. Hart pointed out his ignoranceand was reluctant to decide. Consequently, Mr. Hart’s behavior cannot be seen as anunconditional agreement to an amendment of the Contract.

Moreover, and most importantly, Mr. Hart’s behavior must be seen in the light of Mr.89Stiles’ assurance that the JS type fuses would be usable. It was only after assurancethat JS type fuses could be used without any problem that Mr. Hart felt safe enoughto acknowledge that Mr. Stiles’ recommendation was probably the best way to proceed

21


(Cl. Ex.No. 2 ). Mr. Stiles’ assurances therefore constituted a condition for Mr. Hart’sreadiness to help Respondent to look for a solution to Respondent’s delivery problem.The correctness of the assurances must be deemed as at least an implicit condition forMr. Hart’s acceptance. As it turned out, Mr. Stiles’ assurance that JS type and JPtype fuses were perfectly interchangeable was incorrect. Hence Mr. Hart’s “acceptance”was based on false assumptions and thus ineffective.

Conclusion: Considering the gap in knowledge, time pressure and Mr. Stiles’ as-90surances, Mr. Hart’s behavior cannot be regarded as an unreserved acceptance. Conse-quently, there was no agreement to substituting JS type fuses for JP type fuses.

III. The written form requirement for a valid amendment was

not met

The Parties agreed in the Contract that they could only modify the contract in writing91(Cl. Ex.No. 1 ). Even if the Tribunal finds that the Parties agreed orally to substituteJS type fuses for JP type fuses, the amendment would not be valid since there wasno written confirmation of an amendment [D.III.1.] and the Parties had not agreed toabandon the written form requirement [D.III.2.].

1. There was no written confirmation of the amendment pursuant to Art.29(2) CISG

According to Art. 29(2) 1st sent. CISG, a contract which contains a provision requir-92ing any modification by agreement to be in writing may not be modified other than byagreement in writing. The written form requirement has the effect that oral modifica-tions are ineffective and the parties primary agreement remains binding (Bianca/Bonell,Art. 29 §2.3 ).

In order to fulfill the written form requirement of paragraph 32 of the Contract,93Respondent had to send a follow-up written confirmation of the phone conversation,which he failed to do. Without this written confirmation of the amendment, there wasno valid amendment of the Contract.

2. The written form requirement was not abandoned by the Parties

Under certain circumstances the written form requirement can be abandoned by both94

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parties (Schlechtriem/Schwenzer (G), Art. 29 §5; Witz/Salger/Lorenz, Art. 29 §15 ).However, the absence of a written confirmation alone cannot be regarded as an aban-donment of the written form requirement. A formless abandonment of the written formrequirement is contradictory to the object of Art. 29(2) 1st. sent. CISG (Schlecht-riem/Schwenzer (G), Art. 29 §5; Witz/Salger/Lorenz, Art. 29 §15 ). Therefore, if thisrequirement is to be abandoned, this must be done clearly and appropriately. In thepresent case, the circumstances clearly show that the written form requirement was notabandoned.

Claimant had no interest in the abandonment of the written form requirement. If95Respondent had sent a written confirmation, Claimant would have submitted it to itstechnical personnel (SoC, §13 ), who would have been able to foresee the problem.

Furthermore, the question of an abandonment was never discussed by the Parties. On96the contrary, Claimant expected a written confirmation of the telephone conversation(SoC, §12 ).

Conclusion: The written form requirement was not met since there was no written97confirmation and the Parties did not abandon the written form requirement.

IV. Respondent could not rely on Claimant’s conduct

Respondent claims that it relied on Mr. Hart’s oral agreement to use JS type rather98than JP type fuses (Answer, §§23 and 25b). It claims that there was an oral amendmentunder Art. 29(2) 2nd sent. CISG (Answer, §22 ). According to that provision a partymay be precluded by its conduct from asserting the written form requirement to theextent that the other party has relied on that conduct. Art. 29(2) 2nd sent. CISGintends to avoid abuse (Schlechtriem/Schwenzer (G), Art. 29 §10; Witz/Salger/Lorenz,Art. 29 §16 ), but it cannot be applied extensively.

Claimant will show that Art. 29(2) 2nd sent. CISG does not apply in the present case:99There was no conduct in terms of Art. 29(2) 2nd sent. CISG that can be attributed toClaimant [D.IV.1.]. Even if there was such conduct, Respondent could not have reliedon an oral amendment [D.IV.2.]. Additionally, Respondent could only rely on an oralamendment if Mr. Stiles assurances were correct [D.IV.3.].

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1. There was no conduct in terms of Art. 29(2) 2nd sentence CISG that canbe attributed to Claimant

Under Art. 29(2) 2nd sent. CISG a party is precluded by its conduct from asserting the100written form requirement if the other party has relied on that conduct. Art. 29(2) 2ndsent. CISG therefore calls for reliance-inducing “conduct” (Schlechtriem/Schwenzer (G),Art. 29 §10; Witz/Salger/Lorenz, Art. 29 §16 ). However, in the present case there isno such conduct, since Claimant did not behave in a way that can be called “conduct”in terms of Art. 29(2) 2nd sent. CISG [D.IV.1.a)]. In any event, Claimant’s behaviorwas not contradictory [D.IV.1.b)].

a) Claimant did not behave in a way that can be called “conduct” in terms ofArt. 29(2) 2nd sentence CISG

The kind of conduct that will lead to a preclusion of asserting the written form require-101ment is not specified by Art. 29(2) 2nd sent. CISG (Bianca/Bonell, Art. 29 §2.4 ).As example of reliance-inducing conduct in terms of Art. 29(2) 2nd sent. CISG, doc-trine often quotes uncontradicted compliance according to the oral modification of thecontract (Secretariat Commentary, Art. 27 §9 Ex. 27a; Schlechtriem/Schwenzer (G),Art. 29 §10 ). The quoted example shows that the sole oral agreement to a modificationdoes not comply with the requirements of “conduct” according to Art. 29(2) 2nd sent.CISG. Thus an additional conduct to provide confidence is needed (Witz/Salger/Lorenz,Art. 29 §16; Honnold, Art. 29 §204 ).

In this case, Respondent proposed an oral modification of the contract (SoC, §12 ).102Claimant did not oppose the proposal, but did not confirm it or behave in any waythat could lead Respondent to assume that Claimant accepted the oral amendment ofthe Contract. Claimant simply remained passive. The fact that Claimant initiated thebank transfer cannot be taken into consideration since that was only after Respondent’sdelivery of 22 August 2005 (Answer, §11 ) and therefore only after the asserted relianceby Respondent. Moreover, the bank transfer did not occur in connection with themodification of the oral contract. Thus, Claimant’s behavior cannot be deemed asreliance-inducting “conduct” in terms of Art. 29(2) 2nd sent. CISG.

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b) In any event, Claimant’s behavior was not contradictory

Since Art. 29(2) 2nd sent. contains the exception of abuse and corresponds to the prin-103ciple of “venire contra factum proprium” (Witz/Salger/Lorenz, Art. 29 §16; Schlecht-riem/Schwenzer (G), Art. 29 §10 ), only behavior that is contradictory can be deemedas “conduct” in terms of Art. 29(2) 2nd sent. (Witz/Salger/Lorenz, Art. 29 §16 ).

In this case, Claimant immediately objected against the delivery of distribution fuse104boards containing JS type fuses on 9 September 2005, as soon as Equalec refused toconnect the JS type fuses to the current on 8 September 2005 (SoC, §17 ). Since therewas an immediate objection after Claimant knew about the failure to comply with thecondition, there was no contradictory behavior of Claimant and therefore no “conduct”in terms of Art. 29(2) 2nd sent. CISG.

2. Respondent could not assume Claimant’s behavior to mean approval of anoral amendment

Respondent claims that it could rely on Claimant’s conduct as approval of an oral amend-105ment (Answer, §25b). Taking into consideration the principle that statements must beinterpreted in light of the circumstances (Art. 8(3) CISG), Respondent’s argument can-not be admitted: Claimant’s conduct cannot be clearly interpreted as approval of an oralamendment [D.IV.2.a)], since the modification of the Contract was only in Respondent’sinterest [D.IV.2.b)] and Respondent itself drafted the writing requirement clause in theContract [D.IV.2.c)].

a) Claimant’s conduct was not clear enough for Respondent to rely on it asapproval of an oral amendment

As shown above [cf. §90], Claimant did not agree to the amendment of the Contract.106Even if the Tribunal finds that Claimant agreed to the oral amendment, its conduct wasnot clear enough for Respondent to rely on it as a proof of Claimant’s acceptance of theoral amendment despite the written form requirement.

During the telephone conversation, Mr. Hart pointed out that he knew little about107electrical equipment. Since Mr. Stiles still urged Mr. Hart to make an immediatedecision the latter asked for a recommendation. Mr. Stiles assured Mr. Hart that JStype fuses could be used without any problem. Based on these assurances, Mr. Hart

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acknowledged that Mr. Stiles’ recommendation was probably the best way to proceed.As Mr. Hart did not know much about the matter he did not want to be responsiblefor any amendment of the Contract. In particular, he did not want to modify a contractorally by violating a form requirement clause since he expected to receive a writtenconfirmation of the telephone conversation (Cl. Ex.No. 2 ).

As Mr. Hart explained his lack of knowledge and hesitated to make a decision, Re-108spondent must have been aware of the fact that, on all accounts, Mr. Hart did not wantto avoid the form requirement clause. Mr. Hart relied on the written form requirementof the Contract. Consequently, in the present case the Parties relied on contradictoryassumptions. Mr. Hart relied on Respondent complying with the form requirement ofthe Contract and Mr. Stiles assumed there was an oral amendment. Since the Partiesagreed on the form requirement clause, Mr. Hart’s reliance is justified. In contrast, Mr.Stiles could not simply assume there was an oral amendment without any clear behaviorof Claimant to indicate this assumption was justified. Respondent’s reliance on an oralamendment is therefore unjustified.

Moreover, agreed form requirements aim to protect parties from drawing overly hasty109conclusions or amending contracts without due care. Therefore, Respondent could notsimply have confidence that Claimant accepted the oral agreement despite the writtenform requirement prohibiting oral amendments in general. On the contrary, relying onan oral amendment would have been acting in bad faith.

b) As only Respondent was interested in an amendment of the contract, itcould not rely on an oral amendment

Respondent would have benefited from an amendment because it could avoid its obliga-110tion to deliver JP type fuses. As long as goods of the required specification are availableon the market, the seller has a procurement obligation (Schlechtriem/Schwenzer (G),Art. 79 §18 ). Since Equatoriana Switchboards Ltd still had CE JP type fuses in stock(PONo. 2, Q. 33 ), Respondent would have been in a position to procure them andwould have been obliged to do so. Indeed, Respondent would even have been obligedto make sure that it had a sufficient quantity of CE JP type fuses in stock when itentered into the Contract with Claimant; or it would have been obliged to procure suchJP type fuses afterwards from a supplier other than CE, regardless of whether thiswould only have been possible at a much greater cost than anticipated by Respondent

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(Schlechtriem/Schwenzer (G), Art. 79 §18 ). Thus Respondent cannot be excused onthe grounds that, in spring 2005, when its inventory of CE JP type fuses was exhausted,CE advised that it was having production difficulties and that it would not be able toship JP type fuses until mid to late August at the earliest, i. e. only after the contractualdelivery date of 15 August 2005 (Rsp. Ex.No. 1 ). Since Respondent bears the brunt ofthe procurement obligation, an amendment of the Contract was the only way for Re-spondent to avoid its obligation to deliver CE JP type fuses. Therefore, Respondent hada great interest in having the Contract amended.

In contrast, the amendment would have been detrimental for Claimant because the111use of JS type fuses did not fit for its purposes and Respondent should have been awareof that fact [C.II.]. A party who suggests such a modification, who could not have beenunaware of the detriment and effect on the other party resulting from the modification,is not acting in good faith.

Consequently, Respondent could not rely on Claimant’s acceptance of this one-sided112proposal and was obliged to assure that the modification was properly acknowledged byClaimant through a written confirmation. This is particularly true since Respondentinitiated the procedure of amendment, knowing that an amendment was the only wayto avoid the obligation to deliver JP type fuses of CE.

c) Since Respondent drafted the writing requirement clause in the Contract, itcould not rely on an oral amendment

The writing requirement clause in the Contract was elaborated in its entirety by Respon-113dent (Answer, §4 ). Since Respondent was the drafting party of the writing requirementclause, it must have been aware of it and could not simply rely on an oral amendmentand circumvent the writing requirement clause Respondent drafted.

3. In any event, Respondent could only rely on the agreement to substitute thefuses to the extent JS type fuses could also be used for the intended purpose

Even if the Tribunal finds that Respondent could rely on an oral agreement to substitute114of JS type fuses for JP type fuses, Respondent’s reliance would only be justified to theextent that JS type fuses could also be used for the intended purpose.

It was only after the assurance of Mr. Stiles that JS type fuses could be used without115any problem, that Mr. Hart agreed to accept Mr. Stiles’ recommendation to use JS

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E. Claimant’s non-complaining to the Commission does not excuse Respondent

type fuses (Cl. Ex.No. 2 ). Mr. Hart only agreed on condition that JS type fuses wouldlater be accepted by Equalec as good substitutes for JP type fuses [cf. §89]. Therefore,Claimant’s behavior could - if at all - only provide confidence to the extent that the JStype fuses were usable and especially not rejected by Equalec.

Consequently, Respondent could not rely on conduct indicating an unreserved agree-116ment to substituting a different type of fuse. Respondent could only rely on its assump-tion that Claimant agreed to an oral amendment of the Contract despite the writtenform requirement if the JS type fuses could really be used. Since it turned out later thatthe JS type fuses could not be used for the intended purpose, Respondent’s reliance onan oral amendment of the Contract was unjustified.

4. Consequently, the requirements of Art. 29(2) 2nd sentence CISG are notfulfilled; in any event Respondent bears the burden of proving the contrary

The above-mentioned explanations show that neither any conduct of Claimant nor a117justified reliance of Respondent is given. It is therefore established that the require-ments of Art. 29(2) 2nd sent. CISG are not fulfilled in this case. Hence, where doubtscontinue to exist, Respondent is responsible for excluding possible sources of doubt. Theburden of proof that the requirements of Art. 29(2) 2nd sent. CISG are fulfilled restswith the party that asserts the objection of abuse (Staudinger/Magnus, Art. 29 §24;Schlechtriem/Schwenzer (G), Art. 29 §14 ). In the light of the record, Respondent is notin a position to discharge its burden of proof. Clearly, a simple assertion of Respondent’sreliance (Answer, §§23 and 25b) does not suffice at all.

Answer to PO No. 1, Question 2b: The contract was not validly amended118since substituting JS type fuses for JP type fuses constituted an amend-ment, which was not agreed upon by the Parties, and which, in any event,was not in the required form. Thus Respondent could not rely on there beingan oral amendment of the Contract.

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E. Claimant’s non-complaining to the Commission

does not excuse Respondent

As seen above, Respondent delivered JS type instead of JP type fuses, which did not119comply with Equalec’s policy. Both of these facts constitute a breach of contract [cf. §76].Respondent asserts (Answer, §25d.) that Claimant should have complained to the Equa-toriana Electrical Regulatory Commission (Commission) because Equalec’s policy con-travened the Equatoriana Electrical Service Regulatory Act and Equalec would havehad to connect the fuse boards to the current even with JS type fuses. Respondentalleges that any failure on the part of Claimant to make such a complaint can haveno legal consequences for Respondent (Answer, §25d.). In essence, Respondent seemsto argue that it should be excused from its breach of contract because of Claimant’salleged failure to make a complaint to the Commission. Respondent’s argument mustbe assessed under the exemption of Art. 80 CISG. Accordingly, Respondent would haveto prove that Claimant was under an obligation to act (i. e. make a complaint), and thatthis alleged omission caused Respondent’s non-performance. In particular, an omissionis only equivalent to an act “if an act in the interest of the promisee was necessaryand objectively suited to making a performance possible” (Schlechtriem/Schwenzer (E),Art. 80 §3 ).

Claimant will demonstrate that it was not under an obligation to make a complaint120to the Commission [E.I.]. Even if the Tribunal found that it had such an obligation, anypossible complaint would in all likelihood not have been successful, i. e. it would nothave been objectively suited to make Respondent’s performance possible [E.II.].

The same line of argument would apply if Respondent’s allegation were assessed under121the duty to mitigate damages pursuant to Art. 77 CISG. As Claimant will demonstrate[E.I. and E.II.], it was under no obligation to file a complaint to the Commission, as thiscannot be seen as a reasonable or adequate measure within the meaning of Art. 77 CISG.Further, Claimant did mitigate losses by making a cover purchase with EquatorianaSwitchboard Ltd.

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I. Claimant had no obligation to file a complaint with the

Commission

In the following it will be demonstrated that Claimant had no obligation to act, i. e.122to make a complaint to the Commission [E.I.1.]. In any event, Respondent would havebeen under a greater obligation to make such a complaint [E.I.2.].

1. Claimant’s alleged duty to make a complaint cannot be based on theContract, a usage, a practice or the principle of good faith

Under Art. 80 CISG and similarly under Art. 77 CISG, an obligation to act might be123based on a contractual stipulation, a usage, an established practice between the partiesor the principle of good faith (Staudinger/Magnus, Art. 80 §10, Art. 77 §10 ). However,none of these possible grounds are applicable in the present case. First, there is nocontractual stipulation obligating Claimant to make a complaint to the Commission(Cl. Ex.No. 1 ). Second, the record neither provides any indication that there might bea general usage or that the parties had established practices between them to this effect,given that this was the first time they had any dealings with each other. Third, aswill be explained below, the principle of good faith cannot be invoked to infer such anobligation by Claimant.

Claimant was not informed of Equalec’s policy until the latter refused to connect the124fuse boards to the electrical grid and told Claimant about the policy on 8 September2005. Not even Claimant’s technical personnel were aware that this provision existed(PONo. 2, Q.25 ). After having spoken to Claimant on 9 September 2005, Respondentasked Claimant if it had inquired at the Commission whether Equalec’s requirementswere within the boundaries of Equatorianese law (Rsp. Ex.No. 1 ). Thus any such obli-gation derived from the principle of good faith could have originated at the earliest fromthis point in time on. However, as will be shown below [E.II.2.], at that time it wouldalready have been too late for a complaint.

2. Respondent would in any event have been under a greater obligation to actand make a complaint

Under the principle of good faith in international trade, Respondent could reasonably125

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be expected to make the relevant complaint either itself or - if it had not had standingto sue - to prepare the request for submission by Claimant.

In accordance with the principle of good faith in commercial transactions, the obligor126may be obliged to act itself where it has greater expertise on the subject at hand thanthe obligee and/or could overcome an impediment just as easily as the obligee (Schlecht-riem/Schwenzer (E), Art.80 §5; Enderlein/Maskow/Strohbach, Art. 80 §3.3 ). Claimantand Respondent became aware of the policy almost at the same point in time. In thetelephone conversation of 9 September 2005, Respondent proved to be knowledgeablein the field of the applicable law. It is, after all, a company trading internationally inelectrical equipment, and has been exporting to Equatoriana for a long time [cf. §70].

Thus Respondent was more experienced, or had at least the same amount of expertise127on the subject at hand as Claimant. As Respondent claimed that Equalec’s policy wasillegal, it obviously seemed to be well informed. The matter predominantly relates toRespondent’s, and not Claimant’s field of expertise: Whereas Respondent is a manu-facturer and distributor of electrical equipment to the trade, Claimant is a developer ofresidential and business properties. If Respondent had seen a chance for its complaint tobe heard, it is beyond comprehension why it did not draw the Commission’s attentionto Equalec’s policy itself. Respondent could have also mandated a lawyer to prepare acomplaint in the name of Claimant had it thought the Commission would not handletheir inquiry for whatever reason (e. g. because it is a foreign company). Yet if thepolicy was really in conflict with Equatorianese public law, the Commission would havebeen obliged to look into it without regard to where the inquiry came from.

Respondent has more expertise and ability to overcome the impediment than Claimant128(if the policy should not conform with the applicable law - which is not proven), thus Re-spondent obviously had the greater obligation to act out of good faith (Russian Federa-tion Chamber of Commerce and Industry, 1998 ). It was, after all, solely in Respondent’sinterest for its delivery of non-conforming goods to be supposedly “saved.”

Conclusion: Claimant had no obligation to file a complaint with the Commission.129Even if the Tribunal were to find that Claimant had such an obligation, Respondenthad a greater obligation to overcome the impediment and therefore could not rely onClaimant to do so without disregarding the principle of good faith in international trade.

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II. The complaint would not have been objectively suited to

make Respondent’s performance possible

The complaint would not have been suitable for bringing about a change in Equalec’s130policy. The allegedly omitted act (i. e. complaint) would have had to provide the desiredresult with a probability so great that it borders on certainty (Staudinger/Magnus,Art. 80 §12 ). If the act itself was likely to be unsuitable, Claimant could not, in anyevent, have been said to have committed an omission in the sense of Art. 80 CISG orArt. 77 CISG.

First, there are in fact very practical reasons for Equalec’s policy, so that it is most131unlikely that the Commission would have asked Equalec to change it [E.II.1.]. Second,due to the time constraints, making a complaint would in all likelihood not have beensuited to make Respondent’s performance possible [E.II.2.].

1. There are good reasons for Equalec’s policy

Such a policy is obviously necessary for security reasons (Cl. Ex.No. 3 ). Unlike JP132type fuses, JS type fuses are available with ratings of over 400 amperes. To preventthe installation of fuses of over 400 amperes in circuits designed for a lower capacity,Equalec requires that fuse boards should only have JP type fuses installed. Because JPtype and JS type fuses are different sizes (Rsp. Ex.No. 2 ), fuse boards must be specificallyconstructed for either JP type fuses, or JS type fuses. JS type fuses can no longer beinstalled in a fuse board designed for JP type fuses. Therefore fuses with a rating ofover 400 amperes cannot be installed by mistake when exchanging fuses. According toEqualec, there have actually been mistakes made in the past in exchanging fuses andJS type fuses have been used for circuits under 400 amperes (Cl. Ex.No. 4 ). Equalec’spolicy is an easy and reliable way of preventing such accidents happening again. Eventhough it is not a fixed policy for Claimant, it is a general practice for Claimant to useJP type fuses for ratings of less than 400 amperes (PONo. 2, Q. 25 ).

Hence there are good reasons for Equalec’s policy. This conclusion has two practical133consequences. First, it is most unlikely that the Commission, which may be expectedto leave a great deal of discretion to operators such as Equalec, would have orderedEqualec to abandon it. Second, given the rationale of the policy, it would not have beenin Claimant’s own interest to challenge a policy that is also in its own security interest.

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Respondent asserts that Claimant should at least have asked the Commission about134the legal admissibility of Equalec’s policy. Even though the review of the policy couldcome under the authority of the Commission, there is no known case of this ever havingbeen done (PONo. 2, Q. 29 ). No one has ever found it necessary to make such an inquiryor file a complaint. It may therefore be assumed that no one else has found the policyto be undue or unjust in a way that would make it incompatible with the ERA. It iscompletely speculative to argue that an inquiry made by Claimant would have changedthe situation.

2. Due to the time constraints, making a complaint would, in all likelihood, nothave been suited to make Respondent’s performance possible

It is most unlikely that the Commission would have been able to order Equalec to connect135the delivered fuse boards in time. The personnel of Equalec refused to connect the fuseboards to the current on 8 September 2005. Time was the pressing matter as the leasesof Mountain View were due to begin on 1 October 2005 (Rsp. Ex.No. 1 ), which gaveClaimant only three weeks to obtain access to the electrical power supply. While itcannot be determined how much time it would have taken for the Commission to issue aruling, an estimated time frame ranges from one week to two months (PONo. 2, Q. 30 ).

Moreover, given Equalec’s belief in its policy and its successful implementation since1362003 (Cl. Ex.No. 4 ), it must be assumed that they would have demanded a full inves-tigation of the matter and would have done everything in their power to avoid havingtheir long-standing policy changed. A full investigation can take up two years or longer(PONo. 2, Q. 30 ), and would have definitely not have been possible within the timeavailable. Therefore, the probability of changing Equalec’s policy is far from certain.

Under these circumstances it cannot be shown that making such a complaint would137have made Respondent’s performance possible.

Conclusion: Even if Tribunal finds Claimant to have had an obligation to make a138complaint, the requested complaint itself would not have achieved its purpose. As aconsequence, Claimant’s alleged failure to make a complaint can neither be qualified asan omission in the sense of Art. 80 CISG, nor can it be considered as a reasonable oradequate measure to mitigate damages under Art. 77 CISG.

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F. Request for Relief

Answer to PO No. 1, Question 3: Claimant was not under an obligation to139make an inquiry or complaint to the Commission; such an action would nothave served to bring about a change in Equalec’s policy, nor would it havebeen an adequate measure to overcome Respondent’s failure to perform.Respondent is therefore not excused for delivering fuse boards containing JStype fuses instead of JP type fuses. Using JS type fuses is in violation of theContract specifications and the purpose of being connected to the current byEqualec. Hence Respondent must be ordered to compensate Claimant forits loss suffered as a result of Respondent’s breach of contract.

F. Request for Relief

In the light of above submissions, Claimant respectfully requests the Tribunal to find:140

• that it has jurisdiction to consider this dispute under the arbitration clause foundin the Contract;

• that Respondent should have delivered distribution fuse boards equipped with JPtype fuses;

• that Respondent is not excused for the delivery of non-conforming goods.

Consequently, Claimant requests the Tribunal to order Respondent:141

• to pay Claimant the sum of US$200,000 as damages, calculated on the basis of:US$180,000 for the cost of replacing the distribution fuse boards purchased fromEquatoriana Switchboards Ltd and US$20,000 for the cost of removing the non-conforming fuse boards and replacing them with conforming ones;

• to pay interest at the prevailing market rate in Equatoriana on the said sum fromthe date of breach to the date of payment;

• to pay all costs of arbitration, including costs incurred by both Parties.

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memorandum for claimant · the arbitration clause found in the contract meets the formal and sub-...

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