MEMORANDUM FOR THE CLAIMANT

	Moot Team:
UNIVERSITY OF ZAGREB	Martina Peri
FACULTY OF LAW	Ivana Vukorepa
	Ivo Ivanevi
	Branimir Ivekovi

TABLE OF CONTENTS

List of Abbreviations

Bibliography

List of Cases

Introduction

I. CONTROLS DOES NOT QUALIFY FOR EXEMPTION FROM PAYING DAMAGES TO SUPERB UNDER THE CISG Art. 79(1) AND 79(2)(a)

III. SUPERB WAS AUTHORISED BY THE CISG Art. 88 TO SELL THE CONTROL SYSTEM

IV. RELIABLE SHOULD NOT BE JOINED TO THIS ARBITRATION AS REQUESTED BY CONTROLS

CONCLUSION

Appendix (Facts of the Case)

List of Abbreviations

AAA	American Arbitration Association
AAA Rules	International Arbitration Rules of the American Arbitration Association
Am.J.Com.L.	The American Journal of Comparative Law
Art.	Article
ATH	Arbitral Tribunal Hamburg
BRIDGET	Bridget Controls GmbH
CISG (the Convention)	United Nations Convention on Contracts for the International Sale of Goods
Coa.	Coauthors
CONTROLS (in appendix EC)	Essential Controls S.A.
DAICA	Danubian Act on International Commercial Arbitration
DIAC	Danubia International Arbitral Centre
e.g.	exampli gratia (for example)
IACD	International Arbitration Center of Danubia
ICC	International Chamber of Commerce
ICC-Bull	The ICC International Court of Arbitration Bulletin
i.e.	id est (that is)
ILA	International Law Association
infra	below
J.Int.Arb.	Journal of International Arbitration
J.L.&Comm	Journal of Law and Commerce
No.	number
Nos.	numbers
NYC	United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards
p.	page
pp.	pages
para.	paragraph
paras.	paragraphs
RA	Revue de l'arbitrage
RabelsZ	Rabels Zeitschrift für Ausländisches und internationales Privatrecht
RELIABLE	Reliable Installation Co.
SUPERB (in appendix SP)	Superb Paper Plc.
supra	above
TICARFCCI	Tribunal of International Commercial Arbitration at the Russian Federation Chmaber of Commerce and Insustry
ULRev	Uniform Law Review
UN	United Nations
UNIDROIT	International Institute for the Unification of Private Law
UNIDROIT Principles	UNIDROIT Principles of International Commercial Contracts
v.	versus
v.	von
Vol.	Volume
YbComArb	Yearbook Commercial Arbitration

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The Sale of Goods, Clarendon Press, Oxford, 1997
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Kommentar zum Einheitlichen UN-Kaufrecht, 2. Auflage, Verlag C.H. Beck, Muenchen, 1995
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"Consolidation of Arbitral Proceedings and International Commercial Arbitration", J.Int.Arb., Vol. 7, No. 2, 1990, pp. 53-76
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Arbitration in International Trade, Kluwer, Deventer, 1985
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A Guide to the New ICC Rules of Arbitration, Kluwer, Deventer, 1998
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"Report on Multi-party Arbitrations of the ICC Commission on International Arbitration", ICC-Bull, Vol. 6, No.1, 1995, pp. 26-41
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Theory and Practice of Multiparty Commercial Arbitration, with Special Reference to the UNCITRAL Framework, Graham & Trotman, London, 1990
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DUBISSON, Michel
"Arbitration in Subcontracts for International Projects", J.Int.Arb., Vol.1, No.3, 1984, pp. 197-211
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Internationales Kaufrecht: Kaufrechtskonvention, Verjaehrungskonvention, Rechtsanwendungs-konvention, Rudolf Haufe Verlag GmbH & Co. K.G., Freiburg - Berlin, 1991
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The Sphere of Application of the Vienna Sales Convention, Kluwer, Deventer, 1995
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Commercial Law, 2nd. Edition, Penguin Books, London, 1995
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Guide to Practical Applications of the United Nations Convention On Contracts for the International Sale of Goods, Kluwer, Deventer, 1989
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The Conflict of Laws - General Principles; VI Recueil des Cours, 1984, pp. 225-448
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MAGNUS, Ulrich
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Commercial Arbitration, 2nd. Edition, Butterworths, London, 1989
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First Interim Report - Complex Arbitration, Report of the 66th Conference, ILA, Buenos Aires, 1994, pp. 690-704
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STROHBACH, Heinz
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The Law of Contract, Sweet & Maxwell, London, 1995
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List of Cases

ICC Cases Nos. 3099 & 3100, Award of 30 May 1979, ICC Collection 1974-1985

ICC Case No. 8128 (1995), http://cisgw3.law.pace.edu/cases/958128i1.html

ICC Case No. 2763, Award of 25 June 1980, YbComArb (X)

ICC Case No. 3540, Award of 3 October 1980, YbComArb (VII)

ICC Case No. 5713 (1989), YbComArb (XV)

ICC Case No. 5195, Partial Award of 1986, YbComArb (XIII)

ATH Case No. 19960321, Award of 21 March 1996, http://cisgw3.law.pace.edu/cases/960321g1.html

TICARFCCI Case No. 155/1994, Award of 16 March 1995, http://cisgw3.law.pace.edu/cases/950316r1.html

Channel Island Ferries Ltd. v. Sealink U.K. Ltd. (1988) 1. Lloyd's Rep. 323, Treitel, p. 813

Istros v. F. W. Dahlstroem & Co. King's Bench Division (1931) 1 K.B. 247; 18 Asp. M.L.C. 177, Smith, p. 448

Tsahiroglou & Co. Ltd. v. Noblee Thorl GMBG (1962) A.C. 93, Treitel, p. 791

U.S. Cir. Ct. Case No. 185, 717, Delchi Carrier S.p.A. v. Rotorex Corp., http://cisgw3.law.pace.edu/cases/951206u1.html

INTRODUCTION

Herewith the claimant, Superb Paper Plc. (hereinafter SUPERB) submits this memorandum in reply to the Tribunal's Procedural order No. 1 of 2 October 1998. In this reply, SUPERB will prove that:

I. Essential Controls S.A. (hereinafter CONTROLS) does not qualify for exemption from paying damages to

SUPERB under the CISG Art. 79(1) and 79(2)(a);

II. SUPERB was authorized to avoid the contract on 9 October 1996 under the CISG Art. 49(1)(b);

III. SUPERB was authorized by the CISG Art. 88 to sell the control system and that the sale was done by

appropriate means;

IV. Reliable Installation Co. (hereinafter RELIABLE) should not be joined to this arbitration as requested by

CONTROLS.

I. CONTROLS DOES NOT QUALIFY FOR EXEMPTION FROM PAYING DAMAGES TO SUPERB UNDER THE CISG Art. 79(1) AND 79(2)(a)

In this chapter SUPERB will show the scope and complexity of the issue concerning CONTROLS' exemption under the CISG Art. 79 (see 1.). Furtheron, SUPERB will not only show that the requirements for exemption under this Article are not met by CONTROLS in this particular case, but also that he could not possibly prove them anyhow (see 2.).

1. SCOPE OF THE ISSUE OF CONTROLS' EXEMPTION UNDER THE CISG Art. 79

CONTROLS claims the right to exemption from liability on grounds of Art. 79.[1] Paragraph (1) of the Article sets the general requirements for a party's exemption. Those requirements are:

a) that there was an impediment and that it was beyond the party's control,

b) that the party could not have reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract,

c) that the party could not have reasonably be expected to have avoided or overcome the impediment or its consequences.

Any hindrance due to the omission or act of the defaulting party, or one that is predictable, preventable or avoidable cannot exempt the party under Art. 79.[2]

Paragraph (2) of the Article sets the requirements for exemption in cases where the failure to perform is due to a third party's failure. The defaulting party must prove that he fulfills the requirements for exemption set in Art. 79(1) and (2)(a) and that those requirements are also met by the third party.

If CONTROLS' failure to perform was due to a failure of RELIABLE, whom he has engaged to perform a part of the contract (i.e. installation and testing), in order to be exempted CONTROLS must prove that the requirements set in Art. 79(2)(a) and (b) are in the particular case fulfilled cumulatively.[3] In other words, he must show that both his and RELIABLE's performance of obligations were subject to impediments beyond their control, which were, as well as their consequences, unforeseeable and unavoidable.

Since Tribunal's Procedural orders Nos.1 and 2 demand parties to stick to Art. 79(2)(a) in the first phase of the arbitration, and since it is enough to show that those requirements are not met on the side of CONTROLS, SUPERB will not at this point discuss Art. 79(2)(b) in this memorandum, as regarding RELIABLE.[4]

CONTROLS is the party claiming his exemption from liability under Art. 79. Therefore, the burden of proof lies on CONTROLS.[5] He is obligated to submit proof which would support his claims, i.e. that the requirements provided in the CISG are fulfilled. CONTROLS failed to prove that.[6]

2. REQUIREMENTS FOR EXEMPTION AS SET FORTH BY THE CISG Art. 79 ARE NOT MET BY CONTROLS

CONTROLS claims that the delay in installing the control system was caused by the airplane crash that killed the installation team from RELIABLE, which was on its way to Mediterraneo, as well as by RELIABLE's inability to assign a new team to the SUPERB contract in time to meet the contractual commitments.[7] These events allegedly make CONTROLS exempted under the CISG Art. 79.[8]

SUPERB shall prove that such assertion by CONTROLS is not justified. SUPERB submits that the mentioned events as such do not represent CONTROLS' impediment beyond control (see 2.1.), that his actual impediment was foreseeable (see 2.2.), and that it and its consequences were avoidable (see 2.3.). Therefore CONTROLS is not entitled to be exempted from liability for paying damages to SUPERB, under Art. 79.

2.1. Impediment beyond control

Impediment, in the sense of Art. 79(1), must be beyond the party's control, i.e. of an external character in regard to the activity of the defaulting party.[9]

By adopting the word impediment the CISG aimed at emphasizing the objective nature of the hindrance over its personal aspect.[10] This does not mean that the party can be exempted merely by proving that the failure to perform was not due to his fault.[11] Only by proving that the failure to perform was due to the effect of an impediment outside his control (that was also unforeseeable and unavoidable), the defaulting party can relieve himself.[12] That is the difference between an impediment, which in itself does not represent an exempting event, and an impediment beyond the party's control which may exempt him. The latter should be the true meaning of impediment in the sense of Art. 79. The impediment should be a true barrier (not implying only physical or legal bars) to contractual performance, and thus determined by the view of an objective and reasonable person's perspective, rather than from the point of view of the non-performing party itself.[13]

In general, every party must act in accordance with the general principle pacta sunt servanda.[14] If the defaulting party claims his subcontractor's non-performance as his own impediment, this does not in itself exempt the defaulting party. Hence, in casu, CONTROLS bears responsibility for any failure on behalf of RELIABLE,[15] even for such arising from unexpected circumstances. This implies that CONTROLS would not be liable only in the case of his total impossibility to perform.[16]

In the counterclaim CONTROLS stated that RELIABLE's team plane crash and other installation team's contractual obligations caused the delay in installation.[17] By making this statement CONTROLS is unclear of what exactly he claims to be his impediment. That is surprising, considering that the exact determination of the impediment is of the essential importance for the CONTROLS' right for exemption under Art. 79. However, since three different events are mentioned in that statement, SUPERB will elaborate and show which is the CONTROLS' actual impediment.

The two unfortunate events (plane crash and unexpected problems) that happened to RELIABLE might only be considered as impediments of RELIABLE. However, only one of them can be recognized as an exempting event which was the exclusive cause [18] for RELIABLE's delay in installation. This exclusive cause of RELIABLE's delay is not the plane crash [19], but the unexpected problems that RELIABLE's other installation team had completing another contract. Those unexpected problems, that had arisen during the testing of the control system at the other contract site and their consequences have led to the creation of CONTROLS' actual impediment. In casu, being the non performing party, CONTROLS is not objective by claiming RELIABLE's delay in installation as his impediment. The actual impediment for CONTROLS is RELIABLE's failure to perform, because this failure represented the exclusive cause for CONTROLS' non-performance. This because of the following reasons.

Firstly, CONTROLS would have the right to claim delay as impediment if the contract was still alive, and there was still time left, or given by SUPERB for the delayed performance. However, as proved infra in the Chapter II of this memorandum, SUPERB had rightfully exercised his right to avoid the contract, which is therefore not in existence since 9 October 1996. Because of this, there can be no say about the delay, but only the failure to perform.

Secondly, not only is it correct to consider RELIABLE's failure as CONTROLS' impediment in regard to the circumstances of the case, but also pursuant to the wording of Art. 79. Article 79(2) says: "(...)if the party's failure is due to the failure by the third person(...)", and Art. 79(1) stipulates: "(...) a party is not liable(...) if (...)the failure was due to an impediment (...)". It is logical to conclude therefrom that in Art. 79(2) the failure to perform of the third person is in fact the impediment for the main party to the contract.

RELIABLE's failure to perform was indeed beyond the control of CONTROLS. Nevertheless, SUPERB will show that CONTROLS' impediment was foreseeable and it and its consequences were avoidable.

2.2. Foreseeabilty

The CISG Art. 79(1) requires that a party seeking exemption could not have reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract.

Reasonableness of foreseeability refers to the standard of the reasonable person, which is underlining the Convention as a whole, as provided in Art. 8(2). Reasonable person criterion represents an objective standard which has to be applied to a party's conduct, and is based on the view of a neutral and prudent person [20] of the same kind as the party in question.[21] SUPERB will show that CONTROLS' could have reasonably foreseen the impediment for two reasons.

Firstly, CONTROLS concluded an installation contract with RELIABLE. Being an experienced installer himself,[22] CONTROLS must have been aware of the following: problems with installations are not unknown, and every firm that does installations has had experience with installations that had unexpected problems.[23] CONTROLS should have foreseen the above mentioned problems, regardless of the fact that in casu he did not install the control system himself. This makes it clear that CONTROLS should have known that certain problems on behalf of RELIABLE may occur and therefore it was reasonable to expect CONTROLS to have taken the possible impediment into account.

Secondly, in today's modern business world, where promptness and conformity of transactions are of utmost importance, a contractor should take into account possible risks to performance whenever he enters into a contract. Anyone who, despite there being a realistic possibility of a risk to performance (such as e.g. problems with installation), nevertheless unconditionally enters into a contract, definitely assumes the risk that the promised performance may be delayed or thwarted.[24] Businessmen are considered to be well aware of the risks which they take within the framework of their business.[25]

Consequently, they are held fully responsible for adverse results if they have failed to protect themselves regarding the actions of their subcontractor by not including in the contract the special provision containing the so called force majeure or frustration clause.[26]

Since CONTROLS is one of only several companies that produce control systems for the making of paper and paper products,[27] he does business in a number of countries.[28] It is not necessary to point out that from these facts it is obvious that the market is specialized and narrow, and that the producers operate on an international level. All the competitors in this market must bear in mind the possible risks that arise in such operations. The bigger the market one company covers and the rarer specific operations are, the risks are automatically higher. When employing a subcontractor in such an operation, the risk increases even more.[29] In the SUPERB-CONTROLS contract CONTROLS also undertook to install and test the control system. Regardless of the fact that he conferred this task to RELIABLE to perform it on his behalf, legally it was still CONTROLS' duty to take into account possible problems in order to insure the fulfillment of his contractual obligation in whole.[30] To be exact, CONTROLS was not expected to have foreseen the plane crash, or any other specific hindrance at the time of the contract conclusion, but should have taken into account the possibility of RELIABLE's non-performance.[31] That especially bearing in mind the fact that CONTROLS should have been aware that RELIABLE, as it is obvious from the case, had only two teams which were capable of performing the type of installation and testing SUPERB needed.[32] Without doubt, CONTROLS' obligation to foresee the possibility of RELIABLE's non-performance arose at the moment when it found out about the plane crash and by all means in a later stage, when it became obvious that RELIABLE had problems with assigning the new team to the SUPERB contract. Those circumstances concern mainly the issue of avoidability, and shall more thoroughly be discussed in the following text.

From all the previously said it is obvious that CONTROLS was reasonably able and should have foreseen the occurrence of the impediment - RELIABLE's failure to perform.

2.3. Avoidability

The CISG Art. 79(1) requires that, subsequent to the conclusion of the contract, the defaulting party could not have been reasonably expected to have avoided or overcome the impediment or its consequences.[33] CONTROLS has not given any proof to support his motion for exemption based on the CISG Art. 79 as regarding avoidability. SUPERB will prove that CONTROLS could have avoided and overcome both impediment and its consequences.

The question regarding avoidability is whether the impediment and its consequences are of a kind that are impossible to avoid under the extent of reasonableness, and how does the application of the standard of reasonableness influence a contractor's duty to perform on one hand, and his right to declare impossibility of performance under Art. 79 on the other.[34] The provisions of that article impose an obligation to a party to take all necessary steps to prevent the occurrence of the impediment, and preclude its consequences. This rule extends so far that it imposes an obligation to the defaulting party to undertake everything in his power to overcome the negative consequences even if the impediment was unforeseeable.[35]

CONTROLS' impediment and its consequences are definitely not of a kind that are impossible to avoid under the extent of reasonableness, as interpreted in the arbitral practice.[36]

2.3.1. CONTROLS could have avoided the impediment

Business risk of a contract's non-performance is a permanent trait which is common in business dealings. However, it does not imply that a party entering into a contract should already at that point either have a pending contract, or start the search for a replacement party.

Considering the circumstances of this case it should have become obvious to CONTROLS that after the plane crash RELIABLE's performance became subject to a great risk because RELIABLE had lost one of only two teams qualified to perform such installation.[37] From the moment he was notified of the plane crash, CONTROLS had 20 days (from 26 August 1996) [38] till the first contractual deadline (16 September 1996) to provide another installation firm, and another 24 days from the first until the second contractual deadline (16 September 1996 - 9 October 1996).

When unexpected problems arose, CONTROLS still had enough time to employ another installer and so avoid the impediment. SUPERB gave CONTROLS a three weeks additional period of time to install the control system. In SUPERB's letter from 18 September 1996 [39] the deadline was set for 9 October 1996, with respect to the tragic loss that RELIABLE has suffered, and understanding of the difficulties that have arisen.[40] From RELIABLE's estimate the duration of installation would have been 12 days (26 August 1996 - 6 September 1996), two weeks at most.[41] The total time CONTROLS had at his disposal is to be calculated from the moment he was notified about the unexpected problems (29 August 1996) [42] to the date of the first contractual deadline (16 September 1996), together with the period from the first till the second contractual deadline, which all together makes 42 days. This time was more than enough to employ another installation firm. Regardless of RELIABLE's assurances, none of which contained a specified date of arrival of the team and completion of installation [43], CONTROLS was nevertheless obligated to employ another installer. It should have already been obvious to CONTROLS that the "solving of problems and sending a new team" was not a matter of days, as CONTROLS wrote to SUPERB,[44] but rather a matter of weeks, and of a very uncertain finish date. In the end it turned out that it lasted 47 days (from 29 August 1996 till 14 October 1996 [45]). CONTROLS knew of the importance of installment for SUPERB to which he was reminded in each of the letters and phone calls from and to SUPERB in the degree that he acknowledged it himself [46] and even reminded RELIABLE thereof.[47] Hence, CONTROLS was obligated to seek and turn to another firm.

To show how avoidable CONTROLS' impediment was, SUPERB will even demonstrate how CONTROLS could have acted in order to avoid it. In general, failure to perform becomes evident by the latest at the date of contractual deadline. However, it was known to CONTROLS that the duration of installation will take two weeks.[48] Therefore, at least two weeks before both contractual deadlines it was obvious that RELIABLE will not perform on time. In this situation, CONTROLS should have started the search for a new installer at the moment when it became obvious that the first deadline will not be met. Having found another installer, CONTROLS must have had employed him the moment when it became obvious that the second and final deadline will not be met by RELIABLE.

CONTROLS' possible claim that he was not able to locate and employ another installer would be unacceptable. SUPERB, when forced by the circumstances, was able to locate and employ another installation company (Bridget Controls GmbH, hereinafter BRIDGET) in a matter of days. This option was also available to CONTROLS. The existence of even one other installation firm [49] dismisses CONTROLS' claim of the impossibility fulfillment of his contractual obligation.[50] In casu, not one, but three other installation firms were known to exist, and they were all potentially available. True, such installation contracts are usually planned two months in advance, but it is not unusual that installations are agreed to on as short a notice as one week in advance.[51] CONTROLS should have taken advantage of this possibility in order to at least try to supersede non-performance by RELIABLE. CONTROLS has not done so.[52]

2.3.2. CONTROLS could have overcome the consequences of the impediment

As SUPERB has extensively elaborated, CONTROLS could have avoided the impediment. If he had done so he would have automatically precluded its consequences. But even if he failed to avoid the impediment, the consequences could have still been overcome.

It is obvious that the consequence of CONTROLS' impediment (i.e. RELIABLE's failure to perform) is CONTROLS' failure to perform. They coincide in their nature, possibility and means of avoiding. The only difference between the impediment and its consequence concerning avoidability is the time of occurring.

At the moment when the plane crashed, CONTROLS should have become more cautious and sensitive about the contract performance, or at that point already possible non-performance. When problems with RELIABLE's other installation team occurred it must have been clear to CONTROLS that his own contractual obligation to SUPERB was endangered to an extent that every reasonable businessman would at this point undertake measures to protect his interests and save the contract. Those would be the same measures as explained supra, Chapter I, para. 2.3.1.

Considering all the arguments ad. 2.3.1. and ad. 2.3.2., it is evident that CONTROLS, as the defaulting party has not undertaken any necessary measure to ensure timely appropriate fulfillment of contractual obligation.[53] Thereby the negligence on his part not to assure another installation firm is evident.[54] In this case, CONTROLS was able to both avoid the impediment and overcome its consequences.

II. SUPERB WAS AUTHORIZED TO AVOID THE CONTRACT UNDER THE CISG Art. 49(1)(b)

In this chapter SUPERB will show that CONTROLS violated his contractual obligations (see 1.), and that those violations constituted fundamental breach (see 2.). Although SUPERB had the right to avoid the contract immediately, he did not do so because he was interested in contract's fulfillment. He decided to give an additional fixed period of time for its performance (see 3.). Since CONTROLS later wrongfully offered another longer period for the performance, SUPERB's non-compliance was of no legal significance (see 4.). In conclusion, SUPERB will prove that he rightfully avoided the contract (see 5.).

1. CONTROLS' VIOLATION OF CONTRACTUAL OBLIGATIONS REPRESENTED NON-DELIVERY

It is indisputable between the parties that RELIABLE failed to perform installation and testing on CONTROLS' behalf. SUPERB will prove that under the circumstances of the case there are several reasons why CONTROLS' violation of the previously mentioned contractual obligations represented non-delivery.

Firstly, since it is normal for the control system of the type sold by CONTROLS to SUPERB to be sold with installation and testing as the non-separable part of the contract,[55] the fact is that the control system itself without installation and testing is of no practical use for SUPERB.

Secondly, CONTROLS signed the contract in which it was expressly settled that his obligations were to deliver, install and test the control system.[56] Article 8(1) of the CISG states that "(...) statements made by (...) a party are to be interpreted according to (party's) intent where the other party knew or could not have been unaware what that intent was". Taking into account the fact that installation and testing are non-separable parts of the contract, CONTROLS knew, or definitely ought to have known that SUPERB's intent was that the above mentioned obligations are to be understood as functionally one obligation, or in terms of the CISG, as delivery.

Finally, the fact is that CONTROLS' obligations were to deliver, install and test the control system and that those obligations are regulated by the CISG because the parties expressly agreed upon its application in the contract.[57] Even if the parties had not stipulated that the contract should be governed by the CISG, it would still be applicable pursuant to Art. 1(1)(a) of the CISG, because both parties have their places of business [58] in the CISG Contracting states.[59]

Article 3(2) of the CISG states that "(t)his Convention does not apply to a contract in which the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labor or other services", which is to be understood that installation and testing do not fall under the scope of the CISG. However, by interpretation argumentum ad contrario of the previously cited Article, if the preponderant part is physical delivery,[60] it is logical to conclude that all obligations, namely delivery, installation and testing should be regulated by the CISG. In casu, the value of installation and testing represented only 6.3% of the whole contractual value,[61] and therefore they are not the preponderant part of the obligation. Hence, the non-performance of CONTROLS' obligations in whole represented non-delivery. Otherwise, the CISG might not be the only applicable law for the contract. Physical delivery of the control system would be by all means regulated by the CISG, while the applicable law for the installation and testing would be determined by the rules of private international law.[62]

Taking into consideration all the above mentioned, all the CONTROLS' obligations should be understood as one obligation, namely delivery. Thus, the failure to perform installation and testing represented non-delivery.

2. FUNDAMENTAL BREACH

CONTROLS failed to perform installation and testing on time. SUPERB considers that he had every right to declare the contract avoided after the expiration of the original contractual deadline (16 September 1996). This because that violation represented for him a fundamental breach.

SUPERB will prove that the two cumulative conditions required for fundamental breach according to Art. 25 of the CISG were fulfilled. A breach of contract committed by CONTROLS was the substantial detriment to SUPERB that deprived him of what he was entitled to expect under the contract (see 2.1.), and it was foreseeable by CONTROLS (see 2.2.).

2.1. Substantial detriment

Although the word "detriment" is not defined in the Convention, in the doctrine it is accepted the opinion that "detriment" should be interpreted in broader sense considering all circumstances.[63] The major emphasis is laid upon the contractual expectation of the injured party: "(...) of what he is entitled to expect under the contract (...)" [64]. The expectation of a party under a contract is the central criterion to the determination whether a breach of contract is detrimental.[65]

SUPERB is producer of paper products in Mediterraneo and by entering into the contract with CONTROLS he wanted to "(...) take advantage of the new technologies in the control of the paper making process".[66] SUPERB had interest to save production costs [67] and so increase the profit in order to be competitive on the paper production market. That SUPERB's intention of competitiveness, basic characteristic of every businessman, is predominantly influenced by the level of the production technology.

Furtheron, in the contract it was stipulated that the control system must be "(...) fully operational (...) on or before 16 September 1996".[68] The fact is that the date itself was of no particular significance.[69] However, SUPERB knew that the average time needed for installation and testing was two weeks.[70] Since CONTROLS did not even start with installation and testing by 16 September 1996, it became evident that he could not perform his obligation in whole at least in the next two weeks time. One should also have in mind the notorious fact that during that period the non-installed and non-tested control system is of no practical use,[71] and so SUPERB would be deprived of making "(...)signifcant cost savings over (that) time".[72] In that manner the time became of the essential meaning.[73]

It is obvious, regarding the above mentioned reasons, that CONTROLS' nonfulfillment of contractual obligations in whole - failure to install and test the control system - represented substantial detriment to SUPERB and that it deprived him of what he was entitled to expect under the contract.[74]

2.2. Foreseeability

For the second condition for the fundamental breach, it is required that the substantial detriment was foreseen by the party in breach and that a reasonable person of the same kind in the same circumstances would have foreseen it. Although the burden of proof for unforeseeability lies on CONTROLS,[75] SUPERB will show clearly that he cannot prove it. Even though in the CISG the moment of unforeseeability is not defined,[76] the wording of Art. 25 should be interpreted flexibly.[77] Hence, it is left to the arbitrators and judges to decide the relevant time of unforeseeability concerning all the circumstances.

Firstly, at the time of the contract conclusion, CONTROLS should have known that the contractual performance on time was important for SUPERB. This because the new control system fully operational on time was to save production costs [78] and thus, of course, bring profit to SUPERB. Moreover, CONTROLS, as the party dealing in his ordinary business with installation,[79] should have been aware of the fact that the control system itself without installation and testing is of no practical use for SUPERB.

Secondly, bearing in mind that SUPERB persistently telephoned CONTROLS on 30 August, and 4, 9, 12 September 1996 inquiring as to when the installation team could be expected, and reminding him of the importance that the system be available for use promptly,[80] CONTROLS not only could have foreseen the detriment's substantiality, he also had to be aware of it.

In addition, under the same circumstances, as above explained, any reasonable person of the same kind would have foreseen the detriment's substantiality.

Considering the whole analysis ad. 2.1. and ad. 2.2, SUPERB is assured that CONTROLS' failure to perform his contractual obligation in whole on time represented fundamental breach. Thus, SUPERB was immediately authorized to declare the contract avoided according to Art. 49(1)(a).

Nevertheless, SUPERB decided not to use his above mentioned legal right because he had great interest in contract's performance. Also respecting the general principles of duty to cooperate [81] and favor contractus[82], deduced from the duties provided in the CISG [83], SUPERB gave to CONTROLS an additional fixed period of time under Art. 47(1) of the CISG to install and test the control system.

3. ADDITIONAL PERIOD OF TIME GIVEN BY SUPERB

SUPERB will prove that the given additional period of time fulfilled the requirements according to Art. 47(1); namely, it was fixed (see 3.1.) and of reasonable length (see 3.2.).

3.1. Period fixed

Although it is indisputable between the parties that the additional period of time was fixed, SUPERB will, nevertheless, show that this requirement was fulfilled. The period given by SUPERB to CONTROLS was fixed because in its letter of 18 September 1996, SUPERB emphasized that he "(...) expects the system be fully installed and operational by 9 October 1996 at the latest".[84] CONTROLS accepted this notice; moreover, it informed RELIABLE about its content.[85] From this particular notice it cannot be deduced anything else but that the time period fixed.

3.2. Length reasonable

The additional period given by SUPERB was of reasonable length. The reasonability of length depends on particular circumstances of the case. It is accepted that the elements which should be taken into account are the nature, extent and consequences of the delay.[86] The buyer's special interest in speedy performance should be the central criterion in determining whether the fixed period is reasonable or not. [87] Originally, RELIABLE estimated that it would take two weeks to complete installation and testing, the period that conformed to CONTROLS' experience.[88] Furthermore, on 27 August 1996 SUPERB received a telephone call from CONTROLS in which he was informed that RELIABLE had stated that, despite the plane crash, it would assign a new team to the job and that the installation and testing should be completed on schedule[89] (i.e. on 16 September 1996). Implicitly that showed to SUPERB that CONTROLS himself believed that the twenty days period should be enough for installation and testing. Hence, considering the legal principle non venire contra factum proprium,[90] CONTROLS should now not be allowed to dispute the reasonability of length of the additional period of time.

Taking this into account, SUPERB gave an additional fixed period of 21 days (18 September 1996 - 9 October 1996) which had to be more than enough for the fulfillment of the contractual obligation in whole.

Considering all the previously stated, CONTROLS' objection that the fixed additional period for performance was not of reasonable length is not founded.

4. CONTROLS' PROPOSAL OF ANOTHER SIX WEEKS PERIOD

SUPERB will prove that under the circumstances of the case CONTROLS did not have the right to propose another six weeks period of time for his performance. Thus, SUPERB's non-compliance with that request was of no legal significance.

SUPERB informed CONTROLS in his letter of 18 September 1996 about the fixed additional period of time and his intention to avoid the contract in the case of non-delivery within that period.[91] Although the next day (19 September 1996) CONTROLS sent a notice to SUPERB [92] asking for a six weeks period (by 30 October 1996) to perform his obligation, he was not allowed to do so.

This because SUPERB had already given the fixed additional period of time. CONTROLS had to take this period as the final one and could not expect another additional extension.[93] Furtheron, the warning of contract's avoidance was so clearly expressed by SUPERB that according to Art. 8(1) CONTROLS could not have been unaware that the date indicated (i.e. 9 October 1996) constituted his final chance to perform, and that SUPERB was not prepared to go beyond this deadline.

In addition, the fact is that in the case of contract's non-performance the buyer has two possibilities: i) to avoid the contract in the case of fundamental breach according to Art. 49(1)(a), or ii) to give an additional fixed period of time for performance pursuant to Art. 47(1). These two possibilities were equal for SUPERB because CONTROLS' failure to perform on or before 16 September 1996 represented fundamental breach as showed above.[94] Buyer's right to avoid the contract under Art. 49 has priority over seller's right to cure under Art. 48.[95] So, it would not be reasonable to put SUPERB in worse position since he had chosen his right under Art. 47(1) to give an additional fixed period of time,[96] and not the right under 49(1)(a) to avoid the contract. Hence, it is logical to conclude that in this case Art. 47 also has priority over Art. 48.

Therefore, at the moment when CONTROLS found out that SUPERB gave him fixed additional period of time CONTROLS was not allowed to propose another period of time to cure pursuant to Art. 48(2).

Moreover, according to Art. 48(1), the seller may himself propose the time in which he can cure, but only in the case where such a cure would not cause unreasonable delay and unreasonable inconvenience to the buyer. However, that was not the case. Firstly, such a cure would cause unreasonable delay for SUPERB. This because "(...)SUPERB expected to make significant cost savings from the new system over time(...)" [97] and was, hence, persistently mentioning to CONTROLS his need and importance of speedy performance.[98] Secondly, it would also cause unreasonable inconvenience because the nature, extent and consequences of delay would be harmful, and CONTROLS had been informed about that before he asked for his alleged right to cure.[99] This argument is further in accordance with one of the CISG's general principles, the principle of good faith.[100] A party can not use his legal right excessively or in an oppressive way, or for a purpose for which it was not intended. Excessive use means use which greatly exceeds that required for the protection of one's legitimate interest, where such conduct leads to a disproportionate loss to another party.[101] In the light of that interpretation, CONTROLS' proposal of another six weeks period would cause unreasonable inconvenience and delay to SUPERB. Thus, CONTROLS was not even allowed to offer 6 weeks period in which he intended to cure.

Furtheron, CONTROLS' suggestion to cure was uncertain. This uncertainty resulted from CONTROLS' entire conduct. On four occasions CONTROLS was repeatedly assuring SUPERB (30 August 1996, 4, 9 and 12 September 1996) that RELIABLE had been working on assembling the new installation team. However, SUPERB was never given a firm date by which its arrival could be expected.[102] Moreover, CONTROLS did not give any firm assurance (e.g. another installation company) that delivery would be done on time. Hence, because the cure was uncertain, SUPERB was not bound with CONTROLS' proposal of another six weeks period.[103]

Considering all the above mentioned, CONTROLS had no right to propose another longer period of time to cure. Since, SUPERB was not bound by CONTROLS' request to cure, his non-compliance with that was of no legal significance. Therefore, during that six weeks period of time there was no legal obstacle for SUPERB to resort to the remedy of avoiding the contract.

5. SUPERB RIGHTFULLY AVOIDED THE CONTRACT UNDER THE CISG Art. 49(1)(b)

Article 49(1)(b) regulates the possibility of contract's avoidance in the case of non-delivery. Since SUPERB has already established CONTROLS' failure to perform his contractual obligations as non-delivery [104], SUPERB's right to avoid the contract was grounded on that article.

Pursuant to Art. 49(1)(b) of the CISG SUPERB had every right to avoid the contract in two cases: firstly, after CONTROLS had declared that he would not deliver within the fixed additional period of time; secondly, after the fixed additional period of time had expired.

CONTROLS wrongfully requested another longer period of time for his delivery on 19 September 1996, so it was obvious that he would not deliver within the fixed additional period of time given by SUPERB.[105] Hence, SUPERB was allowed to declare the contract avoided, according to Art. 49 (1)(b), from 19 September 1996 onwards.

However, acting in accordance with the principles duty to cooperate and favor contractus SUPERB did not use that right immediately, but decided to avoid the contract no sooner than on 9 October 1996. This because he was hoping that CONTROLS would nevertheless fulfill his obligation in whole. CONTROLS did not do so until 9 October 1996 and it was obvious that he would not even begin with installation by the end of that working day.

Thus, SUPERB rightfully declared the contract avoided under Art. 49(1)(b).

III. SUPERB WAS AUTHORIZED BY THE CISG Art. 88 TO SELL THE CONTROL SYSTEM

SUPERB will prove that he had the right to reimbursement of $400.000 advanced payment (see 1.). Considering the facts that CONTROLS was not prepared to reimburse SUPERB the whole sum of the advanced payment, and that SUPERB gave to CONTROLS reasonable notice of his intention to sell, SUPERB had every right to sell the control system according to Art. 88 (see 2.). Furtheron, SUPERB will prove that the sale was done by appropriate means (see 3.), and that SUPERB had every right to retain the whole amount acquired from the sale (see 4.).

1. SUPERB'S RIGHT TO REIMBURSEMENT OF THE ADVANCED PAYMENT

In the case of contract's avoidance, according to Art. 81(1) both parties are released from their obligations. According to para.(2) of the same article, a party who has performed the contract either wholly or in part may claim restitution from the other party of whatever the first party has supplied or paid under the contract. Furtheron, if both parties are bound to make restitution, they must do so concurrently.

CONTROLS did the physical delivery of the control system on 20 August 1996,[106] but failed to perform installation and testing. On the other hand, SUPERB paid the first installment of $400.000 on 22 August 1996.[107] Considering that, the only possible logical deduction is that SUPERB had every right to claim restitution of that amount from CONTROLS, just as CONTROLS had the right to claim the return of the control system. More on, since both parties were bound to make restitution, they were obliged to do it concurrently. However, disregarding the four months negotiations,[108] CONTROLS was not prepared to return the whole sum of $400.000 of the advanced payment; he was ready to reimburse SUPERB only $330.000 on account of alleged $70.000 damages.[109] On the other hand, SUPERB was ready to return the control system as soon as CONTROLS was prepared to return the advanced payment.

Considering all the previously said, and the duty of concurrent restitutions, SUPERB rightfully retained the control system as security, based on his previously proved right to avoid the contract due to CONTROLS' failure to perform his obligation in whole.

2. SUPERB'S RIGHT TO SELL THE CONTROL SYSTEM

SUPERB will prove that he had the right to sell the control system due to CONTROLS' unreasonable delay in taking back the goods pursuant to Art. 88(1) (see 2.1.), as well as due to its rapid deterioration according to Art. 88(2) (see 2.2.).

2.1. Unreasonable delay in taking back the goods

As showed above,[110] CONTROLS refused to perform his restitution of $400.000 concurrently with SUPERB's returning of the control system during the six months period.[111] The relevant period had begun on the day of contract's avoidance (9 October 1996) and lasted until 13 March 1997 when SUPERB wrote to CONTROLS about his intention to sell the control system.[112] One should consider the purpose of the provision of Art. 88(1) according to which the case when the seller is willing to take back the goods, but refuses to perform another obligation concurrently (e.g. repaying the price) is to be understood as unreasonable delay.[113] Thus, CONTROLS has been in unreasonable delay in taking back the possession of the goods.

SUPERB sent notice to CONTROLS of his intention to sell the system in the case of non-reimbursement of $400.000 by 24 March 1997.[114] Due to the fact that CONTROLS did not reimburse it, SUPERB rightfully sold the system on 4 April 1997 pursuant to Art. 88(1). Moreover, since CONTROLS in his letter of 20 March 1997 stated that it would hold SUPERB responsible if he sold the control system for less than $290.000, CONTROLS implicitly agreed with the selling of the control system.

2.2. Rapid deterioration of goods

Pursuant to Art. 88(2) in the cases of rapid deterioration, a party who is bound to preserve the goods must take reasonable measures [115] to sell them.

Firstly, SUPERB will clearly show that the particular control system can be compared with the perishable goods subject to deterioration.[116] The honorable Tribunal should have in mind the fact that the CISG was adopted in 1980 when the computer technology and industry were not so developed as today when they are improved daily. Control system is a combination of hardware and software,[117] so it can be considered as a computer. It is commonly known that every day better and faster computers are produced, and that the "old" ones lose on their practical value and operability. The control system's value diminishes daily (what was also stressed by CONTROLS in his letter of 17 February 1997) [118] and, moreover, it can never rise again (as in the case of oil, gold etc., the price of which fluctuates). From this it is obvious that nowadays notion of "perishable goods" should have contemporary, more modern meaning than at the time when the CISG was adopted. That is exactly why control system should be considered as perishable goods subject to rapid deterioration. Therefore, SUPERB had every right to sell the system pursuant to Art. 88(2).

Secondly, if the honorable Tribunal finds that the control system cannot be compared with the perishable goods subject to deterioration, SUPERB will show that the concept of economic loss can be subsumed under the notion of "rapid deterioration". It is accepted that the notion of "rapid deterioration" should be interpreted broadly; it is not only to be understood as the physical one, but also as the economic one [119]. Although the word "loss" in the sense of economic fluctuations in price [120] was deleted from the CISG Draft,[121] it is logical that if the Commission wanted to exclude the concept of economic loss entirely, it would certainly do so expressively.[122] Hence, the notion of "rapid deterioration" regulated in Art. 88(2) may also, under certain circumstances in particular cases, include the concept of economic loss. Since CONTROLS was not willing to accept the control system concurrently with the return of $400.000, and he explicitly admitted system's "rapid deterioration" by saying that "(...) it diminishes in value every day (...)",[123] SUPERB actually not just had the right, but was obliged to sell it in order to protect CONTROLS' as well as its own interests.

3. THE SALE DONE BY APPROPRIATE MEANS

In compliance with Art. 88(1) the sale may be done "by any appropriate means". Since the Convention itself does not expressly state the ways of the sale, it is not necessary to sell the goods at an auction or by any other special form of sale.[124] In view of the fact that the sale of control system does not fall under SUPERB's scope of business, SUPERB acted as a reasonable businessman and sold it rightfully by the use of services of a broker who has experience in the sale of similar equipment.[125] Moreover, CONTROLS' objection that the sale was not done by appropriate means is not founded because he knew of SUPERB's intention to sell the system [126] and, hence, could have influenced the means of the sale by being present directly or by a representative at the sale.[127]

Furtheron, the fact that the price of $250.000 realized by SUPERB's sale was a fair price [128] corroborates SUPERB's assertion that the sale was done by appropriate means.[129]

Therefore, it is logical to conclude that CONTROLS' objection that the sale was not done by appropriate means is not legally grounded.

4. SUPERB'S RIGHT TO RETAIN THE WHOLE AMOUNT ACQUIRED FROM THE SALE

It is indisputable that pursuant to Art. 88(3) SUPERB had every right to retain "reasonable expenses of preserving the goods and of selling them", which amounted to $3.000.[130] SUPERB will also prove that he had the right to retain the net receipt of $247.000.

As showed above,[131] the fact is that the parties had to make concurrent restitution in its whole amount, but CONTROLS wanted to retain the alleged $70.000 of damages. Since SUPERB was not in breach of contract,[132] CONTROLS had no right to claim damages.

Furtheron, concerning the facts that CONTROLS was not ready to reimburse SUPERB his advanced payment of $400.000 and that SUPERB rightfully sold the control system for $250.000, it is accepted that SUPERB also had the right to retain the net receipt of $247.000, by which he partially settled the advanced payment.[133]

Moreover, SUPERB and CONTROLS had two mutual demands of the same kind: SUPERB had to return the net receipt of $247.000, and CONTROLS had to return the $400.000 of the advanced payment. Since their demands result from the same contractual relationship governed by the CISG, they are subject to set-off,[134] which is preferable considering the modern business point of view.[135]

Thus, SUPERB was authorized to retain the whole amount of $250.000 obtained from the sale of the control system and to claim the rest to the whole amount of the advanced payment before the Tribunal.

IV. RELIABLE SHOULD NOT BE JOINED TO THIS ARBITRATION AS REQUESTED BY CONTROLS

The counsel have agreed that there would be no need to join RELIABLE in this arbitration if CONTROLS does not qualify for exemption from paying damages under the CISG Art. 79. The issue of RELIABLE'S joinder arises only if CONTROLS qualifies under the CISG Art. 79(2)(a) for exemption from paying damages.[136] SUPERB has already proved that CONTROLS does not qualify.[137]

SUPERB will show that even if CONTROLS would qualify under Art. 79(2)(a), RELIABLE should not be joined to this arbitration. SUPERB will firstly elaborate the relation between SUPERB-CONTROLS and CONTROLS-RELIABLE contracts (see 1.), secondly, point out the difference between the two types of joinder stipulated in these two contracts (see 2.), and finally show that the requirements contained in para. 24 of the SUPERB-CONTROLS contract are not met (see 3.).

1. THE RELATION BETWEEN SUPERB-CONTROLS AND CONTROLS-RELIABLE CONTRACTS

To be able to discuss the issue of RELIABLE's joinder to the ongoing arbitration between SUPERB and CONTROLS it is necessary to first distinguish the relation between the two contracts to which references have been made as regarding that issue.

On one hand there is the CONTROLS-RELIABLE contract which was concluded on 7 June 1996. This contract regulates rights and obligations of those two parties, but also includes certain provisions regarding SUPERB.[138] However, this contract and all of its provisions represent for SUPERB res inter alios acta.[139]

On the other hand there is the SUPERB-CONTROLS contract, concluded on 10 June 1996. That contract regulates the relationship between SUPERB and CONTROLS, but also contains certain provisions regarding RELIABLE.[140] Those provisions become applicable when the issue of RELIABLE's possible joinder is triggered.[141] Nevertheless, this contract represents for RELIABLE res inter alios acta.

It is logical to conclude that the mentioned two contracts regulate two different legal relationships.

The current state of facts is the following: SUPERB raised the claim against CONTROLS. The arbitral proceeding was initiated before DIAC in Vindobona, Danubia. By virtue of the parties' agreement substantive issues will be regulated by the CISG and procedural issues by the AAA Rules.[142]

In the light of the above stated there is no doubt that for all the issues in this case there is only one relevant contract whose provisions are exclusively applicable to the relations between SUPERB and CONTROLS, and that is the SUPERB-CONTROLS contract. Therefore, SUPERB is, naturally, not bound to accept any request based on a contract to which SUPERB is not a contracting party. For that reason CONTROLS may submit any request regarding SUPERB based only on the contract between CONTROLS and SUPERB.[143]

Consequently, any request for joinder of RELIABLE may be based only on the contract between SUPERB and CONTROLS.

2. TWO DIFFERENT TYPES OF JOINDER ARE STIPULATED IN THE TWO ARBITRATION CLAUSES

CONTROLS requested that RELIABLE be joined as a defendant to SUPERB-CONTROLS arbitration in accordance with provisions of para. 24 of the SUPERB-CONTROLS contract, and paras. 14 and 15 of the CONTROLS-RELIABLE contract.[144] SUPERB opposes to this joinder because, as SUPERB has already explained, CONTROLS cannot base his request on a non-applicable, and as far as SUPERB is concerned, non-binding contract to this case, i.e. paras. 14 and 15 of the CONTROLS-RELIABLE contract. More importantly, even though both of the articles referred to in his request essentially represent multi-party arbitration,[145] they legally differ, since they regulate two completely different types of joinder.

On one hand, the arbitration clause in CONTROLS-RELIABLE contract (paras. 14 and 15), as well as CONTROLS' request for joinder and RELIABLE's agreement there to, all aim at including RELIABLE as a (co)defendant in the ongoing arbitration.[146] It would mean that RELIABLE comes into the proceedings on behalf of CONTROLS, as a party, whose position in the proceedings would be only to help CONTROLS, and after the judication be bound by the award in the same degree and amount as CONTROLS, if he would be found liable to SUPERB.[147]

On the other, the SUPERB-CONTROLS arbitration clause (para. 24) is aimed specifically at initiating and subsequent including of whole new arbitral proceedings (between CONTROLS and RELIABLE) in the ongoing arbitration between SUPERB and CONTROLS.[148] This arbitration clause includes main constituting elements of consolidation.[149] From the heresaid, it is self evident that para. 24 refers to consolidation as the only way of third party involvement. Consolidation can be initiated only with an expressed consent of all the parties in compliance with the stipulated arbitration clause.[150] Such consent in consolidation is needed because there is no direct contractual relationship between employer and subcontractor.[151] Namely, it can never be overlooked that from a legal point of view there exist two distinct and separate contractual relationships,[152] even if economic purpose is to be regarded as a unity.

This is not a rare type of arbitration clause in cases in which the main contractor engages a subcontractor for the performance of the whole or a part of the main contract. According to such type of clause, the dispute arising between main contractor and his subcontractor may be settled in the form of a separate arbitration in the arbitration between the employer and the main contractor.

It is evident herefrom that in this case it is being dealt with two different types of joinder. The one stipulated in the SUPERB-CONTROLS contract gets the upper hand.

3. THE REQUIREMENTS CONTAINED IN Para. 24 OF THE SUPERB-CONTROLS CONTRACT ARE NOT MET

Regarding the above mentioned reasons for exclusive application of para. 24 of SUPERB-CONTROLS contract for determining the possibility of joining RELIABLE to this arbitration, SUPERB submits specific requirements set out in para. 24. There are in fact four requirements, which are:

1) The existence of a claim of CONTROLS against RELIABLE (see 3.1.);

2) RELIABLE's consent to have the claim of CONTROLS against him settled in the SUPERB-CONTROLS arbitration (see 3.2.);

3) RELIABLE's waiver of any right it may have to participate in the selection of the arbitral Tribunal (see 3.3.);

4) The claim of CONTROLS against RELIABLE must raise no new questions of law or fact from those to be decided in the arbitration between SUPERB and CONTROLS (see 3.4.).[153]

These four requirements must be fulfilled cumulatively. SUPERB will prove that none of them is fulfilled.

3.1. CONTROLS' claim against RELIABLE does not exist

SUPERB agreed to have RELIABLE joined to the SUPERB-CONTROLS arbitration, provided that there exists a claim of CONTROLS against RELIABLE.[154]

CONTROLS requested joinder of RELIABLE as a party to the ongoing arbitration.[155] It is obvious that this request cannot by any means be considered as the claim of CONTROLS against RELIABLE, especially not in the sense of para. 24 of the SUPERB-CONTROLS contract. In order for RELIABLE to be included in the arbitration pursuant to para. 24 of the SUPERB-CONTROLS contract, CONTROLS must have firstly submitted the claim against RELIABLE. In this way CONTROLS would have initiated a separate arbitral proceedings against RELIABLE. In this proceedings there would be no direct legal link between SUPERB and RELIABLE ,[156] thus creating legal ground for para. 24 to be activated. Secondly, CONTROLS must have requested uniting of, at that point, already ongoing proceedings. Finally, this request must be formally approved by the arbitrators.

Had CONTROLS raised the claim against RELIABLE, he would fulfill the basic requirement for application of para. 24. Then, RELIABLE could be joined to the SUPERB-CONTROLS arbitration, provided that he fulfills the other three requirements. However, since CONTROLS did not do so, RELIABLE cannot be joined to the ongoing arbitration.

From all the arguments CONTROLS submitted in the arbitration so far, it is obvious that there is no claim of CONTROLS against RELIABLE. With respect to CONTROLS' request and his attitude towards this issue it does not appear at this moment that there will be any at all.

3.2. RELIABLE did not give consent to joinder under para. 24 of the SUPERB-CONTROLS contract

SUPERB will show that RELIABLE consented to joinder under paras. 14 and 15 of the CONTROLS-RELIABLE contract, which is not relevant in this arbitration.[157] RELIABLE, as will also be demonstrated did not consent to joinder in the sense of para. 24 of the SUPERB-CONTROLS contract, which is the only relevant in this arbitration.

RELIABLE did give a certain consent to joinder. That consent is as following: "(...)RELIABLE agrees to defend CONTROLS against that portion of the claim based on the alleged failure in respect of the installation and testing of the control system(...)" It is obvious that this consent, given in para. 14 of the CONTROLS-RELIABLE contract is the consent of RELIABLE to come into the proceedings between SUPERB and CONTROLS on behalf of the latter, to defend him and later be bound by the award.[158] It has already several times been pointed out that referring to paras. 14 and 15 regarding joinder of RELIABLE is not justified.

Since para. 24 of the SUPERB-CONTROLS contract is the only relevant arbitration clause, any RELIABLE's consent to joinder must be given strictly in line with that paragraph. Consent in that sense should be e.g. as follows: "RELIABLE agrees to have the claim of CONTROLS against him settled in the arbitration between SUPERB and CONTROLS." This would represent a consent to uniting of two arbitral proceedings into one arbitration before the same panel of arbitrators, which would be the only acceptable consent concerning para. 24 of the SUPERB-CONTROLS contract.

In the light of all the above mentioned, it is clear that the consent given by RELIABLE is not the consent required by para. 24 of the SUPERB-CONTROLS contract. SUPERB is therefore right when asserting that, other than being included under para. 24, RELIABLE can appear in the SUPERB-CONTROLS arbitration only as a witness.[159]

3.3. RELIABLE did not waive the right to participate in the selection of the arbitral tribunal

In the same manner, as regarding consent, SUPERB will show that the waiver given by RELIABLE is not the one requested under para. 24 of the SUPERB-CONTROLS contract.

RELIABLE allegedly waived the right to participate in the creation of the arbitral tribunal by stating: "(...)If the claim of SUPERB is asserted against CONTROLS in arbitration, RELIABLE agrees to waive any right it may otherwise have to participate in creation of the arbitral tribunal(...)" It is evident that this waiver under para. 15 of the CONTROLS-RELIABLE contract refers to the waiver of the right to participate in selection of the tribunal in the ongoing arbitration between SUPERB and CONTROLS, in which RELIABLE is to be joined as a (co)defendant under para. 14 of the CONTROLS-RELIABLE contract.

Contrary to the one stated, the waiver of the right to participate in the selection of the arbitral tribunal under para. 24 of the SUPERB-CONTROLS contract should be e.g. as following: "If CONTROLS brings a claim against RELIABLE, the latter waives his right to participate in the selection of the arbitral tribunal in the case that this arbitration is to be joined with the one between SUPERB and CONTROLS into one proceedings." It is obvious that this waiver would refer to the uniting of two separate, ongoing proceedings.

Considering all the previously said, it is clear that RELIABLE did not waive the right to participate in creation of the Tribunal in the CONTROLS-RELIABLE arbitration, as required under para. 24.

3.4. The claim of CONTROLS against RELIABLE would raise new questions of law and fact

SUPERB will demonstrate that joinder of RELIABLE in this arbitration would raise new questions of law (see 3.4.1.) as well as new questions of fact (see 3.4.2.) from those to be decided in the arbitration between SUPERB and CONTROLS.

3.4.1. New questions of law

In the contract between SUPERB and CONTROLS it is expressly agreed that it will be governed by the CISG, and any disputes arising from the contract will be settled in accordance with it.[160]

On the other hand, the contract between CONTROLS and RELIABLE is to be governed by the UNIDROIT Principles.

The dispute between CONTROLS and SUPERB is already before the arbitral Tribunal, and is being decided in accordance with provisions of the CISG. If it would come to joining of RELIABLE, subsequent to para. 24 of the contract between SUPERB and CONTROLS,[161] there would arise a situation of two joint proceedings, which are governed by different laws. This would mean that arbitrators would have to refer to one law (the CISG) when solving the dispute between SUPERB and CONTROLS, and to the other (the UNIDROIT Principles) in the dispute between CONTROLS and RELIABLE.

The preceding statement may well be illustrated on the issue of CONTROLS' exemption, that is to be discussed before the arbitral Tribunal (i.e. since it is the first issue of the Procedural Order No. 1). In the scope of discussing the issue of CONTROLS' exemption the Tribunal must argue about all the requirements set out in Art. 79. By applying the provisions of that article, CONTROLS is exempted if the requirements for exemption set out in Art. 79(1) are met by CONTROLS and if those requirements would also be met by RELIABLE.[162] In other words, the issue of RELIABLE's exemption would be determined according to the CISG's provisions. On the other hand, as showed above, RELIABLE could be joined to the ongoing arbitration only pursuant to para. 24 of the SUPERB-CONTROLS contract. This could happen only if CONTROLS had brought the claim against RELIABLE. In that claim the relationship between CONTROLS and RELIABLE concerning RELIABLE's exemption would be governed by the UNIDROIT Principles as stipulated in CONTROLS-RELIABLE contract.

Hence, the application of the relevant provisions of the SUPERB-CONTROLS contract and the CONTROLS-RELIABLE contract would necessarily lead to the application of two different sets of legal rules to the same issue. This would inevitably mean the raise of new questions of law.

3.4.2. New questions of fact

The contract between SUPERB and CONTROLS is a legally relevant fact, and contractual relationship between SUPERB and CONTROLS represents a certain factual situation. Factual situation consists of a number of facts - factual complex.

When the Tribunal decides on a dispute between SUPERB and CONTROLS it will only regard the facts relevant to issues arising from their contract, in other words, it will deal only with the factual complex contained in and related to SUPERB-CONTROLS contract. If it would come to an involvement of RELIABLE to this arbitration, the Tribunal would have to take into account the following: the contract between CONTROLS and RELIABLE as the new and different legally relevant fact, the contractual relationship between CONTROLS and RELIABLE as the new and different factual situation, which is based on the new and different factual complex.

Therefore, SUPERB submits that involvement of RELIABLE as respondent in the arbitration between CONTROLS and RELIABLE might reveal new facts which are at this point unknown to SUPERB and CONTROLS, and which they may not become acquainted with without the involvement of RELIABLE.

From the elaboration above, it is most probable that joining of RELIABLE would raise new questions of fact.

CONCLUSION

Considering the above submission in response to the Tribunal's Procedural order No. 1 of 2 October 1998, SUPERB requests the honorable Tribunal to declare that:

I. CONTROLS cannot be exempted from paying damages to SUPERB under the CISG Art. 79(1)and (2)(a)

as a result of delayed installation of the control system;

II. SUPERB was authorized to avoid the contract on 9 October 1996 under the CISG Art. 49(1)(b)

III. SUPERB was authorized to sell the control system under the CISG Art. 88 and that the sale was done by

appropriate means;

IV. RELIABLE should not be joined to this arbitration as requested by CONTROLS.

Respectfully, SUPERB also pleases the honorable Tribunal to award him the requests from the Relief Sought, para. 23.

Counsel for Superb Paper Plc.

Martina Peri

Ivana Vukorepa

Ivo Ivanevi

Branimir Ivekovi

Appendix

CLAIMANT (buyer) Superb Paper, Plc. / SP       Mediterraneo

-------------------------------

RESPONDENT (seller) Essential Controls, S.A. / EC       Equatoriana                | Reliable Installation Co.       Hanseatica

FACTS OF THE CASE

1) 13.05.96. Negotiations between SP and EC; "Reliable" accepted by both parties as installation firm;

2) 10.06.96. SP and EC enter into contract: EC agrees to sell and install new control system to SP for $500.000;
Payment: $400.000 upon delivery, $ 50.000 within 10 days after final testing, $ 50.000 within 6 month after final testing;
Installation and final testing by "Reliable" on EC's behalf on or before 16.09.96

3) 20.08.96. Delivery of control system

4) 22.08.96. Payment of $400.000; "Reliable" estimates installation and testing in 2 weeks time

5) 25.08.96. Airplane with "Reliable" team crashed

6) 26.08.96. "Reliable" notifies EC about the crash

7) 27.08.96. EC notifies SP about the crash; "Reliable" will assign a new team; Completition on schedule (16.09.96)

8) 29.08.96. "Reliable" to EC: a few days delay possible; the only qualified personnel left were assigned to another contract (should have been completed by 30.08.96 - unexpected problems - delay)

9) 30.08, 4/9/12.09.96. SP inquires EC about team's arrival

10) 13.09.96. SP writes to EC: Next working day (16.09.96) dead line date; EC faxes "Reliable" asking for a firm date; if not, then turning to another firm

11) 16.09.96. "Reliable" replies EC : will give firm date by 20.09.96.

12) 18.09.96. SP writes to EC: suggests that EC had to assure different installation firms; EC should finish installation and testing by 9.10.96. (fixed period of time); otherwise SP will exercise its legal rights EC fax to "Reliable": "Send new installation team within 3 weeks or we will terminate the contract and find a new installation firm"

13) 19.09.96. EC notifies SP about his fax to "Reliable"; EC asks SP whether it would be satisfied with installation and testing within next six weeks (30.10.96.)

14) 09.10.96. SP notice to EC: deadline expired, contract avoided; SP demands return of $400.000

15) 10.10.96. SP enters into contract with "Bridget Controls"
EC telephones SP-"Reliable" promised to complete the job prior to 30.10.96.
SP says: "Too late"; holds the control system as security for the return of $400.000

16) Nov.96-Feb.97. Negotiations
SP insists the return of $400.000; EC says that SP breached the contract; claims right to recover damages

17) 17.02.97. EC letter to SP: - claims right to recover damages from the advanced payment
- demands the return of the control system

18) 13.03.97. SP letter to EC: 10 days period for return of $400.000; otherwise the control system will be sold

19) 20.03.97. EC responds to SP: - reiterates statement from 17.02.97.
- offers the reimbursement of $400.000 less its damages of $70.000 (total $330.000)
- warns of holding SP responsible for the consequences in case of control system selling for less than $290.000

20) 04.04.97. SP did not reply to EC's letter of 20.03.97; EC did not return the advanced payment; SP sold control system for $ 250.000 ($3.000 costs of preservation, net receipt of $ 247.000)

FOOTNOTES

1. Statement of Defense and Counterclaim, para. 14.

2. ² Vedriš/Klari, p. 425.

3. Herber/Czerwenka, Art. 79, paras. 16, 17. See also: Magnus, Staudinger, Art. 79, para. 5; Tallon, Bianca/Bonell, Art. 79, para. 2.6.

4. Any argument regarding RELIABLE will be made in this memorandum only if it directly influences legal issues between SUPERB and CONTROLS.

5. Magnus (RabelsZ), para. 24: The party asserting an exemption in her favor generally has to prove the existence of the factual prerequisites of that exemption. See also: Tallon, Bianca/Bonell, Art. 79, Para. 2.7.3; Bernstein/Lookofsky, p.107; ICC Case Nos. 3099 and 3100, Award of 30 May 1979, ICC Collection 1974-1985, p. 92. The Tribunal concluded that since the defendant did not succeed in proving that three conditions for exemption were met, his motion for exemption was rejected, and he was held responsible for all damages resulting from non-performance.

6. TICARFCCI Case No. 155/1994, Award of 16 March 1995. The seller should bear liability for failure to fufill his obligations on grounds that he was unable to establish that he could not reasonably be expected to take account, in concluding the contract, of the obstacle preventing his compliance with the contract or to avoid or surmount that obstacle or its consequences.

7. Statement of Defense and Counterclaim, para. 14.

8. Ibid.

9. Tallon, Bianca/Bonell, Art. 79, para. 2.6.1.

10. Ibid.

11. Herber/Czerwenka, Art. 79, para. 2.

12. Schlechtriem, Art. 79, paras. 6,7.

13. Weitzmann , pp. 265-290.

14. The basic rule that the contract is binding, and that it must be performed in accordance with party's promises. Magnus (RabelsZ), para. 9.

15. Tallon, Bianca/Bonell, para 2.7.2.

16. ¹⁶ Ibid, para. 2.7;. Tsakiroglou & Co. Ltd. v. Noblee Thorl GmbH. The Tribunal established that it did not come to a case of total impossibility to perform, due to the closure of Suez Canal. The party was held liable for non-shipment of the goods around the whole continent, which would increase the travelling distance as well as transportation expences multiply. A contract can only be discharged if it implements a performance which becomes totally impossible for the defaulting party. In: Treitel, p. 791

17. Statement of Defense and Counterclaim, para. 14.

18. Tallon, Bianca/Bonell, para. 2.6.6.

19. The plane crash does in fact represent an impediment, but not of a kind required under Art. 79(1). This because it was not the exclusive cause of RELIABLE's non-performance. That is the fact which RELIABLE himself acknowledged (Claimant's Exhibit No. 2).

20. Magnus (RabelsZ) para. 6; Similarly: Herber/Czerwenka, Art. 79, paras. 10, 11; Honnold, Art. 8, para. 107.1.

21. There are two types of reasonableness - vertical and horizontal. Vertical is in regard to the standards of the specific trade, and horizontal in regard to the standards common to all trades. SUPERB will prove that CONTROLS should have foreseen his impediment under both standards.

22. Statement of Defense and Counterclaim, para. 5; Procedural Order No. 2, Answer to Factual Question 17.

23. Procedural Order No. 2, Answer to Factual Question 19.

24. Schlechtriem, Art. 79, paras. 22, 23; See also: Tallon, Bianca/Bonell Art. 79, para. 2.6.3.

25. ATH, Case No. 19960321, Award of 21 March 1996. The Tribunal held that the buyer's claim was not precluded under the CISG Art. 79 since the difficulties of the seller's manufacturer were within the sphere of the seller's responsibility.

26. Strohbach, p. 46. Force majeure clause is an agreement on certain criteria and conditions of exemption from responsibility. Such a clause ensures that after the signature of the contract there will not be a total breakdown of the contract. See also: Melis, pp. 218, 219; Heuzé, p. 452; To avoid the difficulties, the contract may include the provision for discharge of a party in case of occurence of specified events, Channel Island Ferries Ltd. v. Sealink UK Ltd. (1988) 1 Lloyd's Rep. 323, in: Treitel, p. 813; "Istros" v. F.W. Dahlstroem & Co. King's Bench Division (1931) 1 K.B. 247; 18 Asp. M.L.C. 177, in: Smith p. 448.

27. Statement of Claim, para 3.

28. Procedural Order No. 2, Answer to Factual Question 17.

29. Schlechtriem, Art. 79, para. 35.

30. The same: ICC, Case No. 2763, Award of June 25, YbComArb (X, p. 45), The Tribunal decided that the defaulting party should not have taken into account the quantity of submerged explosives at the construction site, but must have been aware of the possibility of presence of explosives at the business site due to historic events in that area.

31. ICC Case No. 8128 of 1995.http://cisgw3.law.pace.edu/cases/958128i1.html, Seller is liable for non-delivery due to subcontractor's non-performance, because that represents a part of seller's risk.

32. The facts of the case do not reveal what are the capacities of the other three companies authorised to do the installation and testing. Nevertheless, it could be argued that it had been CONTROLS' duty to inquire about it.

33. Honnold, Art. 79, para. 423.4.

34. To avoidability applies the same objective criterion of reasonableness as stipulated in the CISG and explained supra Chapter I, para. 2.2.

35. Herber/Czerwenka, Art. 79, para. 12.

36. ICC Case No. 5195 of 1986, Partial award in YbComArb (XIII), p. 69. The Tribunal was of the opinion that the standard of a reasonable businessman extended so far that if the party accepted to perform in a country with great political and ethnical instability, it was reasonable to expect completion of the contract, regardless of the worsened situation in the country and an apparent possibility that his workers may come under attack by a paramilitary organization; Tsakiroglou & Co. Ltd. v. Noblee Thorl GmbH (1962) A.C. 93. The Tribunal held the party responsible for not delivering due to the closure of Suez Canal. The party should have found another way of transport in order to fulfill his contractual obligation. See detailed: Treitel, p. 791.

37. Statement of Defense and Counterclaim, para. 6.

38. Claimant's Exhibit No. 2.

39. Claimant's Exhibit No. 4.

40. Ibid.

41. Statement of Defense and Counterclaim, para. 6.

42. Statement of Defense and Counterclaim, para. 7.

43. Claimant's Exhibit Nos. 3, 4, 5, 6; Respondent's Exhibit No. 3.

44. Claimant's Exhibit No. 3.

45. Claimant's Exhibit No. 7.

46. Claimant's Exhibit No. 5.

47. Respondent's Exhibits Nos. 2,4.

48. Statement of Defense and Counterclaim, para. 6.

49. There is an internationally accepted rule that generic goods do not come within the scope of Art. 79 See: Tallon, Bianca/Bonell, Art. 79, Para 2.6.5. In casu, there are two types of goods - the control system and services required for installation and testing. SUPERB has the right to equalize the position of goods and services as regarding replaceability in this case, because of the following. When it became obvious that CONTROLS will not fulfill his contractual obligation and right of avoidance was available to SUPERB, he managed to locate and employ another company within a short period of time, which both delivered the goods and supplied the services. This proves that neither the control system nor the qualified personal were of a limited kind, and others were obtainable as substitutes. Thus CONTROLS cannot claim that the performance required from him by SUPERB was one of a kind, and therefore not replaceable. Since this is the case, delivery should have been performed, regardless of any impediment.

50. Magnus, Staudinger, Art. 79, paras. 40-43; See also: Tallon, Bianca/Bonell para. 2.6.4; v. Caemmerer/Schlechtriem, Art. 79, para. 24.

51. Procedural Order No. 2, Answer to Factual Question 14.

52. Procedural Order No. 2, Answer to Factual Question 5.

53. Kritzer, p. 519.

54. Melis, p. 221.

55. Procedural Order No. 2, Answer to Factual Question 2.

56. Claimant's Exhibit No. 1, paras. 3, 4.

57. Ibid, para. 22.

58. Ibid, para. 1: SUPERB in Mediterraneo, CONTROLS in Equatoriana.

59. Statement of Claim, para. 12.

60. Hascher, pp. 220-224: "The price to be paid for the assembly of the materials was of a completely secondary order of magnitude compared to that of the purchase of the materials. The arbitrator thus correctly examined the economic value of the benefits furnished in order to conclude that the contract at issue came within the purview of the CISG".

61. Contractual value between SUPERB and CONTROLS amounts to $500.000 (Claimant's Exhibit No. 1); installation and testing cost $31.500 (Respondent's Exhibit No. 1).

62. This will cause "dépaçage". In broader meaning dépaçage relates to the situation when more than one law is applicable to a complex agreement containing elements which may each exist as separate contracts. The true dépaçage operates when separate issues in contract e.g. capacity, formalities and mode of performance are governed by separate laws, Lando, pp. 245-254.

63. Lorenz, p. 4; Will, Bianca/Bonell, Art. 25, para. 2.1.1.1.

64. Art. 25. of the CISG.

65. Lorenz, pp. 4,5.

66. Statement of Claim, para. 3.

67. Procedural Order No. 2, Answer to Factual Question 23.

68. Claimant's Exhibit No. 1, para. 4.

69. Procedural Order No. 2, Answer to Factual Question 23.

70. See: infra, Chapter II, para. 3.2.

71. Bonell/Liguori, p. 365.

72. Procedural Order No. 2, Answer to Factual Question 23.

73. Schlechtriem, v. Caemerer/Schlechtriem, Art. 25, para. 9; Herber/Czerwenka, Art. 25, para. 7.

74. See also: U.S. Cir. Ct. Case No. 185, 717, Delchi Carrier S.p.A. v. Rotorex Corp. http://cisgw3.law.pace.edu/cases /951206u1.html

75. Vilus, p. 89; Honnold Art.25, para. 183; Will, Bianca/Bonell Art. 25, para. 183.

76. Honnold, Art. 25, para. 183: "The Commission, after deliberation, did not consider it necessary to specify at what moment the party in breach should have foreseen or had reason to foresee the consequences of the breach", UNCITRAL, Report of Tenth (1977) Session.

77. "The Official Records also indicated that information provided after the conclusion of the contract could modify the situation as regards both substantial detriment and foresight"; Kritzer, p. 207, See also: Magnus, Staudinger, Art. 25, para. 17; Enderlein/Maskow/Strohbach, Art. 25, para. 4.3; Will, Bianca/Bonell, Art.25, para. 2.2.2.2.5; Honnold Art. 25, para. 183.

78. Procedural Order No.2, Answer to Factual Question 23.

79. Statement of Defense and Counterclaim, para. 5.

80. Claimant's Exhibit No. 3.

81. Obligation of every party to enable the other party to perform and not to jeopardise the contractual purpose. Magnus (RabelsZ),

para. 11.

82. The intention of preserving the contract whenever possible. Magnus (RabelsZ), para. 9.

83. Ibid.

84. Claimant's Exhibit No. 4.

85. Respondent's Exhibit No. 4.

86. Will, Bianca/Bonell, Art. 47, para. 2.1.3.2; Honnold, Art. 47, para. 289; Huber, v. Caemmerer/Schlechtrim, Art. 47, para. 9; Magnus, Staudinger, Art. 47, para. 9; Enderlein/Maskow/Strobach, Art. 47, para. 2.

87. Bernstein/Lookofsky, p. 92.

88. Statement of Defense and Counterclaim, para. 6.

89. Claimant's Exhibit No. No. 2; Statement of Claim, para. 5; of Defence, para. 6.

90. Prohibition against actions contrary to party's prior conduct, Magnus (RabelsZ), para. 3.

91. Claimant's Exhibit No. 4.: "(W)e expect the system to be fully installed and operational by 9 October 1996 at the latest. If it is not operational by that date, we will have to look to our legal rights.".

92. Claimant's Exhibit No. 5.

93. Will, Bianca/Bonell, Art. 47, para. 2.1.3.1.

94. See: supra, Chapter II, para. 2.

95. Lorenz, p. 5; Similarly: Schlechtriem, Art. 48, para. 2.

96. By chosing Art. 47(1).

97. Procedural Order No. 2, Answers to Factual Questions 23.

98. Claimant's Exhibit No. 3; Respondent's Exhibit No. 2.

99. Claimant's Exhibit Nos. 3, 4.

100. Magnus (RabelsZ), para. 3.

101. Friedmann, Beatson/Friedmann, pp. 400, 401.

102. Claimant's Exhibit No. 3.

103. Will, Bianca/Bonell, Art. 48, para. 2.1.1.1.1.

104. See: supra, Chapter II. para. 1.

105. Claimant's Exhibit No. 5, Statement of Claim, para. 8.

106. Statement of Claim, para. 5.

107. Ibid.

108. Statement of Claim, para. 11.

109. Respondent's Exhibit No. 6.

110. See: supra, Chapter III, para. 1.

111. Statement of Defence and Counterclaim, para. 2.

112. Statement of Claim, para. 11.

113. Schlechtriem, Art. 88, para. 16; Enderlein/Maskow/Strohbach, Art. 88, para. 2.1.

114. Claimant's Exhibit No. 9.

115. The notion of "reasonable measures" is to be understood as party's obligation to sell the goods. Barrera Graf, Bianca/Bonell, Art. 88 para. 2.8.; Vilus, p. 182.

116. The notion of "rapid deterioration" refers to perishable goods: Schlechtriem, Art. 88, para. 24.

117. Procedural Order No.2, Answer to Factual Questions 22.

118. Respondent's Exhibit No. 5.

119. Barrera Graf, Bianca/Bonell, Art. 88, para. 2.8; Enderlein/Maskow/Strohbach Art. 88, para. 5.

120. Vilus, p. 182.

121. Ibid: First draft of the CISG contained "(...) loss and rapid deterioration (...)".

122. Ibid: The Commission deleted the word "loss" due to Singapore representative suggestion, only in order to protect possible difficult position of the party which would be bound to sell the goods in the case of price fluctuations.

123. Respondent's Exhibit No. 5.

124. Magnus, Staudinger, p. 679; v. Caemmerer/Schlechtriem, Art. 88, para. 22; Herber/Czerwenka, Art. 88, para. 5.

125. Defense to Counterclaims and Reply to Request for joinder of Third Party, para. 3.

126. Claimant's Exhibit No. 9.

127. Barerra Graf, Bianca/Bonell, Art. 88, para. 2.7.

128. Procedural Order No. 2; Answers to Factual Question 3.

129. Herber/Czerwenka, Art. 88, para. 5.

130. Statement of Claim, para. 11.

131. See: supra, Chapter III, para. 1.

132. See: supra, Chapter II, para. 5.

133. Magnus, Staudinger, Art 88, para. 25; Herber/Czerwenka Art. 88, para. 8; Enderlein/Maskow/Strohbach, Art. 88, para. 9; Schlechtriem, Art. 88, para. 32.

134. Magnus (RabelsZ) paras. 14, 15.

135. See cases: ICC, No. 3540, 3 October 1980, YbComArb (VII), p. 124; ICC, No. 5713/1989, YbComArb (XV), p. 70.

136. Procedural Order No. 1.

137. See: supra, Chapter I.

138. Respondent Exhibit No. 1, paras. 1, 2, 14, 15.

139. Ballentine, p. 1104. Res inter alios acta - the acts and declarations either of strangers, or of one of the parties to the action in his dealings with third parties. See also: Romac, p. 510.

140. Claimant's Exhibit No. 1, paras. 4, 24.

141. Claimant's Exhibit No. 1, para. 24.

142. Substantive issues not regulated by the CISG should be solved in accordance with Art. 7(2) of the CISG. Procedural issues not regulated by the AAA Rules will be solved by virtue of Art. V1(d) of the NYC, under the DAICA. More about the application of DAICA - see in: Memorandum for the Claimant, University of Zagreb, Fourth Annual Willem C. Vis International Commercial Arbitration Moot, p. 5.

143. Mustill/Boyd, p. 144. The claimant can oppose to joinder of the third party as a co-defendant requested by respondent if it is not stipulated in the claimant-respondent contract, because claimant did not agree to arbitrate with the defendant and a third party.

144. Statement of Defense and Counterclaim, para. 26.

145. Delvolvé, p. 27. Multi-party arbitration is defined as an arbitration involving a confrontation between more than two parties with opposing interests. See detailed: Bernini (Warsaw Symposium), Arbitration in Multi-party Business Disputes. Aksen (Warsaw Symposium), The United States Experience. Glossner (Warsaw Symposium), Arbitration Between More than two Persons. Merchant (Warsaw Symposium), International Arbitration in Multi-party Commercial Disputes.

146. See detailed for this type of joinder: Dika, Hague-Zagreb, pp. 133, 134.

147. Respondent's Exhibit No. 1, para. 14; Procedural Order No. 3, Clarifications para.1.

148. Defense to Counterclaims and Reply to Request for Joinder of Third Party, para. 4.

149. Filipovi, Triva and Coa., p. 121; Dika, Hague-Zagreb, p. 129; Consolidation is a process of uniting two or more pending arbitrations into one proceedingss before the same panel of arbitrators. The uniting of proceedings, under consolidation, can only occur if they have already begun. In addition, each of the arbitration proceedings in consolidation retain their own independence from others to be united with; See detailed: Chiu, Consolidation of Arbitral Proceedingss and International Commercial Arbitration.

150. Naon, p. 701. In the construction contract in wich the employer commmences arbitral proceedingss against the contractor, the latter blames his non-performance on a subcontractor not being a party to the arbitration agreement between employer and contractor. The Tribunal decided that the incorporation of subcontractor would require all parties to clearly express consent to the stipulated arbitration agreement.

151. In casu - because there is no direct contractual relationship between SUPERB and RELIABLE, this is not a multi-party arbitration in the strict sense of the term, but rather a "parallel arbitration", arising between parties who are linked together only in the context of a set of related contracts, but there is no single contract or single arbitration clause linking SUPERB, CONTROLS and RELIABLE.

152. Bernini (Warsaw Symposium), p. 294; Gravel, p.45.

153. Claimant's Exhibit No. 1, para. 24.

154. According to the arbitration clause (i.e. para. 24) of the SUPERB-CONTROLS contract.

155. Statement of Defense and Counterclaim, para. 26; Procedural Order No. 3, Clarifications, para. 1.

156. Even though they are in the same arbitration.

157. Statement of Defense and Counterclaim, para.21; Respondent's Exhibit No. 7.

158. Respondent's Exhibit No. 7.

159. Procedural Order No. 3, para. 1.

160. Claimant's Exhibit No. 1, para. 22.

161. Para. 24 of the SUPERB-CONTROLS contract requires an already initiated procedure between CONTROLS and RELIABLE in order for RELIABLE to be joined. See detailed: supra, Chapter IV, para. 3.1.).

162. See: supra, Chapter I, para 1.