Fourth Annual Willem C. Vis
International Commercial Arbitration Moot

1996-97

Clarifications to the Problem

A number of teams have submitted requests for clarification of various factual aspects of the problem. Many of the requests for clarification ask essentially the same question, though in different words. Therefore, the questions have been restated so as to convey the information requested in a manner adequate to answer the question, however it may have originally been stated.

It should be noted that at this stage of the Moot the teams are representing the Claimant, Textile Export-Import Co. Facts known by Textile can be ascertained by asking the client. Facts known only by High Quality Clothes Co. could be ascertained only by a fact-finding process that involved it. Since that fact-finding process is not available to the teams, and since those facts may be necessary for the second phase of the Moot, when it would be possible to ascertain them by asking the client, the requested clarifications will be given in the second portion of these clarifications.

It should also be noted that Textile and Menís Suits are potentially in an adversarial position in regard to this dispute. However, because its interest in maintaining a close relationship with Textile is more important than any liability it may have in this matter, Menís Suits has given the information requested of it.

1. What is the relationship between Menís Suits Manufacturing Co. and Textile Export-Import Co.?

Menís Suits and Textile are independent companies with no common ownership or management. As indicated in the statement of claim, Textile is engaged in importing textiles into and exporting them from Mediterraneo. While not directly relevant to the situation that has arisen, over the years Menís Suits had purchased imported textiles from Textile. In recent years the management of Menís Suits had become dissatisfied with the performance of its export department and it had considered various options as to how it might improve the situation. One option was to close its own department and rely upon the services of a specialized firm. As a result of those determinations, in December 1993 Menís Suits and Textile entered into a contract whereby, as of 15 February 1994, all export sales would be handled by Textile. Textile was expected to promote their sale as well as handle the export documentation. (only the packing list would be generated by Menís Suits.) It was understood that at the beginning most of the orders from foreign countries would be from former customers of Menís Suits. Therefore, when an order is received by Menís Suits, it is referred to Textile. Textile submits purchase orders of its own to Menís Suits. As in the case in dispute, the finished goods are usually shipped directly from Menís Suits pursuant to the instructions of Textile. The two firms treat these as sales from Menís Suits to Textile and from Textile to the foreign buyer.

Textile is required to pay Menís Suits at the end of the month for all shipments made by Menís Suits through the 15th of that month. On the 31st of August Textile paid Menís Suits for a number of shipments, including the one to High Quality. The payment was made out of its general funds; no specific financing of this payment was necessary, though Textile does have a line of credit against which it has borrowed at the short term prime commercial lending rate for Mediterraneo francs of 10%.

2. Did the order sent by Textile to Menís Suits contain the correct information?

The order transmitted by Textile to Menís Suits contained the correct information. The confirmation from Menís Suits to Textile also contained the correct information. After shipping the goods to High Quality, Menís Suits sent a copy of the packing list to Textile. On that document the model numbers of the goods actually shipped, rather than the goods ordered, were shown. That document was reviewed by Textile. The discrepancy in the model numbers was not noticed.

3. What were the model numbers of the goods actually shipped to High Quality?

The model numbers of the goods shipped were the first three digits of the goods ordered, i.e., 425, 426, 517, 622 and 739. In the Menís Suits catalog goods with three digits were jackets with pants of a coordinated color. They were ordered and shipped as sets. Jackets or pants ordered separately had four digit numbers beginning with "1", e.g., 1234.

4. What documents accompanied the goods and did those documents indicate the model numbers of the goods shipped or the model numbers of the goods ordered?

Textile had sent to High Quality by courier service the marine bill of lading, the packing list, a certificate of insurance and an invoice. The bill of lading described the goods as "one container said to contain menís clothes". The invoice, which had been prepared by Textile, gave the model numbers of the goods ordered. The packing slip, which had been prepared by Menís Suits, gave the model numbers of the goods shipped. It may be that the discrepancy in the documents was the cause for the delay in customs.

5. What were the contents of any receipt that High Quality gave for the delivery?

High Quality surrendered the bill of lading in order to receive the goods.

6. Where were the conforming goods?

Menís Suits manufactured to order. It did not manufacture for inventory. Since the mistake by Menís Suits had been made at the time it had entered the order into its production schedule, no conforming goods had been manufactured to meet this order.

7. How many days would it have taken for a shipment of conforming goods to have been made from Menís Suits to High Quality?

Menís Suits normally had a backlog of orders equal to three months production. For orders of more than 1000 jackets or 1000 pairs of pants, Menís Suits asked for four months notice. That had been the experience of High Quality in the past. However, Menís Suits could have manufactured conforming goods within four weeks of having been given notice of the non-conforming nature of the goods shipped. If the goods had been shipped to High Quality by sea, as the original shipment had been, another three weeks should have been envisaged from the time they were ready for packing to the time they would have been landed in Handelshafen. If the goods had been shipped by air, approximately seven days would have been required.

8. What were the terms and conditions in the contracts between High Quality and Menís Suits during the previous seven years?

While it is not feasible to reproduce those contracts in these clarifications, it can be said specifically that there was neither a limitation of liability clause nor an arbitration clause in those contracts. Furthermore, there were no other terms that would be relevant to this dispute.

In the past when there had been a defect in any of the clothes shipped by Menís Suits to High Quality, Menís Suits had given an allowance on the price if the clothes were repairable. If the defect was so substantial that the item could not be used, a credit was given for the unit price of the item or items. It had never before happened that the wrong goods were shipped.

9. What other terms were contained in the confirmation form sent by Textile?

None of the other terms were relevant to this dispute.

10. Was there any contact between High Quality and Textile after the confirmation was sent and prior to delivery of the goods?

No.

11. When High Quality had received confirmation forms from Menís Suits in the past, what had then happened?

As in this case, High Quality had filed the confirmation form and there was no further communication about the order unless other factors intervened.

12. When does the winter season begin and end?

In Equatoriana retailers start receiving clothes for the winter season in July and showing them in August. They would normally have all of their goods on display by September 1. The major selling season begins in September and lasts through December. They would seldom receive major shipments of clothes for the winter season after October 15.

13. Was there correspondence between Textile and High Quality between November 4, 1994 and May 5, 1996?

There were negotiations attempting to settle the dispute, but they did not succeed. In spite of the dispute, High Quality has placed several orders for various types of clothing with Textile. They have been executed to the satisfaction of both parties.

14. Query re currencies in general.

All amounts are quoted in Equatoriana dollars. It is a freely convertible currency. Mediterranean francs are also freely convertible. Five Equatoriana dollars are equal to four US dollars.


Matters not known to Claimant, Textile Export-Import Co.,
but which have been ascertained by inquiry of High Quality

15. Was the transaction between High Quality and Quick Delivery at armís length?

Yes. It should be noted that the Terms of Reference note that "The parties have stipulated that the contract price of $750,000 Ö was a fair price Ö."

16. What were the delivery dates in the contract between High Quality and Quick Delivery?

As indicated in the reply, para. 4, the first shipment of 500 units was made on September 15, 1994. A second shipment of 1,500 units was made on September 26. The third, and final, shipment of 3,000 units was made on October 10.

17. Is the High Quality warehouse in Handelshafen?

Yes. Distribution to the retail stores throughout Equatoriana is made from that warehouse.

18. Could High Quality have examined the goods at any time earlier than August 20, the date when they arrived at the High Quality warehouse?

From August 9 until August 20, the container was under customs seal. High Quality did not have access to them until they arrived at the warehouse.

19. Why did High Quality delay in notifying Textile of the lack of conformity in the goods ordered?

The immediate concern was to purchase the goods that were needed for the winter season. Since past experience had indicated that it would not be possible to procure them from Menís Suits in time, and therefore presumably from Textile, there had been no thought given to call either Menís Suits or Textile for that reason. By the time the arrangements had been made with Quick Delivery other matters came up and the matter of giving notice of the non-conformity seems to have slipped everyoneís mind. There was no conscious decision not to give notice.

Applicable Law

20. Have Equatoriana and Mediterraneo enacted the Vienna Convention into domestic law?

The Convention is binding as domestic law in both countries.

21. Has either country made a declaration under Article 96 of the Convention as to whether contracts must be in writing?

No.

22. Are either Equatoriana or Mediterraneo civil law or common law countries or do they have a mixture of both?

The parties have agreed in the terms of reference that "any matter not governed by the Convention should be decided in accord with the principles of law applicable to international contracts." Both Equatoriana and Mediterraneo, as well as Danubia, would accept that as a valid choice of law for all matters other than those that are mandatory law.