Annual

Willem C. Vis International Commercial Arbitration Moot

1999-2000

MEMORANDUM FOR RESPONDENT

Paris Lodron
University of
Salzburg

Team:
Alexandra Frantsuzova
Isabelle Innerhofer
Stephanie Kathan
Roland Lohnert
Sabine Prenn
Erwin Schön
Ingo Steinwender


London Court of International Arbitration

Hulton House, 6th Floor
161-166 Fleet Street
London EC4A 2DY

Case No. Moot 7

Claimant:

Feed Processing Corp.
123 Industrial Avenue,
Highlands, Mediterraneo.

v.

Respondent:                    Represented by Salzburg University Team

Grain Dealers, PLC
26 Export Pl.,
Southside City, Danubia.

Memorandum for Respondent


TABLE OF CONTENTS:

Table of References

Table of Cases

Abbreviations

To the Form of this Memorandum

INTRODUCTION

ISSUE 1: The Tribunal lacks jurisdiction

A. No enforceable contract was concluded, therefore no agreement to arbitrate exists between the parties (Art. 7 (1) MAL)

B. Even if the parties had concluded a contract, the formal requirements for an agreement to arbitrate were not met (Art. 7 (2) MAL)

ISSUE 2: Mr. Dean's witness statement should be excluded or, at least, deserves less than full weight and ambiguities therein should be construed against Claimant

ISSUE 3: No contract concluded between Respondent and Claimant

A. Formation of a contract in the CISG

B. No intention to be bound

C. No meeting of minds (dissent)

C.1. Alleged conclusion on 19 February 1998
C.2. Alleged conclusion on 20 February 1998
C.3. Alleged conclusion on 24 February 1998
C.4. Mistake excluded from CISG
C.5. Claimant is not entitled to enforce on basis of agency

ISSUE 4: Claimant breached its obligation to cooperate in good faith

A. The Arbitral Tribunal may find the interpretation of the sales contract required adaptation and Claimant's cooperation in good faith

B. The trade usage of re-allocation required Claimant to cooperate in good faith

B.1. Trade usage of re-allocation
B.2. As a consequence of the trade usage of re-allocation, Claimant had the obligation to cooperate in good faith

C. CISG required adaptation of the contract and Claimant's cooperation in good faith

C.1. Change of basic assumptions on which contract was made
C.2. Promotion of good faith and fair dealing under CISG
C.3. No possibility to overcome governmental interference
C.4. Claimant's obligation to cooperate in good faith
C.5. Respondent had a right to avoid the contract

ISSUE 5: Respondent is exempted from duty to pay damages according to Art. 79 CISG

A. Occurrence of an "impediment beyond control"

B. Unforeseeability, unavoidability and insuperability of the impediment

ISSUE 6: Claimant breached its duty to mitigate damages

A. Claimant could have accepted proposed delivery of 4,800 tons in July and of 1,200 tons in October 1998, shipment in both cases from Danubia

B. Even if full July-delivery had been indicated as fundamental, the following alternative would have been more reasonable then the substitute purchase: 4,800 tons from Danubia and 1,200 tons from outside Danubia, delivery in July 1998

ISSUE 7: Claimant did not calculate its damage correctly

ISSUE 8: Claimant has to bear all costs

Epilogue


TABLE OF REFERENCES:

Legal Sources:

· UNCITRAL Model Law on International Commercial Arbitration 1994 (MAL)

· London Court of International Arbitration (LCIA) Rules 1998

· The Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention)

· The United Nations Convention on Contracts for the International Sale of Goods 1980 (CISG)

· The Convention on Agency in the International Sale of Goods 1983 (CAISG)

· ICC Uniform Customs and Practice for Documentary Credits 1994 (UCP 500)

· UNIDROIT Principles of International Commercial Contracts 1994 (UNIDROIT Principles)

· Principles of European Contract Law 1995 (European Principles)

Bibliography:

Aicher, J., Leistungsstörungen aus der Verkäufersphäre - Ein Beitrag zur wesentlichen Vertragsverletzung und zur aliud-Lieferung im UN-Kaufrechtsübereinkommen, in: Das Einheitliche Wiener Kaufrecht. Neues Recht für den internationalen Warenkauf (Hoyer/Posch (eds.), Wien, Wirtschaftsverlag Dr. Anton Orac, 1992).

Audit, B., La Vente Internationale de Marchandises (Paris, L.G.D.J., 1990).
cited as: Audit, Vente Internationale (1990)

Baker, S.A./Davis, M.D., The UNCITRAL Arbitration Rules in Practice. The Experience of the Iran-United States Claims Tribunal (Deventer/Boston, Kluwer Law and Taxation Publishers, 1992).
cited as: Baker/Davis, UNCITRAL Arbitration Rules (1992)

Berger, K.P., Studies in Transnational Economic Law 9: International Economic Arbitration (Deventer/Boston, Kluwer Law and Taxation Publishers, 1993).
cited as: Berger, International Economic Arbitration (1993)

Bernstein, R., et al., Handbook of Arbitration Practice (London, Sweet & Maxwell, 1998).

Berger, K.P., Der Zinsanspruch im Internationalen Wirtschaftsrecht, 61 Rabels Zeitschrift für ausländisches und internationales Privatrecht 313 (Tübingen, Mohr Verlag, 1997).

Bianca, C.M./Bonell, M.J. (eds.), Commentary on the International Sales Law. The 1980 Vienna Sales Convention (Milan, Giuffrè, 1987).
cited as: Bianca/Bonell, Commentary (1987).

Bonell, M.J., An International Restatement of Contract Law: The UNIDROIT Principles of International Commercial Contracts (Irvington/New York, Transnational Juris Publications, Inc., 1994).
cited as: Bonell, Restatement (1994)

Bonell, M.J., The 1983 Geneva Convention on Agency in the International Sale of Goods, 32 The American Journal of Comparative Law 717 (American Association for the Comparative Study of Law, Inc. (ed.), 1984).

Bredow, J./Seiffert, B., Incoterms 1990. Wegweiser für die Praxis (Bonn, Verlag Die Wirtschaft Berlin/Economica Verlag, 1990).
cited as: Bredow/Seiffert, Incoterms (1990)

Bridge, M., The International Sale of Goods (Oxford, Oxford University Press, 1999).
cited as: Bridge, Sale of Goods (1999)

von Caemmerer, E./Schlechtriem, P., Kommentar zum einheitlichen UN-Kaufrecht: das Übereinkommen der Vereinten Nationen über den internationalen Warenkauf - CISG-Kommentar (Schlechtriem (ed.), München, Verlag C. H. Beck, 2nd ed. 1995).
cited as: von Caemmerer/Schlechtriem, Kommentar (1995)

Chambers English Thesaurus (Chambers Publishing, 1998).
cited as: Chambers English Thesaurus (1998)

Corvaglia, S., Das einheitliche UN-Kaufrecht - CISG (Bern, Verlag Stämpfli & Cie AG, 1998).

del Busto, C., ICC Guide to Documentary Credit Operations for the UCP 500 (ICC Publication No. 515, Paris, ICC Publishing, 1994).

Der Fischer Weltalmanach 2000 (Frankfurt am Main, Fischer Taschenbuch Verlag, 1999).
cited as: Fischer Weltalmanach 2000

Derains, Y./Schwartz, E.A., A Guide to the New ICC Rules of Arbitration (The Hague, Kluwer Law International, 1998).
cited as: Derains/Schwartz, New ICC Rules (1998)

Dore, I., The UNCITRAL Framework for Arbitration in Contemporary Perspective (London/Dordrecht/Boston, Graham & Trotman/Martinus Nijhoff Publishers, 1993).
cited as: Dore, UNCITRAL Framework (1993)

Enderlein, F./Maskow, D./Strohbach, H., Internationales Kaufrecht - Kaufrechtskonvention, Verjährungskonvention, Vertretungskonvention, Rechtsanwendungskonvention (Freiburg im Breisgau/Berlin, Rudolf Haufe Verlag GmbH & Co. KG, 1991).
cited as: Enderlein/Maskow/Strohbach, Internationales Kaufrecht (1991)

Gabriel, H., Practitioner´s Guide to the Convention on Contracts for the International Sale of Goods (CISG) & the Uniform Commercial Code (New York/London/Rome, Oceana Publications, Inc., 1994).
cited as: Gabriel, Practitioner´s Guide (1994)

Gstoehl, M., Das Verhältnis von Gewährleistung nach UN-Kaufrecht und Irrtumsanfechtung nach nationalem Recht, 39 Zeitschrift für Rechtsvergleichung, Internationales Privatrecht und Europarecht 1 (Wien, Manz Verlag, 1998).
cited as: Gstoehl, Gewährleistung (1998)

Hanncock, W.A. (ed.), Guide to the International Sale of Goods Convention (Ohio, Business Laws, Inc., 1998).
cited as: Hanncock, Guide, (1998)

Herber, R./Czerwenka, B., Internationales Kaufrecht. Kommentar zu dem Übereinkommen der Vereinten Nationen vom 11. April 1980 über Verträge über den internationalen Warenkauf (München, Verlag C.H. Beck, 1991).
cited as: Herber/Czerwenka, Internationales Kaufrecht (1991)

Herman, A.H., International Trade Terms: Standard Terms for Contracts for the International Sale of Goods (London, Graham & Trotman Ltd. & Kluwer Academic Publishers Group, 1993).

Holtzmann, H.M./Neuhaus, J.E., A Guide To The UNCITRAL Model Law On International Commercial Arbitration: Legislative History and Commentary (Deventer/Boston, Kluwer Law and Taxation Publishers, 1989).
cited as: Holtzmann/Neuhaus, UNCITRAL Model Law (1989)

Honnold, J.O., Uniform Law for International Sales under the 1980 United Nations Convention (Deventer/Boston, Kluwer Law and Taxation Publishers, 2nd ed. 1989).
cited as: Honnold, Uniform Law (1989)

Honnold, J.O., Uniform Law for International Sales under the 1980 United Nations Convention
(The Hague, Kluwer Law International, 3rd ed. 1999).
cited as: Honnold, Uniform Law (1999)

Honnold, J.O., Uniform Words and Uniform Application. The 1980 Sales Convention and International Juridical Practice, in: Einheitliches Kaufrecht und nationales Obligationenrecht (Schlechtriem (ed.), Baden-Baden, NOMOS Verlagsgesellschaft, 1987).
cited as: Honnold, Uniform Words (1987)

Honsell, H. (ed.), Kommentar zum UN-Kaufrecht (Berlin/Heidelberg, Springer-Verlag, 1997).
cited as: Honsell, Kommentar (1997)

Huleatt-James, M./Gould, N., International Commercial Arbitration (London, Lloyd's of London Press Ltd., 1996).
cited as: Huleatt-James/Gould, Commercial Arbitration (1996)

Hutter, M., Die Haftung des Verkäufers für die Nichtlieferung bzw. Lieferung vertragswidriger Ware nach dem Wiener UNCITRAL- Übereinkommen über internationale Warenkaufverträge vom 11. April 1980 (Universität Regensburg, Dissertation, 1988).
cited as: Hutter, Haftung (1988)

Jan, Sheng-Lin, Die Erfüllungsverweigerung im deutschen und im UN- Kaufrecht (Frankfurt, Verlag Peter Lang GmbH, 1992).

Karollus, M., UN-Kaufrecht. Eine systematische Darstellung für Studium und Praxis (Wien/New York, Springer-Verlag, 1991).
cited as: Karollus, UN-Kaufrecht (1991)

Keil, A., Europäische Hochschulschriften, Reihe II / Rechtswissenschaft 1413: Die Haftungsbefreiung des Schuldners im UN-Kaufrecht im Vergleich mit dem deutschen und US-amerikanischen Recht (Frankfurt am Main, Verlag Peter Lang GmbH, 1993).
cited as: Keil, Haftungsbefreiung (1993)

Keily, T., Good Faith & The Vienna Convention on Contracts for the International Sale of Goods, 3 Vindobona Journal 15 (Münster, Quadis Publishing, 1999).
cited as: Keily, Good Faith (1999)

Koziol, H./Welser, R., Grundriß des bürgerlichen Rechts I (Wien, Manz Verlag, 10th ed. 1996).
cited as: Koziol/Welser, Grundriß I (1996)

Kritzer, A.H. (ed.), International Contract Manual, Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods (Deventer/Boston, Kluwer Law and Taxation Publishers, 1994).
cited as: Kritzer, Int. Contract Manual (1994)

Lake, R.B./Nanda, V.P./Draetta, U., Breach and Adaptation of International Contracts: An Introduction to Lex Mercatoria (Salem/New Hampshire, Butterworth Legal Publishers, 1992).
cited as: Lake/Nanda/Draetta, Breach (1992)

Lando, O./Beale, H. (eds.), The Commission on European Contract Law, The Principles of European Contract Law. Part I: Performance, Non-Performance and Remedies (Dordrecht, Martinus Nijhoff Publishers, 1995).
cited as: Lando/Beale, Principles (1995)

Lew, J.D.M., Contemporary Problems in International Arbitration (Dordrecht/Boston/Lancaster, Martinus Nijhoff Publishers, 1987).
cited as: Lew, Contemporary Problems (1987)

Linder, L., Law of Contract, in: Business Transactions in Germany (Campbell (ed.), New York, Matthew Bender, 1988).
cited as: Linder, Law (1988)

Lookofsky, J.M., Understanding CISG in the USA: A Compact Guide to the 1980 United Nations Convetnion on Contract for the International Sale of Goods (The Hague, Kluwer Law International, 1995).

Magnus, U., Die allgemeinen Grundsätze im UN-Kaufrecht, 59 Rabels Zeitschrift für ausländisches und internationales Privatrecht 469 (Tübingen, Mohr Verlag, 1995).
cited as: Magnus, Grundsätze, 59 RabelsZ (1995)

Magnus, U., UN-Kaufrecht, in Staudinger, J. von, Kommentar zum Bürgerlichen Gesetzbuch mit Einführungsgesetz und Nebengesetzen (Berlin, Sellier-de Gruyter, 13th rev. ed. 1994).
cited as: Magnus, UN-Kaufrecht (1994)

Malcolm, E., The Convention on Agency in the International Sale of Goods 1983, in: Regional Seminar on International Trade Law - New Delhi, 17 to 20 October 1989, 76 (Asian-African Legal Consultative Committee (ed.), New Delhi, 1989)

McKendrick, Force majeure and frustration of contract (London, Lloyd's of London Press Ltd., 1991).
cited as: McKendrick, Force majeure (1991)

Mustill, Sir M.J./Boyd, S.C., The Law and Practice of Commercial Arbitration in England (London/Edinburgh, Butterworths, 2nd ed. 1989).
cited as: Mustill/Boyd, Commercial Arbitration (1989)

Nicholas, B., Parker School of Foreign and Comparative Law, Columbia University, Impracticability and Impossibility in the U.N. Convention on Contracts for the International Sale of Goods, in: International Sales. The United Nations Convention on Contracts for the International Sale of Goods (Galston/Smit (eds.), New York, Matthew Bender, 1984).

Pike and Fisher, Inc. (ed.), Uniform commercial code digest (Chicago, Callaghan & Comp., 1993).

Piltz, B., Internationales Kaufrecht. Das UN-Kaufrecht (Wiener Übereinkommen von 1980) in praxisorientierter Darstellung (München, Verlag C.H. Beck, 1993).

Posch, W./Kandut, G., Die allgemeinen Bestimmungen über den Warenkauf: Art. 25 - 29, in: Das Einheitliche Wiener Kaufrecht. Neues Recht für den internationalen Warenkauf (Hoyer/Posch (eds.), Wien, Wirtschaftsverlag Dr. Anton Orac, 1992).

Redfern, A./Hunter, M., Law and Practice of International Commercial Arbitration (London, Sweet & Maxwell, 3rd ed. 1999).
cited as: Redfern/Hunter, Arbitration (1999)

Reinhart, G., UN-Kaufrecht. Kommentar zum Übereinkommen der Vereinten Nationen vom 11. April 1980 über Verträge über den internationalen Warenkauf (Heidelberg, C.F. Müller Juristischer Verlag GmbH, 1991).
cited as: Reinhart, UN-Kaufrecht (1991)

Reisman, W.M./Craig, W.L./Park, W./Paulsson, J., International Commercial Arbitration. Cases, Materials and Notes on the Resolution of International Business Disputes (New York, The Foundation Press, Inc., 1997).
cited as: Reisman/Craig/Park/Paulsson: Arbitration (1997)

Roth, M., False Testimony at International Arbitration Hearings Conducted in England and Switzerland - A Comparative View, 11 Journal of International Arbitration 5 (Geneva, Werner Publishing Ltd., 1994).
cited as: Roth, False Testimony (1994)

Rudolph, H., Kaufrecht der Export- und Importverträge - Kommentierung des UN-Übereinkommens über internationale Warenkaufverträge mit Hinweisen für die Vertragspraxis (Freiburg im Breisgau/Berlin, Rudolf Haufe Verlag GmbH & Co. KG, 1996).
cited as: Rudolph, Kaufrecht (1996)

Schlechtriem, P. (ed.), Einheitliches Kaufrecht und nationales Obligationenrecht. Referate und Diskussionen der Fachtagung Einheitliches Kaufrecht am 16./17.2.1987 (Baden-Baden, NOMOS Verlagsgesellschaft, 1987).

Schlechtriem, P., Uniform Sales Law: The UN-Convention on Contracts for the International Sale of Goods (Wien, Manz Verlag, 1986).

Schlechtriem, P., Unification of Law for the Sale of Goods. German National Reports (Private Law and Civil Procedure) (Baden-Baden, NOMOS Verlagsgesellschaft, 1987).
cited as: Schlechtriem, Unification (1987)

Schlechtriem, P. (ed.), Kommentar zum einheitlichen UN-Kaufrecht (CISG); Commentary on the UN Convention of the International Sale of Goods (New York, Oxford University Press Inc., 2nd ed. 1998, translated by Geoffrey Thomas).
cited as Schlechtriem, Commentary (1998)

Schmid, P., Der Schuldnerverzug -Voraussetzungen und Rechtsfolgen im BGB und im UN-Kaufrecht (Berichte aus der Rechtswissenschaft, Aachen, Shaker Verlag, 1996).
cited as: Schmid, Schuldnerverzug (1996)

Secretariat Commentary CISG, URL: http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-72.html
cited as: Secretariat Commentary Unidroit-Principles, URL: http://www.unidroit.org/english/principles/contents.htm.

Thomson/Martinet, A Practical English Grammar (Oxford, Oxford University Press, 4th ed. 1986, 14th impression 1994).
cited as: A Practical English Grammar (1994)

Treitel, G.H., The Law of Contract, (London, Sweet & Maxwell, 8th ed 1991).
cited as: Treitel, Law (1991)

Van Houtte, H., The Law of International Trade ( London, Sweet & Maxwell, 1995).

Ward, R.K., The Flexibility of Evidentiary Rules in International Trade Dispute Arbitration, 20 Journal of International Arbitration 5 (Geneva, Werner Publishing Company Ltd., 1996).
cited as: Ward, Evidentiary Rules (1996)

Weber, R.H., Verletzungsfolgen, in: Wiener Kaufrecht - Der schweizerische Aussenhandel unter dem UN-Übereinkommen über den internationalen Warenkauf, Berner Tage für die juristische Praxis 1990 (Bucher (ed.), Bern, Verlag Stämpfli & Cie AG, 1991).
cited as: Weber, Verletzungsfolgen (1991)

Soukhanov (ed.), Webster's II New Riverside University Dictionary (Riverside Publishing Co., 1988).
cited as: Soukhanov (ed.), Webster's II New Riverside University Dictionary (1988).

Will, R.M., The UN-Convention on Contracts for the International Sale of Goodes (Geneva, International Bibliography, 1995).

Ziegel, J.S., Parker School of Foreign and Comparative Law, Columbia University, The Remidial Provisions in the Vienna Sales Convention: Some Common Law Perspectives, in: International Sales. The United Nation Convention on Contracts for the International Sale of Goods (Galston/Smit (eds.), New York, Matthew Bender, 1984).

Ziegler, U., Leistungsstörungen nach dem UN-Kaufrecht (Baden-Baden, NOMOS Verlagsgesellschaft, 1995).


TABLE OF CASES:

· Mexico 30 November 1998 Compromex Arbitration proceeding (Dulces Luisi, S.A. de C.V. v. Seoul Inter)

· United States 14 April 1992 U.S. Dist. Ct. (Filanto S.p.A. v. Chilewich International Corp.).

· Lauritzen (J) AS v. Wijsmuller BV [1990] 1 Lloyd's Rep 1;

· Westfälische Central Genossenschaft GmbH v. Seabright Chemicals Ltd. (unreported, but discussed and approved in Bremer Handelsgesellschaft mbH v. Continental Grain Co [1983] 1 Lloyd's Rep 269);

· Bremer Handelsgesellschaft mbH v. Vanden-Avenne Izegem PVBA [1978] 2 Lloyd's Rep 109, 115 (Lord Wilberforce)

· Continental Grain Export Corpn v. STM Grain Ltd [1979] 2 Lloyd's Rep 460, 473.


Abbreviations:

Art./Artt. article/-s
Ass. association
BGB Bürgerliches Gesetzbuch
CAISG Convention on Agency in the International Sale of Goods
CISG United Nations Convention on Contracts for the International Sale of Goods
clarific. clarification(s)
Co. company
Corp. corporation
cp. compare
ed. edition
ed./eds. editor/-s
e.g. exempli gratia, for example
et al. and others
et seq. et sequentes, following
i.e. id est
ICC International Chamber of Commerce
Inc. Incorporation
LCIA London Court of International Arbitration
ltd. limited
MAL UNCITRAL Model Law on International Commercial Arbitration
n. (nn.) footnote(s)
No./Nos. marginal number/s
para(s). paragraph(s)
PLC public company
PO Procedural Order
RabelsZ Rabels Zeitschrift für Ausländisches und Internationales Privatrecht
rev. ed. revised edition
UCP Uniform Customs and Practice for Documentary Credits
UCC Uniform Commercial Code
UNCITRAL United Nations Commission on International Trade Law
U.S. Dist. Ct. United States District Court
v. versus
VJ Vindobona Journal of International Commercial Law and Arbitration
ZfRV Zeitschrift für Rechtsvergleichung, Internationales Privatrecht und Europarecht


TO THE FORM OF THIS MEMORANDUM:

Dear readers,

According to the Rules of the Willem C. Vis Moot Court, the text of the memoranda should be double spaced and utilize, at least, 10 point. type style. Having experimented with our format, we concluded that a smaller space between the lines and a larger type style would be much more positive in several respects than the Rules' double space and minimum type style. Therefore we have written our memorandum using smaller interline spacing. Prof. Bergsten's approved our approach on 29 November 1999, with the result that the 30 pages which we would have been allowed with double spaced text and type style 10 point are now reduced to 23 pages with our smaller space and with type style 11,5.

We have chosen the present smaller space between the lines and the larger type style, because we wish to enhance reading comfort and structural clarity by giving the text the shape of easily perceptible "blocks of information".

Having carefully considered the advantages and disadvantages of our format, we now present our memorandum and hope that the readers will approve of and appreciate our considerations.

Yours,

Salzburg University Team


INTRODUCTION:

The present Memorandum for Respondent is the memorandum supporting the position of Grain Dealers, PLC (hereinafter referred to as Respondent) in the arbitration procedure Case Moot No. 7, Feed Processing Corp. (hereinafter referred to as Claimant) v. Grain Dealers, PLC - memorandum which is due to be received by the London Court of International Arbitration by 14 February 2000.

In the present Memorandum we will demonstrate the following:

(1) Mr. Dean's witness statement should be excluded or, at least, deserves less than full weight and ambiguities therein should be construed against Claimant;

(2) The Tribunal's jurisdiction has not been established due to defects in the formation of the sales contract and arbitration agreement;

(3) Claimant is not entitled to enforce a sales contract against Respondent (even if the Arbitral Tribunal were to find that a valid arbitration agreement and a valid sales contract between Claimant and Respondent existed);

(4) Claimant breached its obligation to cooperate in good faith; Respondent was entitled to avoid the contract (Art. 64 CISG); and Claimant is barred from claiming damages and interest on damages (Art. 80 CISG);

(5) In the alternative, the occurrence of an unforeseeable, unavoidable and insuperable impediment beyond control exempts Respondent from the duty to pay damages (Art. 79 CISG) or interest thereon (Art. 78);

(6) In the alternative, Claimant breached its duty to mitigate damages (Art. 77 CISG) and is, therefore, not entitled to unmitigated component of the $90,000 damages claimed or to interest thereon (Art. 78 CISG);

(7) In the alternative, Claimant calculated the claimed damages incorrectly to Respondent's disadvantage (Art. 74 CISG).

(8) Finally Respondent claims that the costs of arbitration as well as legal and other costs shall reflect Respondent´s relative success in the arbitration (Artt. 28.1 to 28.4 LCIA Rules).


ISSUE 1: The Tribunal lacks jurisdiction:[1]

1. In brief:

The Tribunal lacks jurisdiction according to Art. 23 LCIA Rules, because:

· No enforceable contract was concluded, therefore no agreement to arbitrate exists between the parties (Art 7 (1) MAL).

· Even if a valid sales contract between Claimant and Respondent had been formed, the formal requirements for an agreement to arbitrate were not met pursuant to the LCIA Rules, MAL and the New York Convention.

In detail:

A. No enforceable contract was concluded, therefore no agreement to arbitrate exists between the parties (Art. 7 (1) MAL):

2. Claimant has contended that a valid sales contract between Claimant and Respondent contained a reference to the Standard Conditions. These contain an arbitration clause. According to Claimant the contract was evidenced in writing by subsequent correspondence so as to constitute the Tribunal´s jurisdiction.[2] This argumentation cannot be accepted:
3. Art. 7 (1) MAL requires an agreement to arbitrate, which „may be in the form of an arbitration clause in a contract". Such an arbitration clause is part of the contract. An arbitration agreement contained in an arbitration clause in a contract is a separate and autonomous agreement (doctrine of separability[3]).[4] A difficulty arises, when the initial validity of the contract is in question. If the parties fail to conclude a contract at all, this can affect the validity not only of the contract itself, but also of the arbitration agreement.[5] Thus, the initial existence of the sales contract also constitutes an essential prerequisite for a validly formed arbitration agreement.
4. The arbitration clause can be incorporated in the contract by reference to another document that contains the arbitration clause, in the present case: the Standard Conditions. However, a sales contract allegedly containing a reference to arbitration was not validly formed between Claimant and Respondent.[6] As there is no valid contract, there is also no agreement to arbitrate. For lack of an arbitration agreement, the Tribunal does not have jurisdiction.[7]

B. Even if the parties had concluded a contract, the formal requirements for an agreement to arbitrate were not met (Art. 7 (2) MAL):
5. The mandatory provision of Art. 7 (2) MAL[8] requires an arbitration agreement to be „[...] in writing. [...] The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement provided that the contract is in writing [...]." All that is required is some written evidence of the agreement to arbitrate between the parties.[9] As long as there is some written evidence of an agreement to arbitrate, the form in which that agreement is recorded is immaterial.[10]
6. The contract containing the arbitration clause was allegedly concluded in the telephone conversation between Mr. Dean and Mr. Stern on 19 February 1998. Arbitration itself was not even mentioned in this conversation. Claimant and Respondent did not conclude a contract in writing. An ordinary telephone conversation cannot suffice to meet the writing requirement.[11]
7. Claimant might argue that an exchange of letters is equivalent to a contract in writing. The correspondence that followed the telephone conversation, i.e. the letters of 20 and 24 February 1998, does not suffice as written evidence: these letters do not correspond to each other because of dissent[12] concerning the identity of the contracting parties. While Mr. Dean's letter of 20 February 1998 might be inferred to evidence that the conversation of 19 February 1998 had resulted in a sales contract between Respondent and Claimant, Mr. Stern's letter of 24 February 1998 and all subsequent letters of Mr. Stern refer to a contract with Imports. Thus, even if a sales contract had been concluded between Respondent and Claimant on 19 February 1998, there is lack of a written agreement to arbitrate between the parties: nothing reflects written evidence that Claimant and Respondent (instead of Imports and Respondent) had the intention to oust the jurisdiction of domestic courts and to resort to arbitration.[13] This means that the formal requirements of Art. 7 (2) MAL have not been fulfilled and that the Tribunal does not have jurisdiction.
8. Also, the writing requirement of Art. II New York Convention is not met due to the lack of any written evidence of an arbitration agreement between Claimant and Respondent. Therefore, a valid award cannot be issued or subsequently enforced under the New York Convention (Art. V in connection with Art. II).

9. Conclusion:

Claimant and Respondent did not conclude an arbitration agreement. Furthermore, there is no written evidence of an arbitration agreement between them. Therefore, the Tribunal does not have jurisdiction. Even if the Tribunal issued an award, it would be invalid and unenforceable under the New York Convention.

ISSUE 2: Mr. Dean's witness statement should be excluded or, at least, deserves less than full weight; ambiguities therein should be construed against Claimant:

10. In brief:

· If the Arbitral Tribunal issues an order to produce Mr. Dean and if Mr. Dean fails to attend the oral hearing without good cause, Mr. Dean's written statement should be excluded or, at least, given less than full weight: there is no good cause under Art. 20.4 LCIA Rules.
· Moreover, the Arbitral Tribunal may exercise its general discretion concerning evidence (Art. 19 MAL, Artt. 14.2, 22.1 (f) LCIA-Rules) to exclude or, at least, to give less than full weight to Mr. Dean's written statement: (1) Claimant has infringed upon the principle of fair trial by not informing Mr. Dean of the arbitration. (2) Mr. Dean's written statement lacks credibility.
In detail:

11. The Arbitral Tribunal has not yet issued an order to produce Mr. Dean in the oral hearing. Claimant has contended that it would have "good cause" in the sense of Art. 20.4 LCIA-Rules, if such an order were issued.[14] This should be rejected. Only "good cause" in the witness' sphere is relevant and not circumstances merely in the party's sphere (Art. 20.4 LCIA-Rules: "[...] and the witness fails to attend the oral hearing without good cause [...]").
12. Respondent requests that the Tribunal exclude or, at least, place less than full weight on Mr. Dean' written statement:
13. If the Tribunal issues an order to produce Mr. Dean, it is highly improbable that he will appear (as Claimant has already indicated[15]). If Mr. Dean fails to appear without good cause (illness, bereavement, etc.[16]) his written statement should be excluded or, at least, given less than full weight.
14. Besides, the Tribunal should exercise its general discretion with regard to evidence and exclude or, at least place less than full weight on Mr. Dean's written statement, because:

(1) The principle of fair trial requires it; and
(2) Mr. Dean's written statement lacks credibility.
15. (1) The principle of fair trial (Art. 18 MAL, Artt. 14.1 and 14.2 LCIA-Rules) requires the parties to act in compliance with equality, fairness and impartiality. Each party must have adequate opportunity to present its case.[17] Mr. Dean's written statement is crucial for Claimant's argumentation. Therefore, it is highly important for Respondent to question Mr. Dean in the oral hearing. Claimant has prevented such questioning by not attempting to produce Mr. Dean. Claimant has not even informed Mr. Dean of the arbitration.[18] The litigation that Claimant has invoked is no excuse for preventing Respondent from questioning Mr. Dean: if Claimant doubts Mr. Dean's honesty in an oral hearing because of the litigation, the principle of fair trial[19] allows Claimant to invoke its doubts as to Mr. Dean's credibility before the Arbitral Tribunal. Claimant's fear is no justification for keeping Mr. Dean away from the oral hearing, thereby denying Respondent's right to properly present its case by questioning a crucial witness. It would utterly contradict the principle of fair trial, if a party could prevent oral testimony just because the witness might not say exactly what that party wants him to say. The inavailability of court assistance to compel Mr. Dean is completely irrelevant: the principle of fair trial obliges Claimant to contribute that Respondent can adequately present its case. This obligation exists independent from any compelling provisions on court assistance. It would be an unjustified procedural disadvantage, if, on the one hand, Respondent could not question Mr. Dean, i.e. could not present its case properly, while, on the other hand, Claimant were allowed to rely on Mr. Dean's contested written statement.
16. (2) Mr. Dean's written statement lacks credibility: It is generally conceded that witnesses must be made available for questioning at the hearing.[20] The Common Law peculiarity of written witness statements might be contrary to public order and may lack credibility in a particular case.[21] In general, arbitral tribunals tend to give less weight to uncorroborated witness evidence as well as to the untested evidence of a witness who has a clear interest in the result of the case.[22] Finally, evidence is unduly prejudicial when, although relevant, its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the finder of fact.[23] In this case there are sufficient indications not to give full weight to the written statement:
17. Mr. Dean gave his statement as a loyal employee allegedly on 18 May 1999, one week before Claimant's Request for Arbitration of 25 May 1999 was made. Given Mr. Dean's direct interest in supporting his employer and his preparation by Claimant's lawyers to produce the written statement[24], there is no guarantee for its veracity. Moreover, false testimony in written form is not punishable in international arbitration proceedings.[25] It is also remarkable that preparation of witnesses for their examination on trial is generally considered unethical.[26] Therefore, the present written statement is even less credible. Mr. Dean's merely signed witness statement cannot dispel doubts as to credibility, so long as it is not confirmed under oath. [27] Finally, the dubious way by which the written statement was submitted arouses suspicion as to the date on which the statement was actually made: the written statement was not submitted with the Request for Arbitration of 25 May 1999, when all the other exhibits were made available for the Tribunal. Without explanation, it was submitted nearly three months later, with the Statement of Case of 12 August 1999.
18. It is conceded that failure to produce evidence can result in an adverse inference. Once the validity of submitted documents has become an issue, the failure of the party to authenticate the documents will adversely affect the weight placed on them.[28] Therefore, Counsel for Claimant should, at least, attest the authenticity of the date of the statement and Mr. Dean's signature. However, the full credibility of this written statement can only be restored, if Mr. Dean personally confirms his previous testimony before the Tribunal.
19. By excluding Mr. Dean's written statement, the Tribunal will not unfairly disadvantage Claimant's presentation of its case (as it has contended[29]). Claimant´s contention cannot be accepted. Artt. 14.1 LCIA-Rules and 19 MAL do not establish a certain method of how to present one's case. Consequently, the party bearing the onus of proof is obliged to use not only every possible, but also the best available source of information to fully prove its case. An arbitral tribunal will give less weight to secondary (written) evidence, if the party could have produced a witness who would have been able to give direct evidence on the factual issue in question.[30] For Claimant the best evidence on the issue in dispute is Mr. Dean's oral testimony, and not his ambiguous written statement. Therefore, if Claimant declines to make use of oral questioning, the Tribunal should take this contradictory behaviour into account when weighing the written statement.
20. Furthermore, the admission of Mr. Dean's written statement would, contrary to Claimant's contention[31], not contribute to the truth-finding process. There are indications that Mr. Dean's allegations might not be correct. The other available evidence - e.g. Mr. Dean's correspondence on Claimant's letterhead - does not prove that Mr. Dean clearly held himself out as an employee of Claimant on 19 February 1998. The written statement is also refuted by the subsequent occurrences: if Mr. Dean really made clear that he was acting for Claimant, Respondent would not have insisted on a contract with Imports. Mr. Dean violated his duty to inform Respondent of his new employer. Hereby, Mr. Dean caused Respondent to believe that he was contracting for Imports. The witness for Respondent, Mr. Stern, is able to confirm the written evidence (letter of 24 February 1998) which contradicts Mr. Dean's testimony ("It was clear to me that he was only talking about the future and that it had nothing to do with the current sale."[32]), if so requested.[33] Mr. Dean's written statement obviously has minimal evidentiary value. The statement is ambiguous as to whether Mr. Dean really informed Mr. Stern of acting on behalf of Claimant. These ambiguities have to be interpreted against Claimant.[34] Therefore, the Tribunal should exclude or, at least, give less weight to Mr. Dean's written statement.

21. Conclusion:

The Tribunal should exclude or, at least, give less than full weight to Mr. Dean's written witness statement (Art. 20.4 LCIA-Rules, general discretion as to evidence). Any ambiguities should be construed against Claimant.

ISSUE 3: No contract concluded between Respondent and Claimant:[35]

22. In brief:

·The telephone conversation of 19 February 1998 does not indicate any intention to be bound according to Art. 14 (1) CISG.
· Dissent of the parties' declarations establishes an impediment for the conclusion of the contract: there is no meeting of minds.
· Claimant is not entitled to enforce on the basis of agency.
In detail: A. Formation of a contract under CISG:

24. The CISG requires an offer and a corresponding acceptance for the formation of a valid sales contract. An offer is "a proposal for concluding a contract addressed to one or more specific persons" which is sufficiently definite and "indicates the intention of the offeror to be bound in case of acceptance".[36] Only the specific person or persons to whom it is addressed may accept an offer. Acceptance only leads to the conclusion of a contract if addressed to the person from whom the offer emanated. Such unadulterated acceptance cannot be found in the communications between Claimant and Respondent of 19, 20 and 24 February 1998 or in their subsequent communications or conduct. The declarations lack the requisite intention to be bound and the meeting of minds. Absence of either of these is fatal to the formation of a sales contract:

B. No intention to be bound:

24. In accordance with Art. 8 CISG, an objective analysis of the telephone conversation of 19 February 1998 (as reported in Mr. Dean's and Mr. Stern's statements[37]) does not indicate the requisite intention to be bound in case of acceptance. It is to be construed as an invitatio ad offerendum.[38] Given that Claimant's lawyers assisted Mr. Dean in the preparation of his statement[39], greater legal significance may be attached to his choice of terms and verb mode.
25. Due to the above mentioned fact that Claimant is not prepared to produce Mr. Dean, who is a vital witness in this case, a detailed examination of the wording of his written statement seems appropriate:
26. Mr. Dean acknowledged that Mr. Stern gave him a "quotation"[40] during the telephone conversation of 19 February 1998. A quotation normally does not indicate an "intention of the offeror to be bound" (Art. 14 (1) CISG); rather it is a "price", "quote", "estimate" or "costing".[41] Moreover, in that conversation Mr. Dean also used the conditional[42] to describe the contract that was then being contemplated: "the purchase would be subject to the Standard Conditions [...] the letter of credit would call for no partial shipments and shipment should be made to Feed Processing Corp."[43] On the other hand, Mr. Dean used the past tense indicative to report other elements of the conversation that on 19 February 1998 he already knew to be facts.[44]
27. This is supported by Mr. Stern' statement: Mr. Stern reported that he was asked "the price we [Respondent] would be asking for it"; moreover, that when he told Mr. Dean "we were currently asking $60 per ton FOB", Mr. Dean replied that "they would take it" and that "I [Mr. Stern] would receive a confirmation from him [Mr. Dean] that would contain the usual details."[45]
28. All this indicates that the conversation of 19 February 1998 only constituted preliminary negotiations without the requisite intention to be bound. The parties contemplated the announced confirmation letter with its "usual details"[46] to constitute the offer. Mr. Stern's letter of 24 February 1998 confirmed this view in its use of the present indicative: "The contract is subject to the . . . Standard Conditions"[47] and the use of the pronoun "this" [48] in reference to the intended contract. It demonstrates Mr. Stern's reasonable understanding that Mr. Dean had not made an offer until 20 February 1998 and that Mr. Stern's letter would supply the acceptance to this offer, subject to clarification of the buyer's identity.

C. No meeting of minds (dissent)[49]:


C.1. Alleged conclusion of contract on 19 February 1998:

29. The telephone conversation of 19 February 1998 fails to clarify objectively[50] who wanted to buy from Respondent or alternatively to whom Respondent wanted to sell (Imports or Claimant). This is shown by Mr. Dean's and Mr. Stern's statements.[51]
30. Mr. Dean asserts that Mr. Stern's subjective intent was to contract with Claimant (whether by acceptance or by making the appropriate offer), while Mr. Stern, who is in the better position to assess his own intent, claims that he sought to contract only with Imports. In terms of offer and acceptance, there was no common intention on 19 February 1998.
31. The declarations were unclear as to the identity of the intended contractual partner. Interpretation of the parties' declaration according to Art. 8 CISG and Art. 4.3 UNIDROIT Principles makes it clear that Respondent intended to contract with Imports, not with Claimant[52]:
32. Mr. Dean refers to "our past practice" on 20 February 1998.[53] There was only a past contractual practice between Respondent and Imports. Respondent had never had a contract with Claimant.[54] Therefore, Respondent was entitled to rely that the contract was, as always in the past, with Imports. It is not clear at all that the reference to past practice meant a practice of Mr. Dean and Mr. Stern rather than a practice of Respondent and Imports (as Claimant has contended[55]).
33. Moreover, neither Imports nor Claimant ever contradicted Respondent when the latter referred to its contract with Imports. Consequently, Respondent had no reason to doubt who its contractual partner was. Respondent thought that it would coordinate implementation of the contract with Claimant. It considered Mr. Dean to be the liaison for implementation with Claimant as well as for contractual issues with Imports. Only after PO 2 had been issued, did Respondent learn that Mr. Dean had no longer been acting for Imports on 19 February 1998. Respondent also did not question the issue of the letter of credit issued by Claimant rather than by Imports, although this was unusual: it assumed in good faith that this formed part of a set off or compensation transaction between Claimant and Imports in the course of restructuring their business relationship. Respondent accepted in good faith that Mr. Dean was its contact person with Claimant and with Imports for the purposes of rectifying the letter of credit. Therefore, Respondent requested Mr. Dean to effect amendment of the letter of credit.
34. The terms used by Mr. Stern are clear. In each written communication he refers to a contract with Imports. On the other hand, the terms used by Mr. Dean are not clear. He did not unequivocally state who the buyer was during the telephone conversation of 19 February 1998 or at any subsequent time. Mr. Dean's letter of 20 February 1998 left it to the recipient to deduce from the letterhead that the buyer might be Claimant. The nature of the contract is of no assistance in resolving this ambiguity. The common meanings of the terms and expressions used here remain ambiguous irrespective of the trade concerned. Claimant has not invoked any applicable usages that would give a meaning to the declarations to the effect that a contract had been concluded between Claimant and Respondent. According to Art. 4.6 UNIDROIT Principles, all these ambiguities should be construed against Claimant, the party seeking to rely on statements that Mr. Dean made as Claimant´s employee. Therefore, there is no indication that Respondent intended to contract with Claimant.

C.2. Alleged conclusion of contract on 20 February 1998:

35. Claimant might argue that a sales contract was offered by Mr. Stern on 19 February 1998 and accepted by Mr. Dean on 20 February 1998. Such argumentation would fail on two points: (1) As demonstrated, the conversation of 19 February 1998 was unclear as to the identity of the buyer. Ambiguous declarations have to be interpreted to the disadvantage of the person who has made them.[56] Therefore, the ambiguities as to the conversation of 19 February 1998 have to be interpreted to Claimant's disadvantage. (2) The Mr. Stern´s declarations lacked intention to be bound. This intention is a prerequisite of an offer.[57]There is no evidence that Mr. Stern directed an offer to Claimant. Both the past contractual practice between Imports and Respondent as well as Mr. Stern's subsequent conduct (letters referring to "Contract with Imports") suggest that his intention during the telephone conversation was to contract with Imports. Even if Mr. Stern's oral declarations of 19 February 1998 amounted to an offer in the sense of being definite and made with intent to be bound, the offer was directed to Imports, not to Claimant. Therefore, it is irrelevant that Mr. Dean intercepted them and attempted to accept them as if they had been addressed to Claimant.

C.3. Alleged conclusion of contract on 24 February 1998:

36. Claimant might argue that the conversation of 19 February and Mr. Dean's letter of 20 February 1998 were offers and that Mr. Stern's letter of 24 February 1998 constituted the corresponding acceptance. It is impossible to qualify Mr. Stern's letter of 24 February 1998 as acceptance resulting in a contract with Claimant: nothing better demonstrates that there was no meeting of minds than the sentence "However, our contract is with Food Imports".[58]

C.4. Mistake excluded from CISG:[59]

37. Claimant has contended that Respondent might make an argument based on mistake. It offers a detailed analysis of how the UNIDROIT Principles as well as national laws have to be applied to solve the problem of mistake.[60]This argumentation should be rejected:
38. Art. 4 CISG enumerates matters that are excluded from CISG's sphere of application. Regarding excluded matters, there is no room for gap-filling under Art. 7 (2) CISG.[61] Validity of the contract is one of those excluded matters. Mistake is a matter affecting the validity of the contract.[62] Therefore, it is excluded from CISG. If there was a mistake issue in the present case, it would be subject to the law applicable by virtue of the rules of private international law. The problem of the contractual partner's identity is to be dealt with as a question of dissent.[63] Defects in formation result in nullity.[64]

C.5. Claimant is not entitled to enforce on basis of agency:

39. Claimant suggests that Claimant would be entitled to enforce as principal an alleged contract concluded by Imports (as Claimant's agent) with Respondent.[65] This view is not convincing:

(1) CAISG has not entered into force.
Even if CAISG had entered into force and were applicable:
(2) No agency relationship exists or has existed between Claimant and Imports;
(3) Claimant's ratification of unauthorized acts by Imports would have been preempted;
(4) Even if an agency relationship had existed between Claimant and Imports, the agent's authority to enter into new transactions had been terminated before the alleged conclusion of the transaction in dispute;
(5) Mr. Dean did not conclude a valid contract with Respondent on behalf of Imports.

40. (1) Claimant fails to show the applicability of the Convention on Agency in the International Sale of Goods (CAISG).[66] Although both Mediterraneo and Danubia are parties to the Convention,[67] there is no evidence that either country has ratified the Convention or incorporated the Convention's provisions into its domestic law. The Convention had not entered into force by the critical date of 19 February 1998, for lack of the requisite number of signatures under Art. 33 (1) CAISG.[68] Even if CAISG were applicable, Claimant's arguments must fail.
41. (2) Claimant states that Imports had acted as agent for Claimant in previous transactions, but fails to substantiate this assertion.[69]Claimant does not produce any evidence that Imports had actual authority (whether express or implied) to enter contracts on behalf of Claimant rather than on its own account. Claimant has provided convincing evidence that Imports did not act as Claimant's agent: "In some cases Food Imports purchased for its own account and later re-sold the items on the market in Mediterraneo. In other cases, it received orders from various companies in Mediterraneo and filled those orders by purchasing from its list of suppliers outside of Mediterraneo and re-selling then to its customer."[70]Even in those "other cases" where Imports did not "purchase for its own account", resale to its customers is by itself not indicative of an agency relationship.
42. Claimant has recognized that under the CAISG, the principal (according to Claimant's scenario: Claimant) may be able to enforce a contract against a third party (according to Claimant: Respondent), where "the third party knew or ought to have known that the agent was acting as an agent"(Art. 12 CAISG), unless"(a) the third party neither knew nor ought to have known that the agent was acting as an agent, or (b) it follows from the circumstances of the case, for example by a reference to a contract of commission, that the agent undertakes to bind himself only" (Art. 13 (2) CAISG). However, the precondition for this is that "the agent acts on behalf of a principal within the scope of his authority".[71]As noted, Claimant has failed to establish that actual authority had been granted, whether expressly or impliedly, or that Imports believed or purported to act under any similar authority.
43. Claimant has failed to demonstrate that Respondent knew or ought to have known that Imports acted as agent for Claimant. In previous transactions, as well as in the present transaction, Respondent believed that Imports purchased for its own account, reselling its purchases to various customers in Mediterraneo, of which Claimant was one: "I note in passing that your letter was sent from Feed Processing rather than from Food Imports, Co. We are curious as to the significance of this fact. We are, of course, happy to work directly with Feed Processing in the implementation of this contract, as we have done in regard to previous contracts where you have purchased grain for your customers. However, our contract is with Food Imports, and we will hold you responsible for its performance."[72]If Respondent "ought to have known that Imports acted as agent for Claimant"[73]
, it is incomprehensible why neither Mr. Dean nor anyone else at Imports or Claimant contradicted Respondent's statement. In such circumstances, silence amounts to fraud. Thus, Respondent was entitled to rely on Imports as its contractual partner, supported by the past contractual practice between Respondent and Imports.
44. (3) Claimant is also not able to rely on an "apparent" or "ostensible" authority under Art. 14 (2) CAISG to enforce a contract against Respondent. Ostensible authority would require the principal's (Claimant's) ratification of the agent's (Imports') acts pursuant to Art. 15 (1) CAISG. The third party may preempt such ratification in conformity with Art. 15 (1) CAISG "if, at any time before ratification, he gives notice of his refusal to become bound by a ratification". Mr. Stern gave such notice of refusal in his letter of 24 February 1998, addressed to Mr. Dean at Imports and copied to Claimant: "However, our contract is with Food Imports, and we will hold you responsible for its performance."[74] It cannot suffice as ratification, if the agent merely uses the principal's letterhead in an alleged confirmation letter without any comment by the principal.[75]
45. (4) Claimant admits that the agency relationship might already have been terminated before 19 February 1998.[76] Claimant's conclusions as to a prolongation of the terminated authority under certain circumstances cannot be approved of:
46. The agent's post-termination authority according to Art. 20 CAISG "to perform on behalf of the principal or his successors the acts which are necessary to prevent damage to their interests" does not extend to the conclusion of new contracts. It is restricted to preservative measures. Deriving from Art. 20 CAISG an authorization of the former agent to conclude new contracts in spite of the termination of authority obviously contradicts the intention of Art. 20 CAISG. If the conclusion of new contracts really were an act necessary to prevent damage to the former principal, the termination of agency itself would become useless: every agent could enter into new contracts contending that he only wanted to avoid damage to his former principal.
47. (5) Mr. Dean had no more authority to represent Imports on 19 February 1998.[77] He had no longer power to oblige Imports after 13 February 1998. Therefore, Mr. Dean could not conclude a contract for Imports (as alleged agent of Claimant).
48. Also, no contract between Imports and Respondent could have arisen by virtue an apparent authority of Mr. Dean for Imports under Art. 14 (2) CAISG, because: (1) there was no meeting of minds since Mr. Dean intended to contract on behalf of Claimant, not Imports[78], and Mr. Stern believed he was contracting with Imports, not with Claimant; and (2) Imports has never ratified Mr. Dean's unauthorized acts.

49. Conclusion:

No contract was concluded between Claimant and Respondent due to lack of intention to be bound according to Art. 14 (1) CISG and due to the failure of the meeting of minds. Furthermore, Claimant is not entitled to enforce the contract onthe basis of agency, because (1) CAISG has not entered into force; because (2) no agency relationship exists or has existed between Claimant and Imports; because (3) Claimant's ratification of unauthorized acts by Imports was preempted. (4) Even if an agency relationship had existed between Claimant and Imports, the authority had been terminated before 19 February 1998. (5) Mr. Dean could not and did not intend to conclude a valid contract with Respondent on behalf of Imports.

50. Even if the Arbitral Tribunal finds not to follow Respondent's arguments of Issues 1-3 and decides that
(1) a valid arbitration agreement was concluded between Claimant and Respondent, constituting the Tribunal's jurisdiction, and that
(2) a valid sales contract was entered into by Claimant and Respondent, the Arbitral Tribunal may benevolently consider Respondent's arguments of the following Issues 4-7:

ISSUE 4: Claimant breached its obligation to cooperate in good faith:[79]

51. In brief:

· Claimant has breached its obligation (contract, trade usage, CISG) to cooperate in good faith towards the adaptation of the sales contract. Consequently, Claimant may not claim damages of $90,000 plus interest.
· According to Art. 61 (1) (a) in connection with Art. 64 (1) (a) and (b) CISG, Respondent had the right to avoid the contract because of Claimant's breach of its fundamental obligation to cooperate in good faith. Art. 80 CISG prevents Claimant from abusing its rights and bars Claimant from claiming damages and interest thereon.

In detail:

A. The Arbitral Tribunal may find that the interpretation of the sales contract required adaptation and Claimant's cooperation in good faith:

52. The governmental export licence system was a radical change of the basic assumptions on which the sales contract between Claimant and Respondent had been concluded: the export licence system allocated only 80 % of the export wheat needed by Respondent. At the time of contracting, none of the parties could foresee floods of the extent of April 1998 or the imposition of a governmental export prohibition followed by an export licence system.[80]
53. If such unforeseen circumstances occur, the contract as primary source of the parties' rights and duties has to be consulted for provisions regarding the new situation.[81] Many contracts contain clauses dealing with such a radical change of circumstances.[82] The incorporation of such clauses is an incidence of the parties' autonomy foreseen by Art. 6 CISG.
54. The present contract does not contain such a clause. Honnold states, "in extreme situations it may be appropriate to conclude that the contract did not contemplate performance under the radically changed circumstances that developed".[83] The decisions in the 1973 "Mississippi-floods-cases" express the same: with regard to allocation, any reasonable action on the seller's part sanctioned implicitly by the contract deserves support.[84]Contractual clauses dealing with radically changed circumstances are broadly recommended.[85]The fact that the parties ignored this recommendation shows that they had not considered the radical change of circumstances as probable. The parties' hypothetical will is decisive[86]: had the parties known the possibility of such a change, they would definitely have provided for a fair solution in compliance with good faith. They would not have agreed upon a regulation that one party (Respondent) has to bear all risks. Hereby it has to be concluded that the parties did not want their contract to remain totally unaffected by the occurrence of a radically new situation. Therefore the parties' will demands re-negotiation of the contract in order to adapt it to fundamentally changed circumstances. Consequently, the parties were obliged to cooperate in good faith towards the adaptation of the contract.[87]Therefore Claimant's contention that the contract must remain unchanged in any case cannot be accepted.[88]

B. The trade usage of re-allocation required Claimant to cooperate in good faith:/STRONG>
B.1. Trade usage of re-allocation:

55. Because of the governmental export licence system, Respondent was allowed to export only 80% of the requested amount of standard feed wheat.[89]According to Art. 9 (2) CISG[90], it is a usage in circumstances like in the present case that the exporter has the right to equally re-allocate the reduced amount of wheat among all affected contractual partners. This usage is evidenced by:

(1) PO 2, clarific. Nos. 11, 27 and 42;
(2) Analogy to Uniform Commercial Code which has been adopted by nearly all States of the United States (UCC), and the contractual practice of American grain traders; and
(3) The rationale of the Danubian Ministry in establishing the export licence system.

56. (1) PO 2, clarific. No. 11 states that "normally a buyer in such a case [governmental export reduction] would take the proffered 4,800 tons and claimed for the extra costs". PO 2, clarific. Nos. 27 and 42, give evidence that most of the other customers with firm contracts as of 17 April 1998 accepted the reduction and were delivered with 80% of the respective contract amounts.
57. (2) The existence of a usage of re-allocation is adopted in § 2-615 UCC - a provision elaborated for circumstances like the present ones.[91]The inclusion of this regulation in UCC and its generally unchanged adoption in the State-codes[92]evidence its broad acceptance among the persons and entities involved in commercial sales contracts.
58. Moreover, the similarity in intention between UCC and CISG is remarkable: both codifications aim at facilitating cross-border trade by offering a uniform body of regulations which is acceptable to contract parties from different legal backgrounds. In the case of the UCC "intra-state" trade and in the case of the CISG "inter-state" trade shall be furthered.[93]Moreover, there is remarkable similarity in many provisions between UCC and CISG.[94]
59. There is no usage in standard feed wheat trade to agree on regulations differing from the re-allocation solution as codified in §2-615 UCC. The USA is one of the world's biggest and therefore most important producers and traders of standard feed wheat.[95]The importance of the American production implies that many international contracts for the sale of standard feed wheat are quite probably entered into on the basis of the American contractual practice. American trade usages ought to be fruitful sources of information on the international contractual practice. Our research concerning the form contracts offered by the various American Grain and Feed Associations shows that the form contracts do not contain any provisions modifying § 2-615 UCC.[96]Therefore, UCC remains applicable. It is reasonable to assume that American traders frequently apply those form contracts in their national as well as international contracts.
60. (3) Additionally, the Danubian Ministry's basis for allocation of export permits is a further evidence for the existence of a trade usage of re-allocation: the Ministry has taken into account customers with firm contracts before a certain date as well as regular customers. In such extraordinary circumstances like the ones due the 1998 floods the Ministry has shown that it considers allocation of the wheat determined forexport to those relevant customers as just and normal. The Ministry´s application of this trade usage proves its existence.
61. Taking into account (1) the evidence of Procedural Order No. 2 referred to above, (2) the inclusion of the re-allocation-obligation in § 2-615 UCC and the similarity in intention between UCC and CISG, and (3) the Ministry's export licence system, it has to be concluded that reasonable and fair re-allocation to the affected customers (be they regular or not) is a usage widely known and regularly observed by standard feed wheat traders. Therefore, Claimant ought to have known this usage, even more so due to its long involvement in the present trade field.[97]There is no evidence in the record of an agreement between the parties to exclude or modify this trade usage.
62. On the contrary, Claimant rejected equal re-allocation and claimed that only customers with firm contracts as of 17 April 1998 should receive full delivery. In doing so, Claimant indicated that all the other customers with contracts concluded after 17 April 1998 - exclusively regular customers[98]- should merely obtain the remainder.[99]Claimant has contended that the allocation of the permitted wheat was at Respondent's discretion.[100]This argument should be rejected: arbitrary allocation would violate the trade usage of fair and reasonable re-allocation, i.e. (by virtue of Art. 9 (2) CISG) the sales contract.

B.2. As a consequence of the trade usage of re-allocation Claimant had the obligation to cooperate in good faith:

63. On the basis of the trade usage of re-allocation, Claimant had the obligation to cooperate in a reasonable manner as far as necessary for the re-allocation. This obligation to cooperate is an aspect of the general good faith principle of CISG: all parties are obliged to act in good faith. [101]
64. In the present case, re-allocation primarily required the opening of a letter of credit which would allow partial shipments and remain open for a reasonable period of time (i.e. until the full contract amount could probably be delivered). It would have been an unreasonable burden for Respondent to re-allocate and deliver in parts, if a letter of credit was opened on the basis of the initial contract: had Respondent re-allocated as contractually obliged and delivered correctly, the issuing bank, nevertheless, would have had to deny any payment. Fulfilling all one's obligations and not receiving payment (i.e. the seller's main interest) is definitely contrary to the intention of a reasonable seller as well as to the object of the contract, the usage of re-allocation and CISG. Therefore, good faith obliged Claimant to cooperate by opening or by amending a letter of credit in order to meet the requirements of re-allocation. (The latter follows from the fact that the contract required an irrevocable letter of credit[102]: any amendment can only be effected with the consent of Claimant as the account party, the beneficiary and the issuing bank.[103])

C. CISG required adaptation of the contract and Claimant's cooperation in good faith:

C.1. Change of basic assumptions on which contract was made:

65. At the time when the alleged contract might have been concluded (19 February 1998), such heavy floods and the consequent government measures were unforeseeable for the parties.[104]The non-occurrence of such a profound change of circumstances affecting Respondent's ability to perform was a basic assumption on which the parties concluded the sales contract.
66. The 80 %-reduction imposed by the Government[105]brought about a new situation in which Respondent was not longer able to perform to all its customers that the Ministry treated as relevant for the granting of export permits. Respondent was thus in the unpleasant situation wherein full performance to one customer (e.g. to Claimant) would lead to a breach of contract with another customer. Respondent immediately informed Claimant of the licence system and its consequences.[106]

C.2. Promotion of good faith and fair dealing under CISG:

67. All provisions of CISG are to be interpreted to promote the observance of good faith in international trade (Art. 7 (1) CISG). Moreover various provisions express the good faith principle.[107]CISG's intention is to create a fair dealing relationship.[108]In the present case, equal re-allocation to all affected customers corresponds to CISG's intention of fairness and avoidance of unjustified preference in international trade.[109] What good faith requires, is evidenced by §2-615 UCC (fair and reasonable allocation).[110]The prohibition of unjustified preference is also strongly supported by the strict frustration principles invoked in the course of the "1973 Mississippi floods cases"[111]: any reasonable action on the seller's part which is implicitly sanctioned by the contract deserves support.[112]All the customers that the Ministry had determined to be relevant for its licence system were "sitting in one boat". They were all equally affected by the governmental reduction. Therefore, no customer was entitled to claim full performance to the detriment of other customers without special justification. In the present circumstances, a claim for full performance would amount to an abuse of one's rights, given that it would be a conscious encroachment upon every other affected customers' entitlement (collusion). It was clear to Claimant that insisting on 100%-delivery would have this consequence.[113]To prefer Claimant without special justification would profoundly contradict CISG's notion of good faith and fair dealing. Claimant itself has acknowledged this notion of equal treatment of the affected customers: "we can understand that allocation would have to take place if the allotment you received from the Ministry was not enough to cover all of your contractual commitments."[114]Respondent was in exactly this situation: It did not receive an export quota sufficient to cover all its contractual commitments as of the time when the permits were issued.
68. Art. 48 CISG supports this view. It gives the seller a right to remedy any failure to perform, if the buyer can reasonably be required to cooperate. If CISG gives a seller such a right after having already breached an obligations, a fortiori the seller should have a right to his contractual partner's reasonable cooperation before he breaches an obligation.

C.3. No possibility to overcome governmental interference:

69. Respondent had no possibility to reasonably overcome the difficult situation caused by the ministerial reduction: the contract called for FOB-performance in any Danubian port.[115] Also Respondent's other contracts called for performance in Danubia, which had to be clear to Claimant.[116]Claimant refused any adaptation of the contract with regard to the profoundly changed circumstances - without stating any reasons. Any wheat shipped from a Danubian port, however, was subject to the governmental export licence system. Even if Respondent had purchased the missing 20 % of wheat for its customers outside Danubia, the wheat would have become subject to the export licence system as soon as Respondent sought to perform by delivering FOB-Danubian port. The permits until August had already been allocated. Consequently, the "new wheat" (i.e. the purchased missing 20 %) could only be permitted for export in the second round of governmental licence allocation. Respondent would not have been allowed to export the additional 20 % before September 1998. Therefore, Claimant knew or, at least, had to know that Respondent was not able to overcome the governmental reduction.
70. In addition, full performance to one privileged customer would not only be contrary to CISG's promotion of good faith and fair dealing, but it would also mean a serious disadvantage for Respondent. It would have to face the justified criticism of all the other customers regarding the incomprehensible preference of Claimant. There was a high probability that Respondent's regular customers would be so disappointed by the unfair preference that they would decide to purchase their wheat from another seller in the future. This was even more likely given that Respondent's regular customers did not depend on Respondent's wheat. There were other suppliers from whom they also purchased their wheat.[117]Losing one's regular customers is definitely one of the most serious dangers for a businessperson's economic existence (especially in a trade field like the present one, where there is relatively little fluctuation of customers compared to other fields). Without adaptation to the radically changed circumstances, Respondent was likely to lose its regular customers and to jeopardize its economic existence.

C.4. Claimant's obligation to cooperate in good faith:

71. A contractual partner is obliged to help to avoid such serious disadvantages as far as reasonably possible (right of debtor to claim adaptation or re-negotiation of contract[118], obligation to cooperate[119]). It has already been shown that Claimant's cooperation was necessary for the adaptation to the changed circumstances.[120]Claimant did not communicate to Respondent why it did not want to cooperate. Had Claimant had any special justification not to cooperate, it should have stated it. Respondent, however, had no indication of any serious interest on the part of Claimant justifying non-cooperation:

(1) Creation of a group of equally affected customers by the governmental licence system;
(2) No fundamental interest in July-delivery;
(3) Even if July-delivery fundamental, Claimant obliged to re-negotiate;
(4) Adaptation would not have impaired Claimant's material interests.

72. (1) The fact that Claimant entered into the contract before some of the other customers now affected cannot in itself justify a preference. The governmental licence system created a group of customers equally affected by the reduction. It did not indicate that any of the affected customers should be privileged.[121]
73. (2) Nothing indicated to Respondent that Claimant would not have been able to wait for the remaining 20% of wheat until September or October. Following Art. 25 CISG, the fundamental character of prompt delivery has to be stated expressly as an essential item during the negotiations or in the contract. The fundamental importance of prompt delivery can also be expressed by the determination of a specific date (e.g. 1 July 1998) or by using terms that are established in international trade such as "fixed delivery" or "definite delivery".[122]There were neither any such formulations in the contract itself nor any indications in the contractual circumstances, which would have given unequivocal evidence that Claimant's main interest in the contract was to receive the wheat exactly and exclusively in July 1998.
74. On the contrary, the agreed time of delivery itself (not a certain day, but the rather long period of one entire month) evidences that the actual date of delivery was not of fundamental importance to Claimant. The requirements of the letter of credit were a mere unilateral repetition of some terms of the contract by Claimant.[123]There is no evidence as to whether the parties had considered those terms fundamental, at the time of contracting. Furthermore, Claimant had given no signs that it would have needed the full amount for the fulfilment of any of its own urgent obligations to its customers.
75. Had the costs of the second shipment been an interest contradicting Respondent's demand for re-allocation, Claimant could very easily have communicated this interest to Respondent and could have demanded that Respondent bear the additional shipping costs.
76. (3) Even if the July-delivery had undoubtedly been a fundamental interest of Claimant, it could have notified Respondent hereof and could have demanded that Respondent deliver the remaining 20 % of wheat outside Danubia and bear the additional shipping costs. Such adaptation would have meant no loss to Claimant and far less cost to Respondent than the damages now being claimed.[124]
77. (4) Claimant has contended that modification of the contract would have impaired its material interests and that Claimant was, therefore, entitled to seek performance.[125]Claimant has given four reasons: (a) uncertainty of performance, (b) and (c) higher freight costs and additional risk as well as (d) loss of benefit:
78. (a) Uncertainty of performance: Respondent's fulfilment of the 18 contracts with Imports calling for direct shipment to Claimant evidence Respondent's reliability. Therefore, Claimant could trust that Respondent would undertake all reasonable steps to perform the modified contract.
79. (b) and (c) Higher freight costs and additional risks: it would have been easy to find a solution by way of re-negotiation. The number of shipments could have been limited and the additional freight costs could have been kept small by admitting places of delivery outside Danubia, e.g. in Equatoriana where the shipping costs to Mediterraneo are lower.[126]It could also have been agreed that Respondent would bear the additional shipping costs as well as the possible costs for an amendment of the letter of credit. Respondent was very likely to accept such proposals.[127]Claimant would only have had to communicate its interests and re-negotiation would have resulted in a solution satisfying both parties. Claimant, however, did not even try this solution. Instead, it simply rejected Respondent's first proposal.[128]
80. (d) Loss of benefit: Claimant has contented that it would loose its benefit from the bargain due to the rise of the world market price.[129]It has to be stated that Respondent never demanded a modification of the contract price, but always kept to the agreed $60 per ton. Therefore Claimant's preoccupation was unjustified.
81. From all this follows that there was no serious justification for Claimant's refusal to cooperate and for its demand to be preferred to the other affected customers. Thus, Claimant was obliged to contribute in good faith to the adaptation of the contract. Claimant, however, refused any adaptation to the changed circumstances as well as any re-negotiations. Instead Claimant demanded to receive preferred performance.[130] Claimant's contention that the allocation of the restricted amount of export wheat to its customers was at Respondent´s free discretion[131]and that Claimant should be preferred to other customers cannot be accepted.

C.5. Respondent had a right to avoid the contract: 82. Claimant first refused to perform its obligation to cooperate in good faith on 21 May 1998.[132]Respondent cannot be accused of neglecting its obligation to cooperate with Claimant[133]: (1) After Claimant's refusal to cooperate, Respondent tried to explain to Mr. Dean the necessity of equal re-allocation on 22 May 1998 - communication to which Claimant did not react at all. Instead of communicating with Respondent, Claimant had a letter of credit issued that did not take into account the requirements of equal re-allocation. (2) Upon receipt, Respondent immediately notified Mr. Dean of the necessity to have the letter of credit amended. This time Claimant responded, repeating its refusal to cooperate. (3) Once more, Respondent attempted to cooperate with Claimant: on 3 June 1998 it set an additional period of time for Claimant to amend the letter of credit in conformity with equal re-allocation. Claimant let the time limit pass by without amending the letter of credit. Moreover, Claimant did not even respond to Respondent's letter. Therefore, upon Claimant's four times repeated refusal to cooperate, Respondent notified Mr. Dean on 16 June 1998 of the termination of the contract - not omitting to express the hope that "this break in our relationship will be only temporary". Once more there was no reaction by Claimant.
83. Upon Claimant's refusal to cooperate in good faith, Respondent was entitled to proceed according to Art. 61 CISG. Nevertheless, Respondent chose to fix an additional period of time (Nachfrist)[134]on 3 June 1998, which was long enough for Claimant to amend the letter of credit (Art. 63 (1) CISG).
84. This additional period of time would not have been necessary. Due to the changed circumstances Claimant's obligation to cooperate in good faith was of fundamental importance to Respondent (Art. 25 CISG).[135] Claimant's failure to cooperate resulted in the letter of credit not being amended. Therefore, Respondent did not enjoy the security of a letter of credit and would not receive payment of the contract price upon performance.[136]Payment is every seller's main interest in a contract. According to Art. 64 (1) (a) CISG, Respondent could have declared the contract avoided immediately after receiving Claimant's definite refusal to cooperate. When the additional period of time had elapsed, Respondent finally avoided the contract (based on Art. 64 (1) (a) and (b) CISG). Consequently, Claimant's contention that Respondent wrongfully terminated the contract[137]cannot be accepted. Artt. 81 et seq. CISG on restitution became applicable. As no wheat or money had been exchanged, no restitution under Art. 81 (2) CISG needed to take place. Fortunately, Respondent did not suffer any loss due to Claimant's breach of contract. Therefore, Respondent has not claimed any damages.
85. Claimant is not entitled to rely on Respondent's avoidance as non-performance according Art 80 CISG, because it was caused by Claimant's breach of its good faith-obligation to cooperate. Claimant's failure to cooperate was conditio sine qua non for Respondent's complete withdrawal to an extent of 100%: had Claimant cooperated in good faith, Respondent would not have avoided the contract at all. Therefore, Art. 80 CISG (prohibits abuse of one's rights, based on the good faith principle[138]) bars Claimant from claiming any damages or interest on damages.
86. Claimant has contended that CISG's provisions on "preservation of the goods" (Artt. 85 et seq.) might be applied.[139]Claimant's argumentation is legally unfounded: Art. 85 alternative 1[140]CISG is conditioned on a buyer's delay in taking delivery of the goods. Respondent, however, had already terminated the contract due to Claimant's continuous refusal to cooperate in good faith. Thus, there was no delivery and, therefore, also no delay in taking delivery. The prerequisites for the application of Artt. 85 et seq. CISG were not met. Consequently, there was neither an obligation to preserve the wheat for Claimant nor an obligation under Art. 88 (3) CISG to transfer the proceeds of any "self help sale" to the buyer in delay (what Claimant has contended[141]).


87. Conclusion:

(1) The sales contract itself,
(2) the implied trade usage of re-allocation,
(3) the good faith-principle of CISG required adaptation of the contract and, consequently, Claimant's cooperation in good faith. Claimant repeatedly refused to fulfil this obligation and thus breached the contract. Therefore, Respondent was, entitled to avoid the contract and to freely dispose of the wheat. Claimant is barred from relying on Respondent's "failure to perform", because it was exclusively Claimant who caused it by its conduct.

ISSUE 5: Respondent is exempted from the duty to pay damages according to Art. 79 CISG:[142]

88. In brief:

· Even if the Arbitral Tribunal finds that neither (1) the sales contract itself nor (2) the implied trade usage of re-allocation nor (3) the good faith-principle of CISG required adaptation of the contract and Claimant's cooperation in good faith, Respondent should be exempted from damages under Art. 79 CISG:
· The governmental export licence system and CISG did not allow Respondent preferred delivery to Claimant to the detriment of the other affected customers.
· The impediment was unforeseeable, unavoidable and insuperable and exempts Respondent from the obligation to pay damages.

In detail:

A. Occurrence of an "impediment beyond control":

89. The governmental reduction of Respondent's export allowance to 80% of its export needs constituted an impediment beyond Respondent's control. Respondent has no influence upon the Danubian government. It is not even a government-owned or government-controlled cooperation.[143]Pursuant to the above indicated trade usage of re-allocation and CISG's principle of good faith and fair dealing[144], Respondent was not entitled to privilege Claimant by a 100%-delivery to the disadvantage of the other customers. Respondent was not allowed to breach its obligations under its other contracts and CISG, just as it was not allowed to ignore the export licence system. Moreover, unjustified preference of customers by breaching contracts with regular customers might seriously have endangered Respondent's economic, i.e. social existence.[145]Thus, Claimant's contention that "full delivery was always available at the discretion of Dealers"[146]cannot be accepted.

C. Unforeseeability, unavoidability and insuperability of the impediment:

90. The occurrence of this impediment had been unforeseeable for both parties at the time when the contract was allegedly concluded. Never before had there been floods and an export licence system comparable to 1998.[147] In addition, the export licence system was unavoidable for Respondent. There was no reason why recourse against the allocation should have been successful.[148]Finally, the impediment was insuperable, because full delivery to Claimant would have necessitated a breach of contract with other affected customers. A breach of contract without special justification could not reasonably be required of Respondent. This would drastically contradict CISG's aim to develop international trade on the basis of equality and mutual benefit and to provide for good faith and fair dealing in international trade.[149]
91. Respondent could not have avoided the breach of contract itself. It was not possible to purchase additional wheat in Danubia, because Respondent would have needed wheat cleared for export. No other Danubian exporter had excess export wheat since their permits were based on their respective need. There was no additional export wheat available for new contracts. Purchase of wheat abroad would not have overcome the impediment, either: all of Respondent's contracts with affected customers called for delivery in Danubia.[150] Thus any wheat imported to Danubia would be subject to the licence system. It could not have been exported from Danubia before the government issued the new export permits for September or October. Consequently, Respondent could not overcome the impediment.
92. Respondent repeatedly gave notice to Claimant of the impediment and its effect on Respondent's ability to perform (Art. 79 (4) CISG).[151]
93. Art. 79 CISG therefore exempts Respondent from the obligation to pay damages or interest thereon as there is no sum in arrears in the sense of Art. 78 CISG.

94. Conclusion:

The governmental export licence system together with the trade usage of re-allocation and CISG's principle of good faith and fair dealing constituted an unforeseeable, unavoidable and insuperable impediment beyond Respondent's control. Therefore, Respondent is exempted from damages. Since there is no sum in arrears Respondent is not obliged to pay interest on damages.

ISSUE 6: Claimant breached its duty to mitigate damages:[152]

95. In brief:

· Even if the Arbitral Tribunal concludes that (1) Claimant had no obligation to cooperate in good faith and that (2) Respondent is not exempted from damages under Art. 79 CISG, Claimant should be found to have breached its duty to mitigate its loss according to Art. 77 CISG. Claimant entered into a substitute purchase for 6,000 tons of standard feed wheat at $75.00 per ton. Two obvious alternatives of reasonable measures, which would have reduced the damage are as follows:
· Claimant could have accepted delivery of the offered 4,800 tons in July 1998, agreeing to delivery of the remaining 1,200 tons in October 1998; shipment in both cases from Danubia. Respondent could have borne any additional costs.
· If delivery of the full amount in July had been a fundamental obligation (of which there are no indications), Claimant could have communicated its interest in 100%-delivery in July to Respondent. 4,800 tons could have been delivered from Danubia in July 1998; the remaining 1,200 tons could have been purchased outside Danubia and shipped from there directly to Claimant in July 1998.

In detail:

A. Claimant could have accepted proposed delivery of 4,800 tons in July and of 1,200 tons in October 1998, shipment in both cases from Danubia:

96. By its communication of 21 May 1998 Respondent offered Claimant delivery of 4,800 tons and proposed to deliver the remaining amount of 1,200 tons by October 1998.[153]This proposal resulted from the fact that full delivery in July was obviously not "urgent" for Claimant: there were no indications that full delivery in July would have been of fundamental importance to Claimant.[154]It would have been Claimant's duty, at the time of entering into the contract, to clearly notify to Respondent that full delivery in July 1998 was its main interest in the contract.[155]
97. Pursuant to Art. 77 CISG, good faith obliged Claimant to take objectively reasonable measures to mitigate its loss and, consequently, bars Claimant from recovering damages that could reasonably have been avoided.[156] This duty to mitigate serves not only to keep the damage low, but also to avoid any damage.[157]
98. Claimant had all necessary information such as wheat prices, shipping costs, etc.[158]enabling it to calculate that the above described alternative course of action would have resulted in a smaller loss than the substitute purchase which was actually carried out.[159]
99. Following Schlechtriem, the aggrieved party is entitled to demand compensation for the costs of the necessary measures in so far as they are not out of proportion to the loss to be avoided.[160]Had Claimant cooperated in the period between 21 May 1998 and 15 June 1998, instead of the totally refusing partial shipment, Respondent would have had to bear the supplemental costs. Moreover, it had to be clear to Claimant that Respondent would prefer this solution to the substitute purchase since Respondent's expenses would have been remarkably lower.[161]This would have meant no greater costs for Claimant than performance of the initial contract[162]and would, consequently, have caused no loss whatsoever for Claimant.[163]
100. In addition, this reasonable alternative conduct would have led to even less effort for Claimant, because no re-negotiation with a new contractual partner would have been necessary.
101. It has already been shown that the time of delivery (July 1998) was not a fundamental interest for Claimant in the contract.[164]
102. Claimant, however, chose the less reasonable and for Respondent more disadvantageous substitute purchase of 6,000 tons. A reason for Claimant's not taking into account the obviously more reasonable alternative might have been that by this substitute purchase Claimant was able to save shipping costs (which it had to bear due to the FOB-term).[165]Under the contract, Claimant would have had to pay $144,000 for shipment from Danubia. The substitute purchase with shipment form Equatoriana allowed Claimant to pay only $132,000. Claimant thus saved the amount of $12,000.
103. Therefore a reasonable businessman in Claimant's position would have abided by the contract and taken the offered 4,800 tons in July 1998 and would have waited until October 1998 for the remainder. Consequently, Claimant's conduct is to be regarded as inconsistent with reasonable business conduct according to Art. 7 CISG and the explicit requirement of Art. 77 CISG.[166]

B. Even if full July-delivery had been indicated as fundamental, the following alternative would have been more reasonable than the substitute purchase: 4,800 tons from Danubia and 1,200 tons from outside Danubia, delivery in July 1998:
104. Even if the Arbitral Tribunal considered that full delivery in July 1998 had been indicated as fundamental, Claimant breached its duty to mitigate: Claimant could have accepted the offered 4,800 tons from Danubia and could have agreed to delivery of the 1,200 tons outside Danubia. Thus, Respondent could have purchased and delivered the 1,200 tons abroad. Any additional costs (shipment, amendment of letter of credit) would have had to be borne by Respondent. It had to be clear to Claimant that this procedure would have been remarkably less disadvantageous for Respondent than the substitute purchase of 6,000 tons. Respondent's expenses would have been remarkably lower.[167]As in the first alternative there would have been no extra costs for Claimant and, consequently, no damages to claim for.
105. In addition and as in the first alternative[168], Claimant would have had the convenience to negotiate with a reliable partner that was well known to Claimant from 18 previous contacts.[169]
106. As to the probable reason why Claimant did not choose the obviously more reasonable and for Respondent less disadvantageous alternative, we refer to the above stated regarding Claimant's benefit of $12,000.[170]

107. Conclusion:

Claimant breached its duty to mitigate under Art. 77 CISG. Its conduct was not reasonable, since less disadvantageous alternatives were at Claimant's disposal. Therefore, the entire claimed loss of $90,000 could have been avoided, if Claimant had taken a reasonable measure to mitigate. Art. 77 CISG exempts Respondent from liability to pay damages for unmitigated loss and interest thereon (Art. 78 CISG).

ISSUE 7: Claimant did not calculate its damages correctly:[171]

108. In brief:

· Even if the Arbitral Tribunal does not find that (1) Claimant had the obligation to cooperate in good faith, that (2) Art. 79 CISG exempts Respondent from damages and that (3) Claimant breached its duty to mitigate under Art. 77 CISG, Claimant has incorrectly calculated its damages under Artt. 74 et seq. CISG: Claimant saved $12,000 of shipping costs as a consequence of Respondent's non-performance. Therefore, its claim for damages of $90,000 has to be reduced by the amount of $12,000.

In detail:

109. Even if the Arbitral Tribunal rejects all the arguments of Issues 4-6, the claim for damages has to be reduced, because the real damage suffered by Claimant was lower than $90,000:
110. Art. 74 CISG requires that the amount of damages have to be calculated on the basis of the specific damage that Claimant suffered because of Respondent's breach of contract.[172]For the calculation of damages Claimant's real financial situation is to be compared with the hypothetical situation where there had been no breach of contract.[173]Furthermore, according to Schlechtriem, "the principle of concrete calculation justifies the taking into account of any advantages which the breach of contract brings for the promisee."[174]If the initial contract had been properly fulfilled, Claimant would have had to bear shipping costs of $24 per ton. For delivery of the contracted 6,000 tons the price would have amounted to the sum of $144,000. The shipping costs of the substitute purchase actually carried out ($22 per ton) were $2 per ton cheaper.[175]This means that the substitute purchase chosen to remedy Respondent's breach of contract brought about an advantage as to shipping costs of $12,000. This remarkable advantage due to the breach of contract has to be incorporated into the calculation of damages.[176]Claimant, however, has demanded $90,000.[177]Respondent cannot accept this calculation, as it is incomplete to Respondent's disadvantage.

111.Conclusion:

Claimant's advantage of $12,000 has to be taken into account and the alleged damages have to be reduced to $78,000. Therefore, also the claim for interest on damages has to be reduced (Art. 78 CISG).

ISSUE 8: Claimant has to bear all costs:[178]

112. The parties have not agreed to diverge from the LCIA Rules as to costs. In accordance with Art. 28.4 LCIA Rules "costs should reflect the parties' relative success and failure in the award or arbitration". There are no particular circumstances in the sense of Art 28.4 LCIA Rules that this approach would be inappropriate. Therefore, Respondent claims costs that reflect its relative success in the award (Artt 28.1, 28.2 and 28.4). Furthermore, Respondent claims reimbursement of the costs of legal representation in this case (Art. 28.3 LCIA Rules), which we herewith request to award pursuant to Art. 28.4 LCIA Rules (relative success in the award). The precise amount will be shown in the schedule of costs, which will be submitted at the conclusion of this arbitral proceeding.


EPILOGUE:

In the present Memorandum we have shown that:

(1) Mr. Dean's witness statement should be excluded or, at least, deserves less than full weight and ambiguities therein should be construed against Claimant;

(2) The Tribunal's jurisdiction has not been established due to defects in the formation of the sales contract and arbitration agreement;

(3) Claimant is not entitled to enforce a sales contract against Respondent;

(even if the Arbitral Tribunal found that there was a valid arbitration agreement and a valid sales contract between Claimant and Respondent)

(4) Claimant breached its obligation to cooperate in good faith, that Respondent was entitled to avoid the contract (Art. 64 CISG), and that Claimant is barred from claiming damages and interest on damages (Art. 80 CISG);

(5) In the alternative, the occurrence of an unforeseeable, unavoidable and insuperable impediment beyond control exempts Respondent from damages (Art. 79 CISG) and, consequently, from interest on damages (Art. 78);

(6) In the alternative, Claimant breached its duty to mitigate damages (Art. 77 CISG) and is, therefore, barred from claiming the avoidable $90,000 and, consequently, from claiming interest on this amount (Art. 78 CISG);

(7) In the alternative, Claimant calculated the damages incorrectly to Respondent's disadvantage (Art. 74 CISG).

(8) Finally Respondent claims that the costs of arbitration as well as legal and other costs shall reflect Respondent´s relative success in the arbitration (Artt. 28.1 to 28.4 LCIA Rules)

Therefore Respondent respectfully asks the Tribunal to:

· exclude or, at least, give less than full weight to Mr. Dean´s written statement,

· find that no valid arbitration agreement was concluded between Claimant and Respondent and that therefore the Tribunal does not have jurisdiction,

· find that no valid contract was concluded between Claimant and Respondent,

· find that Claimant is not entitled to claim damages of $90,000,

· find that Claimant is not entitled to interest on damages,

· determine the costs of the arbitration as well as legal and other costs in accordance with the parties´ relative success and failure in the arbitration.

Respectfully submitted by the Counsel for Claimant, Salzburg University Team:

(Alexandra Frantsuzova)

(Isabelle Innerhofer)

(Stephanie Kathan)

(Roland Lohnert)

(Sabine Prenn)

(Erwin Schön)

(Ingo Steinwender)

Salzburg, 10 February 2000.

THANKS TO:

Stiftungs- und Förderungsgesellschaft der

Paris Lodron Universität Salzburg

HYPO Landesbank
Die Salzburger Bank mit Idee und Kompetenz


FOOTNOTES

1. Memorandum for Claimant, 2.1 et seq.

2. Memorandum for Claimant, 2.1 et seq.

3. Art 16 (1) MAL; e.g. Reisman/Craig/Park/Paulsson, Arbitration, at 508 et seq. and 664 et seq. (1997); Lew, Contemporay Problems, at 76 (1987); Berger, International Economic Arbitration, at 121 (1993).

4. Huleatt-James/Gould, Commercial Arbitration, at 68 (1996).

5. Huleatt-James/Gould, Commercial Arbitration, at 68 (1996).

6. The non-formation of a sales contract between Claimant and Respondent is discussed in Issue 3.

7. Redfern/Hunter, Arbitration, at 1-06 (1999).

8. Holtzmann/Neuhaus, UNCITRAL Model Law, at 198 (1989).

9. E.g. Redfern/Hunter, Arbitration, at 3-10 (1999).

10. Redfern/Hunter, Arbitration, at 3-10 (1999).

11. Holtzmann/Neuhaus, UNCITRAL Model Law, at 263 (1989).

12. 12 See Issue 3, C.

13. Berger, International Economic Arbitration, at 137 et seq. (1993).

14. 14 Memorandum for Claimant, 1.1.2.2

15. PO 1, paras. 3 and 4.

16. Official information from the LCIA-staff of 12 October 1999 to a personal inquiry of the Salzburg University Team; for further information please contact Casework Assistant Gemma Stone or Mr. Winstanley on +44 171 936 3530.

17. Art. 14.1 LCIA-Rules.

18. PO 1, para 4; PO 2, clarific. No. 34.

19. Cp. e.g. Reisman/Craig/Park/Paulsson, Arbitration, at 1187 et seq. (1997); Mustill/Boyd, Commercial Arbitration, at 299 et seq. (1989).

20. Derains/Schwartz, New ICC Rules, at 257 (1998).

21. 1 Baker/Davis, UNCITRAL Arbitration Rules, at 126 (1992).

22. Redfern/Hunter, Arbitration, at 6-79 (1999).

23. Ward, Evidentiary Rules, at 8, 9 (1996).

24. PO 2, clarific. No. 36.

25. Roth, False Testimony, at 22, 25 (1994).

26. Roth, False Testimony, at 1 (1994).

27. PO 2, clarific. No. 36.

28. Dore, UNCITRAL Framework, at 71 (1993).

29. Memorandum for Claimant, 1.2.1.1. to 1.2.1.3.

30. Redfern/Hunter, Arbitration, at 6-79 (1999).

31. Memorandum for Claimant, 1.2.1.2.

32. Defendant's Exhibit No. 2.

33. PO 2, clarific. No. 57.

34. Art. 4.6 UNIDROIT Principles.

35. Memorandum for Claimant, 2.2, 2.4 and 2.5.

36. Art. 14 (1) CISG.

37. Claimant's Exhibit No. 12; Defendant's Exhibit No. 1.

38. Magnus, UN-Kaufrecht, Art. 14, No. 13 (1994); Schlechtriem, Commentary, Art.14, No. 13 (1998).

39. PO 2, clarific. No. 36.

40. Claimant's Exhibit No. 12, para. 4.

41. Microsoft Office 2000 Thesaurus, (1999); see also Chambers English Thesaurus (1998): „quotation" - „charge, cost, estimate, figure, price, quote, rate, tender."

42. The conditional is the tense used in reported speech to describe events in the future from the point of view of the person being reported. The use of "would" in Mr. Dean's statement can also mean that Mr. Dean actually used the word "would" on 19 February 1998, hereby showing that the contract was not concluded yet, but needed subsequent acceptance: "would" in statements as well as in if-clauses is not changed in reported speech; see e.g. Thomson/Martinet, A Practical English Grammar, at 270-272 (1994).

43. Claimant's Exhibit No. 12, para. 4.

44. Claimant's Exhibit No. 12, para. 4.

45. Defendant's Exhibit No.1, para. 3.

46. Defendant's Exhibit No.1.

47. Defendant's Exhibit No. 3, para. 1, sentence 3.

48. Defendant's Exhibit No. 3, para. 2, sentence 3. "This - 1. Being just mentioned or present in time, space or thought." Soukhanov (ed.), Webster's II New Riverside University Dictionary (1988).

49. Schlechtriem, Commentary, Art. 14, No.4 (1998): „[...] if an indication of a necessary element is so ambiguous that it is not possible to clarify it by interpretation under Article 8, there is no offer capable of acceptance; [...]".

50. See Art. 8 CISG and Art. 4 UNIDROIT Principles: An objective analysis of what was actually said or could be reasonably inferred from what was said - as opposed to what was meant or understood - is decisive.

51. Claimant's Exhibit No. 12; Defendant's Exhibit No. 1.

52. See Redfern/Hunter, Arbitration, at 2-66 et seq. (1999): Tribunals may refer to them as an aid to the interpretation of contract terms and conditions or even as a standard to be observed.

53. Claimant's Exhibit No. 2.

54. Statement of Defence, para. 2.

55. Memorandum for Claimant, 2.4.

56. Art. 4.6 UNIDROIT Principles.

57. Note that the most definite statement comes from Mr. Stern (Defendant's Exhibit No. 1) "He said that they would take it.".

58. Defendant's Exhibit No. 2.

59. Memorandum for Claimant, 2.5.

60. Memorandum for Claimant, 2.5.1.

61. E.g. Schlechtriem, Commentary, Art. 7, Nos. 27 et seq. (1998).

62. E.g. Honsell, Kommentar, Art. 4, No. 6 (1996); Gstoehl, Gewährleistung, 39 ZfRV 1 (1998).

63. Art. 23 in connection with Artt. 14 and 18 CISG; see e.g. Honsell, Kommentar, Art. 18, No. 12 (1997).

64. Art. 23 in connection with Artt. 14 and 18 CISG; cp. National laws of Germany (Linder, Law, at §10.02[7] (1988)), Austria (Koziol/Welser, Grundriß I, at 109 (1996)) and the Common Law (Treitel, Law, at 249 et seq. (1991)).

65. Memorandum for Claimant, 2.6.

66. Memorandum for Claimant, 2.6.1.

67. PO 2, clarific. No. 3.

68. 10 ratification, acceptance, approval or accession instruments would had to have been deposited on or before 31 January 1997 for the CAISG to have entered into force on 1 February 1998. As of 5 January 2000, only 9 States had deposited their instruments (URL: http://www.unidroit.org/english/implement/i-83.htm (7 February 2000)).

69. Memorandum for Claimant, 2.6.2.

70. Claimant's Exhibit No. 12, para. 2.

71. 71 Artt. 12 and 13 (1) CAISG.

72. Defendant's Exhibit No. 2 , para. 2.

73. Art. 12 CAISG.

74. Defendant's Exhibit No. 3, para 2.

75. Cp. Art. 15 (8) CAISG: It would seem logical that the inference of ratification must be made or be susceptible to being made by the third party (awareness of the principal's ratifying conduct) and that it should not suffice if the ratifying conduct only emanates from the principal's allegedly actual agent or allegedly apparent subagent (Mr. Dean).

76. Memorandum for Claimant, 2.6.5.

77. PO 2, clarific. No. 32.

78. Claimant's Exhibit No. 12.

79. Memorandum for Claimant, 4 and 5.

80. PO 2, clarific. No. 44.

81. Lake/Nanda/Draetta, Breach, at 181 et seq. and 211 (1973 Mississipi floods).

82. Honnold, Uniform Law, Art. 79, Nos. 424 and 431 (1999); McKendrick, Force majeure, at 102, 207 et seq. (1991); Lake/Nanda/Draetta, Breach, at 185 (1992). See as to examples for excusable delays provisions: Kritzer, Int. Contract Manual, at 647 et seq. (1994).

83. Honnold, Uniform Law, Art. 79, No. 435.1 (1989).

84. Bridge, Sale of Goods, No. 8.25 (1999); Lake/Nanda/Draetta, Breach, at 211 (1992), citing numerous court decisions in nn. 111, 112 and 113.

85. Keil, Haftungsbefreiung, at 37 seq. (1993); Mc Kendrick, Force majeure, at 207 et seq. (1991).

86. Weber, Verletzungsfolgen, at 172 (1991).

87. The terms that needed adaptation (in the contract and, consequently, in the letter of credit) were the terms as to partial shipment, time of delivery and, possibly, place of delivery as well as allocation of shipping costs. Adaptation required from the parties their cooperation in good faith. Especially, the amendment of the irrevocable letter of credit was impossible without the cooperation of the beneficiary and the account party. Claimant, however, repeatedly refused any such cooperation in good faith, without showing good cause why it should not fulfil its obligation to cooperate (see Claimant's Exhibits Nos. 6 and 9).

88. Claimant's Exhibits Nos. 6 and 9; see as to Claimant's repeated refusal to cooperate in good faith No. 81, Request for Arbitration, paras. 6 et seq., and Statement of Case, paras. 5 et seq.

89. Statement of Defence, para. 9; PO 2, clarific. Nos. 19 et seq.

90. The record does not provide any information about a usage or practice in the sense of Art. 9 (1) CISG between Claimant and Respondent.

91. §2-615 UCC provides: "Except so far as a seller may have assumed a greater obligation and subject to the preceding section on substituted performance:
(a) Delay in delivery or non-delivery in whole or in part by a seller who complies with paragraph (b) and (c) is not in breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation of order whether or not it later proves to be invalid.
(b) Where the causes mentioned in paragraph (a) affect only a part of the seller's capacity to perform, he must allocate production and deliveries among his customers but may at his option include requirements for further manufacture. He may so allocate in any manner, which is fair and reasonable.
(c) The seller must notify the buyer seasonably that there will be delay or non-delivery and when allocation is required under paragraph (b) of the estimated quota thus made available for the buyer."

92. See for the State-codes e.g. URL: http://www.lawcornell.edu/unifor/ucc.html#a2m.

93. Cp. Hanncock, Guide, at 103.903 (1998): „It [Art. 79 CISG] has also been described as "very similar to the commercial impracticability sections of the UCC"".

94. See e.g. the comparisons of Kritzer, Int. Contract Manual (1994); Hanncock, Guide (1998); Gabriel, Practitioner´s Guide (1994).

95. According to Fischer Weltalmanach 2000, at 1137, more than 50% of the worldwide feed wheat exports are provided by the USA.

96. Researched Associations: National Grain and Feed Ass. (URL: http://www.ngfa.org/), Kansas Grain and Feed Ass. (URL: http://www.kgfa-kfca.org/), Texas Grain and Feed Ass. (URL: http://www.tgfa.com/).

97. Claimant's Exhibit No. 13; Statement of Defence, para. 2.

98. PO 2, clarific. No. 26.

99. Claimant's Exhibit No. 6.

100. Memorandum for Claimant, 4.7., 5.1., 5.2.

101. 101 See e.g. Magnus, Grundsätze, 59 RabelsZ 469, at 470-493 (1995): "A vast majority of commentators regards the principle of good faith also as a standard for the interpretation of the parties´ agreement and for the entire legal relationship between the parties"; Bridge, Sale of Goods, Nos. 2.32 and 2.33 (1999); Herber/Czerwenka, Internationales Kaufrecht, Art. 7, Nos. 13 and 14 (1991); Reinhart, UN-Kaufrecht, Art. 7, Nos. 4 and 5 (1991); Mexico 30 November 1998 Compromex Arbitration proceeding (Dulces Luisi, S.A. de C.V. v. Seoul Inter); United States 14 April 1992 U.S. Dist. Ct. (Filanto S.p.A. v. Chilewich International Corp.). See for the application and interpretation of good faith also Art. 1.7.1 UNIDROIT Principles and Art. 1.106 European Principles.

102. ICC's UCP 500 are part of the contract via Art. 9 (2) CISG. Pursuant to Art. 6 c UCP 500 a letter of credit is irrevocable unless otherwise indicated.

103. Art. 9 d UCP 500.

104. This is evidenced by PO 2, clarific. Nos. 25 and 44.

105. Claimant's Exhibit No. 5.

106. Claimant's Exhibit No. 5.

107. Beside Art. 7 CISG, direct application of the principle of good faith especially in the provisions of Artt. 7, 29 (2), 35 (3), 38, 40, 44, 46 (2), 47 (2), 68, 77 and 82 (2) CISG; Audit, Vente Internationale, No. 53 c (1990).

108. Art 7 (1) CISG in connection with Art. 1.7 UNIDROIT Principles, Art. 1.106 European Principles.

109. Art. 1.7 UNIDROIT Principles; Art. 1.106 European Principles; Bonell, Restatement, at 79 et seq. (1994); Lando/Beale, Principles, at 53 et seq. (1995); Honsell, Kommentar, Art. 7, No. 9(1997); Magnus, UN-Kaufrecht, Art. 7, Nos. 41 et seq. (1994); Honnold, Uniform Law, Art. 7, No. 95 (1999); Kritzer, Int. Contract Manual, Art. 7, at 71 et seq. (1994); Secretariat Commentary, Art. 6 (draft counterpart of Art. 7 CISG); Schlechtriem, Commentary, Art. 7, Nos. 10 et seq. and 15 et seq. (1998); Rudolph, Kaufrecht, Art. 7, No. 8 (1996); Enderlein/Maskow/Strohbach, Internationales Kaufrecht, Art. 7, Nos. 5 et seq. (1991); Bianca/Bonell, Commentary, Art. 7, Nos. 2 and 3 (1987); Audit, Vente Internationale, No. 53 et seq. (1990); Keily, Good Faith (1999).

110. See No. 57; national regulations are valuable sources for the interpretation of the good faith principle. They represent regulations that are particularly well accepted, otherwise they would not have been converted into norms. According to Magnus, the CISG "is comparative law crystallized to norms" (see Magnus, UN-Kaufrecht, Art 7, No. 37 (1994)).

111. Bridge, Sale of Goods, No. 8.25 (1999) (stating that the frustration principles require equal allocation and do not allow preference of certain customers); citing among others the following decisions: Lauritzen (J) AS v. Wijsmuller BV [1990] 1 Lloyd's Rep 1; Westfälische Central Genossenschaft GmbH v. Seabright Chemicals Ltd. (unreported, but discussed and approved in Bremer Handelsgesellschaft mbH v. Continental Grain Co [1983] 1 Lloyd's Rep 269); Bremer Handelsgesellschaft mbH v. Vanden-Avenne Izegem PVBA [1978] 2 Lloys's Rep 109, 115 (Lord Wilberforce); Continental Grain Export Corpn v. STM Grain Ltd [1979] 2 Lloyd's Rep 460, 473.

112. Lake/Nanda/Draetta, Breach, at 211 (1992), citing numerous court decisions in nn. 111, 112, 113.

113. Claimant's Exhibits Nos. 5, 7 and 10.

114. Claimant's Exhibit No. 8.

115. Claimant's Exhibits Nos. 2 and 12; Defendant's Exhibits Nos.1 and 2.

116. PO 2, clarific. Nos. 27 and 42; Claimant's Exhibits Nos. 5, 7 and 10.

117. PO 2, clarific. No. 43.

118. Magnus, UN-Kaufrecht, Art. 79, No. 24 (1994); Schlechtriem, Commentary, Art. 79, No. 40 (1998); Enderlein/Maskow/ Strohbach, Internationales Kaufrecht, No. 3, outline of Art. 79 and Art. 79, No. 6.3 (1991); Rudolph, Kaufrecht, outline of Art. 79, Nos. 6-10 (1996), stating the diverging opinions as to the question of re-negotiation and adaptation and giving good reasons for the application of Artt. 6 and 7 CISG in favour of re-negotiation and adaptation. Especially the argument of uniformity in CISG's interpretation convinces. It would certainly not correspond to CISG's intention of uniform application to leave the solution of this question entirely to national law. On the other hand, fixing a promisor under all circumstances to the original contract would definitely contradict CISG's promotion of good faith and fair dealing. Therefore, we agree with the commentators who favour the application of Art. 6 and especially Art 7 (1) CISG in order to avoid unfair hardship.

119. Magnus, UN-Kaufrecht, Art. 7, No. 47 (1994) citing among others Soergel/Lüderitz, Vol. 3, Art. 7, No. 9 (12th ed. 1991); Audit, Vente Internationale, No. 51 (1990); Bianca/Bonell, Commentary, Art. 7, No. 2.3.2.2 (1987); Enderlein/Maskow/Strohbach, Internationales Kaufrecht, Art. 7, No. 9.1 (1991); Karollus, UN-Kaufrecht, at 16, n. 88 (1991); Honnold, Uniform Words, at 139 (1987), citing Maskow, Bonell and Samson; Honnold, Uniform Law, No. 323, n. 2, No. 342, n. 2, No. 436 (1989).

120. Allowance of partial shipment or modification of place of delivery as well as amendment of irrevocable letter of credit was impossible without Claimant's cooperation; see No. 64.

121. PO 2, clarific. Nos. 21 and 23.

122. von Caemmerer/Schlechtriem, Kommentar, Art. 25, No. 18 (1995); Schmid, Schuldnerverzug, at 26 (1996); Enderlein/Maskow/Strohbach, Internationales Kaufrecht, Art. 25, No. 3.4 (1991); Hutter, Haftung, at 112 (1988).

123. Claimant's Exhibit No. 1: the contract itself did not determine in detail the requirements of the letter of credit.

124. Costs of 4,800-ton-shipment from Danubia: $134,400. / Given the Danubian shipping prices in PO 2, clarific.No. 51 and assuming that shipment of 1,200 tons from outside Danubia to Mediterraneo would also have cost 150 % of the price for 6,000 tons (like in Danubia), the price per ton for delivery from Equatoriana can be calculated as an example for delivery abroad: shipment of 1,200 tons at $33 per ton would cost $39,600. Thus, sum of shipping costs: $174,000. Under the contract Claimant had to bear $144,000 of shipping costs. Additional shipping costs therefore: $30,000. / Purchase of 1,200 tons at $75 per ton (world market price) minus payment of contract price ($60 per ton): loss of $18,000. / Amendment of letter of credit (only necessary if already opened): normally about 1/1000 of the letter of credit-sum, in the present case $396. / Sum of costs for Respondent: $48,396. In comparison to the claimed damages of $90,000: savings of $41,604

125. Memorandum for Claimant, No. 4.1.1.

126. PO 2, clarific. No. 52.

127. See No. 76.

128. Claimant's Exhibit No. 6.

129. Memorandum for Claimant, 4.1.1.

130. Claimant's Exhibits Nos. 6 and 9.

131. Memorandum for Claimant, 4.7, 5.1 and 5.2.

132. Claimant's Exhibit No. 6.

133. Claimant's Exhibits Nos. 7, 8, 9, 10 and 11.

134. Kritzer, Int. Contract Manual, at 502 (1994).

135. Gabriel, Practitioner´s Guide, at 243 (1994).

136. See No. 64.

137. Request for Arbitration, para. 7; Memorandum for Claimant, 4.

138. E.g. Herber/Czerwenka, Internationales Kaufrecht, Art. 80, No. 2 (1991).

139. Memorandum for Claimant, 5.8.

140. Art. 85 alternative 2 CISG is irrelevant in the present case: payment and delivery did not have to be made concurrently.

141. See Memorandum for Claimant, 5.8.

142. Memorandum for Claimant, 4.4 and 5.1.

143. PO 2, clarific. No. 20.

144. See Nos. 55 et seq. and 67 and seq.

145. See No. 70.

146. Memorandum for Claimant, 5.1; see also 4.7 and 5.2.

147. PO 2, clarific. Nos. 25 and 44.

148. PO 2, clarific. No. 19.

149. Preamble and Art. 7 (1) CISG; Art. 1.7 UNIDROIT Principles, Art. 1.106 European Principles.

150. Shown by Respondent's 80% re-allocation to all its affected customers: Claimant's Exhibits No. 5 and 7 in which Respondent informed Claimant about the re-allocation to the customers on the Ministry's 80% basis ("we requested…300.000 tons, but received only 240.000 tons. Therefore, … able to furnish… 4.800 tons"; "…only reasonable … use it as the basis for our allocation of shipment to our customers"); PO 2, clarific. Nos. 27 and 42.

151. Claimant's Exhibits Nos. 3, 5, 7, 8 and 10.

152. Memorandum for Claimant, 5.5, 5.5.1, 5.5.2 and 5.5.3.

153. Claimant's Exhibit No. 5.

154. Claimant's Exhibits Nos. 2, 6 and 9; PO 2, clarific. Nos. 12; see also No.73.

155. Schlechtriem, Commentary, Art. 25, No. 18 (1998); Enderlein/Maskow/Strohbach, Internationales Kaufrecht, Art. 25, No. 4.1 (1991); Herber/Czerwenka, Internationales Kaufrecht, Art. 7, No. 14 (1991).

156. Honnold, Uniform Law, Art. 77, Nos. 417 et seq. (1999).

157. E.g. Magnus, UN-Kaufrecht, Art. 77, No. 8 (1994); Honnold, Uniform Law, Art. 77, No. 419 (1999).

158. PO 2, clarific. Nos. 47, 51 and 52.

159. Respondent's proposal would have caused the following extra costs to Claimant: 4,800 tons x $4 per ton = $19,200 (shipment price-difference between 6,000 tons and 4,800 tons from Danubia); 1,200 tons x $12 per ton = $14,400 (shipment price-difference between 6,000 tons and 1,200 tons from Danubia); sum of costs: $33,600. Damage due to actually carried out substitute purchase: $90,000. Respondent's proposal would have avoided $56,400 of loss.

160. Schlechtriem, Commentary, Art. 77, No. 3 (1998).

161. See n. 124.

162. Claimant's Exhibit No. 2.

163. Enderlein/Maskow/Strohbach, Internationales Kaufrecht, Art. 77, No. 5 (1991).

164. See No. 73 et seq.

165. See Claimant's Exhibits Nos. 2 and 12; Defendant's Exhibits Nos. 1 and 2; Request for Arbitration, para. 5. See as to the costs of shipment under the FOB-term: Bredow/Seiffert, Incoterms, at 56 et seq. (1990). The Incoterms 2000 came into force on 1 January 2000 and are not applicable to the present case. (URL: http://www.iccwbo.org/home/menu_incoterms.asp (30 January 2000)).

166. Honnold, Uniform Law, Art. 77, No. 419.3 (1999).

167. See n. 124.

168. See No. 100.

169. Statement of Defence, para. 2.

170. See No. 102.

171. Memorandum for Claimant, 5.3.2.

172. Schlechtriem, Commentary, Art. 74, No. 31 (1998); Magnus, UN-Kaufrecht, Art. 74, Nos. 25 and 26 (1994).

173. Magnus, UN-Kaufrecht, Art. 74, No. 26 (1994); Weber, Verletzungsfolgen, at 195 (1991).

174. Schlechtriem, Commentary, Art. 74, No. 32 (1998).

175. PO 2, clarific. Nos. 51 and 52.

176. Schlechtriem, Commentary, Art. 74, No. 32 (1998).

177. Request for Arbitration, para. 12; Statement of Case, para. 9; Memorandum for Claimant, 5.3.2.

178. Memorandum for Claimant, No. 5.7.