International Commercial Arbitration Moot
Institute of International Commercial Law
Pace University School of Law
78 North Broadway
White Plains, NY 10603
USA

Tel: (1-914) 422-4402
Fax: (1-914) 422-4229
E-mail: ebergsten@genesis.law.pace.edu

INTRODUCTION

I. The Arbitral Moot

The International Commercial Arbitration Moot is an annual competition of teams representing law schools throughout the world (the "Arbitral Moot").

The Arbitral Moot is organized by the Institute of International Commercial Law at Pace University School of Law.

Goals. The Arbitral Moot is intended to stimulate the study of international commercial law, especially the legal texts prepared by the United Nations Commission on International Trade Law (UNCITRAL), and the use of international commercial arbitration to resolve international commercial disputes. The international nature of the Arbitral Moot is intended to lead participants to interpret the texts of international commercial law in the light of different legal systems and to develop an expertise in advocating a position before an arbitral panel composed of arbitrators from different legal systems.

II. Organization of the Arbitral Moot

Venue. The oral hearings will be held in Vienna, Austria. The general rounds on Tuesday to Friday, April 1 to 4, 1997, will be held at the Faculty of Law (Juridicum) of the University of Vienna. The quarter-, semi-final and final rounds will take place at the International Arbitral Centre of the Austrian Federal Economic Chamber (Wirtschaftskammer Österreich) Saturday and Sunday, April 5 and 6, 1997.

Language. The Arbitral Moot will be conducted in English.

RULES

I. Registration

Registration is accomplished by submission of the registration form and is confirmed by payment of the registration fee of $400. It is desirable that the registration form be submitted at least one week prior to the date on which the Problem will be sent. Registration will be accepted at a later date to the extent that space is available and there is sufficient time for the team to prepare and submit the memorandum for claimant.

The fee includes an invitation to an opening reception for all team members, coaches and accompanying persons as well as an invitation to the awards banquet on Sunday, April 6, 1997, for up to four team members and accompanying team coach. Additional team members and accompanying persons are also invited, but will be asked to pay for the dinner.

II. The Problem

Subject Matter. The Problem in the 1996-97 Arbitral Moot involves a controversy arising out of a hypothetical international sale of goods subject to the United Nations Convention on Contracts for the International Sale of Goods.

Dispute Settlement. The controversy is before an arbitral tribunal pursuant to the Rules of Arbitration of the International Chamber of Commerce. The ICC International Court of Arbitration has decided that the arbitration will be held in Vindobona, Danubia. Danubia has enacted the UNCITRAL Model Law on International Commercial Arbitration. Danubia, Equatoriana and Mediterraneo, the three hypothetical states involved, are party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

The Competition. In the 1996-97 Arbitral Moot, the claimant has already filed its request for arbitration, the respondent has filed its statement of defense (in which it has, inter alia, contested the jurisdiction of the tribunal), the arbitral tribunal has been appointed, and the terms of reference have been prepared and accepted by the parties. The Arbitral Moot involves writing memorandums and oral argument in support of the positions of the claimant and respondent.

Distribution. The Problem will be distributed by the Institute on October 4, 1996.

Facts. The facts in the dispute that is the subject matter of the Moot are given in the Problem. No additional facts that are not a logical extension of the given facts may be introduced into the Moot. By way of example, the subject matter of the dispute in the Fourth Moot is men's suits. You may assume that the suits are made of cloth. You may not assume that they are, or should have been, made of pure wool. If the material out of which they are made seems to be relevant, you may request a clarification of the Problem.

Clarifications. Requests for clarification of the Problem may be sent to the Institute prior to November 10, 1996. A request for clarification must include a short explanation of the expected significance of the clarification. Any clarifications issued by the Institute will be sent to all teams.

III. Teams

Composition. Each participating law school may enter one team. A team is composed of two or more students registered at the school for the study of law. There is no maximum limit on the number of students who may be members of the team. No student who has been either admitted or licensed to practice law is eligible to participate.

The list of team members, indicating the full name of each member and a permanent mailing address, must be submitted to the Institute at or before December 2, 1996, the date when the memorandum for claimant is to be submitted. Eligibility to participate in the Moot is determined as of December 2, 1996.

Participation. All members of the team may participate in preparation of the memorandums for claimant and respondent.

In each of the oral hearings two members of the team will present the argument. Different members of the team may participate in the different hearings. Therefore, between two and eight members may participate in the oral hearings. However, to be eligible for the prize for best individual oralist, a participant must have argued at least once for the claimant and once for the respondent.

IV. Written Memorandums

Memorandums. Each team must submit a memorandum in support of the claimant's position by December 2, 1996. Each claimant's memorandum will be sent to one of the other teams by December 13, 1996. Each team will prepare a memorandum in support of the respondent's position in response to the memorandum in support of the claimant's position that was sent to it. The Institute will determine to which team a memorandum in support of the claimant's position will be sent.

The memorandum for respondent must be responsive to the arguments made in the memorandum for claimant. Nevertheless, the memorandum for claimant to which a memorandum for respondent is to be prepared may not have made all of the arguments that the team preparing the memorandum for respondent believes should have been made. The team preparing the memorandum for respondent may deal with those issues. Such additional arguments (arguments in response to arguments not made by your opponent) would not normally be made in a real arbitration. However, they may be appropriate in the Arbitral Moot. If such arguments are made, they must be identified in an appropriate manner so that the jury judging the memorandums and the arbitrators hearing the oral arguments will be able to treat them separately.

Form, length and other elements of style. Citations must be in footnotes, not endnotes. Citations to authorities should be in a form that is intelligible to all who will read the memorandum, including the members of the other teams, the arbitrators in the oral hearings and the members of the jury who will judge the written phase of the Arbitral Moot. You should take into account that the style of citation of cases or articles in legal journals that is common in your country may not be intelligible to participants in the Moot from other countries.

Memorandums may be no longer than thirty (30) double spaced 8½ x 11 inch or A4 typed pages of argument or discussion, including footnotes. Cover pages, tables of contents, indices, lists of authorities or other material that does not consist of argument or discussion may be in addition.

No type style smaller than standard elite may be used. The use of ten (10) or twelve (12) point proportional type is encouraged. Reproduction of all copies must be full sized and clear.

Memorandums may be reproduced on both sides of the paper.

Memorandums must be stapled or otherwise bound securely. Memorandums that are held together by rubber bands, light weight staples, paper clips or other insecure forms are not properly submitted and will not be considered for award.

The name of the team should appear prominently on the cover page.

Memorandum Revision. A memorandum may not be revised once it has been submitted to the Institute.

Scoring of Memorandums. A jury selected by the Institute will score the memorandums on the basis of the quality of the analysis, persuasiveness of argument, thoroughness of research and the clarity of the writing. The jury will take into account whether the memorandum for respondent is responsive to the arguments raised by the claimant.

Submission of Memorandums. Each team is to submit in total thirty (30) copies of the memorandum for claimant and the memorandum for respondent. Teams are requested to send in addition the memorandums on a diskette, preferably 3½ inch, specifying the word processing application used.

Deadlines and Place for Submission of Memorandums. A submission of fifteen (15) copies of the memorandum for claimant and for respondent should be sent to:

International Commercial Arbitration Moot

Institute of International Commercial Law

Pace University School of Law

78 North Broadway

White Plains, NY 10603

U.S.A.

As of December 16, 1996 administration of the Arbitral Moot will move to Vienna. Therefore, submission of the remaining fifteen (15) copies of the memorandum for claimant and for respondent will be made to

Professor Eric Bergsten

Schimmelgasse 16/14

A-1030 Vienna

Austria

Tel. & fax +43 1 713-5408

E-mail ebergsten@genesis.law.pace.edu

To assure prompt reception of a copy of the memorandum, teams with access to the Internet are requested to send a copy of the memorandum by e-mail to ebergsten@genesis.law.pace.edu. Memorandums must be received by the Institute by the following dates:

Memorandum for claimant (15 copies) (White Plains) December 2, 1996

Memorandum for claimant (15 copies) (Vienna) December 28, 1996

Memorandum for respondent (15 copies) (White Plains) February 14, 1997

Memorandum for respondent (15 copies) (Vienna) February 14, 1997

The Institute must be notified by fax or e-mail of the date the memorandums were sent, the means by which they were sent, and if sent by courier service, the name of the courier service and the waybill number.

On December 13, 1996, the Institute will send to each team the memorandum for claimant to which a memorandum for respondent must be prepared.

A team whose memorandum for claimant has not been received by December 13, 1996 will not be permitted to participate further in the Arbitral Moot.

By February 28, 1997, the Institute will send to each team the memorandum for respondent prepared in reply to its memorandum for claimant as well as the memorandums of the other teams against which it will argue in its third and fourth oral hearings.

Copyright. Memorandums once submitted shall be the property of the Institute and may be copyrighted by the Institute.

V. Oral Hearings

Venue. The oral hearings will be held in Vienna, Austria at the Faculty of Law (Juridicum) of the University of Vienna and at the International Arbitral Centre of the Austrian Federal Economic Chamber (Bundeswirtschaftskammer Österreich).

General Rounds. Each team will argue four times in the general rounds, twice as claimant and twice as respondent. In its first two oral hearings, each team will argue once as claimant and once as respondent. The respondent will be the team that prepared the memorandum for respondent in opposition to the memorandum for claimant that was sent to it. In its third and fourth oral hearings the teams will argue against teams with which they were not paired for the purpose of preparing written memorandums.

The general rounds will be scheduled so that each team will argue once per day, Tuesday through Friday.

Quarter-final Round. After the general rounds, the scores of each team for its oral presentation in the four arguments will be totaled. The eight teams that have obtained the highest composite scores will meet in the quarter-final round Saturday morning, April 5, 1997. They will be paired so that the first and eighth, second and seventh, third and sixth and fourth and fifth will argue against one another. Ranking of the eight teams will not be divulged until completion of the final round. Decision as to which teams will be claimant and which will be respondent in the quarter-final round will be determined by lot.

Semi-Round. The winners of the quarter-final round will meet in the semi-final round Saturday afternoon, April 5, 1997. When one of the two teams in any semi-final round was claimant and the other was respondent in the quarter-final round, they will argue for the opposite party in the semi-final round. If both teams argued for the claimant or both argued for the respondent in the quarter-final round, the decision as to which team will be claimant and which will be respondent in the semi-final round will be determined by lot.

Final Round. The two winners of the semi-final round will meet in the final round Sunday, April 6, 1997. If one of the two teams argued for claimant and the other for respondent in the semi-final round, they will argue for the opposite party in the final round. If they both argued for the same party in the semi-final round, the decision as to which team will be claimant and which will be respondent in the final round will be determined by lot.

Duration of Oral Presentation Arguments. In all its hearings as claimant and in its first hearing as respondent each team should expect to be restricted by the arbitral tribunal to the arguments presented in its written memorandum. In any subsequent hearing as respondent a team may depart from the arguments it presented in its memorandum in order to respond to the arguments of the claimant.

Questions by Arbitrators. The arbitrators are requested to act during the oral hearings as much as possible the way they would in a real arbitration. There are significant differences in style dependent both on individual personalities and on perceptions of the role of an arbitrator (or judge) in oral argument. Some arbitrators, or arbitral tribunals, may interrupt a presentation with persistent or even aggressive questioning. Other arbitrators, or arbitral tribunals, may listen to an entire argument without asking any questions.

Scoring. Arbitrators will score the oral arguments without knowledge of the scores on the written memorandums or the results of earlier arguments.

Winning Team. The winning team of the oral phase of the Arbitral Moot is the team that wins the final round.

VI. Assistance

Written Memorandums. The memorandums must be the product of the team itself. Teams from jurisdictions where English is not the mother tongue may have a coach to aid them in regard to the use of the English language, terminology and the like. All coaches in regard to the English language must rigorously refrain from aiding in the preparation of the memorandum itself, by editing the memorandum or otherwise.

Oral Hearings. One purpose of the Arbitral Moot is to develop the art of advocacy in international commercial arbitration proceedings. Observance of the performance of other participants is one way to develop that art. Therefore, attendance at the quarter-final, semi-final and final rounds is encouraged. Attendance of team members at the general rounds is permitted, except that no team, or friends or relatives of members of a team, is permitted to attend arguments of other teams against which it is scheduled to argue at a later time. Violation of this rule will disqualify a team from participation in the semi-final round.

VII. Awards

Frédéric Eisemann Award for Best Team Orals. This award will be made to the winning team in the final round of the oral hearings.

Pieter Sanders Award for Best Written Memorandums. The phase of the competition marked by the memorandums will be won by the team allocated the highest composite score for both memorandums.

Martin Domke Award for Best Individual Oralist. This award for the general rounds will be won by the individual advocate with the highest composite score during these rounds. To be eligible for this award a participant must have argued at least once for the claimant and once for the respondent.

VIII. Interpretation of the Rules

Requests. For interpretation of these rules, requests may be addressed to the Institute. All interpretations, as well as any waivers, consents, or other decisions are at the discretion of the Institute in its administration of the Arbitral Moot.

FOURTH ANNUAL

WILLEM C. VIS

INTERNATIONAL
COMMERCIAL ARBITRATION MOOT

Juridicum
and
International Arbitral Centre
Federal Economic Chamber

April 1-6, 1997

THE PROBLEM

Further information:

International Commercial Arbitration Moot
Institute of International Commercial Law
Pace University School of Law
78 North Broadway
White Plains, NY 10603
USA

Tel: (1-914) 422-4402
Fax: (1-914) 422-4229
E-mail: ebergsten@genesis.law.pace.edu

INTERNATIONAL COURT OF ARBITRATION

OF THE INTERNATIONAL CHAMBER OF COMMERCE

Case No. Moot 4

REQUEST FOR ARBITRATION

ON BEHALF OF

TEXTILE EXPORT-IMPORT CO.
Industry City
Mediterraneo

Claimant

AGAINST

HIGH QUALITY CLOTHES CO.
Cool City
Equatoriana

Defendant

MAY IT PLEASE THE TRIBUNAL

I. THE FACTS OF THE CASE:

1. (a) High Quality Clothes Co., hereafter referred to as HIGH QUALITY, is incorporated in Equatoriana. It owns and operates a chain of 25 retail clothing stores in Equatoriana. It sells merchandise at the high-middle level of price and quality.

(b)Men's Suits Manufacturing Co., hereafter referred to as MEN'S SUITS, is incorporated in Mediterraneo and all of its business is conducted in Mediterraneo. It manufactures and sells men's outer clothing, including suits and separate jackets and pants.

(c)Textile Export-Import Co., hereafter referred to as TEXTILE, is incorporated in Mediterraneo. It purchases textiles of various types for importation into Mediterraneo, which it sells to manufacturers of clothing and other finished products, and sells for export textiles, finished clothing and other finished products made from textiles that have been manufactured in Mediterraneo. Although it has purchasing and selling agencies in a number of countries, it has no such office or agency in Equatoriana.

2. On March 1, 1994, HIGH QUALITY sent a letter to MEN'S SUITS ordering 5,000 men's suits of certain designated models at the prices in the list dated January 15, 1994 (Claimant's exhibit 1). MEN'S SUITS forwarded to TEXTILE the letter from HIGH QUALITY since, as of February 15, 1994, MEN'S SUITS had discontinued selling directly outside Mediterraneo and as of that date all of its export sales were handled by TEXTILE.

3. On March 10, 1994, TEXTILE sent to HIGH QUALITY a confirmation of the order (Claimant's exhibits 2, 3 and 4). The confirmation quoted a price of $130 CIP Handelshafen, Equatoriana (Incoterms 1990) per piece, for a total of $650,000, payable 30 days after shipment. Payment was to be made to the dollar account of TEXTILE in London. The confirmation also indicated that the goods would be shipped directly from MEN'S SUITS to HIGH QUALITY on or before August 15.

4. The goods were shipped from MEN'S SUITS on August 1, 1994. HIGH QUALITY did not pay the open account on August 31, 1994, as required by the contract. TEXTILE sent a routine reminder on September 9, 1994 (Claimant's exhibit 5). A second reminder was sent on October 10, 1994 (Claimant's exhibit 6). On October 14, 1994, HIGH QUALITY finally replied saying that the goods received had not been the suits ordered but had been separate jackets and pants (Claimant's exhibit 7). On October 20, 1994, TEXTILE replied that

this was the first time HIGH QUALITY had complained to it about the goods received,

the season for selling winter clothing to retail chains had already passed,

it was too late for TEXTILE to find another buyer in Equatoriana or otherwise within reasonable shipping distance of HIGH QUALITY that would be willing to pay the proper invoice price for the suits, and that

under the circumstances, HIGH QUALITY was responsible for the price (Claimant's exhibit 8).

In its letter TEXTILE offered an adjustment on the price in order to settle the dispute, but that offer was rejected by HIGH QUALITY and is no longer valid.

5. On October 27, 1994, HIGH QUALITY transferred to the account of TEXTILE in London $390,000. The same day it sent a letter to TEXTILE explaining its actions. The letter was received by TEXTILE on November 3, 1994. In the letter HIGH QUALITY said that it had sold the suits for the account of TEXTILE to Overstock Merchandising, another retailer of men's clothing in Equatoriana, for $500,000. It said that it had transferred that sum, less $110,000 for alleged costs and damages, to our account (Claimant's exhibit 9). On November 4, 1994, TEXTILE replied that it had accepted the $390,000 as a partial payment on the $650,000 owed to it by HIGH QUALITY, and it made demand for payment of the remaining $260,000(Claimant's exhibit 10). The payment has never been made.

II. THE LEGAL POSITION

a) Agreement to arbitrate

The confirmation form sent by TEXTILE contained in article 11 the standard ICC arbitration clause, and provided that in case of dispute there shall be three arbitrators, the language of the arbitration shall be English (Claimant's exhibit 4). HIGH QUALITY accepted the terms of the confirmation form as the terms of the contract, including the arbitration clause, when it failed to object to them and accepted the goods.

b) Law applicable to the contract

Article 10 of the confirmation form provided that the contract was to be governed by the United Nations Convention on Contracts for the International Sale of Goods. That would have been the result in the absence of article 10, since both Equatoriana and Mediterraneo are, and were prior to March 1, 1994, parties to the Convention.

c) Legal rights of the claimant

TEXTILE and HIGH QUALITY entered into a contract of sale for 5,000 men's suits for a total sale price of $650,000. The goods were shipped to and received by HIGH QUALITY. According to the contract payment was due 30 days after shipment, i.e., on August 31, 1994. Payment of $390,00 was made on October 27, 1994, leaving a remaining balance of $260,000 outstanding.
HIGH QUALITY gave no notice to TEXTILE that the goods as delivered were not as ordered for more than a month after they were received and not until TEXTILE had twice made demand for payment. As a result of this long delay in giving notice, HIGH QUALITY has no right to rely on the lack of conformity of the goods.
The goods actually delivered to HIGH QUALITY were of the same quality as those specified in its letter of March 1, 1994 to MEN'S SUITS and in the confirmation form of TEXTILE dated March 10, 1994, and HIGH QUALITY has never suggested otherwise. Therefore, even if HIGH QUALITY had given notice of non-conformity, the non-conformity did not amount to a fundamental breach of the contract.
Even if HIGH QUALITY had given proper notice of the non-conformity and even if the non-conformity had amounted to fundamental breach, HIGH QUALITY did not give notice of avoidance of the contract. Therefore, the contract remains in existence and HIGH QUALITY owes the unpaid portion of the price for the goods.

MAY IT PLEASE THE ARBITRAL TRIBUNAL

to order HIGH QUALITY to pay the purchase price in accordance with the contract ($650,000) less the amount already paid ($390,000), i.e., $260,000;

to order HIGH QUALITY to pay interest on the outstanding balance of $650,000 from August 31, 1994 to October 26, 1994 and on a balance of $260,000 from October 27, 1994 to the date of payment;

to order HIGH QUALITY to pay all costs of the arbitration, including the lawyers' fees.

(signed)______________________________________, 5 May 1996
Attorneys for Textile Export-Import Co., Claimant

CLAIMANT'S EXHIBITS
(Contents only)

CLAIMANT'S EXHIBIT No. 1

Letter from High Quality Clothes Co. to Men's Suits Manufacturing Co. dated March 1, 1994

March 1, 1994

Mr. Sidney Lockwood
Sales Manager
Men's Suits Manufacturing Co.
123 Textile Place
Industry City, Mediterraneo

Dear Mr. Lockwood:

We are now prepared to place an order with you for 5,000 men's suits for the forthcoming winter season on the usual terms and conditions. The distribution between models, sizes and colors is indicated on the accompanying list. [List not included in this reproduction.] Please arrange to ship so that they will arrive in Equatoriana by the end of August.

Please inform us immediately if the prices would be different from those in your 1994 catalogue and accompanying price list dated January 15, 1994.

Sincerely,

(Signed)
Claude Simpson
Purchasing Manager
High Quality Clothes Co.

CLAIMANT'S EXHIBIT No. 2

Letter dated March 10, 1994 from Textile Export-Import Co. to High Quality Clothes Co.

March 10, 1994

Mr. Claude Simpson
Purchasing Manager
High Quality Clothes Co.
456 Retail Street
Cool City, Equatoriana

Dear Mr. Simpson:

Your letter of March 1, 1994 addressed to Men's Suits Manufacturing Co. in which you ordered 5,000 men's suits of various model numbers has been referred to us. Since February 15 Textile Export-Import Co. handles all the export sales for Men's Suits Manufacturing Co.

We enclose our confirmation of your order. Since you have been a regular customer of Men's Suits Manufacturing Co. for the past seven years, we have granted you the same payment terms you have been enjoying with Men's Suits Manufacturing Co., i.e., payment is due 30 days after shipment. We are pleased to confirm that the prices quoted in our confirmation are in accord with those in the price list of Men's Suits Manufacturing Co. dated January 15, 1994, including shipping and insurance.

We wish to express our pleasure in welcoming you as a new customer of Textile Export-Import Co.

Sincerely,

(Signed)
Harold Swenker
Export Manager
Textile Export-Import Co.

CLAIMANT'S EXHIBIT No. 3

Front of confirmation form sent by Textile Export-Import Co. to High Quality Clothes Co. in the letter of March 10, 1994

TEXTILE EXPORT-IMPORT CO.

Sales Confirmation

Customer's name: High Quality Clothes Co.
Address: 456 Retail Street
Cool City, Equatoriana

Supplier's: name Men's Suits Manufacturing Co.
Address: 123 Textile Place
Industry City, Mediterraneo

Merchandise: Men's suits
Quantity: 1,000 each of referenced numbers. Total, 5,000
Model numbers: 4250, 4263, 5176, 6228, 7398
Sizes: Equatoriana sizes 48, 49, 50, 51 52 (200 each size, each model)

Shipment: Direct from supplier on or before August 15, 1994

Price per unit: $ 130 CIP HANDELSHAFEN, Equatoriana (Incoterms 1990)

Total price: $ 650,000

Payment terms: Due 30 days after shipment. Payment to be made to Textile Export-Import Co. $ account 17335, Foreign Exchange Bank, London, England

OUR CONFIRMATION OF YOUR ORDER IS SUBJECT TO OUR GENERAL CONDITIONS OF SALE SET OUT ON THE REVERSE SIDE OF THIS FORM. THEY WILL BE THE TERMS AND CONDITIONS OF THE CONTRACT UNLESS YOU SPECIFICALLY OBJECT WITHIN FIFTEEN (15) DAYS OF THE RECEIPT OF THIS CONFIRMATION.

CLAIMANT'S EXHIBIT No. 4

Relevant provisions from rear side of confirmation form sent by Textile Export-Import Co. to High Quality Clothes Co. in the letter of March 10, 1994.

GENERAL CONDITIONS OF SALE

* * *

6. Limitation of remedies. If the goods delivered to Buyer are non-conforming, Buyer's rights shall be limited to a reduction of the price. Buyer shall have no right to claim damages, whether general or specific.

* * *

10. Choice of law. The contract is to be governed by the United Nations Convention on Contracts for the International Sale of Goods.

11. Arbitration. All disputes arising in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by three arbitrators appointed in accordance with the said Rules.

CLAIMANT'S EXHIBIT No. 5

Letter from Textile Export-Import Co. to High Quality Clothes Co. dated September 9, 1994.

September 9, 1994

Mr. Claude Simpson
Purchasing Manager
High Quality Clothes Co.
456 Retail Street
Cool City, Equatoriana

Dear Mr. Simpson:

I refer to your order of March 1, 1994 sent to Men's Suits Manufacturing Co. and our confirmation dated March 10, 1994. The goods indicated in your order were shipped by Men's Suits Manufacturing Co. directly to you on August 1, 1994.

According to the contract payment was due 30 days after shipment by transfer to our dollar account 17335 at the Foreign Exchange Bank, London, England. We are sure that the delay in payment is due to an oversight.

We look forward to hearing from you soon.

Sincerely,

(Signed)
Harold Swenker
Export Manager
Textile Export-Import Co.

CLAIMANT'S EXHIBIT No. 6

Letter from Textile Export-Import Co. to High Quality Clothes Co. dated October 10, 1994.

October 10, 1994

Mr. Claude Simpson
Purchasing Manager
High Quality Clothes Co.
456 Retail Street
Cool City, Equatoriana

Dear Mr. Simpson:

I refer to my letter of September 9, 1994. Your account is now more than a month overdue. I am sure that you wish to keep your credit standing with us.

Therefore, I would ask you to be sure to remit the balance due, $650,000, promptly to our $ account 17335, at the Foreign Exchange Bank, London, England.

Sincerely,

(Signed)
Harold Swenker
Export Manager
Textile Export-Import Co.

CLAIMANT'S EXHIBIT No. 7

Letter from High Quality Clothes Co. to Textile Export-Import Co. dated October 14, 1994.

October 14, 1994

Harold Swenker
Export Manager
Textile Export-Import Co.
789 Middle Street
Industry City, Mediterraneo

Dear Mr. Swenker:

I refer to your letters of September 9 and October 10, 1994.

In our order placed with Men's Suits Manufacturing Co. we ordered 5,000 men's suits of various models and sizes. Your confirmation dated March 10, 1994 also referred to 5,000 men's suits.

You did not send us men's suits. Instead, you sent us 5,000 separate jackets and pants. These were not the goods we ordered, and we are not able to use them. We had already ordered, and have received, our complete requirements for this type of clothing for the winter season. As a result of your non-fulfillment of our order, it has been necessary for us to purchase replacements from another source.

We hold the jackets and pants at your disposition. Please tell us what you wish us to do with them. I would appreciate it if you could inform me promptly, since we are short of warehouse space and we need the space your clothes are occupying.

Sincerely,

(Signed)
Claude Simpson
Purchasing Manager
High Quality Clothes Co.

CLAIMANT'S EXHIBIT No. 8

Letter from Textile Export-Import Co. to High Quality Clothes Co. dated October 20, 1994.

October 20, 1994

Mr. Claude Simpson
Purchasing Manager
High Quality Clothes Co.
456 Retail Street
Cool City, Equatoriana

Dear Mr. Simpson:

Your letter of October 14, 1994 has been received. I do not understand it. You received the shipment on August 20. You waited for almost two months to tell us that the wrong goods had been shipped. Surely one thing you could tell immediately upon receiving the goods was whether they were men's suits or separate jackets and pants.

Even though you waited so long to let us know the wrong goods had been shipped we would have been willing to look for another buyer for them. However, now it is too late. The season for selling winter goods to retailers is almost over. It will not be possible for us to find another buyer in Equatoriana or otherwise within reasonable shipping distance of you at the proper invoice price. The goods are yours.

We recognize, however, that the error in shipping you separate jackets and pants rather than the suits you had ordered is ours. Since the list price for the jackets is $75 and for the plants $50, both CIP Handelshafen, we would be willing to make an adjustment on the outstanding balance of $25,000, bringing it down to $625,000. We hope you will accept this offer so that we can continue the good relations you have had with Men's Suits Manufacturing Co. We look forward to receiving your remittance within the next ten days, confirming that you have accepted our offer.

Sincerely,

(Signed)
Harold Swenker
Export Manager
Textile Export-Import Co.

CLAIMANT'S EXHIBIT No. 9

Letter from High Quality Clothes Co. to Textile Export-Import Co. dated October 27, 1994

October 27, 1994

Harold Swenker
Export Manager
Textile Export-Import Co.
789 Middle Street
Industry City, Mediterraneo

Dear Mr. Swenker:

Today we transferred to your $ account 17335 at the Foreign Exchange Bank, London the sum of $390,000. That is the net proceeds from the resale of your pants and jackets.

As you indicated in your letter of October 20, it is indeed getting late in the season for winter goods. Since it would soon become more and more difficult to resell the goods at a reasonable price, we thought we had better move quickly so as to realize the best possible price for you.

Yesterday we were able to resell them here in Equatoriana to Overstock Merchandise Inc. for $500,000. From that we have deducted the amount of $10,000 for our various expenses associated with storing, handling and selling the goods. I can furnish you with a detailed breakdown of those expenses if you should so wish.

In addition, we have deducted the amount of $100,000 for the extra expense we incurred in purchasing replacement suits in time for the winter season (i.e., $750,000 rather than $650,000 for 5,000 suits).

I should say at this point that I appreciate the offer you made in your letter of October 20, but I am sure you can understand why it was not acceptable. I am sorry that these difficulties have occurred, but I look forward to working with you in the future.

Sincerely,

(Signed)
Claude Simpson
Purchasing Manager
High Quality Clothes Co.

CLAIMANT'S EXHIBIT No. 10

Letter from Textile Export-Import Co. to High Quality Clothes Co. dated November 4, 1994.

November 4, 1994

Mr. Claude Simpson
Purchasing Manager
High Quality Clothes Co.
456 Retail Street
Cool City, Equatoriana

Dear Mr. Simpson:

Your letter of October 27, 1994 has been duly received.

We have accepted your payment of $390,000 to our account in London as partial payment on your obligation of $650,000. Your sale of the jackets and pants was for your account, not for ours.

We hereby make formal demand on you for the outstanding balance of $260,000.

Sincerely,

(Signed)
Harold Swenker
Export Manager
Textile Export-Import Co.

INTERNATIONAL COURT OF ARBITRATION

OF THE INTERNATIONAL CHAMBER OF COMMERCE

Case No. Moot 4

REPLY AND COUNTERCLAIM

ON BEHALF OF

HIGH QUALITY CLOTHES CO.
Cool City
Equatoriana

Defendant

AGAINST

Textile Export-Import Co.
Industry City
Mediterraneo

Claimant

MAY IT PLEASE THE TRIBUNAL

I. THE FACTS OF THE CASE:

Since 1989 High Quality Clothes Co., hereafter referred to as HIGH QUALITY, has purchased men's clothing from Men's Suits Manufacturing Co., hereafter referred to as Men's Suits, on a regular basis for sale in its 25 retail clothing stores. On March 1, 1994, it sent the order for 5,000 men's suits set out in Claimant's Exhibit 1. The order specified model numbers and sizes and said that the order was placed on the usual terms and conditions that had prevailed in the previous contracts between HIGH QUALITY and Men's Suits. The suits were ordered for the winter season, and was so indicated in the order.
In late March HIGH QUALITY received from Textile Export-Import Co., hereafter referred to as TEXTILE, a letter dated March 10, 1994 indicating that the order had been forwarded to it by Men's Suits with an explanation that TEXTILE was currently handling all of the export sales for Men's Suits. A confirmation form was included with the letter. The confirmation form was verified in the Purchasing Department of HIGH QUALITY for the quantity, model numbers and shipping date, all of which conformed to the order placed by HIGH QUALITY with Men's Suits, and for the price. The price of $130 per unit CIP Handelshafen conformed to the price list of January 15, 1994 issued by Men's Suits. The Purchasing Department did not, and had no reason to, verify the terms on the back of the confirmation form before the form was filed.
A container shipped by Men's Suits to HIGH QUALITY arrived at Handelshafen on August 9, 1994, and, after some delay in customs, arrived at the HIGH QUALITY warehouse on August 20, 1994. When the container was opened no suits were found inside. Instead, the container contained 5,000 jackets, or sports coats, and 5,000 pair of slacks. Those goods had not been ordered by HIGH QUALITY.
In order to supply its needs for merchandise for the winter season, which was fast approaching, on August 25, 1994, HIGH QUALITY contracted with Quick Delivery, Inc. for 5,000 men's suits of styles and qualities comparable to those ordered from Men's Suits. The price was $150 CIP Handelshafen (Incoterm 1990) per unit. Delivery was to be in installments with the first shipment of 500 units to be made by September 15, 1994. Quick Delivery Inc. fulfilled its contract obligations and the suits sold successfully during the winter selling season. HIGH QUALITY turned to Quick Delivery Inc. because, in its experience, Quick Delivery Inc. was able to deliver quality merchandise, to meet delivery schedules and to do so on shorter notice than any other supplier serving the Equatoriana market. On previous occasions Men's Suits had not been able to deliver merchandise to HIGH QUALITY on such short notice. However, Quick Delivery Inc. added a premium for orders that required delivery in less than three months. Consequently, the suits ordered from Quick Delivery, Inc. cost a total of $750,000, in place of the $650,000 contract price for the suits from TEXTILE.
In response to TEXTILE's request for payment, on October 14, 1994 HIGH QUALITY sent the letter set forth in Claimant's Exhibit 7 stating that the suits ordered had not been delivered but that in their place TEXTILE had shipped 5,000 separate jackets and pants. HIGH QUALITY requested advice as to what it should do with the jackets and pants as they were occupying valuable warehouse space. In reply, in its letter of October 20, 1994, TEXTILE denied any responsibility for the jackets and pants. HIGH QUALITY legitimately understood that letter to state that TEXTILE had no interest in how HIGH QUALITY disposed of the goods, whether at retail or in bulk to another merchant that would be able sell them at retail, as HIGH QUALITY could not.
As noted, the jackets and pants were occupying valuable warehouse space. As indicated in the letter of October 20, 1994 from TEXTILE, the jackets and pants sent to HIGH QUALITY by mistake were already distress merchandise that could be sold only at a lower price, and a price that was deteriorating constantly. Under those circumstances, and in order to protect the financial interests of TEXTILE, on October 26, 1994, HIGH QUALITY negotiated a sale of the jackets and pants to Overstock Merchandising for a total price of $500,000.
HIGH QUALITY incurred various expenses in the sale of the jackets and pants in the order of $10,000. It also paid $100,000 more than the price in the contract for the suits coming from Men's Suits. Therefore, on October 27, 1994, HIGH QUALITY transferred to the account of TEXTILE in London the sum of $390,000.

II. THE LEGAL POSITION

1. Lack of an agreement to arbitrate

No arbitration agreement has been entered into. The contracts between HIGH QUALITY and Men's Suits had not included an arbitration clause. Prior to receipt of the confirmation form from TEXTILE, HIGH QUALITY had never had any contact with TEXTILE It did not reply to the confirmation form and never signed any contract containing an arbitration clause. Therefore, there is no agreement to arbitrate.

2. Substance of the dispute

a) Law applicable to the contract

As noted below, HIGH QUALITY does not agree that any of the terms of the confirmation form that differ from the usual terms and conditions on which it contracted with Men's Suits Manufacturing Co. are binding on it. Nevertheless, HIGH QUALITY agrees that the contract is governed by the United Nations Convention on Contracts for the International Sale of Goods.

b) Clause 6 on the confirmation form sent by TEXTILE, limiting the remedy available to the Buyer in case the goods delivered are non-conforming to reduction of the price, is not binding on HIGH QUALITY

The contracts between HIGH QUALITY and Men's Suits had not included any clause purporting to limit the damages that might be available to either party in case of non-performance by the other party.

Prior to receiving the letter dated March 10, 1994 from TEXTILE, HIGH QUALITY had never had any correspondence with it. Upon receipt of the letter, HIGH QUALITY understood that TEXTILE was operating as the export agent of Men's Suits Manufacturing Co. and that, in effect, the letter and confirmation form were those of Men's Suits Manufacturing Co. Since our order had said that it was on the usual terms and conditions, the general conditions on the reverse side of the confirmation form were not reviewed by the operating personnel of HIGH QUALITY and were not brought to the attention of any of its responsible personnel. It is clear that they were were not agreed to by HIGH QUALITY and are not, therefore, part of the contract between TEXTILE and HIGH QUALITY.

c) There was complete failure of performance by TEXTILE

TEXTILE and HIGH QUALITY entered into a contract of sale for 5,000 men's suits for a total sale price of $650,000 CIP Handelshafen, Equatoriana (Incoterms 1990). TEXTILE shipped to HIGH QUALITY a container that purported to contain the suits, but which in fact contained completely different goods. As a result there was a complete failure of delivery on the part of TEXTILE

d) Notice of the failure of performance was not required

At no time has HIGH QUALITY suggested that the jackets and pants sent to it were not in conformity with the description of them in the 1994 catalogue of Men's Suits Manufacturing Co. or that they were in any other manner defective in quality. The problem is that they were not "the goods" that were the subject matter of the contract. Therefore, the issue as to whether there was a lack of conformity of the goods does not arise and the notice provisions of article 39 do not apply.

Alternatively, if the tribunal were to consider that shipment of goods unrelated to the goods called for in the contract is "a lack of conformity of the [contract] goods", it was a "lack of conformity … of which [TEXTILE] knew or could not have been unaware and which he did not disclose to the buyer." Accordingly, TEXTILE may not rely on the provisions of article 39.

e) HIGH QUALITY was justified in turning immediately to a different supplier for the suits it needed for the winter season

As a result of the failure of TEXTILE to deliver the suits that had been ordered, HIGH QUALITY faced the prospect of having an inadequate supply of merchandise for the winter season. Its past experience with MEN'S SUITS was that a minimum period of four months was required to receive shipments in the quantities needed. Since HIGH QUALITY could not wait that long, it turned to Quick Delivery Inc., a supplier with which it had dealt in the past and which it knew could furnish the needed quantity of the requisite quality within a short period of time.

Because the purchase was entered into late in the season for acquiring such merchandise, HIGH QUALITY was required to pay $100,000 more than the contract price, for which TEXTILE is responsible.

f) HIGH QUALITY was obligated to sell the jackets and pants for the account of TEXTILE

When HIGH QUALITY informed TEXTILE of the failure of delivery and inquired what disposition it wished to be made of the merchandise that was delivered, TEXTILE indicated in its letter of October 20, 1994 that it would not be possible for them to find another buyer within reasonable shipping distance of us at the proper invoice price. Since the winter season for sale to retailers was almost over and the price for goods that had not already been purchased was deteriorating, HIGH QUALITY was under an obligation to take reasonable measures to sell them. It did so.

Accordingly, High Quality sums up as follows:

MAY IT PLEASE THE INTERNATIONAL COURT OF ARBITRATION

- to inform TEXTILE pursuant to Article 7 of the ICC Rules of Arbitration that the arbitration cannot proceed for lack of an agreement to arbitrate.

If the International Court of Arbitration should decide that there is a prima facie agreement to arbitrate:

MAY IT PLEASE THE ARBITRAL TRIBUNAL

- to declare that the arbitration clause in the confirmation form sent by TEXTILE to HIGH QUALITY is not binding on HIGH QUALITY and that there is no agreement to arbitrate.

Subsidiarily, and only if the arbitral tribunal should decide that there is an agreement to arbitrate:

MAY IT PLEASE THE ARBITRAL TRIBUNAL

to dismiss TEXTILE's claim,

to state and decide that HIGH QUALITY acted appropriately in selling the goods for $500,000,

to state and decide that HIGH QUALITY was entitled to deduct the $10,000 in expenses incurred by it in storing and selling the goods from the $500,000,

to sentence TEXTILE to $100,000 in damages for the increased price HIGH QUALITY was required to pay to replace the suits that TEXTILE failed to deliver, and to declare that HIGH QUALITY was authorized to deduct that amount from the $500,000,

to sentence TEXTILE to pay the costs of arbitration, including lawyer's expenses.

(signed)_______________________________________________June 3, 1996
Attorneys for High Quality Clothes Co., Respondent

Contents of a letter dated June 21, 1994 from Secretariat of the Interna tional Court of Arbitration
to Counsel in Textile Export-Import Co. v. High Quality Clothes Co.
Case No. Moot 4

June 21, 1994

Dear (title, last name),

On July 18, 1996 the International Court of Arbitration met and considered the referenced case.

Pursuant to Article 7 of the Rules, the Court found that there was a prima facie agreement to arbitrate and has referred the request for arbitration and the reply to the arbitral tribunal.

Pursuant to Article 12 of the Rules, and failing any agreement of the parties, the Court has fixed the place of arbitration to be Vindobona, Danubia.

Pursuant to Article 2 of the Rules, the Court confirmed as arbitrators the nominees of the parties. As chairman of the arbitral tribunal, the Court has named the nominee of the National Committee of Danubia, Dr. (first name, last name).

Sincerely,

(signed)
Technical Advisor

INTERNATIONAL COURT OF ARBITRATION

OF THE INTERNATIONAL CHAMBER OF COMMERCE

Case No. Moot 4

TERMS OF REFERENCE

in accordance with article 13 of the Rules of Arbitration in force 1 January 1988, as amended 14 June 1989

I. THE PARTIES

Claimant: TEXTILE EXPORT-IMPORT CO.
Industry City
Mediterraneo

(hereafter called "TEXTILE")

Defendant: HIGH QUALITY CLOTHES CO.
Equator City
Equatoriana

(hereafter called "HIGH QUALITY")

I. SUMMARY OF THE FACTS OF THE CASE

On March 1, 1994, HIGH QUALITY sent a letter to Men's Suits Manufacturing Co. ordering 5,000 suits of designated models and sizes for the following winter season. The letter indicated that the terms and conditions of the contract should be the same as in previous contracts between those two companies. Unbeknownst to HIGH QUALITY, Men's Suits had discontinued selling directly outside of Mediterraneo, and had turned over the export sales to TEXTILE. On March 10, 1994, TEXTILE sent a letter to HIGH QUALITY indicating that it was now handling the export sales for Men's Suits, and enclosed its confirmation of the order that had been sent to Men's Suits.

The information on the confirmation form relevant to the goods and shipping dates was in conformity with the order sent by HIGH QUALITY to Men's Suits. The price was $130 per unit CIP Handelshafen, Equatoriana, the port of entry for Equatoriana, for a total of $650,000. According to the confirmation, payment was due 30 days after shipment, by transfer to TEXTILE's dollar account in London.

The confirmation form also included on the bottom of the front page the following legend "OUR CONFIRMATION OF YOUR ORDER IS SUBJECT TO OUR GENERAL CONDITIONS OF SALE SET OUT ON THE REVERSE SIDE OF THIS FORM. THEY WILL BE THE TERMS AND CONDITIONS OF THE CONTRACT UNLESS YOU SPECIFICALLY OBJECT WITHIN FIFTEEN (15) DAYS OF THE RECEIPT OF THIS CONFIRMATION." The reverse side of the confirmation form included terms and conditions that varied from those on which HIGH QUALITY and Men's Suits had contracted in the past. In particular, clause 6, limiting the Buyer's remedies to reduction of the price in case of the delivery of non-conforming goods, and clause 11, the standard ICC arbitration clause, had not been in the contracts between Men's Suits and HIGH QUALITY.

HIGH QUALITY did not reply to the letter or the confirmation from TEXTILE. Shipment was made directly from Men's Suits to HIGH QUALITY. When HIGH QUALITY opened the container on August 20, 1994, it found that the suits it had ordered had not been shipped. Instead, there were 5,000 men's jackets and separate pairs of pants. HIGH QUALITY did not at that time notify TEXTILE of the mistake in goods shipped.

In order to supply its need for men's suits for the winter season, HIGH QUALITY purchased 5,000 suits from Quick Delivery Inc. at a price of $150 per unit CIP Handelshafen, or a total of $750,000.

Since the goods were shipped from Mediterraneo on August 1, 1994, the price was due on August 31, 1994. When HIGH QUALITY did not pay the price, on September 10, 1994, TEXTILE sent a reminder note, to which HIGH QUALITY did not answer. Another note was sent on October 10, 1994. HIGH QUALITY replied on October 14, 1994. In its letter it stated that the goods shipped had not been the suits ordered, but had been separate jackets and pants. HIGH QUALITY requested advice as to what should be done with them since they were occupying warehouse space. On October 20, 1994, TEXTILE replied that, because of the delay in notifying it that the wrong goods had been shipped, it was now too late for it to re-sell the jackets and pants at the invoice price. TEXTILE took the position that the goods were the responsibility of HIGH QUALITY. However, TEXTILE offered to reduce the price by a total of $25,000, since the list price for the goods shipped had been $25,000 less than the list price of the suits ordered.

On October 26, 1994, HIGH QUALITY sold the jackets and pants to Overstock Merchandising for $500,000. From that amount it deducted $10,000 for its expenses in the sale of the goods and $100,000 for the higher price it paid Quick Delivery Inc. It transferred the remaining $390,000 to TEXTILE's account in London. On November 4, 1994, TEXTILE replied that it accepted the $390,000 as partial payment on the contract price of $650,000, and made demand for the outstanding balance of $260,000.

TEXTILE filed a request for arbitration. In reply, HIGH QUALITY denied the existence of a binding arbitration clause. Subsidiarily, HIGH QUALITY defended on the merits and filed a counter-claim.

The International Court of Arbitration found that there was prima facie an arbitration clause, leaving the determination as to whether it was binding on HIGH QUALITY to the tribunal.

III. THE PARTIES' CLAIMS

TEXTILE

TEXTILE claims that the arbitration clause in the confirmation was accepted by HIGH QUALITY when it took various actions acknowledging the existence of a contract between it and TEXTILE.

TEXTILE claims on the merits that HIGH QUALITY's delay in giving notice of the non-conformity of the goods precludes it from any remedy for the non-conformity.

TEXTILE also claims that there was no fundamental breach of the contract since the goods actually shipped were of the same basic quality as the goods ordered.

TEXTILE also argues that, even if there had been fundamental breach, HIGH QUALITY did not give any notice of any avoidance of the contract.

TEXTILE relies on clause 6 of the confirmation form that HIGH QUALITY's remedies in case of non-conformity are limited to reduction of the price.

Finally, TEXTILE claims that HIGH QUALITY is obligated to pay the contract price for the goods; that the transfer of $390,000 to TEXTILE's account was a partial payment on the account and that there is a balance of $260,000 due.

Therefore , TEXTILE claims:

the remaining $260,000 balance of the purchase price,

interest to be added to the award on the full $650,000 from August 31, 1994 to October 26, 1994 and on the balance of $260,000 from October 27, 1994 to the date when payment is finally made.

HIGH QUALITY

HIGH QUALITY claims that the arbitration clause never became binding on it and that the tribunal should dismiss the claim for lack of jurisdiction.

HIGH QUALITY has made its claim of lack of jurisdiction in its reply, and therefore it also submitted its defenses on the merits, and has submitted a counter-claim.

HIGH QUALITY submits that TEXTILE did not perform the contract at all when the jackets and pants were shipped to it. Therefore, it argues that it was not bound to give notice of non-conformity.

As a subsidiary argument, HIGH QUALITY argues that TEXTILE could not have been unaware of a failure of performance that consisted of shipping improper goods. Therefore, HIGH QUALITY argues, even if the shipment of goods other than what was ordered was performance, albeit non-conforming, it had no obligation to notify TEXTILE of it.

On the grounds that the jackets and pants were the responsibility of TEXTILE, HIGH QUALITY argues that the price was quickly deteriorating since they were winter goods and the season for selling winter goods to retailers was already almost over. Since TEXTILE had indicated that would not accept responsibility for the goods, it was not only HIGH QUALITY's privilege, but it was HIGH QUALITY's duty to sell the goods for TEXTILE's account.

By way of counter-claim, HIGH QUALITY states that it was necessary for it to purchase substitute goods. Because it was so late to purchase winter goods, HIGH QUALITY claims that it had to pay $100,000 more for the replacement goods than the amount of the contract price.

Therefore, HIGH QUALITY claims:

dismissal of TEXTILE's claim for lack of jurisdiction

dismissal of TEXTILE's claim on the merits for any portion of the contract price

recognition that HIGH QUALITY was justified in selling the jackets and pants to Overstock Merchandising for Textile's account for $500,000 and that it was justified in deducting the $10,000 in handling and selling expenses it incurred in regard to the goods

award of $100,000 in damages for the higher price it paid to secure replacement merchandise for the suits that were not delivered, consideration of this claim to be had if and only if the tribunal determines that the tribunal has jurisdiction under the arbitration clause in the confirmation form..

IV. APPLICABLE LAW

The parties are in agreement that the contract is subject to the United Nations Convention on Contracts for the International Sale of Goods. The parties have agreed that any matter not governed by the Convention should be decided in accord with the principles of law applicable to international contracts.

Danubia has enacted the UNCITRAL Model Law on International Commercial Arbitration.

Danubia, Equatoriana and Mediterraneo are all party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

V. STIPULATIONS

The parties have made the following stipulations:

All prices quoted are in dollars of Equatoriana. TEXTILE's account in Foreign Exchange Bank is also in dollars of Equatoriana.
While HIGH QUALITY denies any responsibility for the price, and therefore denies that any interest would be due, the parties have stipulated that the following interest rates exist that might be applicable if interest would be due.
- Equatoriana
7% Short term prime commercial lending rate Equatoriana dollars

5% Interbank rate Equatoriana dollars

4% Official discount rate Equatoriana dollars
6% Legal rate on unpaid judgments
- Mediterraneo
10% Short term prime commercial lending rate Mediterraneo francs

7% Interbank rate Mediterraneo francs

6% Official discount rate Mediterraneo francs
5% Legal rate on unpaid judgments
- London
6.5% Short term commercial lending rate Equatoriana dollars
5.5% Interbank rate Equatoriana dollars
- Danubia
3% Official discount rate Danubian marks

4% Legal rate unpaid judgments

The parties have stipulated that the price of $500,000 received from Overstock Merchandise Inc. for the 5,000 jackets and pants was a fair price for winter goods sold as late as October 26, 1994.

The parties have stipulated that the contract price of $750,000 paid to Quick Delivery Inc. for 5,000 men's suits of a quality comparable to that contracted for between TEXTILE and HIGH QUALITY was a fair price for winter goods ordered subsequent to the August 20, 1994 receipt of the shipment from TEXTILE.

The parties have stipulated that the list price from Men's Suits for the 5,000 jackets and pants would have been $625,000 CIP Handelshafen (Incoterms 1990).

VI. ISSUES TO BE DECIDED

Does the arbitration clause in the confirmation form give the Arbitral Tribunal jurisdiction to adjudicate this case?
Does HIGH QUALITY have a right to right to rely on the lack of conformity of the goods?
Did HIGH QUALITY sell the jackets and pants to Overstock Merchandise Inc. for the account of TEXTILE or for its own account?
Does HIGH QUALITY owe any portion of the contract price, and if so, in what amount?
If any amount is due from HIGH QUALITY to TEXTILE, is interest due on that amount, and if so, in what amount?
How should the cost of arbitration be apportioned between the parties?

VII. NAMES AND ADDRESSES OF THE ARBITRATORS

(To be filled in later)

VIII. PLACE OF ARBITRATION

The place of arbitration is Vindobona, Danubia.

IX. LANGUAGE OF ARBITRATION

The language of the arbitration is English.

___________________________ ____________________________ Textile Export-Import Co. High Quality Clothes Co.

The Arbitrators:

______________________________ _______________________ (Textile nominated arbitrator) (ICC named chairman) ___________________________________ (High Quality nominated arbitrator)

October 4, 1996

Fourth Annual Willem C. Vis
International Commercial Arbitration Moot

1996-97

Clarifications to the Problem

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

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

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

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

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

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

2. Did the order sent by Textile to Men's Suits contain the correct information?

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

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

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

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

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

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

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

6. Where were the conforming goods?

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

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

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

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

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

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

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

None of the other terms were relevant to this dispute.

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

No.

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

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

12. When does the winter season begin and end?

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

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

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

14. Query re currencies in general.

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

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

15. Was the transaction between High Quality and Quick Delivery at arm's length?

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

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

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

17. Is the High Quality warehouse in Handelshafen?

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

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

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

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

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

Applicable Law

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

The Convention is binding as domestic law in both countries.

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

No.

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

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

Pace Law School Institute of International Commercial Law - September 1997

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