Vis Moot Claimant Memorial Singapore Management University

SEVENTH ANNUAL WILLEM C.
VIS (EAST)
INTERNATIONAL COMMERCIAL ARBITRATION MOOT
HONG KONG- MARCH 2010
MEMORANDUM FOR CLAIMANT
ON BEHALF OF: AGAINST:
MEDITERRANEO ENGINEERING CO EQUITORIANA SUPER PUMPS S.A.

CLAIMANT RESPONDENT
ENOCH ANG • ASIYAH ARIF • EUNICE CHAN • JANE LIM
LUCAS LIM • NICHOLAS POON • SOONG WEN E • CHERYL TEO

SINGAPORE MANAGEMENT UNIVERSITY TABLE OF CONTENTS
TABLE OF CONTENTS
INDEX OF ABBREVIATIONS …………………………………………………………...….…. VI
INDEX OF AUTHORITIES…..…………………………………………………………..….…. VIII
INDEX OF CASES….……………………………………………………………………..…… XI
INDEX OF ARBITRAL AWARDS..……………………………………………………….. …….. XV
STATEMENT OF FACTS ..……………………………………………………………….….… 1
ISSUE 1: TRIBUNAL HAS JURISDICTION TO ARBITRATE THE DISPUTE BETWEEN ENGINEERING AND
SUPER PUMPS……………….………………………………………..... 3
(A) The fulfillment of the conciliation procedure in cl. 18 is not a prerequisite for
commencement of arbitration….….….….….….….….….….….….….….….….… 3
(i) Commencing conciliation is not a prerequisite for commencing
arbitration…………………………………………………………………..…….. 3
(a) Commencement of conciliation as a prerequisite is inconsistent with the parties‘
intentions……………………………………………………………………… 4
(b) Commencement of conciliation as a prerequisite is inconsistent with the reasonable
hypothetical man test…………………………………………………………... 5
(ii) Successful attempt at conciliation is not a prerequisite for commencing
arbitration…………………………………………………………………………. 5
(a) Successful conciliation as a prerequisite is inconsistent with parties‘
intentions……………………………………………………………………… 6
(b) Successful conciliation as a prerequisite is inconsistent with the reasonable
hypothetical man test…………………………………………………………... 6
(B) Even if conciliation procedure was a prerequisite, the parties' attempt at
conciliation fulfils the requirements of cl. 18……………………………………….. 7
(i) Mr. Holzer was acting with the full authority of the CEO of Engineering……………… 7
(ii) Representation by CEOs was not of the essence to the
conciliation………………………………………………………………………... 8
II
(iii) Super Pumps impliedly agreed to Engineering‘s representation by Mr. Holzer………… 8

(C) TRIBUNAL SHOULD ASSUME JURISDICTION AS FURTHER CONCILIATION IS UNLIKELY TO
RESOLVE DISPUTE………………………………………………………………………… 9
Conclusion to issue 1………………………………………………………………………... 10
ISSUE 2: ENGINEERING IS ENTITLED TO DAMAGES AS SUPER PUMPS HAD BREACHED ITS OBLIGATION
TO PROVIDE PUMPS THAT WERE IN CONFORMITY WITH REGULATIONS…………………………… 10
(A) Super Pumps breached the contract by delivering pumps that did not comply
with all relevant regulations for importation into Mediterraneo and for use in
Oceania………………………………………………………………………………... 11
(i) Super Pumps had breached its warranty under the Contract to provide pumps that would
comply with the regulations in Mediterraneo and the requirements of IR 08-45Q
…………………………………………………………………………………… 11
(ii) Super Pumps is liable under Art. 35(2)(b) for delivering goods that were not fit for the
particular purpose stated in the contract…………………………………………….. 12
(a) The purpose of the pumps was made known to Super Pumps……………………... 12
(b) Engineering reasonably relied on Super Pumps‘ skill and judgment……………….. 13
(iii) Super Pumps breached its obligations to ensure conformity until risk passed…………... 14
(B) Super Pumps cannot rely on the exemption under Art. 79………………………… 16
(i) Super Pumps cannot rely on Art. 79 of the CISG because Super Pumps had assumed the
risk under the contract……………………………………………………………... 16
(ii) Super Pumps cannot rely on Art. 79 of the CISG because Super Pumps fails to satisfy the
requirements under the Article……………………………………………………... 16
(a) Super Pumps could reasonably have foreseen the impediment at the time of
conclusion of the Contract……………………………………………………… 17
(b) Super Pumps could reasonably have overcome the consequence of the
impediment…………………………………………………………………… 18
(C) Engineering is entitled to avoid the contract with Super Pumps as the breach
amounted to a fundamental breach…………………………………………………. 19
(i) Engineering was substantially deprived of what it was entitled to expect under the
contract…………………………………………………………………………… 20
III
(ii) Super Pumps did foresee the detriment……………………………………………... 20

(iii) Engineering properly avoided the contract ………………………………………….. 21
Conclusion to issue 2………………………………………………………………………... 21
ISSUE 3: ENGINEERING IS ENTITLED TO DAMAGES AS SUPER PUMPS HAD BREACHED ITS OBLIGATION
TO DELIVER THE PUMPS ON TIME ………………………………………………………………. 21
(A) Super Pumps breached its obligation to deliver on time…………………………… 22
(i) Super Pumps failed to perform in the additional time period fixed by
Engineering...……………………………………………………………………… 22
(a) Engineering‘s acceptance of Super Pumps‘ extended delivery date amounts to the
fixing of an additional time period ……………………………………………… 22
(b) The additional time period was of a reasonable length …………………………… 23
(ii) Alternatively, Super Pumps failed to deliver by the modified delivery date ……............ 23
(B) Super Pumps’ breach of its obligations to deliver on time is not exempted under
Art. 79 of the CISG…………………………………………………………………….. 24
(i) Super Pumps could reasonably have foreseen the impediment at the time of conclusion of
the contract ……………………………………………………………………….. 24
(ii) Super Pumps could reasonably have overcome the consequences of the impediment …... 25
(a) Super Pumps could have procured substitute pumps for Engineering……………… 25
(b) Super Pumps could have arranged for alternative transport for the pumps…………. 26
(C) Engineering is entitled to avoid the contract ………………………………………. 27
(i) Engineering can avoid the Contract as Super Pumps failed to perform in the additional
period fixed …………………………………………………………..................... 27
(ii) Engineering is entitled to avoid the Contract with Super Pumps as late delivery
amounted to a fundamental breach ……………………………………………......... 27
(a) Engineering suffered substantial detriment as a result of Super Pumps‘
breach…………………………………………………………………………. 28
(b) The detriment was foreseeable to Super Pumps …………………………………. 28
(iii) Engineering properly avoided the contract ………………………………………….. 28
Conclusion to Issue 3 ………………………………………………………………………. 29
IV
ISSUE 4: ISSUE 4: ENGINEERING DID NOT FAIL TO MITIGATE THE CONSEQUENCES OF THE
CANCELLATION OF IR 08-45Q …………………………………………………………………. 29
(A) The duty to mitigate did not arise prior to the avoidance of the contract ……….. 29
(B) Even if the duty to mitigate had arisen, Engineering did not breach its duty to
mitigate……………………………………………………………………………….. 30
(i) Engineering‘s delay in avoiding the Contract was not unreasonable …………………... 31
(a) Engineering was not obliged to avoid the Contract………………….................. 31
(b) Engineering did not delay the avoidance in an unreasonable manner…………….. 31
(ii) Engineering could not have mitigated the loss occasioned by the breach ………………. 32
(a) Engineering could not have found full substitute performance for its contractual
obligations to Water Services…………………………………………………. 32
(b) Engineering could not find substitute performance given the short time span …… 34
Conclusion to Issue 4 ………………………………………………………………………. 35
Relief Requested ………………………………………………………………………….... 35
V
SINGAPORE MANAGEMENT UNIVERSITY INDEX OF ABBREVIATIONS
INDEX OF ABBREVIATIONS
AC Court of Appeal
ACICA Australian Centre for International Commercial Arbitration
All ER All England Reports
Art. Article
BGH Bundesgerichthof [Federal Supreme Court—Germany]
CEO Chief Executive Officer
CISG United Nations Convention on Contracts for the

International Sale of Goods
Cl. Clause
CLOUT Case Law on UNCITRAL Texts
Conciliation Rules UNCITRAL Conciliation Rules
Corp. corporation
e.g. exempli gratia [for example]
Engineering Mediterraneo Engineering Co.
Etc. Et cetera
ICC International Chamber of Commerce
Inc. Incorporated
IR 08-45Q Irrigation Project IR 08-45Q
Ltd. Limited
No. Number
OLG Oberlandesgericht (German Upper Regional Court)
para paragraph
paras paragraphs
VI
SINGAPORE MANAGEMENT UNIVERSITY INDEX OF ABBREVIATIONS
p. page
pp. pages
Pty. Private
Super Pumps Equitoriana Super Pumps S.A.
UNCITRAL United Nations Commission on International Trade Law
US Ct. App. United States Court of Appeals
U.S. Circ. Ct. United States Circuit Court
U.S. S. Ct. United States Supreme Court
v versus
Water Services Oceania Water Services
WLR World Law Reports
VII
SINGAPORE MANAGEMENT UNIVERSITY INDEX OF AUTHORITIES
INDEX OF AUTHORITIES
BACH CHRISTIANSEN, LISBETH What Risks Does it Involve to Seller and How Does He Secure
Against Them? A Practical Guide
Thesis, University of Capetown (2005)
(cited: BACH CHRISTIANSEN, in para 49)
BERNSTEIN, HERBERT Understanding the CISG in Europe

LOOKOFSKY, JOSEPH Netherlands (1997)
(cited: BERNSTEIN/ LOOKOFSKY, in para 146)
BIANCA, CESARE MASSIMO Commentary on the International Sales Law

BONELL, MICHAEL JOACHIM The 1980 Vienna Sales Convention
TALON, DENIS Milan (1987)
(cited: BIANCA/BONELL/TALLON, in paras 62, 64, 97, 98)
BIANCA, CESARE MASSIMO Commentary on the International Sales Law

BONELL, MICHAEL JOACHIM The 1980 Vienna Sales Convention
BENNETT, TREVOR Milan (1987)
(cited: BIANCA/BONELL/BENNETT, in para 125 )
DHARMANANDA, KANEGA Reflections on Drafting Effective Dispute Clauses

(2008) 24 BCL 150
(cited: DHARMANANDA, in para 8 )
EARLE, WENDY Drafting ADR and Arbitration Clauses for Commercial Contracts
Toronto (2002)
(cited: EARLE, in para 12 )
HEUZE, VINCENT La Vente Internationale de Marchandises - Droit Uniforme/ The

Uniform Law on the International Sale of Goods
Paris (2000)
(cited: HEUZE, in paras 70 and 102)
HONNOLD, JOHN Uniform Law for International Sales under the 1980
United Nations Convention,
2nd Edition,
Deventer, Boston (1991)
(cited: HONNOLD, in paras. 4, 14, 23)
VIII
LEISINGER, BENJAMIN Fundamental Breach Considering Non Conformity of the Goods

Beiträge Zum Internationalen Wirtschaftsrecht/ Contributions on
International Commercial Law
München, 2007
(cited: LEISINGER, in para. 49)
PILTZ, BURGHARD Internationales Kaufrecht,

2nd Edition,
München (2008)
(cited: PILTZ, in paras. 70, 102)
REINHARDT, GERT Un- Kaufrecht Kommentar zum Übereinkommen der Vereinten

Nationen vom April 1980 über Verträge über den Internationalen
Warenkauf
Heidelberg (1991)
(cited: REINHARDT, in para. 49)
SAIDOV, DJAKHONGIR Methods for Limiting Damages under the Vienna Convention on
Contracts for the International Sale of Goods
United Kingdom (2001)
(cited: SAIDOV, in para. 125)
SECRETARIAT COMMENTARY UNCITRAL Commentary on the Draft Convention on Contracts

for the International Sale of Goods
UN-Document No. A/CONF. 97/5
(cited: SECRETARIAT COMMENTARY, in paras 79, 81, 83, 95, 125)
SCHLECTRIEM, PETER Uniform Sales Law in the Decisions of the Bundesgerichtshof

50 Years of the Bundesgerichtshof [Federal Supreme Court of
Germany]
A Celebration Anthology from the Academic Community
Germany
(cited: SCHLECTRIEM, in paras 54, 62)
IX
SCHLECTRIEM, PETER Commentary on the UN Convention on the International Sale of

SCHWENZER, INGEBORG Goods (CISG)
2nd English edition
Oxford (2005)
(cited: SCHLECTRIEM/SCHWENZER)
SCHLECTRIEM, PETER Kommentar zum Einheitlichen Kaufrecht – CISG

STOLL, HANS Germany, 2005
(cited: STOLL/ SCHLECTRIEM, in paras. 138, 14 , 146)
WITZ, WOLFGANG International Einheitliches Kaufrecht,

SALGER, HANNS-CHRISTIAN Praktiker-Kommentar und Vertragsgestaltung
LORENZ, MANUEL zum CISG
Heidelberg (2000)
(cited: WITZ/SALGER/LORENZ, in para. 4)
X
SINGAPORE MANAGEMENT UNIVERSITY INDEX OF CASES
INDEX OF CASES
Australia
Supreme Court of Queensland
Allco Steel (Queensland) Pty Ltd v Torres Strait Gold Pty. Ltd
12 March 1990
Unreported, 2742 of 1989
(cited: ALLCO STEEL V TORRES STRAIT GOLD, Unreported, 2742 of 1989, IN PARA. 36)
Finland
Helsinki Court of Appeal
Skin care products case
30 June 1998
Unilex Database No. 19067
(Cited: HELSINKI COURT OF APPEAL, 30 June 1998, IN PARA. 50, 52)
Germany
Oberlandesgericht Braunschweigh
Frozen meat case
28 October 1999
CLOUT Abstract No. 361
(cited: OLG BRAUNSCHWEIGH, 28 October 1999, IN PARA. 124)
Oberlandesgericht Düsseldorf
Shoes case
14 January 1994
CISG Online No.119
(cited: OLG DÜSSELDORF, 14 January 1994, IN PARA. 124)
Oberlandesgericht Frankfurt a M
Seller (Germany) v Buyer (Austria)
XI
31 March 1995
CISG-online 137
(cited: OLG FRANKFURT A M, 31 March 1995, IN PARA. 14)
Oberlandesgericht Hamburg
Iron molybdenum case
28 February 1997
CISG Online No. 261
(Cited: OLG HAMBURG, 28 February 1997, IN PARA. 71, 90, 92, 104, 115)
Schiedsgericht der Handelskammer Hamburg

Chinese goods case
21 March 1996
CISG Online No. 187
(cited: SCHIEDSGERICHT DER HANDELSKAMMER HAMBURG, 21 March 1996, IN PARA. 146, 147)
Landgericht Frankfurt
Shoe case
16 September 1991
(cited: LANDGERICHT FRANKFURT, 16 September 1991, IN PARA. 83)
Oberlandesgericht Karlsruhe
Machine case
19 December 2002
(cited: OLG KARLSRUHE, 19 December 2002, IN PARA 84)
Great Britain
United Kingdom House of Lords
White and Carter (Councils) Ltd v McGregor
XII
[1962] 2 AC 413
(cited: WHITE & CARTER V MCGREGOR, [1962] 2 AC 413, IN PARA. 132)
Switzerland
Appelationshof Bern
Wire and Cable Case
11 February 2004
CISG Online No. 1191
(cited: APPELATIONSHOF BERN, 11 February 2004, IN PARA. 56)
Cassation Court of the Canton of Zurich

15 March 1999
ZR 99 (2000) No. 29
(cited: KASSATIONSGERICHT ZURICH, ZR 99 (2000) NO.29, IN PARA. 38)
United States of America

United States District Court – District of Maine
Cumberland and York Distributors v Coors Brewing Co
February 7, 2002
No 01-244-P-H, 2002 WL 193323, at *4 D Me
(Cited: CUMBERLAND AND YORK DISTRIBUTORS V COORS BREWING CO, No 01-244-P-H, 2002 WL 193323, at *4 D
Me, IN PARA. 36)
United States Court of Appeals for the Eleventh Circuit (1998)

MCC-Marble Ceramic Center, Inc v Ceramica Nuova D‘Agostino SpA
144 F 3d 1384,1391
(cited: MCC-MARBLE CERAMIC CENTRE V CERAMICA NUOVA D’AGOSTINO, U.S. Ct. App. 11th Circ., IN PARA 4, 23)
United States District Court - Eastern District of Louisiana

Medical Marketing Int'l, Inc. v. Internazionale Medico Scientifica, S.r.l,
17 May 1999
XIII
CISG Case Presentation

(cited: MEDICAL MARKETING INT’L V INTERNAZIONALE MEDICO SCIENTIFICA, 17 May 1999, IN PARA 53)
XIV
SINGAPORE MANAGEMENT UNIVERSITY INDEX OF ARBITRAL AWARDS
INDEX OF ARBITRAL AWARDS
ICC Cases
ICC Case No. 7331
Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft
15 June 1994
(cited: ICC Case No. 7331, IN PARA. 3)
ICC Case No.9977

Cour d'Appel Grenoble
Final Award of June 22, 1999
CLOUT 15/1998, case 202 = TranspR-IHR 1999, 7
(cited: ICC Case No. 9977, IN PARA. 28)
CLOUT Cases
CLOUT Case No. 204
Cour d‘appel, Grenoble, France
15 May 1996
(cited: CLOUT Case No. 204, IN PARA. 58)
CLOUT Case No. 253

Cantone del Ticino Tribunale d‘appello, Switzerland
15 January 1998
(cited: Clout Case No. 253, IN PARA. 58)
XV
SINGAPORE MANAGEMENT UNIVERSITY STATEMENT OF FACTS
STATEMENT OF FACTS
1 July 2008 Mediterraneo Engineering Co. [hereafter ―Engineering‖] enters into a contract
[hereafter ―Contract‖] with Equatoriana Super Pumps S.A. [hereafter ―Super
Pumps‖].
The Contract stipulates that Super Pumps is to supply three P-52 pumps and a
number of other field pumps to draw water from a reservoir for the purposes of
an irrigation project, [hereafter ―IR 08-45Q‖] with Oceania Water Services
[hereafter ―Water Services‖].
Super Pumps warrants that the pumps will be in compliance with all regulations
in Oceania relating to the pumps.
The Contract contains the DES (Incoterms 2000) trade term, providing that
delivery to Engineering will be at the port of Capitol City, Mediterraneo on or
before 15 December 2008. Super Pumps is aware that the delivery date is
important for Engineering to perform its contractual obligations to Water
Services.
1 August 2008 Oceania Office of Environmental Health adopts a regulation restricting the use of
beryllium in copper and steel products that have moving parts and that are to be
used in enclosed spaces.
The steel used in the three P-52 pumps contains beryllium and are to be used in
an enclosed space. Super Pumps procures new steel to manufacture the three P-
52 pumps in accordance with the regulation.
15 November 2008 Production of pumps is completed.
22 November 2008 The ship delivering the pumps to Capitol City, Mediterraneo leaves port. The
expected arrival date of the ship is 22 December 2008, a week after the original
contract date for delivery. Engineering agrees to the delay in delivery.
28 November 2008 An accident involving another ship causes extensive damage to the locks on the
Isthmus Canal. The canal is closed, and the ship‘s scheduled transit of the Canal is
delayed. The ship only transits the Canal on 12 December.
1 December 2008 The government of Oceania resigned and military rule was enforced.
1
SINGAPORE MANAGEMENT UNIVERSITY STATEMENT OF FACTS
28 December 2008 The military regime passed a decree effective 1 January 2009 prohibiting the
import or manufacture of products containing any amounts of beryllium.
The military regime gives instructions that projects involving foreign suppliers of
goods should be cancelled if any term of the contract was breached.
1 January 2009 The decree becomes effective.
5 January 2009 Water Services cancels the contract for irrigation project IR 08-45Q on the
grounds that the pumps had not yet been delivered to Oceania as required by the
contract.
Engineering immediately notifies Super Pumps and avoids the contract, and
requests for the return of purchase price.
6 January 2009 The ship reaches the port of Capitol City, Mediterraneo.
15 January 2009 Counsel for Engineering writes to Super Pumps claiming damages of
US$320,000. He also claims the return of the purchase price of US $1,214,550.
Engineering‘s efforts to sell the goods pursuant to CISG Art. 88 are unsuccessful.
28-30 May 2009 Parties decide to carry out conciliation pursuant to Cl. 18 of the contract at the
conference for The Future of Irrigation.
The clause states that the parties are to be represented by ―their Chief Executive
Officer‖. Engineering is represented by Mr. William Holzer, its Deputy Chief
Executive Officer. Super Pumps does not question the authority of Mr. Holzer at
the conciliation.
Conciliation is unsuccessful.
7 June 2009 Mr. Wilson discovers that Mr. Holzer is the Deputy Chief Executive Officer of
Engineering after looking at the list of participants at the conference.
17 August 2009 Super Pumps objects to the representation of Engineering at conciliation by its
Deputy Chief Executive Officer and claims that the conciliation had not taken
place.
2
SINGAPORE MANAGEMENT UNIVERSITY ISSUE 1
ISSUE 1: TRIBUNAL HAS JURISDICTION TO ARBITRATE THE DISPUTE BETWEEN

ENGINEERING AND SUPER PUMPS
1. The tribunal has jurisdiction to arbitrate the dispute because (A) the conciliation procedure in Cl. 18 of
the Contract is not a prerequisite for the commencement of arbitration. Alternatively, (B) even if
conciliation was a prerequisite, the stipulated conciliation procedure had been fulfilled. Furthermore,
the tribunal should assume jurisdiction as (C) further conciliation would not have resolved the dispute.
(A) The fulfillment of the conciliation procedure in cl. 18 is not a prerequisite for
commencement of arbitration
2. The fulfillment of the conciliation procedure in cl. 18 is not a prerequisite for commencement of
arbitration as (i) commencing conciliation itself is not a prerequisite for the commencement of
arbitration and (ii) even if commencing conciliation was a prerequisite, a successful conciliation was not
a prerequisite for commencement of arbitration.
(i) Commencing conciliation is not a prerequisite for commencing arbitration

3. Preliminarily, the curial law or lex arbitri is the UNCITRAL Model Law on International Commercial
Arbitration with the 2006 amendments (―2006 ML‖). This is supplemented by the Australian Centre for
International Commercial Arbitration Rules (―ACICA Rules‖) which the parties have agreed to be
subject to. Since neither the 2006 ML nor the ACICA Rules deal with the issue of when an arbitration
agreement becomes effective, the arbitral tribunal is free to apply international commercial arbitration
principles [ICC Case No. 7331].
4. Art. 8(1) of the CISG provides that party intention is the primary criterion for interpretation of the
arbitration clause [SCHLECHTRIEM/SCHWENZER, pp. 113-114]. Art. 8(2) further provides for an objective
ascertainment, according to the hypothetical understanding of a reasonable person in the shoes of the
party [MCC-MARBLE CERAMIC CENTRE V CERAMICA NUOVA D’AGOSTINO, U.S. Ct. App. 11th Circ.; HONNOLD, para.
107]. Circumstances such as wording of the statement, negotiations, established prior trade practices
and subsequent conduct of the parties should be taken into account when interpreting party intention
[WITZ/SALGER/LORENZ, Art. 8, paras. 5-11].
3
SINGAPORE MANAGEMENT UNIVERSITY ARGUMENTS
5. Thus, there was no requirement that the conciliation procedure should be commenced before parties
could turn to arbitration because it is inconsistent with (a) parties‘ intention or in the absence of parties
intention, (b) the reasonable hypothetical man‘s test.
(a) Commencement of conciliation as a prerequisite is inconsistent with the parties’ intentions

6. Commencing conciliation could not have been a prerequisite for commencing arbitration as this would
be contrary to the common intention of both parties. The purpose of cl. 18 was to preserve the
underlying healthy business relationship by providing that parties are to attempt conciliation or
arbitration instead of litigation which is more acrimonious. This was all the more important as the
parties had every intention to work closely not just on the irrigation project but for future projects as
well [Claimant’s Exhibit 2].
7. Cl. 18 does not impose on parties an obligation to resolve by conciliation over arbitration. It is unlikely
that that the parties intended for conciliation to be a necessary precondition to arbitration and there is
no express common intention to this effect. Instead, cl. 18 simply indicates that the parties preferred
for the occurrence of conciliation prior to arbitration. This was all parties had intended but this does
not amount to conciliation being a necessary prerequisite for the commencement of arbitration.
8. Furthermore, a typical multi-tiered dispute resolution clause must have a clear transitioning mechanism
such that parties know when to proceed on to the next dispute resolution mechanism. In this case, the
absence of any method of ascertaining the ―point of failure‖ of conciliation indicates that parties did not
intend for any transitioning of conciliation to arbitration [DHARMANANDA, p. 158]. Instead, conciliation
and arbitration are simply to be treated as alternatives. Conciliation is at best a preference in light of the
intention to maintain the healthy business relationship.
9. Hence, the dispute is referable to arbitration in any situation where "the dispute has not been settled
pursuant to the said conciliation procedure‖ and this includes the situation where parties choose not to
conciliate or cannot agree to commence conciliation.
4
(b) Commencement of conciliation as a prerequisite is inconsistent with the reasonable hypothetical man test
10. A ‗reasonable hypothetical man‘ is unlikely to view conciliation as a precondition as that would confer
on either party a right to hold the other hostage by not agreeing to attempt conciliation.
11. To hold that conciliation was a precondition to arbitration would lead to the absurd conclusion that a
party may refuse to have the matter resolved by both conciliation and arbitration by simply not
participating in conciliation. A party could be entirely excluded from access to an adjudicatory body
(court or arbitral tribunal) if such an interpretation of cl. 18 was taken.
12. The clear absence of any timeframe in which conciliation must take place also points towards an
interpretation which does not render conciliation a prerequisite. This is because it is important that a
clear beginning and end be specified so that one party is not left to the mercy of the co-operation of the
other party [EARLE, p. 3-12]. Such a unilateral allocation of power would place one party at the mercy
of the other and is antithetical to the very notion of dispute resolution.
13. Furthermore, a reasonable man would be able to envisage situations whereby conciliation would be
inappropriate or unsuitable for a particular dispute. If conciliation was to be strictly interpreted as a
necessary prerequisite, it would severely frustrate any attempts to resolve the issue since arbitration
cannot commence unless conciliation, even when it is obviously unsuitable, has been commenced. In
such cases, the reasonable man would say that the tribunal should take jurisdiction.
14. Lastly, since cl. 18 was drafted by Super Pumps, the well established rule of contra proferentum which
applies under the Convention [OLG FRANKFURT A M, 31 March 1995; HONNOLD, para. 107.1] operates to
make Super Pumps bear the risk of the ambiguity of the clause. Hence, commencing conciliation is not
a prerequisite to commencement of arbitration.
(ii) Successful attempt at conciliation is not a prerequisite for commencing arbitration

15. Even if the commencement of conciliation is a prerequisite, cl. 18 does not require the conciliation to
be successful before parties can have recourse to arbitration because it is inconsistent with (a) parties‘
intention or in the absence of intention, (b) the reasonable hypothetical man‘s test.
5
(a) Successful conciliation as a prerequisite is inconsistent with parties’ intentions

16. Parties could not have intended for a successful conciliation as a prerequisite for the commencement of
arbitration. The key phrase in cl. 18 is ―if the dispute has not been settled pursuant to the said
conciliation procedure‖ and this operates as a qualifier on the commencement of arbitration when
conciliation has already been elected.
17. In the UNCITRAL Conciliation Rules (―Conciliation Rules‖) which parties expressly selected to govern
the conciliation, ―settled‖ can be understood in the context of a settlement agreement under Art. 13
which binds parties and puts an end to the dispute. However, Art. 15(b) clearly envisages the possibility
that conciliation may not produce a settlement and that it can be terminated by a declaration from the
conciliator.
18. The reference to the Conciliation Rules therefore reflects parties‘ intention that conciliation may not be
effective and the next step would be to resort to arbitration. Therefore, a successful conciliation is not a
prerequisite for the commencement of arbitration.
(b) Successful conciliation as a prerequisite is inconsistent with the reasonable hypothetical man test
19. Even if parties‘ intention cannot be found, a reasonable man would not conclude that a successful
conciliation is a prerequisite for the commencement of arbitration. If ―settled‖ in cl. 18 is interpreted as
resulting in successful settlement, it would render the arbitration aspect in cl. 18 otiose as there would
be no more dispute to refer to arbitration. Thus, it is likely that cl. 18 simply reflects parties‘
expectation that commencement of arbitration is valid as long as a settlement agreement has not been
reached despite reasonable effort by both parties.
20. As the conciliation procedure was attempted and validly terminated by the conciliator pursuant to Art.
15(b) of the Conciliation Rules [Claimant’s Notice of Arbitration and Statement of Claim at para 23],
Engineering is entitled to commence arbitration.
6
(B) Even if conciliation procedure was a prerequisite, the parties' attempt at conciliation
fulfils the requirements of cl. 18
21. The requirements of the conciliation clause had been fulfilled because (i) Mr. Holzer was acting with
the full authority of the CEO of Engineering, or alternatively (ii) the representation of the parties by
their CEOs was not of the essence to the conciliation. Alternatively, Super Pumps is estopped from
invalidating the conciliation proceedings as (iii) Super Pumps had impliedly agreed to Mr. Holzer‘s
representation.
(i) Mr. Holzer was acting with the full authority of the CEO of Engineering
22. As Mr. Holzer is the Deputy CEO of Engineering, it is a reasonable inference that he possessed actual
authority to act and represent Engineering in the conciliation.
23. Art. 8(1) of the CISG states that party intention is the primary criterion of contractual intention.
Pursuant to Art. 8(2) of the CISG, a reasonable person in the shoes of Super Pumps [MCC-MARBLE
CERAMIC CENTRE V CERAMICA NUOVA D’AGOSTINO, U.S. Ct. App. 11th Circ; HONNOLD, para 107] would have
understood that the contractual requirement of representation by the CEO at conciliation would allow
an individual with the authority of the CEO to act in his capacity during conciliation.
24. It is reasonable to expect CEOs to delegate their duties to other competent individuals within the
company. It would be manifestly onerous on one party if the law required a specific person to be
physically present to represent the company in the conciliation proceedings, since the company could
have vested the Deputy CEO with the requisite authority to act in the capacity of the CEO.
25. Furthermore, a literal interpretation results in each party having unduly powerful leverage over the
other. Since only CEOs could conciliate, a literal interpretation would render any conciliation void and
ineffective as long as one party chooses not to be represented by its CEO. This situation could not have
been intended by parties given the commercial need to resolve disputes to minimize antagonism and
business uncertainty. The fact that parties had an amicable relationship at the time of conclusion of the
Contract also suggests that they could not have intended that each party could have held the other
hostage through an abuse of their right under cl. 18.
7
26. Hence, Engineering did not breach cl. 18 through the non-attendance of its CEO since its Deputy CEO
had authority to act on behalf of the CEO as representative of Engineering in the conciliation.
(ii) Representation by CEOs was not of the essence to the conciliation

27. It was not the intention of the parties for the representation of the parties by their CEOs to be of the
essence to conciliation. Hence, the purported technical breach of Cl. 18 by Mr. Holzer‘s representation
of Engineering at conciliation did not go to the root of the contractual term nor was it sufficient to
prevent the conciliation procedure from being fulfilled.
28. In ICC Case No. 9977, the arbitrator found that a first tier obligation to first submit the controversy ―to
senior management representatives of the parties who will attempt to reach an amicable settlement
within fourteen calendar days after submission‖ was fulfilled, despite the meetings only being attended
by the legal representatives of the claimant, not by a member of senior management.
29. Similarly, cl. 18 merely suggests that parties intended to attempt settle the dispute in good faith
through conciliation through an agreement between the highest levels of management of the respective
companies. This is in line with their intention to maintain their close business relationship which existed
prior to the Contract [Claimant’s Exhibit 1 and 2], as well as their intention to co-operate on future
projects. Therefore, the reference to representation by the CEOs was merely a label to reflect the need
for the companies to be represented by members of the higher management who would take into
account their business relationship.
30. Being a member of the company‘s highest management, Mr. Holzer was able to appreciate the
importance of the parties‘ business relationship and his decision at the conciliation would be binding as
if the CEO had made the very same decision. Hence, the clause was not breached.
(iii) Super Pumps impliedly agreed to Engineering’s representation by Mr. Holzer

31. Super Pumps is stopped from invalidating the conciliation procedure since they impliedly agreed to vary
the parties‘ obligation to be represented by its CEO at the conciliation proceedings.
8
32. It is likely that Super Pump‘s representative, Mr. James Stecker, knew that Engineering was
represented by Mr. William Holzer, its Deputy CEO instead of its CEO. Parties must have been
introduced by name and designation at the conciliation proceedings. It is likely that parties exchanged
business cards which would have stated the designation of the participants. Therefore, Mr. Stecker
ought to have known that Mr. Holzer was the Deputy CEO.
33. Although Super Pumps claimed that Mr. Stecker discovered one week after the conciliation that Mr.
Holzer was not the CEO but the Deputy CEO, neither Mr. Stecker nor Super Pumps made any attempt
to voice their objection immediately. Super Pumps‘ objection ex post facto is likely designed only to
thwart the prospect of resolving the dispute through arbitration under the Tribunal.
34. Since Mr. Stecker did not oppose to Mr. Holzer‘s representation during the conciliation, Super Pumps
must be taken to have impliedly agreed to Mr. Holzer‘s representation of Engineering, pursuant to Art.
6 of the Conciliation Rules which allows parties to be represented by persons of their choice.
(C) TRIBUNAL SHOULD ASSUME JURISDICTION AS CONCILIATION IS UNLIKELY TO RESOLVE DISPUTE

35. As further conciliation will not resolve the dispute, the Tribunal should assume jurisdiction and proceed
with arbitration even if the proper conciliation procedure had not been complied with. This would
enable parties to finally obtain an effective resolution which allow them to assess their respective rights
and obligations. Compelling parties to re-attempt conciliation serves no useful purpose and only causes
further delay and unnecessary uncertainty.
36. In Allco Steel, [ALLCO STEEL V TORRES STRAIT GOLD, 2742 of 1989, 12 March 1990, Unreported], the court
examined the effect of a conciliation clause as a condition precedent to commencing litigation. The
judge found that there had been a clear breach of the conciliation clause but nevertheless went on to
hold that since both parties had taken positions which effectively ruled out the possibility of
conciliation, no useful purpose would be served by compelling parties to conciliate. Thus, the court
refused to grant a stay of litigation proceedings. Also, in Cumberland [CUMBERLAND & YORK DISTRIBUTORS V
COORS BREWING, No 01-244-P-H, 2002 WL 193323, at *4 D Me], the court held that a party is not allowed
to prolong resolution of a dispute by insisting on mediation which would only lead to a delay.
9
37. Engineering does not believe that further conciliation would yield any resolution. Indeed, Mr. Holzer
who represented Engineering at the conciliation procedure had the full authority of the CEO and
competently represented Engineering‘s position. If Super Pumps could not reach a settlement with Mr.
Holzer, it would likewise not be able to resolve the issue now with Engineering‘s CEO. Hence, since
conciliation would be pointless, in the interest of efficacy, the Tribunal should assume jurisdiction to
hear the dispute.
38. In any event, it is also open to the Tribunal to hold that the breach of a conciliation clause only gives
rise to damages and does not go towards negativing jurisdiction. The Switzerland Court of Cassation,
Kassationsgericht Zurich, held that the breach of a conciliation clause was not of a jurisdictional nature and
was to be distinguished from jurisdiction or arbitration clauses which have jurisdictional consequences
for courts and arbitration tribunals [KASSATIONSGERICHT ZURICH, ZR 99 (2000) NO.29]. This functional
approach would accord more certainty and is particularly relevant in instances such as the present case
where conciliation would not be effective anyway.
CONCLUSION TO ISSUE 1
39. Conciliation was intended to be an alternative to arbitration, not a pre-condition. As such, even if
conciliation was not satisfied, commencement of arbitration was still valid. In any event, the
conciliation procedure had been satisfied. Even if it was not satisfied, further conciliation would not
yield any resolution and unnecessarily prolong the dispute. Therefore, the arbitration tribunal has
jurisdiction to hear the dispute.
ISSUE 2: ENGINEERING IS ENTITLED TO DAMAGES AS SUPER PUMPS HAD BREACHED

ITS OBLIGATION TO PROVIDE PUMPS THAT WERE IN COMFORMITY WITH
REGULATIONS
40. Super Pumps had breached its obligations under the Contract as (A) Super Pumps delivered pumps that
did not comply with all relevant regulations for importation into Mediterraneo and for use in Oceania.
Furthermore, (B) Super Pumps cannot rely on Art. 79 to exempt itself from damages, and (C)
Engineering was entitled to avoid the contract with Super Pumps and reclaim the purchase price as the
breach amounted to a fundamental breach.
10
(A) SUPER PUMPS BREACHED THE CONTRACT BY DELIVERING PUMPS THAT DID NOT COMPLY WITH ALL
RELEVANT REGULATIONS FOR IMPORTATION INTO MEDITERRANEO AND FOR USE IN OCEANIA
41. Super Pumps breached the contract because (i) Super Pumps had breached its warranty under the
Contract to provide pumps that would comply with the regulations in Mediterraneo and the
requirements of IR 08-45Q. Alternatively, (ii) Super Pumps is liable under Art. 35(2)(b) for delivering
goods that were not fit for the particular purpose stated in the contract. Furthermore, (iii) Super
Pumps breached its obligations to ensure conformity until risk passed.
(i) Super Pumps had breached its warranty under the Contract to provide pumps that
would comply with the regulations in Mediterraneo and the requirements of IR 08-45Q.
42. Cl. 2 of the Contract between Super Pumps and Engineering states that ―Super Pumps warrants that the
pumps are in compliance with all relevant regulations for importation into Mediterraneo and for use in
Oceania‖ [Claimant Exhibit 3]. The Contract also incorporates the DES (Incoterms 2000) which states
that risk passes to the buyer at the time the ship arrives at Capitol City, Mediterraneo. Hence, until risk
passes to Engineering, Super Pumps has an obligation to provide pumps that comply with regulations
for importation into Meditarraneo and the requirements of IR 08-45Q.
43. The purpose of the warranty is to ensure that the pumps comply with regulations for importation into
Mediterraneo for use in IR 08-45Q. A warranty by the seller allocates the risk on the seller to provide
goods that meet the contractual requirements since the seller retains control over the goods. Art. 36(1)
of the CISG reinforces this principle, stating that the seller is liable for any lack of conformity at the
time when risk passes to the buyer. Thus, any time before risk passes to the Engineering, Super Pumps
bears the obligation of providing goods of contractual quality.
11
44. This is buttressed by the fact that it was Engineering who had insisted on the warranty because it could
not have known whether the pumps were in compliance with Oceania‘s technical specifications
[Procedural Order No.2, para 9]. Only Super Pumps, as the manufacturer, could have known. Thus, the
warranty was a reflection of parties‘ intention that the onus of ensuring that the pumps met the
regulations for importation into Mediterraneo for use in IR 08-45Q lay with Super Pumps.
45. As a result of the warranty in the Contract, Super Pumps must be taken to have borne the risk of any
subsequent changes, which may result in a breach of its obligations under the warranty. Regulatory
changes were one such possible risk and Super Pumps cannot now renege on its warranty after it had
agreed to bear the risk. Hence, Super Pumps breached the Contract by breaching its warranty to
provide pumps that would comply with regulations pertaining to IR 08-45Q.
(ii) Super Pumps is liable under Art. 35(2)(b) for delivering goods that were not fit for the
particular purpose stated in the contract
46. Super Pumps is liable under Art. 35(2)(b) of the CISG because (a) the particular purpose of the pumps
were made known to them and (b) Engineering reasonably relied on Super Pumps‘ skill and judgment.
47. Under Art. 35(2)(b), the seller is responsible for the fitness of the goods for ―a particular purpose [that
has] been expressly or impliedly made known to the seller at the time of the conclusion of the contract,
except where circumstances show that the buyer did not rely, or that it was unreasonable for him to
rely, on the seller‘s skill and judgment‖.
48. Super Pumps is liable under Art. 35(2)(b) of the CISG because it failed to supply pumps in conformity
with the contractual terms. Super Pumps was obliged under cl. 2 to provide pumps that were in
compliance with all relevant regulations pertaining to IR 08-45Q.
(a) The purpose of the pumps was made known to Super Pumps
49. The particular purpose of the pumps for use in Oceania for the irrigation project IR 08-45Q was
expressly made known to Super Pumps in the contract. The requirement of ―making known‖ is not
strict. There is no need for the particular purpose to have been contractually agreed upon
[SCHLECHTRIEM/SCHWENZER, Art. 35 para. 20]. The generally recognized view is that it is only necessary
12
that the buyer makes known the particular purpose to the seller and not that the seller recognizes the
particular purpose [LEISINGER; ENDERLEIN MASKOW/STROHBACH, Art. 35 para. 11; REINHARDT, Art. 35 para.
6; BACH CHRISTIANSEN, p.36]. It is sufficient if a reasonable seller could have recognized the particular
purpose from the circumstances [SCHLECHTRIEM/SCHWENZER, Art. 35, para. 21]. Hence, Super Pumps
knew the purpose of the pumps as it was clearly stated in the contract that they were to be used in
Oceania in IR 08-45Q.
50. As in the skin care products case [HELSINKI COURT OF APPEAL, 30 June 1998], the court found that the seller
violated Art. 35(2)(b) when it did not deliver skin care products that maintained the specified levels of
Vitamin A throughout their shelf life. It was held that the buyer intended to purchase products with the
specified vitamin levels, that this ―special purpose ... was known by the [seller] with sufficient clarity‖
and that ―the buyer counted on the seller's expertise in terms of how the seller [reached] the required
vitamin A content and how the required preservation [was] carried out‖.
51. The requirement of ‗made known‘ is clearly met here because the particular purpose was expressly
made known to Super Pumps as Cl. 1 of the contract clearly states, ―the pumps are for installation in
Oceania by Mediterraneo Engineering Co. for Irrigation Project IR 08-45Q‖ [Claimant Exhibit 3].
(b) Engineering reasonably relied on Super Pumps’ skill and judgment

52. As a general rule, there will be reliance if the seller is a specialist or expert in the manufacture of goods
for the particular purpose intended [SCHLECHTRIEM/SCHWENZER, Art. 35, para. 23]. Super Pumps is a
specialist manufacturer of pumps for irrigation systems. It conducts sales in over 50 countries, and had
previously provided Engineering with pumps for one of their projects. In light of these circumstances,
Engineering reasonably relied on Super Pumps‘ skill and judgment to deliver pumps that would comply
with the regulations in Oceania. That Engineering is also knowledgeable in this field because it carried
out irrigation projects in Mediterraneo and six foreign countries before, does not by itself nullify its
reliance on Super Pumps‘ expertise [HELSINKI COURT OF APPEAL, 30 June 1998].
53. Engineering duly informed Super Pumps of the new regulations immediately and reasonably relied on
Super Pumps‘ expertise to supply pumps that would be in conformity with these new regulations. As in
Medical Marketing [MEDICAL MARKETING INT’L V INTERNAZIONALE MEDICO SCIENTIFICA, 17 May 1999], where an
13
arbitration tribunal and an American district court unquestioningly presupposed the applicability of the
importing country‘s (USA) safety regulations. Similarly, in ICC Case No. 9977, the Court of Appeal
found it incontestable that the seller had to comply with the marketing regulations in force in the
importing country (France). This was so given the dealings carried on between the parties for a number
of months; that the seller knew that the goods were destined for the French market and that this
knowledge obliged it to comply with the marketing regulations in force in France. Although Super
Pumps and Engineering did not deal with each other on a regular basis, Super Pumps knew that the
pumps were destined for use in the irrigation project in Oceania. Thus, this knowledge obliged it to
comply with the environmental regulations in force in Oceania.
54. Super Pumps bears the risk associated with the observance of public law regulations because the
contract clearly delineates that the seller has an obligation to provide goods in conformity with the
particular purpose of the contract. Therefore, since Super Pumps knew that the pumps were for use in
IR 08-45Q, this risk falls on Super Pumps. Alternatively, even where no party agreement may be
discerned from the contract, Art. 35(2)(b) of the CISG determines that this risk falls on Super Pumps in
the present case. As per Schlechtriem, ―If the seller knows where the goods are intended to be used,
then he will usually be expected to have taken the factors that influence the possibility of their use in
that country into consideration‖ [SCHLECHTRIEM/SCHWENZER, Art. 35]
55. It has been established that Super Pumps knew specifically that the pumps were to be used in the
irrigation project in Oceania by virtue of Cl. 1 of the Contract and thus should have taken into account
the political situation in Oceania. It was therefore obliged to supply pumps in conformity with the
regulation of 1 August 2008 [Claimant Exhibit 4] and the decree effective 1 January 2009 [Claimant
Exhibit 11]. Moreover, as Engineering had reasonably relied on Super Pumps to provide pumps that
were in conformity, the requirements under Art. 35(2)(b) are clearly satisfied.
(iii) Super Pumps breached its obligations to ensure conformity until risk passed
56. Art. 36(1) of the CISG provides that Super Pumps is liable for any lack of conformity, which exists at
the time when the risk passes to the buyer, even though the lack of conformity becomes apparent only
after that time. The goods must be in conformity with the terms in the contract for the purposes of Art.
35 of the CISG at the time when the risk passes to the buyer. The burden to prove conformity of the
14
goods therefore rests on the seller only until the time of the passing of the risk. [APPELATIONSHOF BERN, 11
February 2004]
57. The time at which the risk passes is governed by the parties‘ agreement, particularly Incoterms.
[SCHLECHTRIEM/SCHWENZER, Art. 36, para 3] The parties agreed to incorporate DES (Incoterms 2000) into
their Contract [Claimant Exhibit 3]. According to the DES (Incoterms 2000), the passing of risk does not
occur until the ship has arrived at Capitol City, Mediterraneo – the named port of destination [Claimant
Exhibit 3, Contract Excerpts]. Hence the time at which the goods must be in conformity with the Contract
is 6 January 2009 when the ship arrived at Capitol City, Mediterraneo.
58. The basic principle of Art. 36(1), that the seller is liable for a lack of conformity that exists at the time
risk passes to the buyer, has been affirmed in several decisions [CLOUT Case No. 204; CLOUT Case No.
24; CLOUT Case No. 253]. In CLOUT case No. 253, Switzerland, there was a contract for the sale of cocoa
beans from Ghana and the contract provided that risk should pass to the buyer when the goods were
handed over to the first carrier. It also required the seller to supply, before the goods were shipped, a
certificate from an independent testing agency confirming that the beans met certain quality
specifications. The independent agency tested the goods some three weeks before they were packed for
shipment and issued the required certificate. However, when the goods arrived, the cocoa beans were
below contract-quality. The court held that the seller would be liable for the lack of conformity in three
situations: (1) if the pre-shipment certificate of quality from the independent agency were simply
mistaken and the goods thus lacked conformity at the time they were inspected; (2) if the deterioration
in the quality of the goods occurred in the three week gap between inspection and shipment; or (3) if
the defects otherwise existed when the goods were shipped but the defects would only become
apparent after they were delivered to the buyer.
59. The present case falls squarely within the second situation identified by the court in CLOUT case No.
253. If the defects in conformity of the goods occur between inspection and shipment the seller is
liable. When Super Pumps shipped out the pumps on 22 November 2008, the pumps were in
conformity with the technical specifications required. However, when the ship arrived at Capitol City
on 6 January 2009, it was not in compliance with the Military Decree effective 1 January 2009
prohibiting the import or manufacture of products containing any amounts of a number of rare
15
elements, including beryllium. The pumps other than the P-52 pumps violated the military regime‘s
environmental decree of 28 December 2008. Thus Super Pumps had breached its obligation to supply
pumps in conformity with the regulations in Oceania when the risk passed to the buyer – 6 January
2009. Even though the decree was only effective on 1 January 2009, whilst the goods were being
transported to Capitol City, Super Pumps is still responsible for the defects that occurred during
transportation because risk has yet to pass to Engineering.
(B) SUPER PUMPS CANNOT RELY ON THE EXEMPTION UNDER ART. 79

60. Super Pumps is not entitled to exempt itself from liability to pay damages pursuant to Art. 79 as (i) it
had already assumed the risk of the lack of conformity under the contract; and (ii) at any rate, it did not
fulfill the requirements of Art 79.
(i) Super Pumps cannot rely on Art. 79 of the CISG because Super Pumps had assumed the
risk under the Contract
61. Liability under Art. 79 flows from the contractual allocation of risk at the conclusion of the contract
[SCHLECHTRIEM/SCHWENZER, pp. 807-808], and the possibility of exemption under Art 79 does not change
the allocation of the contractual risk [BGH, 24 March 1999]. Therefore, a party will not be allowed to
claim an exemption if it had assumed the risk of the event which caused its failure to perform its
obligations.
62. Super Pumps‘ standing warranty in the Contract amounted to a guarantee that Super Pumps would
ensure that the pumps would be appropriate for use in Oceania for IR 08-45Q. This form of guarantee
imposes an absolute obligation on Super Pumps from which there can be no relief of responsibility
[Schlectriem/Schwenzer, p. 828; Bianca/Bonell/Tallon, Art. 79, note 2.6.7].
(ii) Super Pumps cannot rely on Art. 79 of the CISG because Super Pumps fails to satisfy the
requirements under the Article
63. Art. 79 of the CISG provides that a party is not liable for a failure to perform any of his obligations if he
proves that the failure was due to an impediment beyond his control and that he could not reasonably
be expected to have taken the impediment into account at the time of the conclusion of the contract or
to have avoided or overcome it or its consequences. The burden is on the party claiming the exemption
16
to prove all the requirements in order to avail himself of Art. 79 [Germany, 2 February 2004, Appellate
Court Zweibrücken, Milling equipment case, http://cisgw3.law.pace.edu/cases/040202g1.html]. If any element
is not satisfied, the party will remain liable for his breach. In the present case, Super Pumps cannot rely
on Art. 79 as (a) it could reasonably have foreseen the impediment at the time of the conclusion of the
contract; and (b) Super Pumps could reasonably have overcome the consequences of the impediment.
(a) Super Pumps could reasonably have foreseen the impediment at the time of conclusion of the Contract
64. Super Pumps‘ standing warranty in the Contract amounted to a guarantee that Super Pumps would
ensure that the pumps would be appropriate for use in Oceania under Irrigation Project IR 08-45Q.
This guarantee imposes an absolute obligation on Super Pumps from which there can be no relief of
responsibility [Schlechtriem/Schwenzer, p. 828; Bianca/Bonell/Tallon, Art. 79, note 2.6.7]. Super Pumps
cannot rely on Art. 79 because regulatory changes which will affect the performance of the Contract
should have been reasonably foreseen.
65. Being experienced in the industry of manufacturing pumps, Super Pumps was clearly aware of the
potential health risks of beryllium contents in their pumps. This is further supported by their
correspondences with Engineering [Claimant’s Exhibit 6]. There is continuing debate over the use of
beryllium in industries. The International Agency for Research on Cancer lists beryllium as a
carcinogen. The Occupational Safety and Health Administration (―OSHA‖) of the United States of
America, following a petition by various groups to issue an emergency temporary standard to curb the
use of beryllium, has since conducted more studies on beryllium and is in the process of passing rules on
the use of beryllium [United States Department of Labour, 71:21962-21968].
66. Given the uncertainty clouding the use of beryllium in industrial products and the fact that the OSHA, a
leading authority on occupational hazards was in the process of passing rules on use of beryllium, the
subsequent change in regulations by the Oceania Office of Environmental Health on 1 August 2008
prohibiting the use of beryllium in moving parts for use in enclosed areas should thus be an event which
Super Pumps ought reasonably to have taken into account.
67. Similarly, the decree passed by the military regime on 28 December 2008 prohibiting the import of
products containing any amounts of beryllium was an event which Super Pumps should reasonably have
17
taken into account. Even if the scientific justification of the regulation is open to question, the fact
remains that the use of beryllium is a highly debated issue and thus such a regulation change, though
surprising, should have been reasonably foreseeable.
68. Furthermore, Super Pumps was also clearly aware of the unstable political climate in Oceania at the
date of contracting [Claimant’s Exhibit 2]. As such, there was a high chance that there may be changes in
regulations anytime which are likely to affect the Contract and therefore the change on 28 December
2008 should have been reasonably foreseeable.
(b) Super Pumps could reasonably have overcome the consequences of the impediment
69. Super Pumps also cannot rely on Art. 79 as Super Pumps could have overcome the consequences of the
regulatory changes.
70. It is a general rule that Super Pumps is expected to overcome the impediment even if it incurs greatly
increased costs and forces it to accept a business loss [Heuze, note 471; Piltz, s. 4, para. 232]. The courts
have been reluctant to allow exemption under Art. 79 for cases of failure to deliver conforming goods
as this would result in the injured party being left uncompensated [Digest of Art. 79 Case Law].
71. In the Iron molybdenum case [OLG Hamburg, 28 February 1997], the buyer entered into a contract of
supply of iron-molybdenum from China with the seller. The seller failed to deliver the goods as the
supplier had themselves failed to obtain the goods from their supplier. Although the market price of
iron-molybdenum had tripled, it was held that the seller is not exempt from liability as the seller bears
the risk of itself receiving delivery of the goods from its own supplier. Only if goods of an equal or
similar quality were no longer available on the market would the seller be exempted from liability.
72. Similarly, Super Pumps should not be exempted from liability since alternative performance could
reasonably have been sought. Indeed, Super Pumps attempted to overcome the consequence of the
impediment of the regulatory change of 1 August 2008 [Claimant Exhibit 4] by procuring new steel to
comply with the regulation [Claimant Exhibit 6].
18
73. With regards to the regulatory change of 28 December 2008, Super Pumps could still have overcome
this impediment. Super Pumps was aware that there was substitute performance available through the
Trading Company of Mediterraneo (―Trading Company‖) [Respondent’s Exhibit 3].
74. When Super Pumps was made aware of regulatory change on 28 December 2008, it could have
approached the Trading Company to provide the compliant field pumps to Engineering. Through this
arrangement, Super Pumps could have overcome the consequences of the later regulatory change even
it may have incurred additional costs. In fact, Super Pumps carelessly stood by without taking any
actions.
75. Therefore, Super Pumps cannot now avail itself of Art. 79 to exempt its liability for damages breach of
obligation to deliver the pumps which are compliant with Oceania‘s regulation.
(C) ENGINEERING IS ENTITLED TO AVOID THE CONTRACT WITH SUPER PUMPS AS THE BREACH AMOUNTED
TO A FUNDAMENTAL BREACH
76. Engineering is entitled to avoid the Contract and reclaim the purchase price as Super Pumps‘ breach of
its obligation to deliver conforming goods amounts to a fundamental breach.
77. Under Art. 49(1)(a), the buyer may declare the contract avoided if the failure by the seller to perform
any of his obligations under the contract or this convention amounts to a fundamental breach of
contract. According to Art. 25, a breach of contract is fundamental if ―it results in such detriment to the
other party as substantially to deprive him of what he is entitled to expect under the contract and the
party in breach did not foresee and a reasonable person of the same kind in the same circumstances
would not have foreseen such a result.‖
78. Super Pumps‘ had committed a fundamental breach as (i) Engineering was substantially deprived of
what it was entitled to expect under the Contract and (ii) Super Pumps did forsee the detriment.
19
(i) Engineering was substantially deprived of what it was entitled to expect under the
Contract
79. Engineering suffered substantial detriment as a result of Super Pumps‘ breach of contract. This
detriment does not refer to the extent of the damage, but instead to the importance of the interest
which the contract and its individual obligations actually create for the promisee
[SCHLECHTRIEM/SCHWENZER, p. 177]. In determining whether the detriment suffered is substantial, regard
must be given to the circumstances of the case, including the extent to which the breach interferes with
the activities of the injured party [SECRETARIAT COMMENTARY].
80. IR 08-45Q was Engineering‘s only reason for contracting for the pumps. The pumps are completely
useless to Engineering if they could not be used for the project. Indeed, non-conformity of the pumps
with the regulations would have been considered so serious by the parties that its existence would
eliminate Engineering‘s interest in the performance of the Contract. Hence, by delivering pumps that
did not comply with regulations, which could not be used in the project, Engineering had been
substantially deprived of what they were entitled to expect under the Contract.
(ii) Super Pumps did foresee the detriment

81. Upon the successful proof by the injured party that it suffered substantial detriment, the breach will be
fundamental unless the party in breach can prove that it did not foresee and had no reason to foresee the
result that occurred [SECRETARIAT COMMENTARY].
82. In the present case, Super Pumps knew that the pumps were to be used in the irrigation project with
Water Services. Therefore, it should have foreseen that a breach of its warranty that the pumps would
be in compliance with all relevant regulations would prevent Engineering from properly fulfilling its
contractual obligations to Water Services. Hence, the detriment to Engineering was foreseeable to
Super Pumps. As such, Super Pumps had committed a fundamental breach of contract under Art. 25
that entitled Engineering to avoid the Contract.
20
(iii) Engineering properly avoided the contract

83. Engineering properly avoided the Contract. Art. 26 of the CISG stipulates that a declaration of
avoidance is only effective if notice is given to the other party, and the contract will be avoided from
the date notice is given [SECRETARIAT COMMENTARY]. In order to be effective, the notice must express
unequivocally and with sufficient clarity that the party will not be bound by the contract any longer and
considers the contract terminated [LANDGERICHT FRANKFURT, 16 September 1991].
84. To constitute effective notice the precise phrase "declaration of avoidance" or even the term
"avoidance" need not be used, as long as one party conveys the idea that the contract is terminated
because of the other‘s breach. A written refusal to perform, coupled with a claim for repayment of
purchase price, has been deemed sufficient notice of avoidance [OLG KARLSRUHE, 19 December 2002].
85. In a letter dated 5 January 2009, Engineering unequivocally stated its intention to cancel the Contract
with Super Pumps, and also asked for a return of the purchase price for the pumps [Claimant Exhibit 13].
Therefore, the requisite notice had been given, and Engineering had properly avoided the Contract.
86. Super Pumps had an obligation to ensure that both the field and P-52 pumps it was contracted to
deliver to Engineering would meet the requirements for IR 08-45Q. Super Pumps‘ obligation was
continuous and binding until risk passed to Engineering under the DES Incoterms. Super Pumps‘ had
breached its obligation even before the risk had passed to Engineering by not ensuring that the field
pumps did not contain beryllium. As this breach amounted to a fundamental breach, Engineering is
entitled to avoid the Contract and reclaim the purchase price. Engineering can also claim damages for
the breach, as Super Pumps is not exempted by Art. 79.
ISSUE 3: ENGINEERING IS ENTITLED TO AVOID THE CONTRACT DUE TO SUPER PUMPS’

BREACH OF OBLIGATION TO DELIVER ON TIME
87. Super Pumps had breached its obligations under the Contract as (A) Super Pumps failed to deliver the
pumps by the delivery date. Furthermore, (B) Super Pumps cannot rely on Art. 79 to exempt itself
21
from damages, and (C) Engineering was entitled to avoid the Contract with Super Pumps and reclaim
the purchase price as the breach amounted to a fundamental breach.
(A) SUPER PUMPS BREACHED ITS OBLIGATION TO DELIVER ON TIME

88. Super Pumps breached its obligation to deliver the pumps to Capitol City, Mediterraneo by the
modified due date of 22 December 2008. Art. 33(a) of the CISG states that where a date is fixed or
determinable from the contract, the seller must deliver the goods on that date. The date of delivery
stipulated under the Contract was 15 December 2008. However, the delivery date was modified to 22
November 2008, either (i) by the fixing of an additional time period for performance pursuant to Art.
47(1) of the CISG; or (ii) alternatively, the agreement of the parties to vary the contractual delivery
date pursuant to Art. 29(1) of the CISG. Nevertheless, Super Pumps failed to deliver by this date.
(i) Super Pumps failed to perform in the additional time period fixed by Engineering
89. Art. 47(1) of the CISG provides that the buyer may fix an additional period of time of reasonable length
for performance by the seller of his obligations. For an additional period of time to be fixed, the buyer
must make a specific demand for performance, stipulating a particular date by which the seller has to
perform his obligations. The additional period of time must also be of reasonable length
[SCHLECHTRIEM/SCHWENZER, pp. 555-556].
(a) Engineering’s acceptance of Super Pumps’ extended delivery date amounts to the fixing of an additional time period
90. The additional time period for performance was proposed by Super Pumps, who informed Engineering
that it was unable to perform by the original delivery date of 15 December 2008, and would instead
deliver by 22 December 2008 [Claimant’s Exhibit 7]. However, it is sufficient for the purposes of Art.
47(1) if the buyer accepts a new delivery date proposed by the seller, provided the buyer makes clear
that performance by that date is essential [OLG HAMBURG, 28 February 1997]. Engineering accepted the
modified delivery date of 22 December 2008. At the same time, it emphasized the absolute importance
of delivery by this due date, clearly stating that ―it is imperative that we meet the schedule‖ and that
there could be no further delays [Claimant’s Exhibit 8].
22
91. Thus, although the additional time period was suggested by Super Pumps and not Engineering,
Engineering‘s acceptance of this extension coupled with its emphasis on the importance of prompt
performance amounts to the fixing of an additional time period for the purposes of Art. 47(1).
(b) The additional time period was of a reasonable length

92. Super Pumps requested to extend the delivery date from 15 December 2008 to 22 December 2008. A
one week extension may seem unreasonable when an additional period of two weeks for the delivery of
three printing machines from Germany to Egypt has been deemed unreasonable [OLG HAMBURG, 28
February 1997]. However, when determining if an additional period of time is reasonable, the buyer‘s
interest in rapid delivery will be decisive if such interest was apparent upon the conclusion of the
contract [SCHLECHTRIEM / SCHWENZER, p. 556]. Super Pumps certainly knew that timely delivery was
essential to Engineering at the conclusion of the Contract, as Engineering had previously stressed the
importance of meeting the delivery date [Claimant’s Exhibit 2]. Furthermore, this time period was
proposed by Super Pumps. Super Pumps was best placed to determine a reasonable additional time that
it would require for performance. As such, the additional time period of a week was reasonable.
93. Therefore, Engineering‘s acceptance of the new delivery date of 22 December 2008 is equivalent to the
fixing of an additional period of time as under Art. 47(1) for Super Pumps to perform its obligations.
94. Notwithstanding the change in delivery date, Super Pumps delivered the pumps late, its ship only
reaching Capitol City on 6 January 2009. This was a clear breach of its contractual obligation to deliver
the pumps by 22 December 2008, the extended due date. As such, Engineering can claim damages for
breach of contract.
(ii) Alternatively, Super Pumps failed to deliver by the modified delivery date
95. Even if the modification of the delivery date to 22 December 2008 did not amount to the fixing of an
additional time period for performance, the date of delivery was nevertheless extended by the
agreement of both parties. Art. 29(1) of the CISG provides that a contract may be modified by parties‘
agreement. Technical modifications such as changes to delivery date can therefore be made upon such
parties‘ agreement [SECRETARIAT COMMENTARY]. Thus, the agreement between Super Pumps and
23
Engineering as presented above amounted to an effective variation of the date of delivery under Art.
29(1), and the extended date Super Pumps was obliged to deliver by was 22 December 2008.
(B) SUPER PUMPS’ BREACH OF ITS OBLIGATION TO DELIVER ON TIME IS NOT EXEMPTED UNDER ART. 79 OF
THE CISG
96. Super Pumps cannot be exempted from its failure to make prompt delivery as (i) the impediment of the
closure of the Isthmus Canal was one that it should reasonably have taken into account; and (ii) Super
Pumps could have reasonably overcome the consequence of the impediment. The proof of any one of
these points will disentitle Super Pumps from relying on Art 79.
(i) Super Pumps could reasonably have foreseen the impediment at the time of conclusion
of the Contract
97. Super Pumps could reasonably have foreseen the delay in transiting the Isthmus Canal. Reasonable
foreseeability refers to whether, under the actual circumstances at the time of the conclusion of the
contract and taking into account the trade practice, the promisor ought to have foreseen the
impediment‘s existence or its subsequent existence. [SCHLECHTRIEM/SCHWENZER, p. 817,
BIANCA/BONELL/TALLON, Art. 79, note 2.6.3].
98. If the impediment was foreseeable at the time of the conclusion of the contract and the promisor made
no reservations regarding it, then he should be understood to have assumed the risk that performance
may be delayed or prevented by that impediment [SCHLECHTRIEM/SCHWENZER, p. 817,
BIANCA/BONELL/TALLON, Art. 79, note 2.6.3].
99. Super Pumps is actively involved and experienced in the sale of pumps, selling to over 50 countries,
including Mediterraneo [Claimant’s Statement of Claim, para. 4]. Much of Super Pumps‘ cross-border
transactions would necessarily involve the shipment of pumps. Super Pumps had also collaborated with
Engineering in the past [Claimant’s Statement of Claim, paras. 4-5; Claimant’s Exhibit 1]. As such, Super
Pumps must have been well aware of the usual route taken and duration of time required for a ship to
reach Capitol City, Mediterraneo. From its experience, it should also have known that the closure of
canals is a possible occurrence for any shipment. While a delay in transiting the Isthmus Canal was not
24
common, it had nevertheless occurred before and could certainly happen again in the future. Super
Pumps should nevertheless have reasonably been expected to take such a possibility into account.
100. Super Pumps was acutely aware that time was of the essence in their delivery of pumps, having been
reminded of its importance repeatedly by Engineering. A late delivery on the part of Super Pumps
would endanger Engineering‘s ability to perform their other contracts. [Claimant’s Exhibits 2 and 6]
Given the utmost importance of prompt delivery, Super Pumps should have accounted for factors, such
as canal closure, that might lead to a delay in its performance, and made the appropriate arrangements.
101. Therefore, given that Super Pumps had all this knowledge but did not make any reservations in its
Contract with Engineering, Super Pumps should be understood to have assumed the risk of delay and
therefore cannot rely on Art. 79 for exemption.
(ii) Super Pumps could reasonably have overcome the consequences of the impediment
102. Art. 79 requires the fulfillment of a standard of impossibility, and mere hardship is insufficient to
provide an exemption. The principle behind the rule is that allowing one party to rely on Art. 79 would
entail a wholly innocent party being left uncompensated. Super Pumps is therefore expected to
overcome the impediment even when this may result in greatly increased costs and forces it to accept a
business loss [HEUZE, note 471; PILTZ, s. 4, para. 232].
103. Super Pumps cannot be exempted under Art. 79 as it could have overcome the consequences of the
canal closure. The consequences of the impediment refer to delay of the shipment resulting in late
delivery of the pumps and Engineering‘s subsequent breach of its obligations under IR 08-45Q.
(a) Super Pumps could have procured substitute pumps for Engineering
104. As discussed above, Super Pumps cannot be exempted from liability unless goods of an equal or similar
quality were no longer available on the market [OLG HAMBURG, 28 February 1997].
105. Super Pumps was aware that there was substitute performance available through the Trading Company
[Respondent’s Exhibit 3]. When Super Pumps was made aware of the canal closure on 28 November
2008, it could have approached the Trading Company or any other company to provide the necessary
25
pumps to Engineering. Through this arrangement, Super Pumps could have effectively overcome the
impediment of the canal closure. Even though Super Pumps may not profit from the Contract anymore
and may instead incur the losses of having to ship back the pumps, this hardship in ensuring the due
performance of the contract is not sufficient to exempt them from liability.
106. On the contrary, Super Pumps was unconcerned with fulfilling their obligations to deliver on time and
made no attempt to remedy the consequences of the impediment despite repeated reminders that time
was of the essence of the Contract. Thus, they should not be exempted under Art. 79.
(b) Super Pumps could have arranged for alternative transport for the pumps
107. In the alternative, once they were notified of the closure of canal due to the damage of the locks, Super
Pumps should have taken immediate actions to avoid the subsequent delay. Super Pumps had made
efforts to inquire on the feasibility of taking an alternative route around the continent, and was
informed that such an action would take longer than any emergency repair to the locks was expected to
take [Claimant’s Exhibit No. 9]. However, such an effort was nevertheless insufficient.
108. Instead of waiting for the locks to be repaired, Super Pumps could have overcome this impediment by
arranging to transport the pumps the rest of the distance by air, which would be much faster. While
such a measure would have been very costly and cause hardship [Procedural Order No. 2, para. 14], it was
certainly short of the standard of impossibility required for a party to rely on the Art. 79. Although the
DES Incoterms included in the Contract necessitates delivery by sea or inland waterway, the delivery of
the pumps by air instead represents a commercially reasonable alternative, since the result would be
similar to what the parties intended for when contracting.
109. Super Pumps was aware that Engineering had to perform its obligation under IR 08-45Q by 2 January
2009 [Procedural Order No.2, para. 15]. When Super Pumps found out that the locks had broke, it was
already 28 November 2008 and it would have taken a further 25 days for the ship to arrive at Capitol
City, Mediterraneo. Thus, it must have been clear to Super Pumps that it would probably fail to deliver
by the extended delivery date of 22 December 2008. It should have known that it would take some
time for the locks to be repaired and even more time for the backlog of ships to cross the canal.
Therefore, it was only reasonable to expect Super Pumps to have taken measures to obtain a
26
commercially reasonable substitute for performance in order to overcome the impediment of canal
closure and ensure prompt delivery of the pumps. Delivering the pumps by air is likely to have
effectively prevented the subsequent cancellation of IR 08-45Q.
110. As Super Pumps did not take any action to overcome the impediment when it could have, they not be
entitled to rely on Art. 79.
(C) ENGINEERING IS ENTITLED TO AVOID THE CONTRACT

111. Engineering can avoid the Contract with Super Pumps as (i) Super Pumps failed to deliver the pumps in
the additional time fixed for performance under Art. 47(1) of the CISG; and (ii) Super Pumps‘ failure
to deliver by the agreed delivery date amounted to a fundamental breach of contract.
(i) Engineering can avoid the Contract as Super Pumps failed to perform in the additional
period fixed
112. Art. 49(1)(b) of the CISG states that in cases where the seller has not delivered the goods within the
additional time period of reasonable length fixed for delivery pursuant to Art 47(1), the buyer may
declare the contract avoided. To avoid the contract under Art 49(1)(b), the buyer need not prove that
the breach of contract amounted to a fundamental breach.
113. As established above, Engineering fixed an additional time period of a week for performance, extending
the delivery date to 22 December 2008. However, Super Pumps only delivered the pumps on 6
January 2009. Therefore, it failed to deliver within the additional time permitted by Engineering and
Engineering was hence entitled to avoid the Contract under Art. 49(1)(b).
(ii) Engineering is entitled to avoid the Contract with Super Pumps as late delivery
amounted to a fundamental breach
114. Super Pumps had committed a fundamental breach pursuant to Art. 25 of the CISG as (a) Engineering
was substantially deprived of what it was entitled to expect under the Contract and (b) Super Pumps
did foresee the detriment.
27
(a) Engineering suffered substantial detriment as a result of Super Pumps’ breach

115. Super Pumps‘ breach of Contract caused Engineering to suffer substantial detriment by depriving it of
what it was entitled to expect under the Contract. While a delay in time is not generally considered as a
fundamental breach of contract, it can constitute a fundamental breach if delivery within a specific time
is of special interest to the buyer. This interest must be foreseeable at the time of the conclusion of the
contract [OLG HAMBURG, 28 February 1997].
116. In the present case, timely delivery was of special interest to Engineering, and Super Pumps was aware
of this interest when the Contract was concluded. Engineering had repeatedly made it clear to Super
Pumps that prompt delivery of the pumps was essential in order for Engineering to fulfill its contractual
obligations with Water Services under Irrigation Project IR 08-45Q [Claimant’s Exhibits 2 and 8]. As a
result of the late delivery by Super Pumps, Engineering was unable to perform these obligations and
this led to the cancellation of their contract with Water Services [Claimant’s Exhibit 12].
117. Therefore, the breach of Contract by Super Pumps caused substantial detriment to Engineering.
Engineering had an important interest in the delivery of the pumps by the stipulated date. The late
delivery hence deprived Engineering of what it was entitled to expect under the Contract.
(b) The detriment was foreseeable to Super Pumps

118. It was foreseeable to Super Pumps that late delivery on its part would result in substantial detriment to
Engineering. Engineering had stated several times that timely delivery was of utmost importance for it
to fulfill its contract with Water Services. Super Pumps also demonstrated awareness of this
importance, and had acknowledged it in the parties‘ correspondence [Claimant’s Exhibit 7].
119. Therefore, it must have been foreseeable to Super Pumps that its late delivery would result in
substantial detriment to Engineering. As such, Super Pumps fundamentally breached the Contract
under Art. 25 of the CISG, and Engineering thereby had an immediate right to avoid the Contract.
(iii) Engineering properly avoided the Contract

120. Engineering properly avoided the Contract, as it unequivocally declared its intention to avoid the
Contract, and gave notice to Super Pumps.
28
121. Super Pumps had breached its obligation to deliver the pumps by 15 December 2008 as well as the
extended delivery date of 22 December 2008. Engineering was also entitled to avoid the Contract
under two grounds. First, that Super Pumps failed to perform within the additional time fixed for
performance, and second, that Super Pumps‘ failure to deliver on time amounted to a fundamental
breach. As Engineering properly avoided the Contract and Super Pumps is not entitled to rely on Art.
79, it can reclaim from Super Pumps the purchase price and damages for breach of the Contract.
ISSUE 4: ENGINEERING DID NOT FAIL TO MITIGATE THE CONSEQUENCES OF SUPER

PUMPS’ BREACHES
122. The respondents contend that Engineering had failed to mitigate the consequences of Super Pumps‘
breaches. However, Engineering did not breach its duty as (A) the duty to mitigate only arose after the
Contract was avoided and (B) even if the duty to mitigate had arisen earlier, Engineering could not have
mitigated the loss.
(A) THE DUTY TO MITIGATE DID NOT ARISE PRIOR TO THE AVOIDANCE OF THE CONTRACT
123. The duty to mitigate arose on 5 January 2009 and no earlier. Hence, Engineering was not obliged to act
during the period of 28 to 31 December 2008.
124. Art. 77 of the CISG does not impose an obligation to mitigate losses as long as the contract still exists.
An aggrieved party is therefore not obliged to mitigate their loss until the contract is terminated [OLG
BRAUNSCHWEIGH, 28 October 1999]. Before that, the aggrieved party will still be entitled to demand
performance from the seller [OLG DÜSSELDORF, 14 January 1994]. The injured party is not obliged to
avoid the contract and enter a substitute transaction just to mitigate its losses.
125. While the duty to mitigate also applies to anticipatory breaches [SECRETARIAT COMMENTARY. Art.63, para.
4; BIANCA/BONELL/ KNAPP, note 21, pp. 566-567], there was no anticipatory breach on the present facts.
Art. 72(1) sets out the conditions for an anticipatory breach: it must be clear prior to the date for
performance that the party required to perform will commit a fundamental breach. This means that an
innocent party needs to be aware of the circumstances and there needs to be a high degree of
29
probability that the fundamental breach will actually occur. [SCHLECTRIEM/SCHWENZER, Art. 72, para. 11;
SAIDOV, s. 4(c)]. A strict test has to be applied in respect to the obviousness of a future breach of
contract. While complete certainty is not required, there needs to be a very high degree of probability
that there will be a fundamental breach. [BIANCA/BONELL/BENNETT, Art 72, note 2.2 Art 72, note 2.2].
126. The court in LANDGERICHT BERLIN 30 SEPTEMBER 1992 held that there was an anticipatory breach because
the buyer was unable to pay the purchase price for 212 pair of shoes from the seller. The facts showed
there was a high possibility that there would be a fundamental breach – two of the three checks handed
over for payment could not be cashed. In our present case, the facts were much less certain. Even
though Super Pumps said that it was due on 6 January 2009, this was only speculative. The email was
vague and only based on what the sales manager ‗expected‘ [Claimant Exhibit No. 10]. Moreover, the
email was sent on 12 December 2008 and by that time the ship had transited Isthmus Canal. This is
different from a case where the checks failed since Super Pumps was in the middle of performing. It was
not possible that it would arrive before the 6 January 2009.
127. Thus, there are insufficient facts to point conclusively to an anticipatory breach. Engineering had no
duty to mitigate from 28 to 31 December 2008 as the Contract was only avoided on 5 January 2009.
(B) EVEN IF THE DUTY TO MITIGATE HAD ARISEN, ENGINEERING DID NOT BREACH ITS DUTY TO MITIGATE
128. Alternatively, if the Tribunal finds that there was an anticipatory breach, the duty to mitigate would
have arisen by 12 December 2008 [Claimant Exhibit No. 11]. Under Art. 77, a party who relies on a
breach ―must take such measures as are reasonable in the circumstances to mitigate the loss, including
loss of profit, resulting from the breach‖. If he fails to take such measures, the party in breach may
―claim a reduction in the damages in the amount by which the loss should have been mitigated‖.
129. Engineering did not breach its duty to take reasonable measures to mitigate as (i) the delay in avoiding
the Contract was not unreasonable and (ii) it was impossible to find substitute performance
30
(i) Engineering’s delay in avoiding the Contract was not unreasonable

130. The respondents may argue that Engineering had breached its duty to mitigate by not avoiding the
Contract when they knew that Super Pumps could not perform. However, Art. 77 does not apply here
as (a) Engineering was not obliged to avoid the Contract and (b) Engineering did not act unreasonably
in choosing to delay avoidance of the Contract.
(a) Engineering was not obliged to avoid the Contract

131. Engineering was not obliged to avoid the Contract even if there was an anticipatory breach.
132. The mitigation rule will not generally override the party‘s right to performance under Art. 46(1) and
62. An aggrieved party, when faced with an anticipatory breach, has no obligation to accept it and avoid
the contract in order to mitigate losses from the breach, as this will cause him to lose his right to
performance under the contract. Following the common law position that mitigation only goes to
damages and will not constrain the injured party‘s right to require performance [WHITE & CARTER V
MCGREGOR, [1962] 2 AC 413], the CISG will not impose a general duty to avoid a contract
[SCHLECTRIEM/SCHWENZER, Art. 77, para. 4] Thus, even if there was an anticipatory breach, the innocent
party can continue to demand performance without infringing Art. 77.
133. Therefore, delaying the avoidance of the Contract does not necessarily result in a failure to mitigate.
The application of Art. 77 is only justified if the injured party delays in an unreasonable manner.
(b) Engineering did not delay the avoidance in an unreasonable manner

134. Art. 77 does not apply here as Engineering did not act unreasonably in delaying the avoidance of the
Contract. While it is clear that Art. 77 of the CISG does not impose a general duty to avoid the
contract, an unreasonable delay would constitute a failure to mitigate within the meaning of Art. 77 of
the CISG. Unreasonable delay in avoiding the contract exists if there was no plausible reason not to
avoid the contract, or if the decision to keep the contract alive was speculative, despite the existence of
a reasonable and practicable substitute transaction [SCHLECHTRIEM/SCHWENZER, pg.792, para 9].
135. Such conduct is not present here. On 12 December 2009 when Engineering found out that the pumps
would arrive only on 6 January 2009, Engineering had no reason to avoid the Contract. Although it
31
was vital to Engineering that the schedule was met, they were not aware that the failure to deliver by
the contract date of 2 January 2009 would result in a total cancellation of the contract for IR 08-45Q.
The military government only gave instructions to cancel contracts made with foreign parties for any
breach on 28 December 2008. Engineering could not have expected such unprecedented ―extreme
action‖ and was not informed of it until 5 January 2009 [Claimant’s Exhibit No. 12]. Since Engineering
had a plausible reason to keep the Contract alive and accept late performance rather than total non-
performance, it was reasonable for them to withhold avoiding the Contract with Super Pumps.
136. Thus, Engineering did not act unreasonably in choosing not to avoid the Contract with Super Pumps
and is not in breach of its duty to mitigate under Art. 77.
(ii) Engineering could not have mitigated the loss occasioned by the breach
137. Engineering could not mitigate their loss as finding substitute performance was impossible. This is
because (a) Engineering could not have found full substitute performance for its contractual obligations
to Water Services; and alternatively (b) Engineering could not have found substitute performance given
the short time span.
(a) Engineering could not have found full substitute performance for its contractual obligations to Water Services
138. Engineering did not breach its duty to mitigate losses as required by Art. 77. Art. 77 requires that a
party who relies on a breach must take such measures as are reasonable in the circumstances to mitigate
the loss of profit resulting from a breach. The principle is that a person "may not recover damages that
he could reasonably have avoided." [STOLL/SCHLECTRIEM, note 11, Art. 77, No. 3]. However, in the
present circumstances, the loss could not have been avoided.
139. The loss of the contract with Water Services could only have been prevented if Engineering had fully
performed all their contractual obligations to Water Services by the agreed execution date of 2 January
2009. Under the contract, Engineering was obliged to deliver both field pumps and the P-52 pumps
that were in compliance with Oceania‘s regulations by 2 January 2009 [Claimant Exhibit 12].
140. This strict requirement was made clear to Engineering by Mr. Horace Wilson of Water Services in a
telephone call on 28 December 2008 [Claimant Exhibit 11]. Thus, Engineering could only have avoided
32
the loss of the contract with Water Services if it was able to find an alternative source which could
provide the quantity and quality of field and P-52 pumps required by 2 January 2009. It would not have
been possible to obtain substitutes for both the field pumps and P-52 pumps required.
141. An aggrieved party is also not in any way obliged to take measures which in the circumstances
concerned are excessive or entail unreasonably high risks and expenses [BIANCA/BONELL/KNAPP, note 21,
p. 560; STOLL/SCHLECHTRIEM, note 16, p.588.]. An aggrieved party which refrains from such measures
will not be considered as not having complied with Art. 77 [BIANCE/BONELL/KNAPP, note 21, p. 560].
142. Even though Super Pumps alleges that there was an alternative source, namely the Trading Company
[Respondent Exhibit 3], the Trading Company would have been unable to supply the full quantity of field
pumps and P-52 required by Engineering. Therefore, Engineering would still not have been able to
perform all its obligations under the contract with Water Services and the contract would still have
been cancelled.
143. Furthermore, acquiring partial substitutes, as recommended by Super Pumps, would also not have
mitigated Engineering‘s loss. On Super Pumps‘ own admission, there is still no indication that the
contract would have been saved by the partial delivery of pumps, as Mr. Wilson only said that it ―might
help‖ [Respondent’s Exhibit 2]. Thus, it was reasonable for Engineering not to take those steps to mitigate
as such steps could not have mitigated the loss in any event.
144. Conversely, had Engineering procured the pumps from Trading Company and Water Services
nonetheless cancelled the contract for incomplete delivery as it was entitled to, Super Pumps would
probably contend that they are not liable for the additional procurement as Engineering was not obliged
to obtain a partial substitute and risk additional losses when it was unlikely that it would have prevented
Water Services from cancelling the contract. Thus, Engineering did not breach its duty to mitigate as
the loss was not one which could have been avoided.
33
(b) Engineering could not find substitute performance given the short time span
145. In the alternative, even if it was possible that a partial delivery of pumps that met specifications would
have saved the contract with Water Services, Engineering‘s choice not to act was not a breach of its
duty to mitigate losses given the short time span in which it required the pumps.
146. Art. 77 requires that parties take ―such measures as are reasonable in the circumstances‖ to mitigate
their losses. ―Reasonable‖ measures are those which ―under the particular circumstances…could be
expected to be taken by a person acting in good faith‖ [STOLL/SCHLECHTRIEM, note 16, p. 588]. When
evaluating what is reasonable in circumstances, regard should be had to the party‘s ―ingenuity,
experience and financial resources‖ [BERNSTEIN/LOOKOFSKY, supra note 2, p. 103] and the relevant trade
practices [STOLL/SCHLECHTRIEM, supra note 16, p. 588; Article 9]. Not looking for substitute goods from
another supplier when there was a short delivery time in the contract or difficulty in finding another
supplier has been held to be ―reasonable‖ pursuant to the requirements of Art. 77 in a Germany
arbitration award case [SCHIEDSGERICHT DER HANDELSKAMMER HAMBURG, 21 March 1996].
147. Super Pumps contends that Engineering should have obtained slightly used pumps that were for sale by
the Trading Company which conformed to the requirements of IR 08-45Q and could have been
transported to Oceania on time. However, these measures could not have been reasonably expected to
be performed by Engineering. Engineering only found out about the Military Decree prohibiting
imports with beryllium on the 28 December 2008 and were expected to find substitute pumps which
could be delivered by midnight of 31 of December [Claimant Exhibit 11]. Given the short time span, it
would not be reasonable to expect Engineering to find substitute performance [SCHIEDSGERICHT DER
HANDELSKAMMER HAMBURG, 21 March 1996].
148. Furthermore, Engineering had never worked with Trading Company before [Procedural Order 2] and
could not have known that they dealt in used pumps, or that the Trading Company had the kind of
pumps that Engineering required. After all, the regulations banning beryllium were contrary to the
normal industry standard of production, where beryllium was used in the manufacturing process
because it renders the pumps more durable [Claimant Exhibit 6]. Since Super Pumps, a major player in
the pumps manufacturing industry, had to source for alternative steel and re-manufacture the pumps to
meet regulations, it was reasonable for Engineering to believe that such pumps would not be readily
34
available elsewhere, if at all. Engineering‘s experience in this field would also have contributed to its
reasonable belief that it would not have been possible to source for, examine, procure and transport the
substitute pumps within such a short time frame.
149. Therefore, even if the Trading Company was able to provide some substitute pumps, Engineering had
not acted unreasonably in choosing not to source for alternative performance under the circumstances.
150. Engineering did not have any duty to mitigate the losses arising from the possible cancellation of the
contract for IR 08-45Q as that duty did not arise until 5 January 2009. Even if it had a duty to mitigate,
Engineering had not breached the duty as there was nothing it could have done to mitigate the loss and
even if partial performance would have saved the contract under Irrigation project IR 08-45Q, it was
reasonable for Engineering not to have taken the steps to provide partial delivery and thus the inaction
did not constitute a breach of the duty to mitigate.
RELIEF REQUESTED
In light of the submissions made, Mediterraneo Engineering Co. respectfully requests that the tribunal find:
That the Tribunal has jurisdiction to consider the dispute between Mediterraneo Engineering Co.,
claimant, and Equatoriana Super Pumps S.A., respondent;
That there was a breach of the contract by Equatoriana Super Pumps S.A.;
That the breach of the contract constituted a fundamental breach;
That Mediterraneo Engineering Co. properly avoided the contract;
That Equatoriana Super Pumps S.A. is obligated to reimburse Mediterraneo Engineering Co. the
purchase price of the pumps in the amount of US$1,214,550;
That Equatoriana Super Pumps S.A. is liable for damages arising out of the breach of the contract in
the amount of US$320,000.
Engineering further requests the Tribunal to order Equatoriana Super Pumps S.A.
35
To reimburse Mediterraneo Engineering Co. the purchase price of the pumps in the amount of
US$1,214,550;
To pay damages in the amount of US$320,000;
To pay interest on the said sums; and
To pay the costs of arbitration.
4 December 2009
Nicholas Poon Asiyah Arif Jane Lim Eunice Chan

Soong Wen E Cheryl Teo Enoch Ang Lucas Lim
36

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SEVENTH ANNUAL WILLEM C.

MEMORANDUM FOR CLAIMANT

ON BEHALF OF: AGAINST:

MEDITERRANEO ENGINEERING CO EQUITORIANA SUPER PUMPS S.A.

ENOCH ANG • ASIYAH ARIF • EUNICE CHAN • JANE LIM

LUCAS LIM • NICHOLAS POON • SOONG WEN E • CHERYL TEO

INDEX OF ABBREVIATIONS …………………………………………………………...….…. VI

INDEX OF AUTHORITIES…..…………………………………………………………..….…. VIII

INDEX OF ARBITRAL AWARDS..……………………………………………………….. …….. XV

STATEMENT OF FACTS ..……………………………………………………………….….… 1

(iii) Super Pumps impliedly agreed to Engineering‘s representation by Mr. Holzer………… 8

(ii) Super Pumps did foresee the detriment……………………………………………... 20

ACICA Australian Centre for International Commercial Arbitration

All ER All England Reports

BGH Bundesgerichthof [Federal Supreme Court—Germany]

CEO Chief Executive Officer

CISG United Nations Convention on Contracts for the

CLOUT Case Law on UNCITRAL Texts

Conciliation Rules UNCITRAL Conciliation Rules

e.g. exempli gratia [for example]

Engineering Mediterraneo Engineering Co.

ICC International Chamber of Commerce

IR 08-45Q Irrigation Project IR 08-45Q

OLG Oberlandesgericht (German Upper Regional Court)

Super Pumps Equitoriana Super Pumps S.A.

UNCITRAL United Nations Commission on International Trade Law

US Ct. App. United States Court of Appeals

U.S. Circ. Ct. United States Circuit Court

U.S. S. Ct. United States Supreme Court

Water Services Oceania Water Services

WLR World Law Reports

BERNSTEIN, HERBERT Understanding the CISG in Europe

BIANCA, CESARE MASSIMO Commentary on the International Sales Law

BIANCA, CESARE MASSIMO Commentary on the International Sales Law

DHARMANANDA, KANEGA Reflections on Drafting Effective Dispute Clauses

HEUZE, VINCENT La Vente Internationale de Marchandises - Droit Uniforme/ The

LEISINGER, BENJAMIN Fundamental Breach Considering Non Conformity of the Goods

PILTZ, BURGHARD Internationales Kaufrecht,

REINHARDT, GERT Un- Kaufrecht Kommentar zum Übereinkommen der Vereinten

SECRETARIAT COMMENTARY UNCITRAL Commentary on the Draft Convention on Contracts

SCHLECTRIEM, PETER Uniform Sales Law in the Decisions of the Bundesgerichtshof

SCHLECTRIEM, PETER Commentary on the UN Convention on the International Sale of

SCHLECTRIEM, PETER Kommentar zum Einheitlichen Kaufrecht – CISG

WITZ, WOLFGANG International Einheitliches Kaufrecht,

Schiedsgericht der Handelskammer Hamburg

Cassation Court of the Canton of Zurich

United States of America

United States Court of Appeals for the Eleventh Circuit (1998)

United States District Court - Eastern District of Louisiana

CISG Case Presentation

INDEX OF ARBITRAL AWARDS

ICC Case No.9977

CLOUT Case No. 253

15 November 2008 Production of pumps is completed.

1 January 2009 The decree becomes effective.

ISSUE 1: TRIBUNAL HAS JURISDICTION TO ARBITRATE THE DISPUTE BETWEEN

(i) Commencing conciliation is not a prerequisite for commencing arbitration

(a) Commencement of conciliation as a prerequisite is inconsistent with the parties’ intentions

(ii) Successful attempt at conciliation is not a prerequisite for commencing arbitration

(a) Successful conciliation as a prerequisite is inconsistent with parties’ intentions

(ii) Representation by CEOs was not of the essence to the conciliation

(iii) Super Pumps impliedly agreed to Engineering’s representation by Mr. Holzer

(C) TRIBUNAL SHOULD ASSUME JURISDICTION AS CONCILIATION IS UNLIKELY TO RESOLVE DISPUTE