IN THE KUALA LUMPUR REGIONAL CENTRE FOR ARBITRATION ASTORIA PRODUCE COMPANY (CLAIMANT) ROLGA FARMERS EXCHANGE (RESPONDENT) MEMORIAL FOR CLAIMANT

Transcription

1 M3020-C IN THE KUALA LUMPUR REGIONAL CENTRE FOR ARBITRATION 2011 ASTORIA PRODUCE COMPANY (CLAIMANT) V ROLGA FARMERS EXCHANGE (RESPONDENT) MEMORIAL FOR CLAIMANT --MEMORIAL FOR CLAIMANT --

2 TABLE OF CONTENTS INDEX OF AUTHORITIES... i STATEMENT OF JURISDICTION......viii QUESTIONS PRESENTED... ix STATEMENT OF FACTS... xi SUMMARY OF PLEADINGS... xiv PLEADINGS ADVANCED 1. THAT THERE WAS AN AGREEMENT BETWEEN THE PARTIES TO SUBMIT THE PRESENT DISPUTE TO THE KLRCA THAT BOTH PARTIES AGREED TO THE DISPUTE BEING RESOLVED BY KLRCA THE ISSUE BEFORE THE TRIBUNAL IS THAT THE CONTRACT ENTERED INTO BETWEEN AP AND RFE HAD CONTRADICTORY TERMS IN THE FORUM SELECTION CLAUSE, AND THE QUESTION IS WHETHER AP S MODIFIED ACCEPTANCE WOULD BE BINDING ON RFE THE ACCEPTANCE WAS A MODIFICATION ALTERING NON MATERIAL TERMS OF THE CONTRACT, AND WAS ACCEPTED BY THE SELLERS SINCE NO OBJECTION WAS RAISED BY THEM THE ACCEPTANCE WAS A COUNTER OFFER ALTERING MATERIAL TERMS, AND WAS ACCEPTED BY THE CONDUCT OF THE SELLER... 4

3 2. THAT RFE WAS NOT IMPROPERLY DENIED THE OPPORTUNITY TO SELECT ITS PARTY APPOINTED ARBITRATOR AND THE PRESIDING ARBITRATOR OR CHAIRMAN WAS PROPERLY APPOINTED THAT RFE FAILED TO APPOINT ARBITRATORS WITHIN THE PRESCRIBED TIME PERIOD RFE WAS GIVEN ADEQUATE NOTICE OF THE ARBITRATION AND TIME TO APPOINT THE ARBITRATORS THAT KLRCA WAS THE APPROPRIATE APPOINTING AUTHORITY KLRCA RULES OF ARBITRATION PROVIDE FOR THE APPOINTMENT OF AN APPOINTING AUTHORITY IN THE ABSENCE OF AN AGREEMENT OF THE PARTIES THAT A PRESIDING OR SECOND ARBITRATOR MAY BE APPOINTED BY KLRCA RULE 3(2) OF THE KLRCA RULES 2010 PROVIDE FOR THE APPOINTMENT OF AN ARBITRATOR BY THE DIRECTOR THE PURPOSE OF CHOOSING AN ARBITRATOR WAS SERVED IN THIS CASE THAT THE ARBITRATION PANEL HAS THE AUTHORITY TO IMPOSE SANCTIONS IN THE FORM OF A FINE ON RFE FOR FAILING TO APPEAR AT THE INITIAL HEARING AND/ OR FOR NOT PROVIDING ADEQUATE NOTICE THAT IT WOULD NOT APPEAR THE TRIBUNAL HAS THE JURISDICTION TO DECIDE THE PRESENT DISPUTE THE KLRCA RULES PROVIDE FOR THE IMPOSITION OF COSTS ON ONE PARTY THAT THE LEGAL PRINCIPLES IN THE UNITED NATIONS CONVENTION ON INTERNATIONAL SALE OF GOODS SHOULD GOVERN THIS DISPUTE THE UNITED NATIONS CONVENTION ON INTERNATIONAL SALE OF GOODS IS APPLICABLE SINCE ASTORIA IS A CONTRACTING PARTY... 13

4 THE UNCISG IS THE CONVENTION APPLICABLE TO TRANSACTIONS OF INTERNATIONAL SALE OF GOODS THE RULES OF PRIVATE INTERNATIONAL LAW APPLICABLE IN THE INSTANT CASE ARE THE AMERICAN LAW INSTITUTE UNIFORM COMMERCIAL CODE AND THE RESTATEMENT (SECOND) OF CONFLICT OF LAWS THE ARTICLES OF THE AMERICAN LAW INSTITUTE UNIFORM COMMERCIAL CODE LEAD TO THE APPLICATION OF THE UNCISG THE PRINCIPLES OF THE RESTATEMENT (SECOND) OF CONFLICT OF LAWS LEAD TO THE APPLICATION OF UNCISG UNDER ARTICLE 7, PRINCIPLES OF UNIDROIT CAN BE USED TO SUPPLEMENT THE UNCISG THAT THE SHIPMENT OF BANANAS ARRIVED AT ITS DESTINATION IN AN UNSATISFACTORY CONDITION DUE TO IMPROPER STORAGE DURING THE VOYAGE FROM ROLGA TO ASTORIA AND THIS CONSTITUTES A BREACH OF THE SELLER S OBLIGATION UNDER THE CONTRACT BETWEEN THE PARTIES THE BANANAS WERE IMPROPERLY STORED DURING THE VOYAGE ON MS PINAFORE THAT THE GOODS DELIVERED MUST BE IN CONFORMITY WITH THE CONTRACT THE GOODS SHOULD BE FIT FOR THE PARTICULAR PURPOSE OF THE CONTRACT THE PARTICULAR PURPOSE MUST BE COMMUNICATED TO THE SELLERS NON CONFORMITY WITH THE CONTRACT AMOUNTS TO FUNDAMENTAL BREACH OF THE CONTRACT THE SELLER IS LIABLE FOR NON CONFORMITY EVEN AFTER THE PASSING OF RISK... 23

5 6. THAT THE SELLER HAD A LEGAL OBLIGATION TO TAKE MEASURES TO PROTECT THE BANANAS FROM FURTHER SPOILAGE AND TO ATTEMPT TO SELL THE BANANAS AS SOON AS PRACTICABLE AFTER THE PINAFORE DOCKED THE SELLER, RFE IS LIABLE TO PRESERVE THE BANANAS UNDER THE UNCISG, ARTICLE IN CASE OF PERISHABLE ITEMS, THE PARTY OBLIGED TO PRESERVE THEM MUST TAKE MEASURES TO SEE THE GOODS UNDER ARTICLE PRAYER FOR RELIEF... 28

6 i INDEX OF AUTHORITIES ARTICLES Bibliography Information Blodgett Paul, The UN Convention on the Sale of Goods and the Battle of Page No. 2 Forms (1989) 18 Colorado Lawyer < lio/blodgett.html>. Burton John, The Uniform Commercial Code and Conflict of Laws (1960) 14 9(3) The American Journal of Comparative Law < Kazimierska Anna, The Remedy of Avoidance under the Vienna 21 Convention on the International Sale of Goods ( ) Pace Review of the Convention on Contracts for the International Sale of Goods < Schlechtriem Peter, Battle of the Forms in International Contract Law 3 (1999) 70 Festschrift für Rolf Herber < Viscasillas Maria del Pilar Perales, Battle of the Forms Under the United Nations Convention on Contracts for the International Sale of Goods: a Comparison with Section UCC and the UNIDROIT Principles (1998) 10 Pace International Law Review < Viscasillas Maria del Pilar Perales, Battle of the Forms and the Burden of 3

7 ii Proof: An Analysis of BGH 9 January 2002 (2002) 6(2) Vindobona Journal of International Commercial Law & Arbitration < BOOKS Bibliography Information Bernstein Herbert and Lookofsky Joseph, Understanding the CISG in Page No. 27 Europe: A Compact Guide to the 1980 United Nations Convention on Contracts for the International Sale of Goods (Kluwer Law International 1997). Bianca CM and Bonell MJ, Commentary on the International Sales Law: The 27, Vienna Sales Convention (Giuffre 1987). Bridge Michael, The International Sale of Goods: Law and Practice (2 nd edn, 25 Oxford University Press 2007). DiMatteo Larry, International Sales Law: A Critical Analysis of CISG 17 Jurisprudence (1 st edn, Cambridge University Press 2005). Felemegas John, An International Approach to the Interpretation of the 24 United Nations Convention on Contracts for the International Sale of Goods (1980) as Uniform Sales Law (1 st edn, Cambridge University Press 2007). Honnold John, Uniform Law for International Sales under the 1980 United 3, 5 Nations Convention (3 rd edn, Kluwer Law International 1999). Lookofsky Joseph and Bernstein Herbert, Understanding the CISG: A 21 Compact Guide to the 1980 United Nations Convention on Contracts for

8 iii International Sale of Goods (3 rd edn, Kluwer Law International 2008). Morrissey Joseph and Graves Jack, International Sales Law and Arbitration: 5 Problems, Cases and Commentary (Wolters Kluwer 2008). Redfern Alan and Hunter Martin, Law and Practice of International 9, 11 Commercial Arbitration (4 th edn, Sweet & Maxwell 2006). Schlechtriem Peter and Butler Petra, UN Law on International Sales: The UN 3 Convention on the International Sale of Goods (Springer 2008). Schwenzer Ingeborg and Fountoulakis Christiana, International Sales Law 5 (1 st edn, Taylor and Francis 2007). Webster Thomas, Handbook of UNCITRAL Arbitration (Sweet & Maxwell ). CASES CHINA Bibliography Information CISG/1991/03 decided by China International Economic and Trade Page No. 28 Arbitration Commission Shenzhen Commission on 6 June 1991 (China) < GERMANY

9 iv Bibliography Information Powdered Milk case VIII ZR 304/00 decided by Bundesgerichtshof [Federal Page No. 5 Supreme Court] on January < ases/020109g1.html> 5 U 209/94 decided by OLG Frankfurt/M on May < VIII ZR 51/95 decided by Bundesgerichtshof [Federal Supreme Court] on 24 April < 7 U 4427/97 decided by OLG München on March < Decided by Schiedsgericht Hamburger Freundschaftliche Arbitrage on 26 December < 1 U 31/99 decided by OLG Hamburg on November , 28 < 8 O 49/02 decided by LG Saarbr ucken on July < INTERNATIONAL CHAMBER OF COMMERCE INTERNATIONAL COURT OF ARBITRATION CASES Bibliography Information 7531 decided by Court of Arbitration of the International Chamber of Page No. 24, 26 Commerce in 1994 < NETHERLANDS

10 v Bibliography Information 2319 decided by Netherlands Arbitration Institute on 15 October 2002 Page No. 22 < RUSSIA Bibliography Information 340/1999 decided by Tribunal of International Commercial Arbitration at the Page No. 27 Russian Federation Chamber of Commerce and Industry on February (Russia) < SWITZERLAND Bibliography Information FCF SA v Adriafil Commerciale Srl 4C.105/2000 decided by BGer on 15 Page No. 24 September 2000 (Switzerland) < s2.html> decided by Tribunal Cantonal Vaud on 17 May (Switzerland) < UNITED KINGDOM Bibliography Information Page No. Lesotho Highlands Development Authority v Impregilo SpA [2006] 1 AC 18

11 vi 221 (HL) UNITED STATES OF AMERICA Bibliography Information Page No. Delchi Carrier SpA v Rotorex Corp 71 F3d 1024 (2d Cir 1995) 25 Filanto v Chilewich 789 F Supp 1229 (SDNY 1992) 4, 5 Geneva Pharmaceuticals Techn Corp v Barr Laboratories, Inc et al 201 F 23 Supp 2d 236 (SDNY 2002) Karaha Bodas Co LLC v Perusahaan Pertambangan Minyak Das Gas Bumi 10 Negara 364 F3d 274 (5 th Cir 2004) Magellan Int l Corp v Salzgitter Handel GmbH 1999 US Dist LEXIS Medical Marketing International, Inc v Internazionale Medico Scientifica, Srl (1) Section K 1 decided by US District Court, Eastern District of Louisiana on May (United States) < UN CONVENTIONS AND OTHER TREATIES Bibliographical Information Page No. Uniform Commercial Code , 3, 14 United Nations Convention on Contracts for the International Sale of Goods (UNCISG) , 4, 13, 21, 22, 23, 24, 25, 26,

12 vii 28 United Nations Commission on International Trade Law (UNCITRAL) Rules 7, 8, OTHER RULES Bibliographical Information Page No. Kuala Lumpur Regional Centre for Arbitration Rules , 8, 9, 11, Restatement (Second) of Conflict of Laws 15, 16, OTHER USEFUL SOURCES Bibliography Information Secretariat Commentary, Guide to CISG Article 87 < Page No. 27 ace.edu/cisg/text/secomm/secomm87.html>. Secretariat Commentary, Guide to CISG article 88 < 28 ce.edu/cisg/text/secomm/secomm88.html>.

13 viii STATEMENT OF JURISDICTION Astoria Produce Company has submitted the present dispute to be settled by arbitration in accordance with the Rules of the Kuala Lumpur Regional Centre for Arbitration pursuant to a written agreement executed by the parties. The parties shall accept the award of this Tribunal as final and binding and shall execute it in good faith and entirety.

14 ix QUESTIONS PRESENTED I WHETHER THERE WAS AN AGREEMENT BETWEEN THE PARTIES TO SUBMIT THE PRESENT DISPUTE TO THE KLRCA? II WHETHER RFE WAS IMPROPERLY DENIED THE OPPORTUNITY TO SELECT ITS PARTY APPOINTED ARBITRATOR AND WHETHER THE PRESIDING ARBITRATOR OR CHAIRMAN WAS PROPERLY APPOINTED? III WHETHER THE ARBITRATION PANEL HAS THE AUTHORITY TO IMPOSE SANCTIONS IN THE FORM OF A FINE ON RFE FOR FAILING TO APPEAR AT THE INITIAL HEARING AND/OR FOR NOT PROVIDING ADEQUATE NOTICE THAT IT WOULD NOT APPEAR? IV WHETHER THE LEGAL PRINCIPLES IN THE UNITED NATIONS CONVENTION ON INTERNATIONAL SALE OF GOODS SHOULD GOVERN THIS DISPUTE? V WHETHER THE SHIPMENT OF BANANAS ARRIVED AT ITS DESTINATION IN AN UNSATISFACTORY CONDITION DUE TO IMPROPER STORAGE DURING THE VOYAGE CONSTITUTING A BREACH OF THE SELLER S OBLIGATION?

15 x VI WHETHER THE SELLER HAD A LEGAL OBLIGATION TO TAKE MEASURES TO PROTECT THE BANANAS FORM FURTHER SPOILAGE AND TO ATTEMPT TO SELL THE BANANAS AS SOON AS PRACTICABLE AFTER THE PINAFORE DOCKED?

16 xi STATEMENT OF FACTS THE PARTIES TO THE CONTRACT The parties to the Contract were Astoria Produce, a major distributor of produce to retail grocery stores in Astoria, and Rolga Farmer s Exchange, a farmer s cooperative made according to the laws in Rolga. THE TERMS OF THE CONTRACT The contract was for the delivery of a large shipment of bananas from RFE to AP initiated on 15 July 2010 through the telephone, with a confirming Bill of Sale sent by RFE to AP the next day containing shipment terms of FOB Rolga. The Bill of Sale contained a forum selection clause sent from RFE to AP whose terms were altered by AP at the time of acceptance, as the Rules of arbitration were made KLRCA from those of the Western Pacific Regional; the number of Arbitrators was changed from one to three; and place of arbitration from Rolga City to Kuala Lumpur. RFE loaded the bananas on the M/S PINAFORE on 21 September A clean Bill of Lading was signed by the Captain on 23 September containing Special Instructions This cargo of bananas must be stored in a cool, dry location with good circulation to prevent spoilage. THE DELIVERY OF THE BANANAS A Letter of Credit was delivered to RFE and they were paid in full on the procurement of required documents to the confirming bank on 30 September. On 24 November, the M/S PINAFORE arrived in Astoria and was inspected by the Director of Food Safety of AP and an Astorian Agriculture Department inspector, where some bananas were found to be ripe or ripening. A report by a professional Maritime Surveyor on the next day showed that 30 percent of the bananas were ripening and most were in the number 2 hold that was tightly

17 xii stowed. The bananas in the number 1 hold were hung by the stem. However, he found that the problem was due to their transportation, and that the cartons used for transport were well ventilated. On the basis of this report, and other observations, RFE was informed through on 26 November that the bananas were rejected by AP and a full refund of the amount paid was expected within 30 days. RFE responded immediately with a refusal to return the money, stating that most of the bananas could still be sold to numerous commercial bakers in Astoria and that they did not have any responsibility over the damage caused, since their responsibility ended with the loading of the bananas on the M/S PINAFORE. The M/S PINAFORE had other ports of call and so the bananas were stored in a warehouse to be picked up and the owner of the warehouse would not be responsible beyond forty eight hours; after they were not picked up for two days, the ripening of the bananas was found to be 54 percent which made it economically unfeasible for any to be sorted and sold, and the warehouse owner and Astorian Agriculture Department dumped the lot. THE ARBITRATION On June 1, the present arbitration was commenced by AP with a request to KLRCA under Rule 3 of UNCITRAL Arbitration Rules Bernard Bodd was the arbitrator appointed by them. RFE did not respond to the notices sent by the Director about the filing of the Request for Arbitration or the request to appoint an arbitrator in 30 days, though it does not deny receiving them. After the lapse of 45 days, the Director appointed Riska Benti as the arbitrator for RFE and Judge John Chong as the presiding arbitrator. An initial hearing was to be held on 15 August, less than an hour before which RFE informed the Director that they would not appear at the hearing since they intended to challenge the Tribunal s jurisdiction. On being told that they would not waive their right to challenge jurisdiction on appearance, another hearing was fixed for 10 October, where RFE was to appear. Shortly hereafter, RFE

18 xiii informed the Director that they wanted an attorney to be their party appointed arbitrator, but this request was denied since it was too late to substitute their own arbitrator for the one already appointed. Subsequently, a fire destroyed the M/S PINAFORE at sea and the owners were now insolvent, so no damages would be sought from the owners for any mishandling of cargos of bananas.

19 xiv SUMMARY OF PLEADINGS I. THAT THERE WAS AN AGREEMENT BETWEEN THE PARTIES TO SUBMIT THE PRESENT DISPUTE TO THE KLRCA. Both Parties agreed for the dispute to be resolved by KLRCA since the acceptance containing altered terms of the contract was not objected to by RFE, and their conduct amounted to acceptance. In the case, the modified terms of the acceptance were non material terms and were accepted in the contract, since they were not objected to; alternatively, they formed a counter offer due to material alteration of terms, which was accepted by RFE on their performance of the contract. II. THAT RFE WAS NOT IMPROPERLY DENIED THE OPPORTUNITY TO SELECT ITS PARTY APPOINTED ARBITRATOR AND THE PRESIDING ARBITRATOR OR CHAIRMAN WAS PROPERLY APPOINTED. RFE was given notice of the arbitration and to time to appoint its arbitrator, however, the failure of RFE to do so in the prescribed time meant that the appointing authority had the authority to appoint the arbitrator and the chairman, according to the KLRCA Rules and UNCITRAL Rules. III. THAT THE ARBITRATION PANEL HAS THE AUTHORITY TO IMPOSE SANCTIONS IN THE FORM OF A FINE ON RFE FOR FAILING TO APPEAR AT THE INITIAL HEARING AND/OR FOR NOT PROVIDING ADEQUATE NOTICE THAT IT WOULD NOT APPEAR. The Arbitral Tribunal has jurisdiction over the present dispute however, the sanction to be imposed on RFE has not been requested by the Claimants and is of the

20 xv Tribunal s own cognizance, and the Tribunal may impose costs on RFE in accordance with the KLRCA Rules. IV. THAT THE LEGAL PRINCIPLES IN THE UNITED NATIONS CONVENTION ON INTERNATIONAL SALE OF GOODS SHOULD GOVERN THIS DISPUTE. The UNCISG is the applicable law to the dispute since Astoria is a Contracting State and the rules of private international law indicate that the place with the most reasonable and appropriate relationship should be applied to the dispute. The UNCISG is also appropriate law since UNIDROIT are general principles that can be used to supplement UNCISG. V. THAT THE SHIPMENT OF BANANAS ARRIVED AT ITS DESTINATION IN AN UNSATISFACTORY CONDITION DUE TO IMPROPER STORAGE DURING THE VOYAGE AND THIS CONSTITUTES A BREACH OF THE SELLER S OBLIGATION. The bananas were improperly stored during their voyage and the terms of the bill of lading were not complied with. Further, it is an obligation of the seller to deliver goods in conformity with the contract and fit for their particular purpose. A failure to do so amounts to a fundamental breach of the seller s obligations. VI. THAT THE SELLER HAD A LEGAL OBLIGATION TO TAKE MEASURES TO PROTECT THE BANANAS FROM FURTHER SPOILAGE AND TO ATTEMPT TO SELL THE BANANAS AS SOON AS PRACTICABLE AFTER THE PINAFORE DOCKED. The UNCISG states that the seller is liable to preserve the goods if the buyer is in delay of taking delivery. If the goods are perishable in nature, then the seller also has a duty to try to sell as many of them as possible to prevent deterioration.

21 1 PLEADINGS ADVANCED THAT THERE WAS AN AGREEMENT BETWEEN THE PARTIES TO SUBMIT THE PRESENT DISPUTE TO THE KLRCA Both parties agreed to the dispute being resolved by KLRCA The issue before the Tribunal is that the contract entered into between AP and RFE had contradictory terms in the forum selection clause, and the question is whether AP s modified acceptance would be binding on RFE. In the instant case, the sellers had added a clause for dispute resolution through arbitration which had a forum selection clause which was included in the Bill of Sale, sent to the buyer by the seller through an . In the response to this Bill of Sale, the buyer accepted the terms of the contract but included certain modifications in the forum selection clause, which changed the applicable rules to those of KLRCA with three arbitrators and the place of arbitration in Kuala Lumpur The acceptance was a modification altering non material terms of the contract, and was accepted by the sellers since no objection was raised by them. In the instant case, the reply to the original Bill of Sale was an acceptance which contains additional or different terms which do not materially alter the terms of the offer and constitutes an acceptance, 1 unless the offeror, without undue delay, objects orally to the discrepancy or dispatches a notice to that effect, in the absence of such an objection the modified terms of the acceptance become the terms of the offer. 2 1 UNCISG 1980, art 19(2). 2 ibid. --MEMORIAL FOR CLAIMANT --

22 2 Another law under which the matter of battle of forms has been dealt with, which is applicable in the instant case, is UCC article 2-207, wherein a contract formed in any manner is confirmed by a record that contains terms additional to or different from those in the contract being confirmed, under which an expression of acceptance operates as an acceptance and, therefore, concludes a contract, even though it states terms additional to or different from those contained in the offer. 3 The additional terms are considered as proposals for addition to the contract and between merchants and become part of the contract unless: (1) the offer expressly limits acceptance to the terms of the offer; (2) the terms materially alter the offer; or (3) notification of objection to the terms has already been given or is given within a reasonable time after notice has been received. 4 Therefore, where the terms of the acceptance form do not expressly limit acceptance to its own terms, that is, the acceptance is not expressly on the condition of the altered terms being accepted and both parties are merchants, offeror s acceptance of offeree s performance, though offeree s forms contain additional or different terms, forms a contract. 5 In the UNCISG, read with UCC article 2-207, a written acceptance or a written confirmation is valid even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional terms. 6 3 Paul Blodgett, The UN Convention on the Sale of Goods and the Battle of Forms (1989) 18 Colorado Lawyer < accessed 2 July Colorado Revised Statutes 2008, (2). 5 Maria del Pilar Perales Viscasillas, Battle of the Forms Under the 1980 United Nations Convention on Contracts for the International Sale of Goods: a Comparison with section UCC and the UNIDROIT Principles (1998) 10 Pace International Law Review < accessed 14 July Uniform Commercial Code 2001, 2-207(1).

23 3 The solution to the more difficult problem of which terms enter into the contract 7 has been offered as the last shot rule, which means that the terms provided in the acceptance control the contract. 8 The modified contract that will govern the terms of the transaction is the last one to be made before the sale of the goods goes forward, the acceptance in this is deemed to be the conduct of the party engaging in the transaction. 9 This is the last shot doctrine. 10 The logic is that the offeror has an implied duty to object to the additional or conflicting terms. Failing to object to additional or conflicting terms and then proceeding to perform on the contract results in a finding of an implied consent to the terms of the acceptance. This is seen in a case of the German Court where the buyer of cashmere sweaters accepted the seller s additional terms, which incorporated the Standard Conditions of the German Textile Industry by performing under the contract. 11 If a party continues to perform or fails to object in a timely manner to additional terms, she runs the risk that her conduct, silence, or act of performance will be interpreted by a Court as an acceptance of the disputed term. 12 In Magellan Int l Corp v Salzgitter Handel GmbH, the Court found that a contract was formed when a distributor indicated assent by opening a letter of credit. 13 The Court held that the terms of the contract were those agreed on at the time the letter of credit was opened. 7 Peter Schlechtriem, Battle of the Forms in International Contract Law (1999) 70 Festschrift für Rolf Herber < accessed 21 July Maria del Pilar Perales Viscasillas, Battle of the Forms and the Burden of Proof: An Analysis of BGH 9 January 2002 (2002) 6(2) Vindobona Journal of International Commercial Law & Arbitration < u/cisg/biblio/perales2.html> accessed 23 July Peter Schlechtriem and Petra Butler, UN Law on International Sales: The UN Convention on the International Sale of Goods (Springer 2008) John Honnold, Uniform Law for International Sales under the 1980 United Nations Convention (3 rd edn, Kluwer Law International 1999) 190, U 4427/97 decided by OLG München on 11 March 1998 (Germany) < wais/db/cases2/ g1.html> accessed 23 July Filanto v Chilewich 789 F Supp 1229, 1240 (SDNY 1992) US Dist LEXIS

24 4 In the instant case, the buyer incorporated a different forum selection clause at the time of accepting the Bill of Sale and the seller not only loaded the bananas on the ship at the Rolga City port as per the contract but also opened the letter of credit, thereby accepting the altered terms of the contract The acceptance was a counter offer altering material terms, and was accepted by the conduct of the seller. The other alternative is that the reply to an offer which purports to be an acceptance but contains additions, limitations or other modifications is a rejection of the offer and constitutes a counter-offer. 14 In this case, the counteroffer needs to be accepted by the other party, in the instant case, the sellers, and the conduct of delivering the goods and opening the letter of credit signifies assent. 15 A German Court held, in the case of acceptance of a different quantity of shoes in delivery that a different quantity was a material change in the terms of the contract so the delivery was a counteroffer that the buyer accepted by taking the goods. 16 Therefore, even when the terms of the contract are materially altered so as to signify a counter offer, conduct can be acceptance. 17 The alteration in the instant case was of the forum selection clause for dispute resolution through arbitration, and a similar issue arose in Filanto v Chilewich, 18 where the Court found that a manufacturer accepted an arbitration provision as part of the agreement, because he failed to object in a timely manner and commenced performance by opening a letter of credit. The Court held that the term was accepted despite the fact that the 14 UNCISG 1980, art 19(1). 15 UNCISG 1980, art 18(1) U 209/94 decided by OLG Frankfurt/M on 23 May 1995 (Germany) < accessed 27 July Honnold (n 10) Filanto (n 12).

25 5 manufacturer repeatedly objected during negotiations to the incorporation of an arbitration clause and that such a clause is a material term under article 19(3). 19 It has also been stated that since battle of forms situations rarely conclude with a reply that matches the counter offer, the typical acceptance actually occurs through conduct or silence indicating acceptance. 20 If the last counter offer was made by the buyer, and the seller proceeds to ship the goods, then the seller s conduct in shipping the goods would rise to the level of acceptance and the buyer s last counter offer will dictate the terms of the contract. 21 Therefore, even if the modified forum selection clause is a material alteration of the contract making it a rejection of the original offer and a counter offer, it stands accepted by the seller when they performed their obligations under the contract. 19 Ingeborg Schwenzer and Christiana Fountoulakis, International Sales Law (1st edn, Taylor and Francis 2007) Powdered Milk case VIII ZR 304/00 decided by Bundesgerichtshof [Federal Supreme Court] on 9 January 2002 (Germany) < accessed 12 July Joseph Morrissey and Jack Graves, International Sales Law and Arbitration: Problems, Cases and Commentary (Wolters Kluwer 2008) 123.

26 6 THAT RFE WAS NOT IMPROPERLY DENIED THE OPPORTUNITY TO SELECT ITS PARTY APPOINTED ARBITRATOR AND THE PRESIDING ARBITRATOR OR CHAIRMAN WAS PROPERLY APPOINTED. Article 9(2) of the UNCITRAL Arbitration Rules, 2010 provides that [I]f within 30 days after the receipt of a party s notification of the appointment of an arbitrator the other party has not notified the first party of the arbitrator it has appointed, the first party may request the appointing authority to appoint the second arbitrator That RFE failed to appoint arbitrators within the prescribed time period RFE was given adequate notice of the arbitration and time to appoint the arbitrators. The rule clearly provides a 30 day limit to the appointment of the arbitrator by the other party incase three arbitrators are to be appointed. In the case at hand, three arbitrators were to be appointed as agreed between the parties. AP appointed its arbitrator, but RFE failed to appoint an arbitrator within 30 days of receiving the notification by the Center s Director on June 15, 2011, despite the 30 day limit specifically mentioned by the Director, thus violating article 9(2) of the UNCITRAL Arbitration Rules, Article 9(2) states that the first party may request the appointing authority. It nowhere makes it mandatory on the first party to request the appointing authority for the appointment of the second arbitrator. Thus, even though a request was not made to KLRCA by AP for the appointment of a second arbitrator, appointment of a second arbitrator for the failure of RFE by the KLRCA Director, in no way violated any provisions of UNCITRAL Rules 2010.

27 7 The notice of Request for Arbitration filed by AP was sent to RFE by the KLRCA Director along with the KLRCA Rules Also, the notice for appointment of an Arbitrator within 30 days was sent by the Director to RFE. RFE has not denied receiving both of these notices. 22 Therefore, it is not in dispute that the notice of arbitration was received by RFE That KLRCA was the appropriate appointing authority KLRCA Rules of Arbitration provide for the appointment of an appointing authority in the absence of an agreement of the parties. Rule 3(1) of the KLRCA Rules provides that unless the parties have agreed otherwise, the KLRCA shall be the appointing authority under the following circumstances: a) If within 40 days from the date the notice of arbitration is received by the respondent, no appointing authority: i) is designated, whether pursuant to a proposal under article 6 of the UNCITRAL Arbitration Rules or otherwise. In the present case, for the failure of RFE to appoint its arbitrator within the 30 day time limit from the date of receiving the notice for the Request of Arbitration, the KLRCA Director appointed the second arbitrator 45 days after RFE received the notices. Since no appointing authority was agreed upon between the parties within 40 days from the date the respondent RFE received the notice of arbitration, KLRCA itself becomes the appointing authority by virtue of rule 3(1)(a)(i) of the KLRCA Rules That a presiding or second arbitrator may be appointed by KLRCA. 22 Moot Problem, 4.

28 Rule 3(2) of the KLRCA Rules 2010 provide for the appointment of an arbitrator by the Director. Rule 3(2) of the KLRCA Rules 2010 provides that where the KLRCA is to appoint a sole, presiding, second or substitute arbitrator, the Director of the KLRCA shall appoint such arbitrator in accordance with the Rules and in doing so may exercise all the powers and discretions specified in the Rules. Article 9(2) of the UNCITRAL Rules 2010 sets out no procedure or criterion that is to be applied by the appointing authority in appointing a co-arbitrator. If one party is not participating, then it would be very unusual for the appointing authority to consult with the parties as to the appointment, as the defaulting party would not probably respond. As a result, such consultation could result in further imbalance as between the parties. In the absence of a set procedure or criteria, institutional appointing authorities will make the appointment based on their practice under their own rules. 23 Thus, in the present case, the Director of KLRCA in accordance with the powers to appoint a second arbitrator vested in him by virtue of rule 3(2) of the KLRCA Rules 2010, appointed the second arbitrator The purpose of choosing an arbitrator was served in this case. The sole purpose of allowing the party to nominate its own arbitrator is that it gives the party concerned a feeling of confidence in the Arbitral Tribunal. This is particularly important in an international commercial arbitration where, in addition to the matters formally in issue, there may well be differences of language, tradition and culture between the parties and, indeed, between the members of the Arbitral Tribunal themselves Thomas Webster, Handbook of UNCITRAL Arbitration (Sweet & Maxwell 2010) Alan Redfern & Martin Hunter, Law and Practice of International Commercial Arbitration (4 th edn, Sweet & Maxwell 2006) 185.

29 9 Therefore, the KLRCA Director to ensure a balance in the composition of the Tribunal, appointed a Rolgan attorney as the arbitrator for RFE. In the case of Karaha Bodas Co LLC v Perusahaan Pertambangan Minyak Das Gas Bumi Negara, 25 on the failure of the respondent to appoint the second arbitrator within 30 days, ICSID (the appointing authority) appointed the second arbitrator. Since, there was no objection or responses to the proposed appointment raised by the respondent, the second arbitrator s appointment by ICSID was treated as final. Relying on the above decision, since there was no objection raised by the respondent RFE as to the competence and integrity of the second arbitrator appointed by the KLRCA Director, the appointment of the second arbitrator must be considered final. As far as the appointment of the presiding arbitrator is concerned, the Director of KLRCA appointed him. There was no objection raised by either the claimant or the respondent as to the integrity and competence of the presiding arbitrator. Therefore, it is humbly submitted that appointment of the presiding arbitrator was not in dispute at all F3d 274, 297 (5 th Cir 2004).

30 10 THAT THE ARBITRATION PANEL HAS THE AUTHORITY TO IMPOSE SANCTIONS IN THE FORM OF A FINE ON RFE FOR FAILING TO APPEAR AT THE INITIAL HEARING AND/ OR FOR NOT PROVIDING ADEQUATE NOTICE THAT IT WOULD NOT APPEAR. An Arbitral Tribunal may only validly determine those disputes that the parties have agreed that it should determine. This rule is an inevitable and proper consequence of the voluntary nature of arbitration The Tribunal has the jurisdiction to decide the present dispute. In the instant case, the Arbitral Tribunal clearly had the jurisdiction to decide the dispute between AP and RFE, since it was voluntarily agreed upon between the parties that any dispute, controversy or claim arising out of or in relation to the contract, or breach, termination or invalidity shall be settled by arbitration in accordance with the KLRCA Rules. 27 The Arbitral Tribunal was appointed for this purpose and had the complete jurisdiction over all the matters pertaining to the dispute arising out of the contract between AP and RFE. Even so, AP did not seek imposition of sanction in the form of fine on RFE, it was Tribunal s complete discretion to do so, as it had the complete jurisdiction over the matter. Also, despite receiving timely notice for the initial hearing, RFE did not send a reply anytime but one hour before the initial hearing. This was very unreasonable on its part The KLRCA Rules provide for the imposition of costs on one party. Rule 7 of the KLRCA Rules 2010 states that the term costs include the expenses reasonably incurred by the KLRCA in connection with the arbitration, the administrative charges of the 26 Redfern (n 24) Moot Problem, 2.

31 11 KLRCA as well as the cost of the facilities made available by the KLRCA under rule 4 28 and not paid for by the parties in the first instance. The expenses involved for the initial hearing scheduled for August 15, 2011 should not be borne by Claimant AP at all, since it was only for the negligence of RFE that the hearing scheduled for August 15 had to be rescheduled. This indeed could be recovered by imposing fine on RFE. Thus, even though AP did not expressly ask the Tribunal to impose any such fine on RFE, it did so with regards to having the complete jurisdiction over the dispute. 28 KLRCA Rules 2010, rule 4.

32 12 THAT THE LEGAL PRINCIPLES IN THE UNITED NATIONS CONVENTION ON INTERNATIONAL SALE OF GOODS SHOULD GOVERN THIS DISPUTE. In the instant case, the matter of the dispute has to be resolved by the Hon ble Tribunal applying a certain substantive law to the dispute, and it is the submission of the Applicants that the legal principles espoused by the United Nations Convention on International Sale of Goods (UNCISG) is the applicable law The United Nations Convention on International Sale of Goods is applicable since Astoria is a contracting party The UNCISG is the Convention applicable to transactions of international sale of goods. The UNCISG is applicable to international sales, and article 1 lays out the applicability of the Convention. Under article 1, the convention is applicable either when both parties are contracting states to the UNCISG 29 or alternatively, when both parties are not contracting states, when the rules of private international law lead to the application of the law of a Contracting State. 30 In the instant case, Astoria is a Contracting State but Rolga is not, however, the application of the rules of private international law in terms of the choice of law in Astoria are the American Law Institute Uniform Commercial Code and the Restatement (Second) of Conflict of Laws, which lead to the application of the law of the Contracting State, that is Astoria. In the instant case, Astoria is a Contracting State but Rolga is not, however, the application of the rules of private international law in terms of the choice of law in Astoria are the 29 UNCISG 1980, art 1(1)(a). 30 UNCISG 1980, art 1(1)(b).

33 13 American Law Institute Uniform Commercial Code and the Restatement (Second) of Conflict of Laws, which lead to the application of the law of the Contracting State, that is Astoria. The rules of private international law applicable in the instant case are the American Law Institute Uniform Commercial Code and the Restatement (Second) of Conflict of Laws The rules of private international law applicable in the instant case are the American Law Institute Uniform Commercial Code and the Restatement (Second) of Conflict of Laws The articles of the American Law Institute Uniform Commercial Code lead to the application of the UNCISG. The American Law Institute Uniform Commercial Code (UCC) is the code adopted by Astoria, and in article 1 of the Code, the territorial application and the power of the parties to choose their own applicable law states that in case of an international transaction, the parties may choose any law which bears a reasonable relation to the transaction in question. 31 In application, courts consider a jurisdiction to have a substantial enough connection with a transaction if it is the place of making or the place of performance. 32 The Official Comments to the UCC however state that a legitimate choice is of a jurisdiction where a significant enough portion of the making or performance of the contract is to occur or occurs. 33 On the meaning of reasonable relation, despite the various interpretations of the term, no court can refuse the parties the right to choose between the law of the place of performance and the law of the place of contracting, and is applicable whenever a 31 Uniform Commercial Code 2001, art John Burton, The Uniform Commercial Code and Conflict of Laws (1960) 9(3) The American Journal of Comparative Law < accessed 8 August ibid.

34 14 transaction [had] a sufficient contact or relationship with a state having the Code to make such an application reasonable and not arbitrary. 34 In this case, the making of the contract took place over the internet, so no one place of making is possible; however the performance and conclusion of the Contract were to take place in Astoria after the goods had reached there, and so the law of Astoria bears a reasonable and significant enough relation to the transaction to be applicable The principles of the Restatement (Second) of Conflict of Laws lead to the application of UNCISG. The Restatement (Second) has been adopted by Astoria only to the extent of section 6 of the Restatement, which lays down the principles to be applied for the choice of law in the absence of an agreement. The principles to be considered include the needs of the interstate and international systems, the relevant policies of the forum, the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue, the protection of justified expectations, the basic policies underlying the particular field of law, certainty, predictability and uniformity of result, and ease in the determination and application of the law to be applied. 35 The principles under section 6 have been applied in section 188 which states that the law that is to be deemed applicable to the transaction is one which has the most significant relationship to the transaction and the parties under the principles stated in section 6. Section 6 is to be applied keeping in mind those factors which are directed to the furtherance of the needs of the parties and by those factors which are directed to implementation of the basic policy underlying the particular field of law ibid. 35 Restatement (Second) of Conflict of Laws, s ibid.

35 15 In order to determine the most significant relationship the contacts to be taken into account to apply section 6 are of the place of contracting, the place of negotiation of the contract, the place of performance, the location of the subject matter of the contract, and the domicile, residence, nationality, place of incorporation and place of business of the parties. Each of these contacts has to be given relative importance with respect to the particular issue. 37 The place of formation of contract is considered to be the place where the last act necessary, under the forum s rules of offer and acceptance, to give the contract binding effect occurred. 38 The acceptance was given in Astoria, and made the contract binding to both parties. However, place of contracting rarely stands alone and is but one of several contacts in the state. 39 The contact of place of performance is not of much importance when there is no one single place of negotiation and agreement, as, for example, when the parties do not meet but rather conduct their negotiations from separate states by mail or telephone. 40 As for the place of contracting, the conclusion of the contract is considered of tantamount importance, as is the place where the goods were to be located, so even if the goods were originally in one place, the fact that they were intended to be transferred immediately after the contract was formed would lead to the application of the laws of the latter State. 41 Also to be taken into account is the party who actually took steps to protect its interests, 42 such as filing the application for arbitration. In the instant case, the bananas were immediately transported to Astoria, where they were to be located, and the party filing the application for dispute resolution was also Astoria Produce. 37 Restatement (Second) Conflict of Laws, s ibid. 39 ibid. 40 ibid. 41 ibid. 42 ibid.

36 Under article 7, principles of UNIDROIT can be used to supplement the UNCISG. Article 7(2) states that questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based. A broad interpretation of this methodology would require the use of express and implied general principles. General principles cover all UNCISG provisions and can be utilized to uncover implied principles that underlie specific provisions. 43 These principles express or implied are to be used for guidance in the interpretation of specific UNCISG provisions. Although the general principles encompassed within the UNIDROIT can certainly be considered applicable to transactions where they have been specified, and may also be used to supplement the provisions of the UNCISG, it would seem an unwonted imposition on the parties to apply the Principles where the contract is merely silent on the applicable law. 44 Therefore, it is submitted by the applicants that the rules of private international law as well as the inclusion of general principles makes the UNCISG the appropriate law to be applied. 43 Larry DiMatteo, International Sales Law: A Critical Analysis of CISG Jurisprudence (1 st edn, Cambridge University Press 2005) Lesotho Highlands Development Authority v Impregilo SpA [2006] 1 AC 221 (HL).

37 17 THAT THE SHIPMENT OF BANANAS ARRIVED AT ITS DESTINATION IN AN UNSATISFACTORY CONDITION DUE TO IMPROPER STORAGE DURING THE VOYAGE FROM ROLGA TO ASTORIA AND THIS CONSTITUTES A BREACH OF THE SELLER S OBLIGATION UNDER THE CONTRACT BETWEEN THE PARTIES. It is the submission of the applicants that the goods were not properly stored and transported during the voyage from Rolga to Astoria, and as a consequence, the duty of the seller under the contract has been breached The bananas were improperly stored during the voyage on MS Pinafore. The condition in which the bananas were to be transported was made clear to the sellers by the buyers at the outset. In the s that were exchanged between the parties and the initial conversations it was made clear that AP was a major distributor to retail grocery stores throughout Astoria. 45 RFE was also informed that in order for the bananas to be sold to the grocery stores, they must be in an unripened (still green) condition. They must be stored in a cool location on the ship where the temperature will not exceed 12 or 13 C. 46 The sellers, RFE also responded to this , clarifying that they understood the details and would ensure delivery of bananas in the expected condition. It is clear from the communication between AP and RFE that the sellers understood the condition in which the bananas had to be transported and stored during the voyage, and took responsibility for ensuring that the bananas should receive special care while on the ship. The clean Bill of Lading that was signed by the captain of the MS Pinafore, Renas Vermelho on September 23, It contained the following Special Instructions: 45 Moot Problem, Moot Problem, 7.

38 18 This cargo of bananas must be stored in a cool, dry location with good circulation to prevent spoilage. On reaching the docks at Astoria, the buyers inspected the goods that they had received, and also retained a professional Maritime Surveyor to examine the goods. Upon examination it was discovered that about 30 percent of the bananas were ripe or ripening although the expected and normal percentage was 3 to 5 percent, with 10 percent considered excessive. The ripening was due to the high temperatures at which they were transported, especially in the No. 2 hold where they were tightly stowed and no slots or separators were had been used to facilitate air flow between the cartons. 47 The treatment of the bananas and their transportation without proper storage facilities was in violation of the agreement between the parties and the clean Bill of Lading that had been signed, and was a breach of the contract between the parties That the goods delivered must be in conformity with the contract. Obligation of the seller that the goods should conform to the contract, has been laid down in article 35 of the UNCISG, and the contract that was entered into was specifically for unripened bananas, as has already been stated. Article 35 states the basic obligation of the seller to deliver goods of the quantity, quality, and description 48 required by the contract The goods should be fit for the particular purpose of the contract. Article 35(2)(b) requires that the goods delivered by the seller be fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the 47 Moot Problem, UNCISG 1980, art UNCISG 1980, art 5(1); Anna Kazimierska, The Remedy of Avoidance under the Vienna Convention on the International Sale of Goods ( ) Pace Review of the Convention on Contracts for the International Sale of Goods < accessed 18 July 2011.