ISSUE3: The right of avoiding the contract by CLAIMANT loses its effect

Table of Contents

Ⅰ. Statement of Facts

§.Parties

§.Application of CISG

Ⅱ. Introduction

§. Outline of the case

§.Time Table of Events

Ⅲ. Claim of Parties

§.Claimant Insisted next Argument

§.Respondent insist next Argument

Ⅳ. ISSUE

ISSUE 1：CLAIMANT cannot exercise the right to rely on the provisions of Article 42 CISG

Ⅰ. RESPONDENT investigates CLAIMANT for responsibility under Article 42

Ⅰ-1.Provisions of Article 42

Ⅰ-2. Interpretation of the Article

Ⅰ-3. Any right or claim of a third party based on intellectual property

Ⅰ-4. The probability that the buyer ought to have become aware of the right or claim

Ⅱ. CLAIMANT did not give notice to RESPONDENT within a reasonable time under Article 43(1) CISG

Ⅱ-1.Provisions of Article 43(1) CISG

Ⅱ-2. Requirements of Article 43(1) CISG

Ⅱ-3 . The letter from CLAIMANT to RESPONDENT is insufficient

Ⅱ-4 .CLAIMANT did not give notice within a reasonable time

Ⅱ-5 .Article 43(2) CISG is not applicable to RESPONDENT

ISSUE 2：The goods delivered by RESPONDENT is not Applied to fundamental breach of contract

under Article 25 CISG

Ⅰ

Ⅰ-1. Provision of Article

Ⅰ-2. Requirements of Article 25

Ⅱ

Ⅱ-1. Countermeasures of CLAIMANT against trademark infringement by Vis Fish Company

Ⅱ-2.Responsibility to prove the possibility of foresee

Ⅱ-3. Possibility of foresee and the time of that

Ⅱ-4. Relations between substantial damage against the expectation under the contract and foresee and the possibility of foresee by a debtor

Ⅱ-5. The intention that CLAIMANT exercise Article 25 CISG

Conclusion of Issue2

ISSUE 3：The right of avoiding the contract by CLAIMANT does not have its effect

Ⅰ

Ⅰ-1. Requirements of avoiding the contract

Ⅰ-2.Provisions pertaining to avoid contract

Ⅱ

Ⅱ-1. Claims by CLAIMANT

Ⅱ-2. Claims by RESPONDENT

ISSUE 4：Payment Damages

Ⅰ.The effect of avoiding the contract

Ⅱ.The obligation to mitigate damages

Ⅲ.RESPONDENT accept part of claims from CLAIMANT

Ⅳ.Remedy for CLAIMANT by Vis Water Sports

Ⅰ. Statement of Facts

§ Parties

CLAIMANT ： Sports and More Sports

principal office：214 Commercial Ave. , Oceanside, Danubia

RESPONDENT： Vis Water Sports

principal office： 395 Industrial Place, Capitol City, Equatoriana

§ Application of CISG

　　　Claimant Sports and More Sports is a buyer of the present contract and it’s place of business is located in Danubia. The respondent Vis Water Sports is a seller of the contract and it’s place of business is located in Equatoriana. Both Danubia and Equatoriana are parties to the United Nations Convention on Contracts for the International Sale of Goods. The present contract is a contract of sale of goods between parties whose place of business are in different states, Danubia and Equatoriana. Therefore, according to article 1(1)(a) CISG of the Convention, the CISG is applicable to the present contract.

Ⅱ. Introduction

§.Outline of the case

On 31 March 1999, Claimant received an announcement from Respondent that they had opened a new web site on the Internet. Negotiation were commenced by an E-mail massage from Claimant to Respondent on same day. After a short exchange of E-mails, a contract for the purchase of water sports equipment in the amount of list price $100,000 FOB Capital City was entered into on 31 March 1999.　The goods were delivered to Claimant and they saw that they would sell well in Danubia and on 25 May 1999 Claimant increased the size of its order by an additional list price of $500,000, which was accepted by Respondent on 28 May 1999. After the contract was concluded, Claimant sold and advertised the equipment.　On 20 September 1999, however, Claimant received a letter from Vis Fish Company stating that the trademark “Vis” was registered in Danubia by them. They also claimed that Claimant was violating their trademark.　On 4 October 1999, Claimant replied that it was not violating the trademark since it was inconceivable that anyone would confuse the athletic equipment. Vis Fish Company did not stop to claim to cease selling. Claimant, therefore, accepted their claims and decided to recall the equipment from the market in Danubia. Legal counsel notified Claimant that they were not violating the Vis Fish Company trademark. Claimant wrote Respondent informing it of the claim by Vis Fish Company and, since it was not possible to continue selling the Respondent equipment without risk of legal action against it, Claimant was avoiding the contract pursuant to Article 49 CISG. Claimant also referred to Articles 81 to 84 of the CISG and stated that it would propose just how it would make restitution of the unsold equipment and the amount of the price paid. Respondent rejected all of the claims of Claimant because there is no basis to avoid the contract. Claimant proposed that if Respondent was able to clarify that sale of its equipment would not lead to litigation arising out of claims of trademark infringement, Claimant would reconsider its avoidance of the two contracts. Respondent would not accept their proposition.　Claimant has withdrawn all of the unsold equipment from its stores and is currently storing it for the account of Respondent.

§Time Table of Events

31 March 1999 　 Sports and More Sports received in the mail an announcement from Vis Water Sports that they had opened a new web site on the Internet.

31 March 1999 An inquiry as to terms of purchase from Sports and More Sports by an E-mail was sent to Vis Water Sports.

2 April 1999 The answer of Sports and More Sports ‘s inquiry from Vis Water Sports by an E-mail.

5 April 1999 　Fast purchase order (No.6839) and condition of purchase from Sports and More Sports by an E-mail to Vis Water Sports.

6 April 1999 Acceptance of Vis Water Sports to Sports and More Sports by an E-mail.

19 May 1999 The goods were delivered by Vis Water Sports.

27 May 1999 Second purchase order from Sports and More Sports 　(No.6910) by an E-mail.

28 May 1999 Acceptance of second purchase order (No.6910) by Vis Water Sports to Sports and More Sports and total amount by E-mail.

20 September 1999 Vis Fish Company claims that Sports and More Sports is violating trademark to Sports and More Sports by a letter.

4 October 1999 Sports and More Sports rejected Vis Fish Company‘s demand.

15 October 1999 Threat of legal action by Vis Fish Company to Sports and More Sports.

28 October 1999 Legal opinion by Howard and Howard as to this trademark infringement.

3 November 1999 Sports and More Sports accepts Vis Fish Company‘s demand.

3 November 1999 Sports and More Sports informed Vis Water Sports that Vis Water Sports has violated its obligation under article 42 and declaration of avoiding the contract.

10 November 1999 Rejection of Vis Water Sports to demand of Sports and More Sports.

16 November 1999 Confirm of avoiding the contract by Sports and More Sports and subsequent procedural steps to Vis Water Sports.

Ⅲ.Claim of Parties

Claimant insisted next argument

Issue1- The contract and the arbitration agreement are valid

Issue2- Vis Water Sports did not sell goods free from a third party intellectual property claim

1.Seller’s obligation to deliver goods free from a third party claim based upon trademark rights

2.Buyer’s obligation to notify the seller of a third party claim within a reasonable Time

3.Conclusion regarding the trademark infringement

Issue3 - Sports had right to avoid the contract

1.Buyer’s right to avoid a contract for seller’s breach under Article49 CISG

2.Conclusion regarding the avoidance

Respondent Insists next Argument

Issue1- CLAIMANT cannot exercise the right to rely on the provisions of Article 42 CISG

Issue2- The goods delivered by RESPONDENT is not applied to fundamental breach of contract under Article 25 CISG

Issue3- The right of avoiding the contract by CLAIMANT does not have its effect

Issue4- Payment Damages

This Memorandum for Respondent is based on Memorandum for Claimant

ISSUES

ISSUE1: CLAIMANT cannot exercise the right to rely on the provisions of Article 42 CISG

Ⅰ. RESPONDENT investigates CLAIMANT for responsibility under Article 42.

Ⅰ-1.Provisions of Article 42

Article 42:

(1) The seller must deliver goods which are free from any right or claim of a third party based on industrial property or other intellectual property, of which at the time of the conclusion of the contract the seller knew or could not have been unaware, provided that the right or claim is based on industrial property or other intellectual property:

(a) under the law of the State where the goods will be resold or otherwise used, if it was contemplated by the parties at the time of the conclusion of the contract that the goods would be resold or otherwise used in that State; or

(b) in any other case, under the law of the State where the buyer has his place of business.

(2) The obligation of the seller under the preceding paragraph does not extend to cases where:

(a) at the time of the conclusion of the contract the buyer knew or could

not have been unaware of the right or claim; or

(b) the right or claim results from the seller's compliance with technical drawings, designs, formulae or other such specifications furnished by the buyer.

Ⅰ-2. Interpretation of the Article

The seller is obligated to deliver goods which are free from any rights or claim of a third party based on the other intellectual property. The goods, therefore, must not infringe any rights or claim and the right for its use. There is a case that the third party claims the right or claim. It is, however, required that the buyer is mala fide at the time of the conclusion of the contract. Such mala fade of the seller is based on the time of the conclusion of the contract. The seller is obligated to give notice to the buyer under Article 7 fair and equitable principle although the seller has no obligation if he becomes mala fide by the time of delivery. The obligation of the seller does not extend if the seller applies to Article 42(2)(a) CISG. It is enough for the seller to consider intellectual property which is provided in Article 42(1)(a) and (b) CISG.

Ⅰ-3. Any right or claim of a third party based on intellectual property

It does not compose the breach of obligation by the seller at once in case that the third party claim its right. The seller must indicate that the claim of a third party is unfounded to satisfy the buyer. The seller needs to take proper means to release the goods from the claim of the third party.[1]

a) There is no justice in the claim of the Vis Fish Company to stop selling goods.

It is no doubt "Vis" is registered in Danubia as a trademark by the Vis Fish Company (hereafter referred to as “VFC”). The trademark "Vis" has been registered in classes of the Nice 22,28 and 29. Until janualy1996, VFC sold sports fishing equipment, which is in class 22 under the "Vis" trademark. At the present time the VFC sells only goods in class 29 under the "Vis" trademark. The athletic equipment sold by RESPONDENT is in classes 28.[2] However, the goods delivered by RESPONDENT do not contain fishing equipment which evokes an obvious association with fish and related food products.[3] It can say that anyone would not confuse Vis Water Sports athletic equipment and VFC fish and fish products, because there is no evidence that VFC engages in commercial activities that are in any way related to athletics or recreation.[4] CLAIMANT also notified RESPONDENT that anyone would not confuse RESPONDENT athletic equipment and VFC fish and fish products because the two types of goods are so different.[5] It appears that CLAIMANT himself verified the claim of the VFC to trademark infringement is unfounded. Furthermore, legal counsel of CLAIMANT had said any legal action that VFC might bring would eventually be dismissed.[6] The probability of winning the litigation is high from these facts.

Judging from the facts above-mentioned, we can insist that the probability to confuse Vis Water Sports equipment and VFC equipment is low. The fact that legal action VFC might bring would be dismissed is likely to mean the claim of VFC is unfounded.[7] Hereby, VFC’s insist related trademark infringement is manifestly unfounded and the claim to stop selling any goods under "Vis" name is also unfounded. There is no justice in the claim to stop selling goods of VFC based on the trademark infringement.

(b) RESPONDENT took proper means to release the goods from the claim of the third party.

The litigation would require the times and costs until its finish even if CLAIMANT wins the litigation. However, RESPONDENT notified CLAIMANT of doing all in RESPONDENT’s power to aid in CLAIMANT defense against the assertion of trademark infringement.[8] The proposal made by RESPONDENT is the offer that RESPONDENT will remedy the goods to perform his obligation under the claim of the third party.

There is no justice in the claim of VFC based on trademark infringement, and RESPONDENT took proper means to release the goods from the claim of third party. The two facts do not means at all the breach of the obligation by the seller.

Ⅰ-4. The probability that the buyer ought to have become aware of the right or claim

The point at this issue in especial is which of CLAIMANT and RESPONDENT have responsibility for investigating whether there are any intellectual property rights in the state of use, under Article 42 CISG. The seller is under duty to investigate the situation, under Article 42(1) CISG. The seller, therefore, is exempted from responsibility under Article 42(1) CISG, when the buyer knew or could not have been unaware of the right or claim of the third party at the time of the conclusion of the contract, under Article 42(2)(a) CISG. In other words, the buyer who knew or could not have been unaware of the right or claim of the third party cannot claim to invoke Article 42(1) CISG.

It is generally made mention of the seller “could not have been unaware” when the right of a third party based on intellectual property has been already registered publicly in the country where the goods will be sold or used at the time of the conclusion of the contract. As a general rule the seller is obliged to survey such intellectual property since the seller usually knows parts, structure, manufacture of the goods in detail and its intellectual property. Hereby, the buyer is not obliged to survey intellectual property of a third party. However, there is an exception as provided in Article 42(2)(a) CISG if the buyer “could not have been aware of the right or claim”. In this case, the buyer will be regarded as nearly unawareness.[9]

RESPONDENT had no actual knowledge of VFC existence at the time of the conclusion of the contract.[10] RESPONDENT, therefore, did not know of the right or claim of the third party based on intellectual property and then delivered the goods. It was difficult for RESPONDENT to find VFC in Danubia since VFC did not have a web site and the registry is not on the Internet.[11] Furthermore, VFC does not conduct business outside of Danubia and RESPONDENT was not in business in Danubia before this contract has been concluded.[12] It is impossible for RESPONDENT to grasp registration of intellectual property in other countries in detail since RESPONDENT exports in seven countries.[13]On the other hand CLAIMANT engages only in Danubia, which is the same country where VFC is in business.[14] Furthermore, since VFC is well known throughout Danubia for its fish and related food products, the relevant personnel in CLAIMANT were aware of VFC.[15]All registered trademarks are in a registry that can be consulted freely by the public and registrations are also published in a journal.[16]As above-mentioned, it is certain that CLAIMANT could be aware of the right or claim of VFC based on intellectual property much easier than RESPONDENT.

Ⅱ. CLAIMANT did not give notice to RESPONDENT within a reasonable time under Article 43(1) CISG

Ⅱ-1.Provisions of Article 43(1) CISG

Article 43(1) :

The buyer loses the right to rely on the provisions of Article 41 or Article 42 if he does not give notice to the seller specifying the nature of the right or claim of the

third party within a reasonable time after he has become aware or ought to have become aware of the right or claim.

Ⅱ-2. Requirements of Article 43(1) CISG

The buyer loses the right to rely on general defects in title or on encumbrances with intellectual property rights if he does not give notice to the seller specifying the nature of the third party right or claim. It is insufficient for a notice under Article 43 to state in general terms that the goods are encumbered by a third party right.[17] The　buyer must, rather, specify the nature of the right or claim of the third party. The precise details required to be given in the notice must be inferred from the purpose of the duty to give notice, namely to enable the seller to ward off the right or claim.[18] The notice must therefore, first of all, indicate the identity of the third party (address, specified right or legal steps, registered right of the third party) and the way in which his right is being asserted. Furthermore, the buyer must inform the seller about any steps which the third party has already taken.[19] What constitutes a reasonable time will depend upon the circumstances of the specific case. But if the buyer realizes that a lengthy delay will create a risk that the seller will be unable to assert his rights against the third party, then he must give notice quickly. The period for giving notice begins when the buyer becomes aware or ought to have become aware of the third party right or claim.　In short, as soon as the buyer becomes actively aware of the third party right or claim, a reasonable time begins. "Actively aware" means when the buyer takes any action toward the claim of the third party.

Ⅱ-3 . The letter from CLAIMANT to RESPONDENT is insufficient

The notice about the lack of rights requires name and address of the third party, which have been notified to the buyer, claimed rights or legal action. In some cases, it also requires the reference number of the documents and the number of registered rights because the seller cannot ward off the right or claim without specific and accurate information about the third party.

On 20 September 1999 CLAIMANT received a letter from the VFC stating that the trademark “Vis” was registered in Danubia by them and that the registration covered all water-related goods and it evokes an obvious association between the use of the equipment and the fish.[20] They claimed that CLAIMANT was violating their trademark by selling goods under the trademark “Vis” by advertising the goods throughout Danubia under that name and by using the slogan “like a fish in water”. On 15 October 1999 CLAIMANT received a further letter from the VFC insisting that it stop selling Vis Water Sports equipment. CLAIMANT was threatened with legal action if it failed to do so.[21] Furthermore, CLAIMANT stated that they have decided to rely on the other brands of water sports equipment.[22]

CLAIMANT, however, did not give notice about address of VFC. CLAIMANT also did not notify RESPONDENT about the right and registration, which were claimed by VFC specifically. Furthermore, CLAIMANT merely states “The advertising and selling of goods bearing the name Vis Water Sports in Danubia would violate trademark of VFC and VFC have threatened legal action if CLAIMANT continued to do so” in the letter[23] dated 3 Nov. 1999 although they received two letters from VFC before that.[24] As above-mentioned, CLAIMANT did not notify the reasons specifically why VFC claimed their right or claim based on intellectual property. Furthermore, CLAIMANT notified RESPONDENT about the claim from VFC and declared the contract was avoided at the same time. CLAIMANT cannot ward off the right or claim from VFC by inarticulate and one-sided letter. The letter from CLAIMANT to RESPONDENT[25] did not attain the purpose of notice under Article 43(1) CISG, therefore CLAIMANT loses the right to rely on the provisions of Article 42 CISG.

Ⅱ-4 .CLAIMANT did not give notice within a reasonable time

A reasonable time begins as soon as the buyer becomes actively aware of the third party right or claim. Hereby, it is certain that CLAIMANT was aware of the right or claim from VFC on 4 Oct.1999 because CLAIMANT replied to VFC on 4 Oct.1999 stating that they reject the claim from VFC dated 20 Sep.1999.[26] It means, therefore, a reasonable time began on 4.Oct.1999. CLAIMANT did not notice to RESPONDENT about the claim from VFC immediately in spite of that. Furthermore, CLAIMANT negotiated with VFC for several times to solve this matter by themselves and notified RESPONDENT that CLAIMANT consulted legal counsel on this matter along with avoidance of the contract in the letter dated 3.Nov.1999.[27] CLAIMANT first gave notice to RESPONDENT a month after CLAIMANT was aware of VFC rights and claim.

If the buyer realizes that a lengthy delay will create a risk that the seller will be unable to assert his rights against the third party, then he must give notice quickly. But CLAIMANT gave notice to RESPONDENT stating that RESPONDENT has violated its obligation under Article 42 to deliver goods free from any right or claim of a third party based on intellectual property and CLAIMANT was avoiding the contract at the same time.

At first, CLAIMANT rejected demand from VFC on 4 Oct.1999.[28]If CLAIMANT gave notice to RESPONDENT at this time, the time when CLAIMANT became actively aware of claims from VFC, VWS could have found a remedy. It created a risk that RESPONDENT will be unable to assert their rights against VFC and it was certain that CLAIMANT would have known about the risk.

The notice given by CLAIMANT after one month is not applicable to a reasonable time. Hereby, CLAIMANT applies to Article 43(1) CISG

Ⅱ-5 .Article 43(2) CISG is not applicable to RESPONDENT

Article 43(2) :

The seller is not entitled to rely on the provisions of the preceding paragraph if he knew of the right or claim of the third party and the

nature of it.

　 Where the seller's lack of knowledge is due solely to his negligence, the seller retains the possibility of relying on the buyer's failure to give proper notice of a defect in title. Mere knowledge of the right or claim of the third party is insufficient the seller must also be aware of the nature of the right or claim. This will include, in particular, positive knowledge of steps, which the third party has already taken against the buyer.[29]

Article 43(2) CISG makes no reference to the relevant time of the seller's knowledge. The time of the conclusion of the contract cannot be relevant, because the nature of the third party right or claim will only rarely be known at the stage. The same applies to the time of delivery.[30] Notice is intended to enable the seller to ward off the right or claim of the third party. The decisive time is therefore the time when the buyer's notice should have reached the seller.[31]

VFC is well known throughout Danubia but it does not conduct business outside of Danubia.[32] RESPONDENT had no actual knowledge of VFC existence because RESPONDENT is a manufacturer of equipment for water sports in Equatoriana and it is a different type of business from VFC.[33] It was difficult to find VFC in Danubia since VFC did not have a web site.[34] As above-mentioned, it is certain that RESPONDENT did not know of the right or claim of VFC and the nature of it at the time when RESPONDENT received the letter from CLAIMANT on 3.Nov.1999.[35]

ISSUE2: The goods delivered by RESPONDENT is not Applied to fundamental breach of contract under Article 25 CISG

Ⅰ

Ⅰ-1. Provision of Article

Article 25:

A breach of contract committed by one of the parties 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, unless 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

This article is to define in which case a breach of contract becomes fundamental. The definition of this article is not necessarily strict, but rather abstract and therefore the unified interpretation cannot be obtained presently. The concept of the fundamental breach of contract is the base to consider the means of remedy for the breach of contract, and it forms a central meaning for the treaty, which practically important item, requiring a special attention for the interpretation.

Ⅰ-2. Requirements of Article 25

　 In this article, it requires that, when the breach of contract is deemed (judged) as fundamental. The practical detriment caused by the breach of contract should exist. The disadvantage which the party must have suffered by the breach of contract by the other party, should be the disadvantage which practically deprive him of what he is entitled to expect under the contract.　However, in case that the party did not foresee the result of the disadvantage happened, in case that a reasonable person of the same kind in the same circumstances did foresees, or in case that a reasonable person of the same kind as the party in the same circumstances could not foresee, the detriment cannot be considered as fundamental. Like this, the fundamental breach of contract requires two conditions of the disadvantage and the capability to foresee the result. To understand the fundamental breach of contract purely and objectively, by interpreting the detriment as a loss and understanding it as the level of detriment caused by the breach of contract to decide whether the breach of contract is fundamental, the “Practical loss of expectation” in the first cause of this article should be studied.　

Ⅱ

Ⅱ-1. Countermeasures of CLAIMANT against trademark infringement by Vis Fish Company

a) The advertisement using “Like a fish in water” is not violating the trademark of Vis Fish Company

CLAIMANT claimed from VFC to cease selling[36] and advertising since CLAIMANT was violating VFC trademark by using the slogan “Like a fish in water” to

advertise Vis Water Sports equipment. VFC claimed that using the slogan “Like a fish in water” for advertisement evokes an obvious association between the use

of the equipment and the fish that VFC sell. It means, therefore, CLAIMANT is in violation of VFC trademark "Vis". It is certain that registered trademark "Vis"

means fish in the Dutch language. However, in Danubia, "Vis" is not associated with fish or fish products.[37] Hereby, “Like a fish in water”, which was used by

CLAIMANT, has no relevance to "Vis" and unable to regard as infringement of VFC trademark.

b) CLAIMANT made a judgment that Vis Water Sports equipment did not cause infringement of the trademark. And CLAIMANT rejected VFC demand

CLAIMANT rejected VFC demand dated 20.Sep.1999 that Sports and more Sports violated the Trademark[38] because the markets and the nature of the products are simply too different. Furthermore, VFC has registered the trademark in different class from what CLAIMANT sells. CLAIMANT, therefore, stated that there is no likelihood that anyone would confuse athletic equipment with the fish and fish products even if it conflicts on the trademark. hereby, it is certain that CLAIMANT made a judgment that CLAIMANT equipment and the trademark of RESPONDENT cannot be applied to the claim from VFC.

c) CLAIMANT was notified from legal counsel that any legal action would be dismissed

VFC threatened legal action if CLAIMANT would not cease selling goods under any name that incorporates registered trademark “Vis”.[39] CLAIMANT

consulted legal counsel whether VFC registered the trademark "Vis" and the claim of VFC was well founded.[40] By this investigation, CLAIMANT verified that

VFC had registered the "Vis" as a trademark in Danubia and VFC does not engages in any commercial activities that are any way related to athletic or recreation

but only in the business of selling fish and other water-related food. CLAIMANT was notified from legal counsel that the claim of VFC to trademark infringement is unfounded and any legal action that VFC might bring would eventually be dismissed. By the judgment from judicial adviser, CLAIMANT drew an objective conclusion that there is no infringement of the trademark. Judging from the process which was above-mentioned, it is certain that the infringement of the trademark against RESPONDENT has no legal foundation. It is the fact that VFC has defended its trademark against two companies in the past but neither cases gone to trial and the court did not make any decision to cease selling. Considering the claim from VFC to stop advertising and selling, difference of the equipment and the estimation of litigation by legal counsel, it is unreasonable that CLAIMANT cease selling based on intellectual property of the third party.

Ⅱ-2.Responsibility to prove the possibility of foresee

There is no foundation that CLAIMANT would be disruption if RESPONDENT has the responsibility to prove.[41] CLAIMANT should prove the basis for

disruption of business is in the contract by themselves if CLAIMANT claims to avoid the contract based on that.[42]

Ⅱ-3. Possibility of foresee and the time of that

In case CLAIMANT is claimed cease selling based on infringement of intellectual property at the time of the conclusion of the contract, it is difficult for

RESPONDENT to foresee the business of CLAIMANT would be disrupted from the information about CLAIMANT and there is no materials at the time of before

the delivery.[43] Hereby, it is difficult for RESPONDENT to foresee the disruption of CLAIMANT neither at the time of the conclusion of the contract nor before the

delivery.

Ⅱ-4. Relations between substantial damage against the expectation under the contract and foresee and the possibility of foresee by a debtor

A fundamental breach of contract is based on expectation of the creditor under the contract and provides that the possibility of foresee by a debtor is exemption

from an obligation. As a result, it is possible that the benefit of creditor to be approved as legal under the contract and to introduce the standard of reasonable

person in escape conditions. The creditor expectation can be accurate with objective standard of contract. Furthermore, the extent of violating creditor's benefit is

not only based on wording in the contract but also should be considered various situations , for example, the infringement which apparently substantial change

trivial and vice versa. This is the requirement based on view that both parties benefit should be balanced equally on the possibility to foresee. The expectation of

the creditor in this contract is the benefit from selling the goods and the dispute about the business of CLAIMANT applies to infringement of creditor’s benefit.

There is no specific information from the content of the contract that business would be dispute in case CLAIMANT was claimed to cease selling based on

infringement of intellectual property at the time of the conclusion of the contract. It would not be foreseen that in case CLAIMANT litigates cease selling claimed

by VFC cause disruption of the business since CLAIMANT has the biggest athletic equipment store in Danubia[44] and has economic power to make the contract

with RESPONDANT.

Ⅱ-5. The intention that CLAIMANT exercise Article 25 CISG

It is impossible to know the intention of CLAIMANT to exercise Article 25 CISG from 1-4. Hereby, to understand the intention of CLAIMANT, see evidence under Article 8(3) CISG. On 28,OCT.1999, legal counsel wrote “a certain amount of disruption to your business”.[45] CLAIMANT avoided the contract based on disruption of the business in case VFC litigates and on 3,NOV.1999, CLAIMANT notified RESPONDENT as fellow; “not in a position to contest any legal action that they might take in regard to what is, after all, your brand” “I should like to assure you that this action in our part is in no way”.[46] It includes some intention of CLAIMANT in the judgment by legal counsel. There is, however, no other foundation to disclose “some intentions” more specifically. Hereby, the validness of “disruption of the business” denies again.

Conclusion of Issue2

A fundamental breach of contract requires substantial damage and the party who violated its obligation should prove the possibility of foresee to escape “A

fundamental breach of contract”. CLAIMANT claimed that RESPONDENT has violated its obligation to deliver goods free from any right or claim of a third party

based on intellectual property and the legal action by VFC would be disruptive to their business. This is the foundation that CLAIMANT claims violation as provided

in Article 25 CISG. As above –mentioned, CLAIMANT did not notice the specific foundation about disruption of the business and there is no legal reason to cease

selling.

ISSUE3: The right of avoiding the contract by CLAIMANT does not have its effect

Ⅰ

Ⅰ-1. Requirements of avoiding the contract

The contract for the international sale of goods involves high transportation charges, insurance and the risk of carriage. It is drastic remedy to avoid the contract which includes such risks and large funds. CISG, therefore, provides the right of avoiding the contract as "ultima ratio". Hereby, the contracts for international sale of goods should be maintained as possible and the disadvantage of a buyer will be adjusted by performing claims and damages. Avoiding the contract is merely considered if a breach of contract is fundamental. CISG also does not permit to avoid the contract as a matter of course " ipso facto avoidance"[47]. And it requires that the buyer has to express his intentions on the basis of his choice. If the buyer spends a long time to exercise the right to avoid the contract, then the buyer loses his right to avoid the contract.[48]

Ⅰ-2.Provisions pertaining to avoid contract

Article 49 CISG

(a) 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.

(b) in case of non-delivery, if the seller does not deliver the goods within the additional period of time fixed by the buyer in accordance with paragraph (1) of article 47 or declares that he will not deliver within the period so fixed

　　 The purpose of this provision is to add the tendency which prevents　from avoiding the contract as remedy.[49] It is apprehensions, however,　if the remedy for the buyer in case of breach of the contract. It is,　however, apprehensions for the balance of the contract if the remedy for the buyer is strict in case of breach of the contract. Article 49(1) CISG　provides that to what extent of a breach of the contract assigns the right to avoid the contract “ultima ratio” It also provides the conditions of the right of avoiding the contract by the buyer and in what conditions the buyer can be released from the contract. Along with above-mentioned, Article 49(1) CISG provides the case when the rights and obligations of the contract lapse. The effects of avoidance are provided in Article 81(1) CISG, releases both parties from their obligation, Article 81(2) CISG, restitution which has been delivered and Article 82 to Article 84 CISG.

Under this provision, avoidance of the contract is possible only in case of a breach of the contract committed by the seller is fundamental as provided in Article.25 CISG or if the seller does not exercise its obligation in accordance with Article 47(1) CISG.

It might be disputed whether there is a fundamental breach of the contract. CLAIMANT claimed that RESPONDENT delivered the goods that were not free from the right of a third party based on intellectual property as provided in Article 42 CISG and CLAIMANT declared the contract avoided founds on that. There is no justice of avoiding the contract by CLAIMANT.

Ⅱ

Ⅱ-1. Claims by CLAIMANT

Since RESPONDENT delivered the goods with possibility of violating the　trademark which has been registered by VFC in Danubia and VFC threatened legal action based on violation of the trademark, CLAIMANT had to cease selling because CLAIMANT are not in a position to contest any legal action. To deliver the goods which applies to Article 42 CISG caused to cease selling. It applies to a fundamental breach. CLAIMANT avoided the contract to sell goods which are not threatened of legal action.[50]

Ⅱ-2. Claims by RESPONDENT

Under Article 49 CISG the buyer may avoid the contract if there is a fundamental breach of the contract as provided in Article 25 CISG. As mentioned above[51], however, it is incomplete that CLAIMANT claims RESPONDENT delivered the goods which were not free from intellectual property of the third party based on Article 42 CISG. Along with that, the substantial detriment which applies to a fundamental breach of the contract as provided in Article 25 CISG, that is, CLAIMANT ceased selling because VFC claimed that the goods which were delivered by RESPONDENT violated the registered trademark, is incomplete measures of CLAIMANT against VFC. It also resulted from improper notice of the fact to RESPONDENT from CLAIMANT. Furthermore, RESPONDENT stood ready for remedy to reimburse CLAIMANT for any litigation that might take place.[52] Under the procedural law of Danubia CLAIMANT could not have required RESPONDENT to participate in the litigation. It is, however, possible to pay legal costs or to remedy.[53] CLAIMANT rejected the offer from RESPONDENT. Although there is possibility that the litigation brought by VFC would deprive the time, CLAIMANT should confirm whether RESPONDENT undertakes its damage. While cease selling by CLAIMANT is one-sided, it is impossible to approve a fundamental breach of the contract with means to undertake damages.

As above-mentioned, avoidance of the contract under CISG is "ultima ratio". Since the contract should be avoided as a last resort, CLAIMANT should have examined the possibility of avoiding the situation and existence of remedy by the seller in process. CLAIMANT, therefore, has no right to exercise the right of avoiding the contract.

ISSUE4 : Payment damages of CLAIMANT

Ⅰ.The effect of avoiding the contract

RESPONDENT denied the right of avoiding the contract. Vis Water Sports, hereby, does not accept the claim from CLAIMANT which is based on Article 81 to Article 84 CISG.

Ⅱ.The obligation to mitigate damages

Under Article 77 CISG, RESPONDENT claims a reduction in damages in the amount by which the loss should have been mitigated if CLAIMANT took reasonable measures. This article does not permit the damages which could have evaded the loss by reasonable measures of a party who claims the right of damages.

Ⅲ.RESPONDENT accept part of claims from CLAIMANT

The Equipment which was delivery by Vis Water Sports does not apply to a fundamental breach of the contract but it is the fact CLAIMANT was claims form the third party. Vis Water Sports, hereby, performs compensation for damages against the unavoidable legal action by third party. Vis Water Sports cannot accept the obligation to mitigate damages under Article 77 CISG.

Vis Water Sports accept the claims of damages as follows ;

1. Costs of legal counsel : 2000 USD [54]

2. Storage cost : From the day when Vis Water Sports was notified to the day when CLAIMANT is remedied (3,Nov.1999).[55]

(Vis Water Sports claims mitigation because it is certain that Vis Water Sports could remedy if CLAIMANT notified to Vis Water Sports that VFC claims to cease selling based on infringement of third party right.)

3. Loss of profit : The amount of loss of profit from the day when VWS was notified to the day when CLAIMANT is remedied.

(Vis Water Sports claims mitigation because it is certain that Vis Water Sports could remedy if CLAIMANT notified to Vis Water Sports that VFC claims to cease selling

based on infringement of third party right.)

Ⅳ.Remedy for CLAIMANT by Vis Water Sports

Vis Water Sports stands ready against the assertion of intellectual property from the third party. In case the litigation between Claimant and VFC that might take place, Vis Water Sports supports the litigation completely under the law of Danubia. Specifically, Vis Water Sports pays for costs of litigation and legal counsel because Vis Water Sports could not participate in the litigation under the procedural law of Danubia.

[1] (S/Schwenzer para 6. Secretariat Commentary on the 1978 Draft, Article37, para 4, O.R. 35, DOCY. HIST. 425)

[13] (SC/OR p426-427 Article40 paras3-4; Honnold paras267-269; B/B/Date-Bannote)

[17] On ULIS cf. Dolle/Neumayer, Art 52EKG,para 13.

[18] (Cf. Staudinger/Magnus, Art 43, para12; Enderlein, "Rights and Obligation of the seller, p.184"Audit, VenteInternationale, note 115)

[19](Cf.Enderlein/Maskow/Strohbach, Art 43, note 4; similarly Herber/Czerwenka, Art 43, para2; Karollus,p 127; Heuze, note 313; Piltz, "Internationales Kaufrecht”, 5,para 120: fresh notice must be given of different defects in title which subsequently occur.)

[29] (Cf.the reasons given for the German proposal by Klingsporn, O.R., p350, Art 40bis, No 84 et seq; a different view apparently by Staudinger/magnus, Art 43, para 31; Enderlein, "Rights and Obligations, p185; no clear view expressed by Bianca/Bonell/Sono, Art43, note2.3; Schlechtriem, "Seller's Obligations, 6-03, pp6-35.)

[30] (Piltz,"Internationales Kaufrecht”, 5,para 124, adopts a different view.)

[31] (So also Schlechtriem,"Internationales UN-Kaufrecht”, para 169; Staudinger/Magnus, Art 43, para 32; Langenecker, p253; Vida, RTD com 1994, 33. Cf. on the parallel problem in the context of liability for defective goods Art 40,para 8.)

[49] Peter Schlechtriem, Uniform Sales Law: The UN-Convention on Contract for the International Sale of Goods, Vienna: Manz(1986)

[50] Memorandum for Claimant, Claimant Exhibit No.12