Memorandum for Respondent

May It Please the Tribunal

1. Thompson Pty Ltd., herein referred to as the Respondent, submits our reply to the request for an arbitration proceeding submitted by Schmitt GmbH, herein referred to as the Claimant.

Summary of Argument

2. Herein Respondent acknowledged the fact that for purposes of law and the merits of the case:

–           The Victorian Supreme Court will have the authority to hear and determine the merits of the case and to challenge the award previously rendered by the tribunal.

Concerning the Contract between the Claimant and the Respondent:

–                     Respondent should not beheld liable for any form of non-conformity to the contract under Article 35 (2) and (3) CISG.

–           Under Article 45 (1), the Claimant is not entitled to recover any form of damages as there is no breach contract between the parties to the case.

Concerning the Jurisdiction of the German Arbitral Tribunal:

–           The jurisdiction of the German Arbitral Tribunal is not being questioned by the Respondent. However, the jurisdiction of the Victorian Court to conduct certiorari litigation is acknowledged by the Respondent.


A. The Victorian Court has the Sole Authority to Challenge the Arbitral Award Rendered by the German Arbitral Tribunal in Consideration to the Merits of the Case.

3. It is a known fact that for every cases being solved and awarded by the German Arbitral Tribunal or any arbitration committee for that matter, the Respondent or the loosing party has also every right to seek remedy to the court where an appeal can be submitted and have the result or the award reheard in accordance to the merits of the case as stated in Section 15 of the Arbitration Rules of the German Maritime Arbitration Association. Although it can be said that an arbitration proceeding provides a more speedy settlement and resolutions of disputes as compared to a regular court, it is also less costly as compared to having a real dispute resolution conducted in the court.

4. It must be noted that an appeal is a court proceeding wherein the loosing party is petitioning in a formal manner to have an official decision rendered by any court altered or change by looking upon the pertinent pieces of evidence. If the loosing party thinks that there is a grave abuse of discretion committed by the judge or an arbiter, it is but necessary to file an appeal to a higher court. This is to ensure that the rights of the loosing party are not being abused or misrepresented.

5. Hence, it is in this regard that good faith is required to among the CISG arbiters. The appeal made for purposes of questioning relevant and applicable laws is granted by the court and the constitution. For a more detailed review of the records of the case and of the award actually rendered, a writ of certiorari is issued by the Supreme Court. This will strengthen the claims and the arguments of the parties to the case as well as the decision of the arbiter that handled the case.

Moreover, a fair and good standing among the arbiters is also being considered during the certiorari proceeding. In this regard, the case will pose as an example for the succeeding cases in such a way that the practice of law which covers a wide range of activities characteristics of the legal profession, including the pursuit and defense of client’s rights and interests before the courts will transgress the sets of governing rules to limit the parameters and tame the exercise of the profession. Hence, the Victorian Court is granted by the Constitution to determine the appeal of the herein Respondent concerning the award given by the German Arbitral Tribunal.

B. The Respondent is Held Liable for Non-Conformity of the Contract Stipulated under Article 35 Section 1 Due to the Delivery of Diamonds Not Stipulated in the Contract.

6. Herein Respondent denied the accusation that there is non-conformity to what has been stipulated under the contract entered into between Schmitt GmbH, herein Claimant, and Thompson Pty Ltd., the Respondent. The law on obligations and contracts defined contract to be  a meeting of the minds of the parties to the contract whereby one binds himself, with respect to the other to give something or to render some services.

Meaning to say, it is a juridical convention manifested in legal form, by virtue of which, one or more persons (or parties) bind themselves in favor of another or others, or reciprocally, to the fulfillment of a prestation to give, to do or not to do. In other words, it is the agreement of two or more persons (or parties) for the purpose of creating, modifying, or extinguishing a juridical relation between them.

7. Pursuance to the case at bar, the Claimant submitted evidence annexed as Exhibit 1. Exonerating the evidence, it can be seen that as per the telephone conversation made between the Claimant and the Respondent, there has been a verbal contract existed wherein the Claimant would purchase 500 uncut diamonds inspected at the factory of the Respondent on the 14th of July 2002. In some of the cases established by the court, it has been rendered that even an oral contract is binding on the parties unless form is essential for its validity and enforceability. Hence, in the case at bar, it is apparent that there is a perfected contract between the parties to the case.

The Respondent is then obliged to render the delivery of the 500 uncut diamonds ordered by herein Claimant. Clearly, the elements of a contract exist between the two parties. There is consent, subject matter, and cause or consideration. The Claimant consented on the delivery of the 500 uncut diamonds from South Africa for a consideration of a total amount of $US 140,000.00 as stated in Exhibit 2.

8. Under Article 35 Section 1, it is stated that the seller has an obligation to deliver the goods ordered by the buyer in such a quantity, description and quality stipulated under the contract. Hence, the stages of a contract must be fulfilled in relation to the product specified. Here, the parties are progressing with their negotiation; they have not yet arrived at any definite agreement, although there may be having been a preliminary offer and bargaining.

But then again, it must be noted that the parties have at long last came to  a definite agreement, the elements of definite subject matter and valid cause have been accepted by mutual consent and the terms of the contract are performed, and the contract may be said to gave been fully executed. The law speaks of a meeting of minds between two persons.

The meeting of the minds really refers to two parties. If at a time of supposed perfection, one of the parties had already previously died, there can be no meeting of the minds; hence, no contract. But it can be seen from the case at bar that there is a perfection of the contract upon delivery of the diamonds stated by the Claimant in which the latter saw and inspected at the factory of the Respondent.

9. Even if it is said that a contract is in existence between the parties to the case, it does not necessarily follows that a tort will be barred from being filed in such a case that the completion of everything stipulated in the contract has not been fulfilled. A case wherein the Claimant can file for a recovery of the damages incurred is granted.

The same principle applies in the case at bar. It is alleged that a tort has been committed by the Respondent and that the Claimant is entitled to whatever damages are there in order to protect the rights of the same. But then again, the non-conformity of the Respondent as stated by the Claimant can be rebutted by the fact that the actual diamonds sent and delivered to them are the same diamonds that have been inspected and saw by the Claimant when the latter visited the factory of the Respondent on the 14th of July 2002.

C. Conformity to the Stipulations of the Verbal Contract between the Respondent and the Claimant

10. It cannot be denied that the Respondent in this case is under the obligation to fulfill the juridical necessity to the Claimant to give what has been ordered and to do what has been obligated. The court has noted that a prestation is an obligation. More specifically, it is the subject matter of an obligation and may consist of giving a thing, doing or not doing a certain act. To reiterate, the law speaks of an obligation as a juridical necessity to comply with a prestation. There is a juridical necessity, for non-compliance can result in juridical or legal sanction. Hence, there is an admission that whenever a person failed to comply with what has been stipulated in the contract, a recovery for damages can be filed before the right court.

Pertinent records of the case revealed that Schmitt GmbH agreed to buy diamonds from Thompson Pty Ltd. The purchased products were delivered to the buyer on the specified time. However, problem arise when the Claimant complained that the diamonds purchased with the Respondents are not the diamonds they needed and because of this, they needed to claim recovery of damages as a result of fact that they cannot, in any way, use the diamonds; hence, the cancellation of the contract.

11. Pursuant to Article 35 of CISG, the non-conformity of the Respondent to what has been stipulated in the contract can be avoided when the products delivered can still be used by the Claimant. Meaning to say, if the products delivered are of the same description, of the same value and usage, claim to recover damages can be avoided. In the case at bar, the diamonds are the ones that have been ordered by the Claimant. The diamonds are not even a different product purchased. Those are the same diamonds seen and inspected at the factory. There is no basis for the Claimant to say that the products delivered are different from the ones ordered.

12. The diamonds that are being sold by the Thompsons Pty Ltd are from South Africa. Meaning to say, Thompsons Pty Ltd is not the ones producing the diamonds. They are merely a reseller of the diamonds imported from South Africa. With this, what Thompsons Pty Ltd is doing is that they are importing diamonds.

They make an order, purchased it through payment and then resell it to other people or companies that are in line with the diamond business. Hence, it is true that all the diamonds that are being sold by Thompsons Pty Ltd are coming from the South Africa. Proof of purchases and records of transaction will prove this claim. In this regard, it is undoubtedly that the diamonds delivered to Schmitt GmbH.

There is no way that Thompsons Pty Ltd will deliver diamonds to Schmitt GmbH that is not from South Africa because the only major distributor or producer of Thompsons Pty Ltd is in Africa.  As stated in the conversation made between the parties to the case, there is a clear showing that the Respondent assured the Claimant that diamonds from South Africa will be delivered. True to its word, Respondent shipped and delivered what has been ordered by the Claimant.

13. The basis, however, of the claim of Schmitt GmbH that the diamonds are not from South Africa is probably its observation that the diamonds are from Sierra Leone. There is a showing that the Respondent had informed the Claimant that they are purchasing the diamonds in South Africa but the products are being cleansed in Melbourne. The final processing of the diamonds so as for it to appear even more elegant and conducive for selling is the cleansing of the stones conducted not in Africa but in Melbourne.

Hence, the diamonds that are purchased from South Africa is being handled by a certain team in Melbourne and they do the final process of cleaning the diamonds. This made an effect to the diamonds. The labeling is done in Melbourne but the actual diamonds are from South Africa. There might have been confusion between Sierra Leone and South Africa. Because the diamonds are cleansed, they presumed it came from Sierra Leone.

D. Claimant’s Obtained Information on the Process Done to the Diamonds

14. It is true that an obligation is being defined as a juridical relation who enabled a person to demand something that is stipulated in the contract from another person for the complete observance and manifestation of a determinative conduct and in case of a non-fulfillment of a contract or a breach, may demand satisfaction from the assets of the latter. It is important to consider that all obligations arising from a contract are being regarded to have the same force and effect of law between the contracting parties; it does not mean that the contract would render the law as inferior. The parties to the contract, in any way they want, may establish and enter such stipulations, terms and conditions and clauses as they may deem convenient to both of them.

However, law, public policy, morals, public order and good customs must be taken into great consideration. The contract entered into between Schmitt GmbH and Thompsons Pty Ltd is a valid contract. But the case of the Claimant cannot proceed from here. Under the articles of arbitration particularly under Article 35 Section3, if the buyer knows of the real condition of the products and still proceed with the sale, the seller will not be held liable. Failure to establish the liability of the seller will not entitle the buyer from any recovery of damages.

15. Elucidating the article further, it can be seen that the Claimant was already informed that the raw appearance of the diamonds will be altered because it will be processed in Melbourne for the purposes of cleansing, the physical appearance and the quality much changed as well, which actually happened in the case at bar. The Claimant is aware that the diamonds to be delivered to them has undergone a process already, although it is not yet cut. Because of the existence of this requisite, the Claimant is not entitled to recover any damages from the Respondent since there is no liability on the part of the Respondent having been able to inform the Claimant of the process being done to the diamonds.

E. Claimant is Not Entitled for Recovery of Damages

16. It must be understood that the Claimant is asking for a set-off claim against herein Respondent. The set-off claim is a form of recovery of damages wherein the Claimant is asking the Respondent to pay for whatever loss has been incurred due to the failure of the full execution and commencement of the contract. But then again, because of the fact that the liability of the Respondent is not fully established by reason of the non-completion and non-fulfillment of the requisites or requirement needed to establish the guilt of the respondent, the latter is moving to have the case quashed and allow the Claimant to pay, instead, to the loss of the Respondent by virtue of the immature filing of the case.

Under the articles on the Rules of Arbitration Proceeding, the buyer needs to inform the seller first of the non-conformity to the stipulations in the contract. The buyer must inform first the seller in order to grant a remedy or a repair to whatever problem has occurred. But looking at the scenario of the case, such right of the seller has been violated when the buyer immediately filed a case against the Respondent without giving an ample time to explain that would eventually lead to the settlement of the problem without going through arbitration proceeding.

F. Request for Relief

–           With all the foregoing and the submission of the exhibits containing the pieces of evidence, Respondent prays that the latter be excused from any liability arising from the alleged non-conformity to the stipulations made in the contract.

–           Respondent also prays that the Claimant’s argument that they are entitled to a recovery of damages be set aside and the set-off claim be quashed at the same time.

–           Respondent is likewise praying for a relief of damages that the latter experienced due to the filing of this case.


Dimsey, M. (2006). International Sales Law. UK: Routledge.