Preliminary​​​Memorandum​​​on​​​behalf​​​of​​​Blue​​​Corporation

RARE​​METALS​​CASEI.

Red​​shall​​pay​​Blue​​$5,000,000​​for​​breaching​​its​​obligation​​to​​supply​​Tungsten​​toBlue<Summary​​of​​Blue’s​​Submission​​regarding​​the​​first​​issue>
This issue is about transaction of the rare metals between Blue Inc. (“Blue”) and Red
Corporation (“Red”). On August 1​st​, 2000, Red and Blue entered into ​Exhibit 6 Agreement(“Priority Supply Agreement”). From Priority Supply Agreement, Red was obliged to supply
Tungsten preferentially which are ordered by Blue from September 2015 to March 2016.
However, Red provided Tungsten to Black Negoland, neglected preferential supply to Blue.
Accordingly, based on UNIDROIT Principles of International Commercial Contracts[​UNIDROIT​]​​7.4.1​​to​​7.4.7,​​Red​​is​​under​​non-performance​​of​​obligation.
1. Red​​was​​obliged​​to​​supply​​Tungsten​​preferentially​​to​​Blue.
Red was obliged to supply Tungsten preferentially to Blue in accordance with Priority
Supply Agreement. In the absence of a stipulated term “​tungsten​” on Priority Supply
Agreement, Tungsten shall be included in “​rare metals​” in two ways. (1) Defining the termof “​rare metals​” and “​affiliate​” by the interpretation according to the common intention of
the parties [​UNIDROIT 4.​1] or (2) formation of Priority Supply Agreement renewal[​UNIDROIT 2.1.1​]. In this case, Red was obliged to provide Tungsten preferentially to Blueas​​following​​(1)​​or​​(2).
In terms of “​in precedence to other prospective purchasers in other countries than
Negoland​” on Priority Supply Agreement, there was a negotiation between parties regarding
purpose and circumstances to embark preferential supply of rare metals [​Paragraph (“​¶​”)
12​]. The term shall be interpreted according to this preliminary negotiations between theparties​​[​UNIDROIT​​4.3​​(a)​].
(1) Priority​​Supply​​Agreement​​shall​​be​​interpreted​​according​​to​​the​​common​​intentionof​​the​​parties​​[​UNIDROIT​​4.1​]​​as​​below;(a) “​rare​​metals​”
Red’s obligation was to supply “​the rare metals, ​such as Nickel and Titanium​” toBlue. Considering the meaning commonly given to terms and expressions in the
trade concerned, the phrase "​such as​" means illustration [​UNIDROIT 4.3 (e)​]. It
shows that “​Nickel and Titanium​” is just an example of “​the rare metals​” inPriority​​Supply​​Agreement.
Moreover, after the conclusion of the contract, both parties embarked on
Platinum-related transactions [¶​14​], which had been conducted without any
trouble [¶​16​] by Red supplying rare metals preferentially to Blue [¶​15​,​16​]. Even
though Red had commented that the priority supply was only in the range ofNickel and Titanium in 2015 [​Exhibit 10​], both parties embarked on and continue
Platinum transactions without revising Priority Supply Agreement since 2003. The
fact of Platinum transaction is sufficient conduct to show their common intention
that “​rare metals”​ in Priority Supply Agreement is not limited to Nickel and
Titanium​​[​UNIDROIT​​4.3​​(c)​].

1Preliminary​​​Memorandum​​​on​​​behalf​​​of​​​Blue​​​Corporation(b) “​affiliate​”
This term shall be interpreted as all affiliate of Red. If this intention was only tosupply rare metals that was produced by Negoland Metals, the provision shouldhave been “Red or Negoland Metal Corporation”. But the reason why the contractstates ​“affiliate” is because Blue had the intention [​UNIDROIT 4.3 (a)​] to use theplant replacement project of Nickel and Titanium as a chance to expand its tradeof rare metals [¶​9​] in a perspective of ​“long-term” ​[¶​12​]. In light of the intention
and comments, Blue had the intention of using Negoland Metal Corporation “​plant
replacement project as a stepping stone to expand” ​[​¶11​] it's rare metal importdeals​​with​​Red.
​​Accordingly,​​Red​​was​​obliged​​to​​provide​​rare​​metals,​​which​​are​​produced​​by​​Red​​or​​its
affiliate.
(2) Even​​if​​the​​range​​of​​“rare​​metals”​​limited​​on​​Nickel​​and​​Titanium,​​or​​the​​rare
metals​​which​​are​​produced​​by​​Negoland​​Metals,​​Priority​​Supply​​Agreement​​wasrenewed​​to​​include​​Tungsten.
(a) There​​was​​the​​acceptance​​of​​an​​offer​​of​​the​​parties​​which​​is​​sufficient​​toshow​​the​​renewal​​of​​Priority​​Supply​​Agreement​​[U​ NIDROIT​​2.1.1​].
In the conversation of ¶​19​, Fox (Red) had offered to ​“give priority fortungsten” and both parties had accepted that Priority Supply Agreement was
renewed to include Tungsten in “​rare metals​”. This offer and acceptance aresufficient​​to​​show​​the​​renewal​​of​​Priority​​Supply​​Agreement.
(b) Even​​if​​there​​wasn't​​an​​acceptance​​of​​an​​offer​​of​​the​​parties,​​there​​was​​aconduct​​of​​the​​parties​​that​​is​​sufficient​​to​​show​​Priority​​Supply​​Agreementwas​​renewed​​[​UNIDROIT​​2.1.1]​.
From September to October 2015, Red supplied its Tungsten products
corresponding to Blue’s order [E​xhibit 9​]. On November 2015, Orange (Red)remarked that “​I understand that our company has promised Blue Inc. toprioritize Blue in our exports of rare metals​” [¶​22​]. Red had recognized that
September to October supply of Tungsten to Blue was based on Priority Supply
Agreement.
The conduct that Red supply Tungsten preferentially to Blue was sufficient toshow​​that​​Priority​​Supply​​Agreement​​was​​renewed.
Accordingly,​​Red​​was​​obliged​​to​​supply​​Tungsten​​preferentially.
(3) “​in​​precedence​​to​​other​​prospective​​purchasers​​in​​other​​countries​​than​​Negoland​”​​in
Priority​​Supply​​Agreement​​shall​​be​​interpreted​​as​​“Red​​supplies​​rare​​metals​​toBlue​​in​​precedence​​to​​other​​prospective​​domestic​​sale​​aimed​​purchasers​​in​​othercountries​​than​​Negoland”​​by​​both​​parties’​​common​​intention​​[U​ NIDROIT​​4.1,​​4.3​].
(a) There​​was​​a​​common​​intention​​created​​by​​meeting​​in​​July​​2000[​UNIDROIT​​4.3​​(a)​].
At meeting in July 2000, Fox (Red) remarked that “We can’t touch the rare
metals earmarked for sales within Negoland” and Ruby (Blue) ​“Let’s agree on2Preliminary​​​Memorandum​​​on​​​behalf​​​of​​​Blue​​​Corporation

US$70 million on condition that your company will give priority to the supply
to us except what you need for domestic sales” ​[​¶12​]. In light of both remarks,
both parties had common intention that rare metals produced by Red or its
affiliate for domestic sales should be reserved with top priority, and remaining
portion​​should​​be​​shipped​​preferentially​​to​​Blue.
(b) The​​nature​​and​​purpose​​of​​Priority​​Supply​​Agreement​​was​​to​​prioritizeBlue​​who​​provides​​world-class​​technology​​[​¶10​]​​with​​discounted​​price[​UNIDROIT​​4.3​​(d)​].
Priority Supply Agreement from Red to Blue was terms of an exchange byBlue to discount the construction price of new plant for Red [​¶12]​. There was apurpose of Priority Supply Agreement to prioritize Blue among foreigncompanies as a consideration for providing world-class technology withdiscounted price to Red. In light of this purpose, Blue should be prioritized
most among foreign companies especially prospective competitors of Blue liketrading​​company.
Regarding the preliminary negotiation of the parties and the nature and purposeof Priority Supply Agreement, Red was obliged Blue to supply rare metals
which are produced by Red or its affiliate preferentially among foreigncompanies,​​and​​only​​use​​for​​domestic​​sales​​shall​​be​​prior​​to​​Blue.
2. Red​​did​​not​​perform​​its​​obligation​​to​​preferentially​​supply​​Tungsten.
Although Red was obliged Blue to supply rare metals which provided by Red or its affiliate
in precedence to other prospective purchasers in other countries than Negoland based on
Priority Supply Agreement, Red did not perform its obligation. Red did not supply Tungsten(one kind of rare metals) which is provided by Negoland Tungsten (wholly owned
subsidiary​​of​​Red​​[​¶21​]),​​to​​fulfill​​order​​from​​Black​​Negoland​​[​¶22​].
(1) Red did not perform its obligation to prioritize Blue in terms of Tungsten supplyby​​supplying​​to​​Black​​Negoland.
Black Negoland was a wholly owned Negoland subsidiary of Meditria-based Black
Corporation (“Black”) [​¶22​]. However, in light of the conversation between Orange(Red) and Nomura (Black), the purpose of Black Negoland foundation was only toexport Tungsten outside of Negoland on behalf of Black. Black Negoland wasn’t acompany​​to​​sale​​Tungsten​​domestically.
Moreover, in light of the conversation between Orange and Nomura, Black Negoland
was a company to avoid Priority Supply Agreement between Red and Blue [​¶22​].
Admitting establishment of subsidiary and supplying to that subsidiary for prioritizing
other foreign companies than Blue is against nature and purpose of Priority Supply
Agreement.
Accordingly, the conduct by Red supplying Tungsten to Black-Negoland prior to Blueis​​non-performance​​of​​the​​obligation​​based​​on​​Priority​​Supply​​Agreement.
(2) Non-performance​​by​​Red​​shall​​not​​be​​excused​​by​​force-majeure​​[​UNIDROIT
7.1.7​].
Red may submit that non-performance of the obligation based on Priority Supply
Agreement shall be excused due to a drop in Tungsten production capacity to 1/3 of thenormal level by record rainfall in October 2015 [​¶21, 22​]. However, Red’s total
3Preliminary​​​Memorandum​​​on​​​behalf​​​of​​​Blue​​​Corporation

production quantity from November 2015 (40 tons) still meets Blue’s order (20 tons) if
Red rejects 20 tons order by Black [​Exhibit 9​]. It means Red could supply Tungsten toBlue​​after​​the​​drop​​of​​Tungsten​​production​​capacity.
​​Accordingly,​​exemption​​from​​the​​obligation​​by​​force-majeure​​shall​​be​​dismissed.
3. Red​​shall​​pay​​US$5,000,000​​to​​Blue​​based​​on​​the​​non-performance​​shown​​above.
Red had never accepted Blue’s order of Tungsten from November 2015 to March 2016[¶​22​]. Blue would have reaped a profit of US$5,000,000 had it been able to obtain the
supply as ordered in the period, and this point is not disputed by either party [¶​23​].
Accordingly, there was causal relationship between Blue’s damage and Red’s
nonperformance of obligation. The damage was certain and foreseeable [​UNIDROIT
7.4.2~7.4.4​].
II.

Red​​shall​​pay​​prescribed​​royalties​​in​​connection​​with​​Platinum​​refining.

<Summary​​of​​Blue’s​​Submission​​regarding​​the​​second​​issue>
This issue is about use of refining technology of Platinum between Blue and Red. Clause 3.2of ​Exhibit 7 ​(License Agreement) stipulates that Red shall pay royalty for using Blue’s“Licensed Technology”. The range of License Agreement provided in clause 1.1 was expanded
to Platinum by conversation on November 2015 [​¶24​]. Red had used Blue’s technology torefine Platinum since March 1st, 2016. Accordingly, Red shall pay prescribed royalties based on
Clause​​3.2​​of​​the​​License​​Agreement.
1.​​​License​​Agreement​​was​​revised​​orally​​to​​cover​​Platinum​​refining.
Conversation and agreement to amend License Agreement was made between Ruby (Blue) andOrange (Red) on November 2015. Based on provision of ​UNIDROIT 2.1.18​, oral revise
precludes the invocation of License Agreement Article 7.10, which provides that the form ofrevision shall be “in writing and signed by a duly authorised representative of each of theparties.”​​Therefore,​​Platinum​​was​​included​​in​​the​​subject​​of​​License​​Agreement.
(1) Oral​​amendment​​of​​License​​Agreement
In the conversation between Ruby and Orange on November 2015, Ruby states ​“wecan revise the license agreement to cover platinum refining as well” [¶​24​], which is anoffer to revise the License Agreement to include Platinum. As response, Orange
confirmed the offer by ​“Thank you. We would revise the license agreement” [¶​24​].
Considering the remark by Orange on mail ​“Thank you very much for your agreement
to the amendment of the License Agreement” [¶​24​], it was sufficient offer andacceptance by both parties to amend License Agreement to add Platinum [​UNIDROIT
2.1.1​].
(2) Oral​​amendment​​of​​License​​Agreement​​precludes​​the​​invocation​​of​​Article​​7.10​​ofLicense​​Agreement​​due​​to​​Blue’s​​reasonable​​action.
Blue had acknowledged that there was a conclusion of oral amendment of License
Agreement to cover Platinum in November 2015. All the more, Blue had sent an email
to confirm and verify the amendment progress, and made sure that the agreement inNovember was valid. [¶​24​] Therefore, when Blue found that Red is using Green’s
Platinum refining technology which was very similar to Blue’s refining technology,4Preliminary​​​Memorandum​​​on​​​behalf​​​of​​​Blue​​​Corporation

Blue investigates Green’s technology in reliance on the conduct of License Agreement
amendment to cover Platinum. Due to the investigation, Blue sent a letter [​Exhibit 12​].
It was reasonable conduct by Blue to investigate and request payment of royalties
proportionate to the Platinum output in reliance of the oral amendment of the License
Agreement.
The conduct by Blue meets the requirement of ​UNIDROIT 2.1.18 provision. Therefore,
oral amendment of License Agreement precludes the invocation of Article 7.10 ofLicense​​Agreement.
2. Red​​was​​obliged​​to​​pay​​prescribed​​royalties​​to​​Blue​​because​​of​​using​​Blue’s​​latest
technology​​for​​Tungsten​​and​​other​​rare​​metals​​refining.
On​​Exhibit​​7​​Article​​3.2​,​​it​​provides​​that​“​ Licensee​​shall​​pay​​the​​Licensor…​​royalty
equal​​to​​three​​percent​​of​​the​​Production​​Amount….​​The​​“Production​​Amount”​​meansthe​​quantity​​produced​​by​​Licensee​​by​​using​​the​​Licensed​​Technology”.​​The​​technology
which​​Red​​the​​“​Licensee​”​​had​​used​​to​​refine​​Platinum​​was​​same​​as​​follows.​​​Therefore,Red​​shall​​pay​​prescribed​​royalties​​to​​Blue.
(1) Red​​had​​used​​Blue’s​​Platinum​​refining​​technology.
Red has claimed that they had made a License agreement [​Exhibit 13​] between Green
Corporation (Green) and had used its’ Platinum refining technology. However, thetechnology of Green overlaps to Blue’s refining technology. Therefore, Red had used
Blue’s​​refining​​technology.
(a) Red’s​​recognition​Red had recognized that Green’s proposed technology was very similar to Blue’s
technology [¶​25​]. To judge the similarity of the technology, written or oral
objective evidence of the detail and process of the refining technology shall becompared. Furthermore, the reason Red should consider the similarity is bycomparing the extremely similar refining technology procedure and methods fromthe​​objective​​evidence.​​
Therefore,​​Green​​and​​Blue’s​​technology​​is​​highly​​similar.
(b) The​​Patent​​Office​​of​​Negoland’s​​judgment​​is​​not​​a​​denial​​of​​similarity​The patent of the technology was approved for Green in Negoland [¶27].
However, Blue’s rejection of the appeal was not based on the “​similarity of thetechnology of Blue” ​[¶​27​]. The judgment was based on Blue’s failure of evidence
submission, that is to say the judgement did not consider the similarity of thetechnology. Therefore, this evidence shall not be used for the judgment of the
independency​​of​​the​​technology.
(c) The​​“same​​technology”​​judgment​​in​​Arbitria​​and​​Meditria.
​The Arbitration Center of Arbitria issued a judgement that Green’s Platinum
refining technology is the same [¶​27​]. In Meditria, the Patent Office of Meditria
refused Green’s technology patent application by the judgment that Green’s
technology​​was​​also​​the​​same​​as​​Blue’s​​technology​​[¶​27​].
According to the two developing countries’ public agency judgement in Arbitria[¶4] and Meditria [¶8], Green’s technology and Blue’s technology shall beconsidered​​as​​the​​same.

5

Preliminary​​​Memorandum​​​on​​​behalf​​​of​​​Blue​​​Corporation(2) Red may claim to ​“pursue domestic mitigation measures” ​[​Paris Agreement Article
4.2​]​Red may claim, that, the use of Green’s technology within Negoland shall not be
precluded in the grounds of the patent approved in the Patent Office of Negoland [¶​27​]
on the bases of ​Paris Agreement Article 4.2​. ​Despite the fact the Green has a patent
within Negoland, this issue is whether Red had used Blue’s technology or not. It isbecause obtainment of patent does not matter but, whether the ​“Licensed Technology”
was​​used​​or​​not​​based​​on​​License​​Agreement​​3.2.
​FISHERIES​​
CASE
I.

​​Blue​​seeks​​an​​arbitral​​award​​be​​rendered​​to​​dismiss​​Red’s​​claim.

<Summary​​of​​Blue’s​​Submissions​​regarding​​the​​first​​issue>
This case is about the exposure of the information of Red, which is caused by a new virus that
infected Blue’s computer. ​The information (“Illegal Activities Information”) reveals fishingactivities which was approved by the Negoland's Ministry of Agriculture, Forestry and Fisheries
which was acted by Negoland's fishing vessels, had a breach based on the Convention on Fish
Stocks. Red claims the right to damages because the leak of such information was Blue’s breachof its confidentiality obligation based on Confidentiality Agreement (​“Exhibit 20”​). However,the​​claim​​shall​​not​​be​​accepted​​because:
1. Illegal Activities Information shall not be included to “Confidential Information”
defined​​in​​Exhibit​​20​​SECTION​​1​;
2. the​​leakage​​of​​Illegal​​Activities​​Information​​was​​not​​due​​to​​Blue’s​​fault;​​and3. A​​causal​​link​​between​​Blue’s​​default​​and​​the​​damages​​is​​not​​sufficient.
Therefore, Blue is not obligated to pay US$10,000,000 in damages to Red due to a breach ofthe​​confidentiality​​obligation.
1. ​​The​​information​​that​​caused​​the​​damages​​shall​​NOT​​be​​Confidential​​Information
The damages arising from plummeting exports of marine products from Negoland in
the period from April to December of 2016 is only because of the exposure of Illegal
Activities Information. This information shall not be included to the DEFINITION[​
Exhibit 20 SECTION 1(1)​], which is stipulated as “​’Confidential Information’ shallmean (i)... (ii)...information which are disclosed by the Discloser, and are clearlylabeled as “Confidential”, or ​should be reasonably considered to be confidential giventhe​​nature​​of​​the​​information​​or​​the​​circumstances​​surrounding​​its​​disclosure.”
The information of the illegal activities (1) was not clearly labeled as “Confidential”,
and it can reasonably considered to be confidential neither (2) given the nature of theinformation​​nor​​(3)​​given​​the​​circumstances​​surrounding​​its​​disclosure.
(1) The mark ​“For Ministry Internal Use Only” is different from the label of“Confidential”​It is impossible to substitute “Confidential” with other similar meaningful
words because “Confidential” stated in the definition is obviously double
6Preliminary​​​Memorandum​​​on​​​behalf​​​of​​​Blue​​​Corporation

quoting,​​and​​thus,​​a​​mark​​is​​limited​​to​​the​​notation​​of​​“Confidential”.
Although Some of the documents of the information are marked “For Ministry
Internal Use Only” [¶​35​], they are not clearly marked as “Confidential”.
Therefore,​​the​​mark​​shall​​not​​apply​​to​​the​​DEFINITION.
(2) It is not reasonable to say that the information has the nature to be
confidential​​from​​the​​reasons​​below(a) The​​loss​​of​​confidentiality​​by​​the​​nature​​of​​the​​information​​marked“For​​Ministry​​Internal​​Use​​Only”​The aim of the mark “For Ministry Internal Use Only” which was insome of the documents of the information is to be kept within certain
ministry. The information was originally controlled and marked by
Negoland's Ministry of Agriculture, Forestry and Fisheries. After that,
it was delivered to Red from the Ministry [¶​35​], and then given tocompany outside Negoland Blue from Red [¶​35​]. This situation is a
departure from the aim of the mark. ​For the reason above, it isreasonable to say that its confidentiality by granting as “For Ministry
Internal​​Use​​Only”​​had​​been​​already​​lost.
(b) The​​necessity​​of​​being​​disclosed​​to​​the​​public​​based​​on​​the​​Convention​“The Convention on Fish Stocks stipulates that if any fishing activity inbreach of...and disclose such illegal activity to the public” ​[​¶35​]. Thus,
Illegal Activities Information had the nature that it should be unveiled
officially. In light of it, this information should not be considered to be
confidence.
(3) It shall not be reasonably considered to be confidence given thecircumstances​​surrounding​​its​​disclosure​​from​​Red​​to​​Blue
It was sent together with other confidential information by Red to Blue [¶​35​].
Even though other information which was given together with was confidential,
Illegal Activities Information does not become confidential information directlyas​​well.
2. The​​leakage​​of​​Illegal​​Activities​​Information​​is​​NOT​​due​​to​​Blue’s​​fault​Exhibit 20 SECTION 2(2)(ii) stipulates ​“the obligation set out in Section 2(1) shall not
apply to the Confidential Information of the Discloser which is or becomes accessible tothe public through no fault of the Recipient”​. In this case, the exposure of Illegal
Activities​​Information​​was​​through​​no​​fault​​of​​the​​Recipient​​for​​the​​reasons​​below.
(1) Blue​​used​​a​​reasonable​​degree​​of​​care​Exhibit 20 SECTION 2(1)(iv) stipulates ​”...it shall use the same degree of care,but no less than a reasonable degree of care, to avoid disclosure or7Preliminary​​​Memorandum​​​on​​​behalf​​​of​​​Blue​​​Corporation

dissemination of the Confidential Information as the Recipient would use withrespect to its own confidential information of similar importance.” ​as a duty ofcare​​that​​the​​recipient​​
has.
​​Blue​​satisfied​​the​​requirements​​of​​this​​clause​​because​​Blue’s;a) standard programs to check virus-infected emails are installed in thesystem​​[¶​34​];​​andb) employees are frequently told to be careful with email attachments sentfrom​​strangers​​[¶​34​].
c) some other companies in Negoland and Arbitria were damaged by thesame​​virus​​[​¶34​].
Therefore, Blue used the same degree of care, but no less than areasonable degree of care, as the Recipient would use with respect to its
own​​confidential​​information.
(2) The action that an employee at Blue opened the email attachment shall notbe​​fault.
In this case, the exposure of Confidential Information of Red was because of ahacker but not Blue’s default. In light of the facts that the email attachment sentfrom it was infected by a new type of virus which could pass through thevirus-infected email check program, using the name of Blue’s importantcustomer and appeared very natural [¶​34​]. Also, other companies in Negoland
and Arbitria were damaged by this virus [​¶34​]. In light of these facts, it wassuch normal to open a file in an email coming out very naturally, and could notverify​​as​​a​​fault​​of​​Blue’s​​behalf.
In addition, inspite Blue took a reasonably degree of care, this virus was notable​​to​​be​​avoided​​under​​a​​considerable​​caution​​[¶34].
Accordingly,​​Red’s​​claim​​Blue​​to​​pay​​US$10,000,000​​in​​damages​​shall​​be​​dismissed.
II.

Blue​​seeks​​an​​arbitral​​award​​be​​rendered​​to​​dismiss​​Red’s​​claim.

<Summary​​of​​Blue’s​​
Submissions​​regarding​​the​​second​​issue>
Red and Blue entered into ​Exhibit 17 agreement ('​Requirement Contract​') for Red to sell, andBlue to buy a certain amount of Super Red Mix for fifteen years. Red submitted hardship basedon the fact that the production had been cut down in half while the cost of production had
doubled​​[​Exhibit​​21​].​​​However,​​this​​shall​​not​​be​​accepted​​because​​of​​the​​reasons​​stated​​below.
1. The​​parties​​are​​bound​​by​​the​​Requirement​​Contract;
2. There​​is​​no​​existence​​of​​hardship​​occurred​​by​​the​​event;
3. Should​​there​​be​​hardship,​​the​​Requirement​​Contract​​​shall​​not​​be​​terminated;​​and4. The​​Requirement​​Contract​​shall​​be​​amended​​as​​stated​​below.
1. The​​parties​​are​​bound​​by​​the​​Requirement​​Contract.
A party must perform its obligation as long as it is possible, regardless of the burden​
8Preliminary​​​Memorandum​​​on​​​behalf​​​of​​​Blue​​​Corporation[​
UNIDROIT 6.2.1 COMMENT​]. The ​Requirement Contract is a contract that definesBlue's obligation to buy, and Red's obligation to sell a certain amount of Super Red
Mix. Red's burden has increased, from the rise in the cost, and decrease in their amountof production. Still, Red is capable of performing their obligation against Blue.
Therefore,​​the​​parties​​are​​bound​​by​​the​​Requirement​​Contract.
2. The​​​change​​of​​the​​equilibrium​​of​​the​​contract​​is​​not​​fundamental
The event does not meet the clauses in ​UNIDROIT 6.2.2(a)-(d)​. In order to fulfill all​clauses from (a)-(d), all three factors [​Exhibit 21①-③​] must individually fulfill themall. If even one factor does not meet a clause, the event will not be fundamental enoughfor​​hardship​​to​​occur.​​Therefore,​​hardship​​does​​not​​exist.
(1) Red could have reasonably taken the event into account at the time of theconclusion​​of​​the​​contract(a) ​​The​​decrease​​in​​the​​catch​​of​​Negoland​​fish​​[​Exhibit​​21①​]
The change in the ocean current due to global warming lead to a fifty
percent decrease in the catch of Negoland fish. Red could have taken
this into account, since marine products including Negoland fish can beaffected by the change of the nature. Global warming had alreadyoccurred at the time of the conclusion of the Requirement Contract.
Red could have considered that the amount of Negoland fish it could
catch​​may​​be​​affected​​by​​the​​change​​of​​the​​environment.
(b) ​​The​​increase​​in​​the​​cost​​of​​imports​​due​​to​​the​​change​​in​​foreignexchange​​rates​​[​Exhibit​​21②​]
Due to the change in foreign exchange rates, the cost of some imported
ingredients used in Super Red Mix increased sharply. Red could havetaken this fact into account, since the change in exchange rates
frequently occur in international trading. In addition, considering thefact that some ingredients in Super Red Mix are imported, Red could
have considered that the production cost and the price of the product islikely to change according to the exchange rates. In addition, in theconversation in ¶32, Wolf (Red) said "​Our recent study confirmed that
there is plenty of supply of Negoland Fish​". This indicates that Red had
conducted studies, and taken into account the catch of Negoland fishand​​the​​amount​​of​​production​​of​​Super​​Red​​Mix.
(2) The​​risk​​of​​the​​event​​was​​assumed​​by​​Red​​[​UNIDROIT​​6.2.2(d)​](a) The​​decrease​​in​​the​​catch​​of​​Negoland​​fish​​[​Exhibit​​21①​]
Red has agreed on Requirement Contract and set down the minimum
and maximum quantity [¶​32, Exhibit 17​]. This shows the confirmation
9

Preliminary​​​Memorandum​​​on​​​behalf​​​of​​​Blue​​​Corporationof Red to guarantee a stable supply to Blue. In light of marine products
can be effected by the nature, Red has clearly set down the numericalrate​​of​​supply​​for​​the​​next​​15​​years​​and​​agree​​to​​supply​​stably.
Furthermore, on the Wolf had commented ​“our recent study confirmedthat there is plenty of supply of Negoland Fish” ​[¶​32​]. This comment ispresuming the Red shall burden the risk to secure Negoland Fish.
Because Blue cannot be involved in the production of Super Red Mix,and the assurance of securing Negoland Fish and to provide the productfor​​15​​years​​is​​based​​on​​Red’s​​investigation.
(b) The​​increase​​in​​the​​cost​​of​​imports​​due​​to​​the​​change​​in​​foreignexchange​​rates​​[​Exhibit​​21②​]
The price of Super Red Mix is set by Red at the beginning of eachcalendar year [​Requirement Contract Section 3​]. In other words, ​theprice can be changed based on any factor in consideration of
production. All the more, in an international trade business exchange
rates shall be one of the important factors to consider. Therefore, Red
could have assumed the change in exchange rates and the risk of it as
well.
From (1) - (2) stated above, the clauses of ​UNIDROIT 6.2.2 (b)-(d) arenot satisfied. Therefore, there is no existence of hardship occurred bythe​​event.
3. ​​​Should​​there​​be​​hardship,​​the​​Requirement​​Contract​​shall​​not​​be​​terminated
A contract shall be terminated only when it is reasonable to do so ​[UNIDROIT​
6.2.3(4)(a)]​. In this case, termination is not reasonable for either party. Considering thatthe price of Blue Salmon increased thanks to Super Red Mix, losing it will create a greatdamage to Blue, since Super Red Mix does not have any competing product. In
addition, Red was able to secure profits by the ​Requirement Contract​. ​Therefore, theRequirement​​Contract​​must​​not​​be​​terminated.
4. The​​Requirement​​Contract​​shall​​be​​amended​​as​​stated​​below(1) The discount of the price shall be 4%, and the minimum total quantity tobe​​purchased​​shall​​continue​​to​​be​​1,000​​tons​​per​​calendar​​year​Red is suggesting an amendment to end the 10% discount and to delete theprovision regarding the minimum purchase. However, this shall not be
accepted. The discount was included on condition of stable supply by
establishing the minimum quantity of 1,000 tons [¶​32​]. In 2016, the total
discount amount was 432,000 Nego-Lira. The amount of production and profit
Red can gain has been cut in half. Thus, it is reasonable for Red's profit to behalf as well. If the regular price will have been changed to 2.5 Nego-Lira, andthe maximum quantity to 2,500 tons, the discount of 4% will make Red's profit
10Preliminary​​​Memorandum​​​on​​​behalf​​​of​​​Blue​​​Corporation

approximately half, which is 250,000 Nego-Lira. Therefore, the discount shallbe decided considering the benefits of both parties, which leads to a 4%
discount.
The minimum total quantity to be purchased shall be decided in relation to thediscount. The 10% discount was introduced on condition that the minimum
total quantity be included. The minimum total quantity to be purchased brings
stable profit to Red, and a cheaper deal for Blue. Therefore, it is reasonable tocontinue the minimum quantity to be 1,000 tons, and change the discount to4%.
(2) The maximum total quantity to be supply shall be 2,500 tons per calendar
year​​instead​​of​​1,200​​tons
Red seeks an amendment to decrease the maximum total quantity of supply to
1,200 tons per calendar year. However, this shall not be accepted, since it would
not rebalance the equilibrium of the Requirement Contract. Considering the factthat the production of Super Red Mix had been cut down by half [​Exhibit 21④
and ⑥​], Blue’s maximum total quantity to be purchased shall still be half theamount of the total production quantity. Furthermore, regarding that Super Red
Mix is a producer goods, decreasing the amount down to 1,200 tons, half ofBlue's last year's order, does not only affect the current farming of Blue
Salmon,​​but​​also​​the​​future​​and​​cause​​an​​excessive​​damage​​to​​Blue​​instead​.
Therefore, it is reasonable to amend the maximum total quantity to 2,500 tons,
to​​fix​​the​​equilibrium​​
between​​Red​​and​​Blue.
(3) Introduce​​a​​clause​​to​​renew​​the​​agreement​​every​​year
It is reasonable to change the limitation of the quantity according to the amount
Red can produce. The situation surrounding the production of Super Red Mix
may change. Therefore, the maximum and minimum quantity of Super Red Mix
Blue​​can​​purchase​​a​​year​​shall​​be​​amended​​accordingly.
[END]

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