Summary of Lucky Bag case
In October 2015, an Agreement was concluded between Red Corp. (hereinafter “Red”) andBlue Inc. (hereinafter “Blue”) regarding New Year Lucky Bags of 2016. Red prepared
10,000 Lucky Bags and delivered these Lucky Bags to Blue for selling them in Arbitira. In
January 2016, 10,000 Lucky Bags were sold through Blue’s website, Blue Village. However,many customers who purchased the Lucky Bags, complained that a dragon embroidered tshirt was contained in the Lucky Bags as the dragon is considered a taboo in Arbitria. 4,000
customers decided to return these t-shirts and asked for a refund. Considering that customers
were upset by receiving this bad-luck symbol t-shirt in New Year, Blue accepted these
returns and refunded US$100 including compensation to each customer.

Claim 1: Red shall reimburse US$420,000 to Blue.
1. There is Red’s non-performance of its obligation. (issue 1)(1) Red was obliged to deliver 10,000 Lucky Bags not containing taboos in Arbitria
to Blue.
Article 1 of Agreement (Ex. 6) stipulates that “Red shall sell and deliver to Blue
10,000 sets of the Goods”. In this case, the “Goods” were Lucky Bags. Since it was
not clear what Lucky Bags specifically are, it should be interpreted based on
UNIDROIT PRINCIPLES OF INTERNATIONAL COMMERCIAL CONTRACTS2010 Article 4.1(hereinafter “U4.1”) (Intention of the parties).
U4.1 stipulates “A contract shall be interpreted according to the common intention of
the parties.”
In this case, according to U4.1) together with U4.3(Relevant circumstance), themeaning of Lucky Bag should be interpreted based upon (a) “preliminary negotiations
between the parties;” and (d) “the nature and purpose of the contract.”(a) Under U4.3(a), negotiations between Red and Blue should be considered.
In the conversation between Red and Blue, Red asked Blue that “Please tellme any taboos that should be avoided for selling Lucky Bags in Arbitria” andraised an example that “For instance, our lucky bags for Negoland market
never contain inauspicious things”. Therefore, Red has intention that taboos,
such as inauspicious things, should not be put into the Lucky Bags. Also Blueanswered that “I’ll let you know if I think of anything.” Therefore, both Red
and Blue confirmed that any inauspicious things, like taboos should not be put
in Lucky Bags. (¶15).
(d) Under U4.3(d), the purpose of Agreement (Ex.6) should be considered.
According to the Agreement(Ex.6), the purpose of this agreement is to sell
these New Year Lucky Bag in Arbitria.
The purpose and nature of Agreement(Ex.6) was to sell New Year Lucky Bags.
New Year Lucky Bag is for celebrating New Year. Also as the name of Lucky
Bag suggests, the nature of the Lucky Bags should be that which makes thecustomers feel lucky. Therefore, any taboos which make the customers feel
unhappy or inauspicious should be avoided. Also, according to the Agreement(Ex.6), these Lucky Bags would be sold in Arbitria. Therefore, any taboos in
Arbitria should be avoided in the Lucky Bags.
Therefore, there was a common intention that any taboos in Arbitira should be
avoided in the Lucky Bags.
1(2) Red did not perform its obligation stated in (1) above.
In this case, Red delivered 5,000 Lucky Bags with t-shirts having dragon on them,although dragons are considered taboo in Arbitria (¶21).
Hence, Red did not perform its obligation to deliver 10,000 Lucky Bags notcontaining taboos in Arbitria.
2. Blue has right to full compensation of US$420,000 to Red. (issue 2)Blue has right to damages caused by Red’s non-performance of its obligation. Under therequirements of right to damages of U7.4.1, three elements (U7.4.2 to U7.4.4), (i) acausal link; (ii) certainty of harm; and (iii) foreseeability of harm should be consideredand proven.
In this case, (i)(ii) If Red had delivered to Blue 10,000 Lucky Bags which did not containtaboos in Arbitria, complaints and requests for refunds from customers would not have
happened. If customers had not required refunds, the cost US$420,000 to Blue for refunds
and the process fee would not have occurred. Therefore, there is a direct causal link
between Red’s non-performance and damages. (iii) Also, Red could foresee that Blue
would accept the return of goods which strongly hurt customers’ feelings under Return
Policy (Ex.7). Therefore, it is obviously foreseeable that Red’s non-performance would
lead to the damages in this case.
As (i)~(iii) above, Blue has the right to damages of full US$420,000 resulted fromRed’s non-performance of its contractual obligation, under U7.4.1.
In conclusion, Blue seeks an arbitral award granting for Red shall reimburse
US$420,000 to Blue.
3. Red is under obligation to reimburse US$420,000, since the amount of compensationis reasonable and appropriate to the harm caused by Red’s non-performance.
[Estimated counter argument from Red]
Red may claim there was no causal link between Red's non-performance and thecompensation paid to customers, which also included in the damages. Therefore, theamount of damages should be reduced to less than US$420,000 by referring U7.4.3(Certainty of harm).
[Response from Blue]In this case, the purpose of the compensation paid to customers, was not only tocompensate customers for selling the bad-luck symbol t-shirts, but also to restore thereputation ruined by these bad-luck symbol t-shirts. Considering both of the above
purposes of compensation, the amount of compensation was appropriate and reasonable
for harm caused by Red’s non-performance. Therefore, Blue refunded each customer
US$100 including compensation.
Hence, the direct causal link exists between damages of US$420,000 and Red’s nonperformance.
In conclusion, Red is under obligation to reimburse US$420,000, since the amount ofcompensation was appropriate to harm caused by Red’s non-performance.

24. The amount of damages should NOT be reduced.
[Estimated counter argument from Red]
Red may claim that the amount of damages shall be reduced, since the harm was due in an"omission" by Blue of not informing Red about taboos in Arbitira according to U7.4.7(Harm due in part to aggrieved party).
[Response from Blue]
1. Blue did not have to inform Red about taboos in Arbitria.
(1) It was impossible for Blue to inform Red about all taboos in Arbitria from
October 2015 to the date of sample examining.
Even in the conversation, after Red asked Blue to inform them about taboos in
Arbitria, and Blue said “I will let you know if I think of anything”, it does notmean that Blue should take responsibility to inform Red about all taboos in
Arbitria. (¶15) Since taboos are innumerable, informing Red about all taboos in
Arbitria would be an extremely large burden to Blue, and almost impossible tofulfill, in comparison to Red’s confirmation. Therefore, this responsibility
should not be recognized. Hence, Blue did not need to inform Red abouttaboos from October 2015 to date of sample examining.
(2) Blue was not able to inform Red that the dragon is a taboo in Arbitria
from the date of sample examining
When Blue was examining the sample on December 1st, Red told Blue“…,with pinpoint embroidery featuring an animal”, which made Blue thinkthat the embroidery on the t-shirts would only feature animals(¶17). From thisconversation, Blue reasonably thought that the taboos of which needed to be
informed to Red were limited to animals. Since in Blue’s recognition that a
dragon is not an animal, Blue did not have to take the responsibility to inform
Red that dragons are taboo.
Hence, Blue did not have to inform Red about taboos in Arbitria.
2. Red should be liable for omitting to inquire about taboos in Arbitira
In conversation, Red told Blue “Though we are going to raise the same question
with the staff in our Arbitrian branch…”. (¶15) However, it omitted to inquire
about taboos with its Arbitria branch. Comparing with Blue’s "omission", which
was to research all taboos in Arbitria, Red only needed to research those which
they decided to produce and include in the Lucky Bags. Even though it was easy
and completely possible for Red to fulfill this commitment, Red still failed in it.
And this omission directly led to the damages this time.
In conclusion, the amount of damages should NOT be reduced.

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[Estimated counter argument from Red]
Red may claim that the amount of damages shall be reduced based on U 7.4.8(Mitigationof harm), since the damages could have been mitigated, if Blue had taken a reasonable
method such as sending the t-shirts back to Red.
[Response from Blue]
1.

Returning t-shirts to Red was not a reasonable stepIn this case, returning t-shirts to Red was not a reasonable step for Blue since:(1) Blue was not able to return the t-shirts to Red(2) Storing returned t-shirts would increase the cost for Blue
(1) Blue was not able to return the t-shirts to Red
In this case, Blue did not think that Red would accept returned t-shirts, and hence did
not return the t-shirts to Red. In the conversation between Red and Blue, Red showed
an obviously uncooperative attitude towards returned t-shirts and told Blue “It’s up to
you to accept returns, but we are not responsible for them.” (¶21) Therefore, Blue wasreasonably not able to know that Red would accept these returned t-shirts.
Also in this case, Lucky Bags is a wholesale business between Red and Blue (Ex.5),
which means that Blue should take all risks of keeping those returned t-shirts stored.
What a reasonable company as Blue should do is to handle these t-shirts as soon as
possible, but not to keep it stored and wait for uncooperative Red to agree to accept
them. Therefore, Blue was reasonably not able to return the t-shirts to Red.
(2) Storing returned t-shirts would increase the cost of Blue
According to the comment of U7.4.8, “Evidently, a party who has already suffered theconsequences of non- performance of the contract cannot be required in addition totake time- consuming and costly measures.” In this case returning t-shirts back to Red
is a time-consuming and costly measure for Blue. Also it is unforeseeable for Blue.
These returned t-shirts containing a dragon on it are completely valueless to Blue. The
longer these t-shirts were stored in Blue’s place, the higher cost to Blue as a result.
Therefore, it is necessary for Blue to handle it as soon as possible. Red sent the email
agreeing to accept returned t-shirts about 2 months after Blue informed Red of the
returns. (¶21, Ex.19) Therefore, waiting until Red agreed to accept the returned t-shirts
was a time-consuming and costly measure. It was obviously unreasonable for Blue tostore the t-shirts for this period of time.
Hence, the tribunal should deny Red's procedural request since Red failed toprove the existence of reasonable steps. U7.4.8 is not applicable in this case.

In conclusion, amount of damages should NOT be reduced.

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Summary of Alpha CaseOn April 21st Blue made an oral order of 10,000 Alpha Series by phone and sent an ordersheet to Red. Based on Vendor Contract and Memo hand-delivered from Red to Blue, Red isunder obligation to deliver those Alpha Series to Blue. However, Red failed to perform thisobligation. Red wrongly delivered to Blue 10,000 pieces of d series instead of Alpha Series
its misunderstanding of the contents of the order sheet. Moreover, even though Blue
made another order on April 30th, Red did not deliver the required goods to Blue on thatoccasion either.
Since then, Blue has lost the opportunity to make a profit of US$250,000. In order to returnthe d series to Red, Blue delivered the goods to carrier, which is Black. However, these goods
were damaged in transit by earthquake.

Claim 1: Red shall reimburse US$250,000 to Blue.(issue 1)
1. Red did not perform its obligation.
(1) Red was obliged to deliver 10,000 pieces of Alpha Series to Blue.
Article 2.26 of Vendor Contract (Ex.4) stipulates that Red has an obligation to deliver
the corresponding goods to Blue. In this case, Red has hand-delivered thememo(Ex.13) to Blue which stipulates that Blue has the right to order and purchase
the Alpha Series before other parties for a period of one-month from the initial release
date of Alpha Series (¶25). Moreover, Blue made an oral order of 10,000 pieces of
Alpha Series by phone (¶26) and then sent an order sheet to Red by email (¶27).
Based upon Vendor Contract, memo and the order sheet which arrived to Red on April
21st, this supplying contract resulted. Therefore, Red is under obligation to deliver
10,000 pieces of Alpha Series to Blue.
(2) There is Red’s non-performance of the obligation stated in (1) above.
However, Red did not deliver ordered goods of 10,000 pieces of Alpha Series to Blue.
Hence, Red failed to perform its obligation.
2. Blue has the right to full compensation of US$250,000 to Red
Blue has the right to damages caused by Red’s non-performance of its obligation. Underthe requirements of right to damages of Article U7.4.1, three elements (U7.4.2 to U 7.4.4),(i) a causal link; (ii) certainty of harm; and (iii) foreseeability of harm should beconsidered and proven.
In this case, (i) (ii) if Red had delivered 10,000 pieces of Alpha series to Blue, Blue could
have sold all of those goods and made a profit of US$250,000. Thus these damages would
have not occurred. Moreover (iii) Red is able to foresee these damages
As (i)~(iii) above, Blue has the right to damage of full US$250,000 resulted fromRed’s non-performance of its contractual obligation, under U7.4.1.
In conclusion, Red shall reimburse US$250,000 to Blue.

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3. Even if the claim stated above were dismissed, Red shall still reimburse US$250,000
to Blue since Blue has made another order of Alpha Series on April 30th.
Even if the order sheet from April 21st were not effective, Red was still under obligation todeliver 10,000 pieces of Alpha Series to Blue based on the order made by Blue on April
30th, 2016.
Red was under obligation to deliver 10,000 pieces of Alpha Series to Blue.
According to the memo (Ex.13), the first one-month period of preferential order
started from the initial release day. Based on U4.1(Intention of the parties) “release”
on this memo means “release in Blue Village”.
There was a 14-hours’ difference between the release in Negoland and Arbitria. If therelease had been interpreted as release in Negoland, during these 14 hours there would
not have been any advantages for Blue to conclude this preferential contract.
Considering the nature of the contract, it is meaningless to Blue and also against thereason why Blue conclude this preferential contract. Therefore, the "release" in thememo should not be interpreted as "release in Negoland", but "in Arbitira."
The beginning of the one-month period should be calculated from the date of releasein Blue Village, which is April 1st by Arbitria time. Therefore, April 30th was includedin this period. And Blue made an effective order for 10,000 pieces of Alpha Series
inside the one-month period (¶28).
Hence, Red is still obliged to deliver 10,000 pieces of Alpha series to Blue. Since Red
did not perform its obligation, according to U7.4.1, Blue has the right to damages infull of US$250,000 caused by Red’s non-performance.
In conclusion, Red shall reimburse US$250,000 to Blue.
4. Red was obliged to deliver 10,000 pieces of Alpha Series to Blue
[Estimated counter argument from Red]
Red may claim that Red was not able to interpret the order sheet as an order for Alpha
Series. Therefore, there was not common intention to deliver Alpha Series to Blue. Hence,
the mutual agreement between Blue and Red did not result.
[Response from Blue]
Red was obliged to deliver 10,000 pieces of Alpha Series to Blue, since order sheet(Ex.14) shall be interpreted as an order for Alpha Series.
Red may claim that Red was not able to know Blue’s intention, even so, U4.2(2)(Interpretation of statements and other conduct) should be applied.
U4.2(2) stipulates “…, such statements and other conduct shall be interpreted according
to the meaning that a reasonable person … would give to it in the same circumstance.”
Based upon U4.2(2), the order sheet shall be interpreted as what a reasonable person as
Red would give to it in this case. Therefore, the order sheet(Ex.14) shall be interpreted as
an order for Alpha Series. Hence, the mutual agreement resulted and Red’s obligation
existed.

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A reasonable person would be able to interpret the order sheet(Ex.14) as anorder for Alpha Series in the same circumstance.
In this case, before the order sheet was emailed, there had been already several
negotiations about the Alpha series between Red and Blue. Also this email arrived just81 minutes after Blue called Red to make an urgent order of Alpha series. Moreover,from the Lucky Bag case, Red should have already known that it was not possible forBlue to order the d series as it included a dragon. Therefore, it is obviously reasonable
to connect this email with the Alpha series.
Hence, in this case, Red, as a reasonable person, was able to interpret the order sheet
as an order for Alpha Series.
In conclusion, the order sheet shall be interpreted as order of Alpha Series and Red wasunder obligation to deliver 10,000 pieces of Alpha series to Blue.
5. The amount should NOT be reduced[Estimated counter argument from Red]
Red may claim that the amount of damage shall be reduced, since the harm was due in anomission by Blue that Emerald forgot to deliver Red’s message of requesting a call according
to U7.4.7.
[Response from Blue]The amount of damage should not be reduced since Red’s omission was the key
factor of the damages
Red omitted to follow the practice established between Red and Blue which is to accept
urgent orders from Blue by phone.
U1.9(Usage and practices) stipulates that “The parties are bound by any usage to which
they have agreed and by any practices which they have established between themselves.”
There was a practice established between Red and Blue.
Urgent orders by phone from Blue were accepted 2 or 3 times in the previous year (¶26).
Also, to prepare for the start of the sales of the Alpha Series, the order of 10,000 pieces of
Alpha Series was made by Blue to Red over the phone. Moreover, after the first 10,000
pieces of the Alpha Series were sold out in Blue Village, Blue made another other for
5,000 pieces by phone and Red gladly accepted it (¶26). Based on these facts, there was apractice established between Blue and Red that the oral urgent order by phone from Bluewas acceptable to Red.
Red omitted to follow the practice between both parties.
Based upon U1.9, Red should follow this practice which has already been established.
However, after Orange called Peacock to make an urgent order for Alpha and told him
about the practice, Peacock still insisted on breaking this practice. (¶26) If Peacock had
followed this practice and accepted the urgent order, the dispute about the contents of theorder sheet would have not happened, the omission by Blue would not have existed, thedamage in this case would also not have occurred too. Thus the omission by Red which
was not following the established practice was the key factor in this case.
Therefore, Red is liable for damages which occurred by its omission.
Hence, Blue’s omission occurred because Red omitted to follow the practice first.
Comparing to Red’s omission, Blue’s omission could almost be ignored.
In conclusion, amount of damage should NOT be reduced.
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Claim 2: Blue is NOT under obligation to reimburse US$1,000,000 to Red.
[Estimated counterclaim from Red]Red is estimated to seek an arbitral award granting for Blue shall pay US$1,000,000 to Red
based on U7.4.1 Blue did not perform its obligation to send back 10,000 pieces of d series toRed.
[Response from Blue]
1. Blue performed its obligation to send 10,000 pieces.
(1) Blue performed its obligation since CPT is applied in this case
Article 4.3 of Vendor Contract stipulates “Trade term shall be CPT (Incoterms
2010 Edition)”. According to Article 4.3 of Vendor Contract, all the trades
between Blue and Red based on Vendor Contract should under CPT. Since CPT
was applied in previous trades between Blue and Red so far, if there was not any
new trading conditions specified in the returning this time, CPT should be appliedalso in this returning.
A4(Delivery) of CPT stipulates “The seller must deliver the goods by handing
them over to the carrier contracted in accordance with A3…”
A3(Contract of carriage and insurance) of CPT stipulates “a) The seller must
contract or procure contract for the carriage of the goods…”
Since the party who contracted with the first carrier was Blue, according to A3, theseller in this returning should be interpreted as Blue. Therefore, according to A4,
Blue was only obliged to hand 10,000 pieces of d series over to Black, which is
first carrier in this case.
Since Blue handed d Series over to Black, Blue performed its obligation. (¶29)(2) If (1) above were not recognized, Blue still performed its obligation sinceU6.1.6 is applied in this case.
The obligation, which was sending 10,000 pieces of d series back to Red, is basedon a new oral agreement by phone. Also, the place of performance of thisobligation was not decided in the conversation of this new oral agreement (¶28).
U6.1.6(1)(b) stipulates that “If the place of performance is neither fixed by, nor
determinable from, the contract, a party is to perform any other (than monetary)
obligation, at its own place of business.”
Since sending d series back to Red was a non-monetary obligation, based uponU6.1.6(1)(b), the place of performance should be decided as the place of Bluebusiness.
As such, when Blue handed over 10,000 pieces of d series to Black at Arbitria, theobligation was performed.
Hence, Blue performed its obligation.

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2. Even if Blue’s non-performance were recognized, non-performance by Blueshould be excused since this is due to force majeure.
Even if there were non-performance by Blue, it should be excused according toU7.1.7(Force majeure).
U7.1.7 stipulates “Non-performance by a party is excused if that party proves that thenonperformance was due to an impediment beyond its control and that it could notreasonably be expected to have taken the impediment into account at the time of theconclusion of the contract…”
In this case, the earthquake was a natural disaster, which is beyond Blue's
control. Also, since earthquakes do not occur frequently in this area, it could notreasonably be expected when Blue was entering into this oral agreement with Red.
Hence, as a consequence of force majeure, this non-performance by Blue shall be
excused.
In conclusion, Blue is NOT under the obligation to reimburse US$1,000,000 to Red.
Summary of Robot Caseth

On May 27 an Equipment Lease Agreement was concluded between Blue and Red that Red
would lease 10 X-5 robots with management application software from Blue. The robots
were delivered to Red on July 15th. During the trial run of these robots, no problem wasfound. After these robots went live, they greatly contributed to Red’s operational efficiency.
However, after Red had changed their arrangement of stocked goods, Red forgot to enter the
new location of one rack. On September 12th, when Red’s warehouse had been experiencing a
power outage on a record hot day, the temperature of Red’s warehouse was assumed to reach
50 degrees Celsius. At that time, one robot, Robot “B” collided against a column of thisrelocated rack, due possibly to malfunction caused by the high temperature. This collision led
to a fire. All of the robots and the warehouse were completely burned down.

Claim 1: The tribunal should deny Red’s procedural request.
[Estimated counterclaim from Red]
Red may claim that Blue is under obligation to reimburse US$1,100,000 to Red referring to
Article 4(3) of Equipment Lease Agreement (hereinafter ELA), based on the ground that the
Robot “B” might have contained deficiency since Blue delivered the robots to Red. Also, thedeficiency of Robot “B” might have caused an incident, which led to the damages to Red.
[Response from Blue]
1. Blue did not breach its obligation according to ELA(Ex.18), since Blue has provided
the robot “B” and conformed to the requirement of Article 4(1) of ELA to Red.
2. Even if Red’s claim was accepted by the tribunal, the amount of the reimbursementon the damages caused by Blue, should be reduced, due to the omission of Red, basedon U7.4.7 (Harm due in part to aggrieved party).

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1.

Blue has provided the robot “B” and conformed to the requirement of Article 4(1) of
ELA to Red. (issue 1)(1) There is NO adequate evidence supporting Red’s assertion that Robot “B”
contained deficiency.
Red may claim that the Robot “B” contained the deficiency of collision prevention
sensor. In order to support this claim, Red may point out the incident of Robot “A”
and the fact that Blue replaced the sensors in the robots which used the same sensor as
Robot “A” and “B”. (¶35)
However, the expected claim of Red should be dismissed since Red cannot prove“deficiency” in Robot “B” from these two facts above.
First, the incident of Robot “A” cannot prove assumed deficiency in Robot “B” since
Robot “B” worked normally at the time of the incident of Robot “A”.
Second, the deficiencies found in the same collision sensor were wire disconnection
after the use of several months appropriately. (¶35⑤) It also cannot be proved that at
the time of incident, the deficiency of wire disconnection had occurred in Robot “B” at
the time of the fire, since Robot “B” worked properly from the time of the trial run up
until right before the incident (¶34).
Therefore, Red lacks evidence to support its claim.
Hence, there is NO adequate evidence supporting Red’s claim.
(2) There is NO causal link between Blue’s non-performance of obligation and thedamages.
Even if Blue’s non-performance of obligation were recognized, there is no directcausal link between Blue’s non-performance and the damages. In this case, Robot “B”
might be assumed to contain deficiency. However, the incident in this case wasassumed to be caused by temporary malfunction which was due to temperature, but
not the deficiency. When the incident happened, Red did not follow the requirementsof the Instruction manual (Ex. 19) to stop using the robots as the temperature hadalready exceeded warranty range. Robots, as a kind of delicate precision instrument,
are easily affected by environment factors, such as temperature. This is why Blue has
clearly specified the warranty temperature range in the Instruction Manual. Therefore,
it is reasonable to consider that the collision was caused by temporary malfunction of
Robot “B” due to the temperature that was higher than the warranty range. (¶35)Hence, there is NO causal link between Blue’s non-performance and the damages.

In conclusion the claim of Red should be dismissed.
2. The amount of the reimbursement on the damages caused by Blue, should be
reduced, due to the omission of Red. (issue 2)
U7.4.7(Harm due in part to aggrieved party) stipulates “Where the harm is due in partto an act or omission of the aggrieved party…, the amount of damages shall be
reduced to the extent that these factors have contributed to the harm…”
In this case, while using robots, Red omitted a) to conform with the Instruction
Manual regarding the warranty temperature range, and b) to enter necessary
information into the management application according to Article 1(5) of ELA(Ex.21).
Therefore, the damages occurred in this time were due in part to Red’s omissions.

10a) Red omitted to enter the necessary relocation information of a rack into
management application of the robots.
According to the Information Sheet (Ex. 19), Red should only use the robots after
entering all the necessary information into the management application. However,Red omitted to enter the relocation information of a rack. (¶34) If Red had entered
this information, Robot “B” would have passed through a new route which isappropriately calculated and would not have collided with the rack, also thedamages would not have occurred. Thus, this omission contributed to the damages.
b) Red omitted to stop using robots to avoid malfunction.
Information Sheet(Ex.19) stipulates "The robots are designed to function properly
between the temperatures of -10 degrees and +45 degrees Celsius. If thetemperature drops too low or becomes too high, the robots may malfunction".
On the day of the incident, while Red’s warehouse had been experiencing a power
outage on a record hot day, the temperature in the warehouse was assumed toreach 50 degrees Celsius which was higher than the warranty range. (¶35 )
According to this, Red should have stopped using the robots in order to prevent
any malfunction when temperature was expected higher than the warranty range.
Red should have stopped using the robots in order to prevent any malfunction.
However, Red omitted to stop using the robots even after Red was aware that thetemperature in the warehouse might have exceeded the warranty range.
In conclusion, the amount of damages shall be reduced since the damages were due inpart to Red’s omissions.

Claim 2: Red shall reimburse US$500,000 to Blue. (issue 3)
Article 5(2) of ELA(Ex.21) stipulates “This Agreement may also be terminated by Blue
immediately by sending a written notice to Red should: the Robot be lost or damaged tothe damaged to the extent it cannot be restored to a state equivalent to when it wasdelivered to Red.”
Based on this Article, Blue informed Red about the termination of the agreement (Ex.21).
Moreover, Article 5(3) of ELA(Ex.21) stipulates “In case that Red is not able to return
the Robot in a condition functionally equivalent to when it was delivered to Red, Red shall
pay to Blue US$50,000 per each such Robot which Red is not able to return to Blue.”
Since all robots were completely burned down, and Red was not able to return the robots
to Blue, Red is under obligation to pay US$500,000 to Blue.
In conclusion, Red shall reimburse US$500,000 to Blue.
[Estimated counter argument from Red]
Red may claim that Red does not have to make an allowance in money, since Blue delivered
the robots with deficiency, and it let to the impossibility to make restitution of the robots
based on 7.3.6(3)(Restitution with respect to contracts to be performed at one time).
[Response from Blue]In this case, as Blue stated in claim 1, Blue delivered the robots without deficiency,
which conformed to the requirements of Article 4(1) of ELA(Ex.18).
Moreover, even if Blue had breached the agreement, there was NO causal link
between Blue’s breach and the fire in the warehouse, which caused the loss of robots,
since the incident was due to Red's omission.
Therefore, Red's estimated counter argument shall be dismissed.
[END]
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