ISSUE 1: THE “RARE METALS” CASE
SUMM ARY OF FACTS
This dispute is between Red Corporation (“Red”), a government-backed entity under the Negoland
Ministry of Economy and Trade and Blue Inc. (“Blue”), a private Arbitrian company. Red and Blue havealways enjoyed a long-standing business relationship, spanning 17 years.
In 2000, Red and Blue concluded a priority-of-supply agreement (“the Agreement”) for Red’s exports ofrare metals, which benefited both parties. In September 2015, Blue’s tungsten refining technology wasused for a new plant in Red. In exchange, there was an oral agreement that the priority-of-supply deal
should be extended to tungsten, in addition to the existing nickel and titanium contract. Red further agreed
to a license fee and monthly royalty payments linked to output. However, heavy rainfalls diminished the
production capacity of Red’s tungsten plant. Black set up a domestic firm within Negoland, divertingtungsten supplies from Blue. Blue would have made a profit of US$5 million if Red’s exports to Blue had
not dropped to 0. From November to December 2015,
Red agreed to amend the license agreement to extend usage of Blue’s technology to include platinum.
However, in January 2016, Red started using Green’s platinum refining technology. In March 2016, theArbitration Centre of Arbitria ordered Green to stop using the technology as it infringed Blue’s patent.
However, the Patent Office of Negoland eventually approved Green’s patent application. Blue then filed
a lawsuit to invalidate Green’s patent. Meanwhile, Blue’s request for Red to pay royalties for usage of thetechnology was rejected.
Blue is seeking US$5 million in damages from Red for breach the Agreement. Blue is also seeking
royalties from Red for breach of the License Agreement.
1. Interpretation Of The Priority-Of-Supply Agreement Includes Tungsten

A. Plain reading of the Agreement shows that the definition of “rare metals” extends beyond nickel
and titanium
1. The Agreement between Red and Blue (Exhibit 6) stipulates that Red gave Blue the right to orderand purchase rare metals “such as nickel and titanium”.
2. It is clear in this phrase that “nickel” and “titanium” are merely examples of the larger class of “raremetals” and was not meant to be restrictive. Therefore, the Agreement should entitle Blue to orderand purchase other rare metals, which are “produced by Red or its affiliate on a priority basis toother prospective purchasers in other countries other than Negoland”.

B. The Agreement should be interpreted to include tungsten from the parties’ common intention
based on their subsequent conduct
3. It is the common intention of Red and Blue to extend the meaning of “rare metals” in the Agreement
beyond nickel and titanium, from the parties’ subsequent conduct.
4. Pursuant to Article 4.3(c) read with Article 4.1(1) of the UNIDROIT Principles of International
Commercial Contracts (“PICC”), the parties’ conduct subsequent to the conclusion of the contract
is relevant when determining the common intention of the parties at the time of the contract’s
construction. This is to prevail when interpreting terms of the contract. Additionally, Article 4.3,
Comment 3 of the PICC also emphasizes the relevance of the parties’ subsequent conduct of theparties in long-term contracts.
5. On the facts, Red’s intention was to supply platinum on a priority basis to Blue, in addition to nickel
and titanium. When Negoland Materials merged into Negoland Metals in 2003 (at [14]), Red began2

supplying platinum to Blue in addition to nickel and titanium despite there being no formal
modification to the Agreement. Furthermore, Red continued to supply nickel, titanium, and platinum
to Blue during a rare metal squeeze in 2004, turning down other overseas buyers who were willingto pay a higher price for platinum to meet Blue’s orders. All of the above clearly show that Red had
been supplying platinum to Blue on a priority basis over other overseas purchasers for the past year
since 2003.
6. Blue’s intention was to purchase platinum from Red on a priority basis. This is evinced from thecorrespondence between Blue and Red at [15]. Blue stressed that they will be “counting on [Red]for stable supplies” of nickel, titanium, and platinum. This practice continued until the dispute over
the Agreement arose in November 2015.
7. Therefore, the parties’ conduct subsequent to the conclusion of the Agreement for the lengthy 11year period from 2004 to November 2015 shows that Red supplied Blue with platinum on a priority
basis. Since Red made no indication to modify the Agreement, both parties must have intended forthe “rare metals” as stipulated in the contract to extend beyond nickel and titanium.
8. On the issue of tungsten’s inclusion in the Agreement, Red’s intention was to supply tungsten toBlue on a priority basis. At [19], Red told Blue that they were “planning to give [Blue] a similar deal”
for tungsten, referring to the Agreement. Furthermore, Red supplied tungsten to Blue based on thisintention for the period of September 2015 to November 2015.
9. Blue’s intention was to purchase tungsten on a priority basis, as stipulated in the Agreement, as
well as to have an active involvement in the tungsten business beyond the priority-of-supply deal.
Therefore, it is the common intention of both parties for tungsten to be included into the Agreement.

C. Red’s ignorance of the changes made to the final draft agreement is insufficient to excuse themfrom being bound by the Agreement
10. Red signed the Agreement as an indication of their assent. Pursuant to Article 2.1.6, Comment 1 of
the PICC, an indication of assent to an offer is an acceptance if the assent is unconditional anddoes not contain any variations to the terms of the offer. Red had already signed the final Agreement(Exhibit 6) without qualifying its assent or varying any terms of the Agreement. Therefore, Red’s
signature constitutes a contractually binding acceptance.
11. Furthermore, it did not matter from a contractual point of view that Red signed “without noticing thedifference between the draft agreement attached to the communication (Exhibit 5) and theAgreement (Exhibit 6)”, as alleged at [13]. This is especially so for commercial contracts, where thecertainty of contract is paramount for businesses to function. Therefore, Red should not be allowed
to excuse themselves from the Agreement’s obligations due to their oversight in not checking thefinal draft agreement thoroughly.

D. Even if common intention between the parties cannot be established, a reasonable businessperson would interpret the term “rare metals” to include tungsten
12. A reasonable business person would interpret the term “rare metals” to include tungsten based on
the nature and purpose of the Agreement.
13. Article 4.2(2) of the PICC provides that the Agreement shall be interpreted “in accordance with themeaning which reasonable persons of the same kind as [Red and Blue] would give to it in the same
circumstances”. Under Comment 2 of Article 4.2(2), relevant circumstances stipulated in Article 4.3
have to be considered in applying the “reasonableness” test. In this case, the relevant consideration
is Article 4.3(d), which is the “nature and purpose” of the Agreement.
14. On the facts, it is clear that the Agreement is of a long-term nature and that the purpose of it wasfor Blue to expand into the rare metals industry. This understanding was communicated to Red at3

[12] where Blue said that the plant replacement project was an “opportunity for [them] to expand[their] relationship” with Red to other areas, in particular, the transactions of rare metals. Blue also
communicated the “long-term benefits” that they hoped to realize from the Agreement, ensuring acommon understanding with Red regarding the nature and purpose of the contract.
15. Furthermore, a reasonable business person is likely to conclude that the Agreement should extend
beyond nickel and titanium. A reasonable business person would interpret the Agreement to be
non-restrictive because it is likely that new rare metals such as tungsten and platinum would be
discovered and parties might want to include them into the Agreement. Hence, limiting theAgreement to only two metals would hinder Blue’s realization of “long-term benefits”, which was theoriginal purpose of the contract.
16. Therefore, a reasonable business person would extend the Agreement beyond nickel and titanium
based on the nature and purpose of the Agreement.

E. Alternatively, Red has an implied obligation to include tungsten in the Agreement stemmingfrom its nature and purpose
17. Red has an implied obligation to include tungsten in the Agreement based on the nature andpurpose of the Agreement.
18. Pursuant to Article 5.1.2(a) of the PICC, implied obligations “stem from the nature and purpose of
the contract”. Illustration 1 shows that a term can be implied when it is “obvious” and “necessary” toachieve an agreement’s purpose. But for the implication of this obligation, the restriction of theAgreement to only nickel and titanium will hinder Blue’s opportunity to expand into the rare metals
industry and realize the “long-term benefits” that Blue communicated to Red at [12].
19. Therefore, there is an implied obligation for Red to supply tungsten to Blue on a priority basis basedon the nature and purpose of the Agreement.
2. Breach Of The Priority-Of-Supply Agreement By Prioritizing Sales To Black Negoland

F. An interpretation of the contract between Red and Black Negoland in accordance with thereasonable person test demonstrates that it was not concluded to fulfil domestic sales
20. In interpreting the contract, Article 4.1(1) of the PICC highlights that if a common intention between
the parties cannot be established, “the contract shall be interpreted according to the meaning thatreasonable persons of the same kind as the parties would give to it in the same circumstances”. In
the present case, the reasonable person test should be done from the point of view of a reasonablebusinessman.
21. Red is a government corporation under the Ministry of Economy and Trade whose primary interest
is to protect the domestic economy (at [3]). Since Red said that they “can’t touch the rare metals
earmarked for sales within Negoland” (at [12]), the reasonable businessman would interpret theterm “domestic sales” to mean “sale of goods within Negoland which would benefit the domestic
economy”. Given that “Black Negoland exports overseas all amounts of the tungsten bullions itpurchases” (at [22]), a reasonable businessman would not consider Black Negoland to fit under thedefinition of a “domestic corporation”.
22. Therefore, Red should be held in breach of the Agreement with Blue for prioritizing the sale oftungsten to Black Negoland.

G. Red should not be allowed to use its contract with Black Negoland to justify its non-performanceof the Agreement because Red did not act in good faith when contracting with Black Negoland423. Pursuant to Article 1.7(1) of the PICC, contracting parties “must act in accordance with good faithand fair dealing in international trade.”
24. On the facts, Red agreed to Black’s proposal to establish a subsidiary (Black Negoland) in Negoland,
aware that this would enable them to prioritize sales to Black. This is because sales to thatsubsidiary “would not be exports” (at [22]). Furthermore, Black Negoland was especially formed topurchase tungsten on a priority basis from Red. This formation took place on November 5, 2015,
five days before Red told Blue that they would not be able to supply Tungsten on a priority basis (at[22]). Even if Black Negoland can be considered a domestic corporation, it is evident that Red
knowingly entered into a new contract with Black to circumvent the Agreement. Thus, Red did not
act in good faith in contracting with Black Negoland.
25. Therefore, Red’s non-performance of the Agreement is unjustifiable and Red should be held in
breach.

H. Red is unable to plead hardship because it was a case of self-induced hardship
26. Even if the record rainfall amounts to hardship (at [21]), Red’s election to contract with Blacksuggests that the hardship was self-induced.
27. Looking at the timeline of facts, the record rainfalls flooded the area at the end of October and thecompany’s production decreased from November 2015 (at [21]). However, Red only entered into acontract with Black Negoland after November 5, 2015, when Black Negoland was incorporated.
This was after Red knew that its supply of tungsten had dropped. In Exhibit 9, it was shown thatfrom October to November 2015, the total production quantity of tungsten dropped from 120 to 40
tonnes. Additionally, there was also a corresponding increase in the demand in Negoland from 20
to 40 tonnes due to the added demand from Black Negoland.
28. Therefore, in electing to contract with a third party knowing that in the process, it would be in breachof its contractual obligations with Blue, Red cannot then plead hardship and has to continue fulfilling
its obligation to supply tungsten.

I.

Hardship does not allow Red to non-performance of the Agreement
29. Pursuant to Article 6.2.3(1) of the PICC, the “disadvantaged party is entitled to request renegotiations”. Reading that with Article 6.2.3(2), “the request for re-negotiation does not in itself
entitle the disadvantaged party to withhold performance”.
30. Therefore, Red still had to continue fulfilling its obligations to supply tungsten on a priority basis toBlue from November 2015 while requesting re-negotiations. However, Red did not do any of theabove, choosing to unilaterally stop its performance. Therefore Red should be held in breach of theAgreement.
3. Use Of The Licensed Refining Technology To Refine Platinum

J. Red should pay royalties to Blue due to the formation of a collateral contract on the use of Blue’s
technology to refine platinum within the License Agreement
31. A collateral contract is a “written or oral agreement associated as a side contract made between
the original parties” (Black's Law Dictionary Free (2nd ed.)). A collateral contract “[leaves] the earlier
written agreement intact and [relates] to a different, independent subject matter”. Otherwise, if it“contradicts or qualifies the original contract”, a collateral contract cannot be found (George Letsas& Colm O'Cinneide, Current Legal Problems 2010, Volume 63, (2011)). According to Comments 1
and 2 of Article 1.2 of the PICC, written evidence for an offer in a collateral contract is allowed.

532. Blue and Red’s conversation (at [24]) evinced the formation of a collateral contract on the use of
the refining technology for platinum. Blue offered the revision of the “License Agreement to coverplatinum refining”. Red then “[agrees] with the part to be amended” to allow Blue’s License
Agreement to be used for platinum. This clear offer and acceptance indicates that a prima faciecollateral contract is formed. This collateral contract allows the refinement of platinum under thesame terms as the License Agreement.
33. Therefore, Blue can claim royalties for Red’s use of Blue’s technology to refine platinum due to theformation of a collateral contract for platinum based on the License Agreement.

K. The arbitral award which both parties willingly submitted to should be enforceable on Red in
Negoland34. The Arbitration Center of Arbitria’s award is enforceable because issues of patent infringement arearbitrable.
35. The International Commerce Court held in Case No. 6097 (1989) that an arbitral tribunal
empowered by the parties can rule on the validity of a patent and bind parties to this award. Since
patentees can surrender, assign, license or transfer one’s patent right to others, they are allowed
to arbitrate on patent issues by choosing arbitration as the conclusive and final solution for theirpatent dispute. Since Green and Blue have agreed to arbitrate on the patent infringement of Green’s
technology, an arbitral tribunal is allowed to arbitrate on Green’s patent infringement.
36. Article III of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“NewYork Convention”) requires each Contracting State to recognize arbitral awards as binding andenforce them accordingly. Given that both Negoland and Arbitria are Contracting States, the arbitralaward should be enforceable within Negoland, the country Red is operating in.

L. Red’s usage of Green’s technology is an infringement of Blue’s technology as the arbitral award
should be enforced within Negoland given an absence of public policy to the contrary
37. The arbitral award is enforceable within Negoland because there is no public policy to the contrary.
Article V(2)(b) of the New York Convention states that recognition or enforcement of an arbitralaward may be refused if enforcing it would be contrary to the public policy of that country. Since
Arbitria and Negoland are Contracting States to the New York Convention (at [6]), the above
consideration would apply to the arbitral award.
38. An arbitral award should “as a matter of comity” be given effect to unless there are public policy
considerations to the contrary which “violate the most basic notions of morality and justice” and theaward is “fundamentally offensive to that jurisdiction’s notions of justice”. The Hong Kong Court ofAppeal in 1999 referred to the case of Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc. 473
US 614 (1985), where the demand for comity required that the Courts enforce the arbitral award“even assuming that a contrary result would be forthcoming in a domestic context.” The Federal
Court of Australia in Traxys Europe S.A. v Balaji Coke Industry Pvt Ltd recognised that a mere
violation of domestic law was unlikely to amount to a ground to refuse recognition or enforcementon the basis of public policy.
39. The strict interpretation of “contrary to public policy” is evinced by the Supreme Court of Thailand
in Case No. 7277/2549 because the underlying contract was tainted by bribery, and an enforcementof the award that was based on the tainted contract would be in contrary to public policy. As such,
most applications to refuse recognition and enforcement of foreign arbitral awards have rarely beensuccessful (Pieter Sanders, A Twenty Years’ Review of the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, 1979 INT’L LAW 269, 270).
40. On the facts, the Arbitration Centre of Arbitria issued an arbitral award on March 1, 2017 which
ordered Green to stop using Blue’s technology immediately and compensate Blue for damages
6

because the technology used by Green infringed Blue’s existing patent. Green’s patent application
for the disputed technology in Negoland was however approved in April 1, 2017 by the Patent Officeof Negoland. There is no public policy to the contrary as the mere violation of domestic patent rules
are insufficient and do not “violate the most basic notions of morality and justice”.
41. Furthermore, there are positive policy considerations for the enforcement of the arbitral award. The
enforcement of the arbitral award will align Negoland’s recognition of Green’s patent infringementwith similar decisions in Meditria and Arbitria. This will improve Negoland’s public policy onIntellectual Property protection by aligning it with the principles of the international community.
42. In enforcing the arbitral award in Negoland while taking into consideration the absence of contrary
public policy, Green’s platinum refining technology in Negoland should be found to infringe on Blue’s
existing patent in Negoland.

M. Red has to pay prescribed royalties to Blue as they have been using Blue’s patented technology
43. The arbitral award has proven that Green’s technology is the same as Blue’s. As such, Red has topay prescribed royalties to Blue since they are in essence using Blue’s technology.
44. Even in the unlikely conclusion that Green’s patent in Negoland takes precedence over the arbitralaward, Red’s claim is that Green’s patent in Negoland precludes them from paying any royalties toBlue. However, the Patent Office of Negoland only approved Green’s patent on April 1, 2017,
making it the operative starting date of the patent. Given that the Arbitration Centre of Arbitria ruledthat Green’s technology constituted an infringement of the patents owned by Blue in Negoland andMeditria, it stands to reason that at the very least, Red’s use of the technology to refine platinum
between March 2016 (the date Red started using Green’s technology) to April 2017 should still be
subject to royalties payable to Blue.

N. Even if there was no collateral contract, Red has breached their License Agreement with Blueby using Blue’s technology for platinum when it was expressly stated that it can only be used
for tungsten
45. In the absence of a collateral contract, Red is also liable for breach of the License Agreement asthey used the technology for platinum. Section 1.1 of the License Agreement in Exhibit 7 states thatthe license is “solely to refine tungsten”. However, by using the technology for platinum, Red has
breached Section 1.2 of the License Agreement in “[using] the Licensed Technology other than the
purpose as set forth in Section 1.1”. This breach entitles Blue to claim for damages as thetechnology has been extended without a License Agreement to refine platinum. The quantum ofdamages is determined by the royalties that Blue would have collected if not for Red’s breach of
the License Agreement.
ISSUE 2: THE “FISHERIES” CASE
SUMM ARY OF FACTS
In 2005, Red developed a fish feed called Red Mix but it did not sell well until Blue started purchasing it
in 2006. The reputation and sales of both Red Mix and Blue’s salmon improved. When Red released theimproved Super Red Mix in 2012, Red and Blue signed a Requirements Contract.
In March 2016, Red and Blue signed a Confidentiality Agreement regarding a joint study project on fishstocks. However, Red’s employee mistakenly leaked confidential project-related information to Blue.
Blue’s employee accidentally opened an innocent-looking email attachment infected by a new strain ofvirus, exposing the confidential project-related information. Subsequently, Negoland’s exports of marine
products plummeted but eventually recovered to its previous level after the Ministry announced newmeasures to conserve fish stocks.

7

Red is seeking US$10 million in damages from Blue, whom they claimed breached their Confidentiality
Agreement. Additionally, in September 2016, Red requested that the Requirements Contract be renegotiated on grounds of hardship. Blue rejected the request and Red brought the case to arbitration,seeking an amendment or termination of the contract.

1. Blue Cannot Be Liable For The Consequences Of The Leak Because Blue Had Acted In
Accordance W ith The Requirements Of The Confidentiality A greement

A. Blue was not in breach of the Confidentiality Agreement as they had exercised a reasonable
degree of care to prevent a breach of confidentiality as required in the contract
1. The interpretation of the standard terms of the contract pursuant to Article 4.1, Comment 4 of the
PICC illustrates the test for reasonableness to determine what constitutes a reasonable standardof care as required in the present contract. Under the Article, “standard terms should be interpreted
primarily in accordance with the reasonable expectations of their average users irrespective of theactual understanding which either of the parties to the contract concerned, or reasonable personsof the same kind as the parties, might have had.” Therefore, the test of reasonableness should bea definitive standard that is not in contention.
2. On the facts, section 2(1)(iv) of the Confidentiality Agreement (Exhibit 20) stipulates that “[theRecipient] shall use the same degree of care, but no less than a reasonable degree of care, to avoid
disclosure, publication or dissemination of the Confidential Information as the Recipient would use
with respect to its own confidential information of similar importance”. The following provision would
constitute a standard term employed in Confidentiality Agreements and interpretation of the terms
is thus subject to Article 4.1 Comment 4, where it is necessary to look at the plain meaning of thecontract and interpret it in a way that is commercially sensible.
3. Employing the test of the “reasonable expectations of their average users”, the contract would
require the parties to have exercised a standard, precautionary measure that is common practiceamong companies. This is to ensure that they will be able to “avoid disclosure, publication ordissemination of the Confidential Information as the Recipient would use with respect to its own
confidential information of similar importance”. The exposure of the confidential information was theresult of opening a virus-infected email attachment Blue’s employee had received. However, Blue
had already maintained the standard programs they had been using throughout the company tocheck for virus-infected emails, and frequently informed their employees to be wary of email
attachments sent by strangers (at [34]). Thus, the steps taken by Blue can be construed to havebeen undertaken with a reasonable degree of care in accordance with the reasonable expectationsof the average user. In addition, it would not have been consistent with the “reasonable expectationsof [an] average user” either to have taken steps to prevent the unforeseeable. The virus that had
produced the information leak was a new strain that bypassed the virus-infected email checkprogramme. Furthermore, the email used the name of Blue’s important customer and appearedvery natural. In the context of Blue’s precautionary and prudent conduct, it would be in the“reasonable expectations of [an] average user” that it was safe to open the email received.
4. Therefore, Blue has acted in accordance with a reasonable standard of care and met theircontractual obligations under the Confidentiality Agreement.

B. The risk created is not within the agreed parameters between Red and Blue and thus Blue was
not in breach of the Confidentiality Agreement
5. Article 4.1.1 of the PICC details that “[a] contract shall be interpreted according to the common
intentions of the parties”. The definition of “Confidential Information” as “the existence of the Project”
pursuant to Section 1(1)(i) of the Confidentiality Agreement should be subjected to the common
8intentions of both Blue and Red when the contract was first concluded. In addition, the interpretationof the terms of the contract should also be consistent, as set out in Article 4.4 that “terms andexpressions shall be interpreted in the light of the whole contract or statement in which they appear”.
6. Blue and Red concurred at [33] that a confidentiality agreement between them would relate to thesharing of data regarding fish stocks and thus established the necessity of signing such an
agreement. In this vein, both Blue and Red were aligned in their intentions of allocating the risk of
disclosing information solely to the sharing of data on fish stocks. Therefore, Blue interprets “theexistence of the Project” in section 1(1)(i) to refer exclusively to the research project regarding fishstock in the sea around Negoland and Arbitria. It has also been confirmed that the information
leaked does not directly relate to the study on fish stocks and would not constitute information
relating to “the existence of the Project”. Hence, the information leaked would not classify as“Confidential Information” under the limb of section 1(1)(i) and the disclosure of the information
could not be in breach of the Confidentiality Agreement.
7. The information leaked also does not satisfy the definition of “Confidential Information” set out insection 1(1)(ii). Section 1(1)(ii) includes “any and all confidential, proprietary or secret information
which are disclosed by the Discloser, and are clearly labelled as ‘Confidential’, or should bereasonably considered to be confidential given the nature of the information or the circumstances
surrounding its disclosure” as “Confidential Information”. However, it could not have been theintentions of both parties to make Blue liable to protect all kinds of confidential information. Thus, itwould be contrary to Article 4.1.1 to hold that the contract should be interpreted against Blue’s
intention. Blue’s intention was to restrict the allocation of risk to information disclosure only to thesharing of data regarding fish stocks. This interpretation of the terms would also be consistent with
Article 4.4 given that the contract hinged upon the sharing of fish stocks data. Since it has been
ascertained that the information leaked does not directly relate to the study on fish stocks, Blue had
no obligation to protect the confidential information disclosed as it does not fulfil the conditions in
section 1(1)(ii). Therefore, Blue was not in breach of the Confidentiality Agreement.

C. Blue cannot be liable for the consequences of the leak because Red’s mistake created theconditions for the information leak to be possible
8. Blue cannot be liable for the damages caused by the leak because Red’s act of sending theconfidential information was the dominant cause of the information leak.
9. The significance of causation on the part of the aggrieved party in relation to the damages sought
is endorsed in Article 7.4.7 of the PICC read with Article 7.1.7. In particular, Article 7.4.7(3) provides
that “[t]he conduct of the aggrieved party or the external events as to which it bears the risk may
have made it absolutely impossible for the non-performing party to perform. If the requirements ofArticle 7.1.7 are satisfied, the non-performing party is totally exonerated from liability.” Withreference to Article 7.1.7(1), it states that “[n]on-performance by a party is excused if that party
proves that the non-performance 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 the conclusion of
the contract or to have avoided or overcome it or its consequences.”
10. On the facts, Red conceded at [35] that their employee had mistakenly sent Blue the confidential
information which was not intended to be disseminated. This mistake bore the risk of suchinformation being leaked eventually since it was no longer confined within the company. Moreover,the mistake made it impossible for Blue to perform its obligations of nondisclosure of information
under the Confidentiality Agreement because it would necessitate Blue to stop short of opening theemail and thereby prevent the virus attack from resulting in an information leak. The email had
bypassed the virus-infected email check programme and “used the name of Blue’s importantcustomer” while appearing very natural. It would not be reasonable to have expected Blue toundertake drastic measures not to open emails received. Since Blue’s non-performance in the
Confidentiality Agreement was due to a virus leak beyond its control given that it had taken
reasonable steps to preclude such a situation and acted with a reasonable degree of care as9

previously submitted. As such, Blue “could not reasonably be expected to have taken the
impediment into account at the time of the conclusion of the contract or to have avoided or overcome
it or its consequences” as Article 7.1.7(1) requires.
11. Moreover, Section (2)(ii) of the Confidentiality Agreement further reiterates that Blue should not be
responsible for the damages incurred from the supposed breach of confidentiality. The
Confidentiality Agreement states that “[n]otwithstanding the foregoing, the obligations set out in
Section 2 (1) shall not apply to any portion of the Confidential Information of the Discloser which isor becomes accessible to the public through no fault of the Recipient”. Therefore, Blue would becompletely absolved from incurring the costs of any damages suffered by Red because Blue was
not in breach of the Confidentiality Agreement.
12. Thus, Red cannot rely on Blue’s alleged failure to adhere to the Confidentiality Agreement to claim
for damages consequent of a breach of confidentiality because Red was responsible for the veryrisk they had created through their mistake. Blue should be absolved of liability relating to theconfidential information leak because Blue did not breach the Confidentiality Agreement.

2. Red Cannot Amend or Terminate the Contract Because The Reasons In Exhibit 21 Do
Not Constitute Hardship

D. As there is no hardship, Red should not amend or terminate the contract because the eventswere reasonably foreseeable and the appropriate risks were assumed
13. Pursuant to Article 6.2.2 Comment 3(b) of PICC, events that could have reasonably been taken into
account by the disadvantaged party at the time the contract was concluded, cannot consist hardship.
Natural Events were reasonably foreseeable
14. According to Exhibit 21, Red cites hardship on the grounds that the change in ocean currents in the
coastal area of Negoland has decreased their catch of Negoland fish. On the facts, global warming
has become more pronounced recently (since summer of 2016), affecting ocean currents and hence
fish supplies. The phenomenon of global warming and its effects have been exponentially on therise. Furthermore, the link between the aggravating effects of global warming and the changes inocean currents, given Negoland’s geographical situation, should not be “unpredictable”.
Economic Events were reasonably foreseeable
15. Red also cites the fact that costs of imports has increased sharply in recent years (Exhibit 21). In
2011, the Tribunal de Contas da União pointed out that even currency fluctuations could bereasonably foreseeable at the time of the conclusion of the contract and the risks of such an event
should have also been assumed by the foreign companies. Furthermore, in Rafael Alberto Martínez
Luna y María Mercedes Bernal Cancino vs. Granbanco S.A. [2012], hardship could not be
concluded because there was insufficient evidence that an economic crisis made the contract more
onerous. Case law has shown that fluctuations in costs and economic circumstances may occur,
but as long as it cannot be proven to alter the fundamental balance of the contract or reasonable
foreseeability and risks can be assumed, hardship cannot be pleaded.
16. On the facts, Red should have had sufficient time to reasonably foresee the impact global economic
circumstances on their businesses at the time of contract formation since they happened over ‘years’of sharp increase. Furthermore, it is precisely because Red is dependent on overseas suppliers
that they should have reasonably foreseen and thus taken into consideration other countries’ market
fluctuations.
17. Red further cites that the breach of confidentiality agreement resulted in a failure of sources, whichcaused some suppliers to pull out. However, given Negoland’s prime geographical location (at [2]),and political support (at [3]), there is no difficulty in extending its scope of influence and reaching10

out to secure a stock or back-up sources or suppliers. These would help to reduce the effects of theocean current shifts and fluctuating costs of imports.
Appropriate risks could have been assumed for Natural Events
18. Red cannot plead hardship because the risks of the ocean currents affecting Negoland’s fish
supplies were already assumed by Blue, and Red was aware of the allocation of risk.
19. Pursuant to Article 6.2.2, Comment 3(d), if the disadvantaged party had assumed the risk of thechange in circumstances, there can be no hardship. This principle was used to plead hardship inCentro de Arbitraje de México (CAM) [2006], but the claim failed because the grower was expected
to assume the risk of occurrence of extraordinary rainfalls which would destroy its crops. On thefacts, Blue would be the disadvantaged party. Blue entered the market for raw materials and isdeemed to have accepted the risk of supervening natural events affecting its fish supplies.
20. Pursuant to Article 7.3.6, Comment 4, this risk of deterioration or destruction of the subject matter
fundamental to the performance of a contract, should lie with the person in control of that
performance. Given that Red Corp. is an active exporter of salmon, trout, mackerel and other fishes(at [28]), it should have the requisite geographical and business expertise and knowledge in dealing
with the risks assumed by Blue.
21. Therefore, as the appropriate risks could have been assumed by Blue and Red is aware of such arisk assumption, hardship cannot be pleaded.
22. Ultimately, PICC lays out a conjunctive test for the pleading of hardship under Article 6.2.2. As thefactors listed under Article 6.2.2 cannot be entirely proven and Blue has in fact, disproved some ofthem, there is no clear evidence of hardship. Therefore, Red should not be allowed to request for
an amendment or termination of the existing Requirements Contract.

E. Where both parties should uphold good faith and fair dealing, Red should not amend or
terminate the contract
23. Furthermore, pursuant to Article 1.7 of the PICC, both parties have to conform to the generalprinciple of good faith and fair dealing. The definition of good faith and fair dealing has not been
explicitly defined in the PICC. However, good faith, as construed from Illustration 4, requires parties
to take the necessary steps to prevent either party from suffering heavy losses. We may also
construe the meaning of good faith from case law applying PICC. In Paciocco v Australia and New
Zealand Banking Group Limited [2015] FCAFC 50, good faith was found on the basis oftransparency and acting honestly. It would not be in good faith for the defaulting party to leave theaggrieved party vulnerable and continue profiting at the aggrieved party’s expense.
24. On the facts, interdependence between Red and Blue is evident. At [29], Blue acknowledged theirlong-term working relationship with Red and agreed to try out Red’s new feed even though they are
not known on the market. Blue was one of Red’s earliest patrons for Red Mix. After which, Red Mix
started gaining popularity on the market (at [31]). After Blue switched to Red Mix, Blue reaped
substantial benefits, in terms of both reputation and price (soaring by 50%). At [32], Blue highlighted
that the success of Blue Salmon owed entirely to Red Mix and expressed a new intention (during
their meeting in August 2012) to purchase Super Red Mix, which Blue stressed would be‘indispensable’ for the farming of Blue Salmon.
25. As noted in obiter in Bobux Marketing Limited v Raynor Marketing Limited [2001] NZCA 348, whichapplied PICC, there exists an implied duty of good faith in contract performance, particularly in longterm contracts. Red and Blue’s oral agreements had always been based on mutual trust thatfairness and good faith will be observed by both parties. Ultimately, Red elected not to uphold theinitial Requirements Contract with Blue and chose to protect its profitability by turning to othercustomers.
1126. Therefore, Red should not be allowed to terminate or amend the contract to their own advantage,to Blue’s detriment, as it will be against the principles of good faith and fair dealing.

3. W here Hardship Is Proven, Blue’s Proposes Modifications To Red’s Proposal Of
Amendments

F. Blue agrees to Red’s proposal to increase the regular price from 1.8 to 2.5 Nego-Lira effectivefrom January 1, 201727. Blue recognizes that it is reasonable for Red to increase the price of Super Red Mix from 1.8 to 2.5
Nego-Lira in order to reflect the change in the exchange rate from 1.1 to 1.4 (Nego-Lira to US
Dollars), as shown in Exhibit 4.

G. Blue counter-proposes that Red maintains the 10% discount
28. This discount should exist independently of the minimum purchase term that was agreed upon byboth parties. This is to distinguish Blue as Red’s first patron (Exhibit 29). While Red Mix was initiallyunpopular, Blue had helped protect Red’s business by using a sample of their feed, to the mutual
benefit of both parties (Exhibit 31). Furthermore, given past dealings in the rare metals casebetween Red and Blue, it is evident that Red and Blue’s partnership is intimate. On this basis of
long-term mutual trust and loyalty, the increase in demand should not eliminate the discount.

H. Red proposes amending the maximum quantity of supply from 5000 to 1200 tons per year but
Blue counter-proposes that the maximum quantity should remain at 5000 tons
29. Red is obligated to maintain the maximum quantity of marine product exports initially agreed uponin the Requirements Contract (Exhibit 17). In 2017, Red’s exports of marine products have been
restored to the previous level (at [35]). Therefore, there are no grounds for Red to decrease themaximum quantity of supply.
30. Furthermore, it appears that Red has pegged the decrease in the maximum quantity to the tentative
measures agreed upon during the pending dispute on hardship. However, Blue only accepted thismeasure with reservations that its acceptance will have no impact on its future claims (at [37]).

I.

Blue agrees to Red’s proposal to remove the minimum purchase provision
31. Blue initially agreed to a minimum purchase provision for the benefit of Red. Blue has also requested
for an annual supply of 2400 tons as evidenced by Blue’s purchase order in 2016 (Exhibit 19) andthis figure is unlikely to decrease. Therefore, the minimum purchase provision would be irrelevant.

J. Summary of Blue’s amendments to the contract
32. In summary, Blue agrees to the increase in the regular price from 1.8 to 2.5 Nego-Lira and to theremoval of the minimum purchase provision of 1000 tons. However, Blue counter-proposes that itis only reasonable that the maximum quantity of supply must remain at 5000 tons and the discountof 10% to still remain in force.

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