Whether Respondent’s avoidance of the Novel Adjuvant Agreement is justified under the

CISG

1. The Claimant and the Respondent have agreed and signed on two contracts namelyAS-Cov-12 Sale
and Manufacturing Agreement and Novel Adjuvant Agreement. 1The Respondent committed a
fundamental breach of contract by not getting the required approval from DTR and thereby failing to
provide the Claimant with the required batches of AS-Cov-12 in the time period fixed in Sale and
Manufacturing Agreement. As there was a breach of the agreement by the Respondent and the
subsequent avoidance, so the claimant is justified in avoiding the Novel Adjuvant Agreement as it
was related to the Sale and Manufacturing Agreement.

2. The Claimant therefore contends, the breach of Sale and Manufacturing Agreement permits the
avoidance of the Novel Adjuvant Agreement [A]. Further, arguendo that the agreements are unrelated,
the Claimant can still avoid the Novel Adjuvant Agreement because of the fundamental breach of
Respondent’s obligations [B]. Moreover, the avoidance of the agreement is in consonance with the
CISG provisions [C].

A. THE BREACH OF SALE AND MANUFACTURING AGREEMENT PERMITS THE

AVOIDANCE OF THE NOVEL ADJUVANT AGREEMENT.

3. The incorporation of terms of one contract into another contract is a common practice. 2 The
requirement that needs to be fulfilled while making a reference to the terms of another contract is that
the terms should be clear and unequivocal.3 When a reference is made to another document then the
language should be treated with utmost importance implying that the matters incorporated into a
contract by reference should seem as though they were as much a part of the contract as if they had
been set out in the contract.4 When a reference to a term of an agreement is provided in another
agreement, either party can terminate the contract as it shows that there is a relation between the two
agreements.5

4. The Respondent was supposed to supply squalene-based adjuvant, Nimbus-B, at commercially

reasonable terms and in quantities, to be determined from time to time. 6 The Claimant in its
communication had expressed its interest in the Respondent’s organic adjuvants to replace aluminium

1
Moot Problem, Exhibit C1, page, 12; Moot Problem, Exhibit C4, Page 15.
2

3
R.W.L. Enterprises v. Oldcastle, Inc., Court of Appeal, Fourth Appelate District (2017)
4
Wasson v. Schubert, 964 S.W.2d 520, 524 (Mo. Ct. App. 1998)
5

6
Novel Adjuvant agreement
 based adjuvant for the AS-Cov-12 vaccine.7 The Respondent in its response had categorically
appreciated the development of the adjuvant for “this particular vaccine”.8 Further, Article 2 of the
Novel Adjuvant Agreement possesses a reference to Article 6 of the Sale and Manufacture
Agreement.9 Article 6 of the Sale and Manufacturing Agreement is concerned with the supply
agreement between both the parties.10

6. The reference to Article 6 of the previously concluded agreement showcases a relation between the
two contracts pertaining to the supply arrangement between the parties. Article 2 of the Novel
Adjuvant Agreement refers to Article 6 of the previous agreement in a clear and unequivocal
language, thereby leaving no confusion in the mind of the Respondent that there was a reference. It is
also to be noted that both the contracts were concluded inherently with the clear objective for
supplying a vaccine for commercial rollout and this similarity cannot be ignored as it showcases a
relation between the two. Further, the pursual of the communications between the two parties also
evidences that the Respondent had agreed to develop the adjuvant in relation to the AS-Cov-12
vaccine. It can be concluded that the clear reference and the furthering of Clause 6 objective shows
the evident relationship between the two contracts.

7. The relationship between the two agreements essentially implies that both the agreements cannot exist
individually and have to be categorised as one large transactions. Thereby the failure of the
Respondent to fulfil the obligation pertaining to the Sale and Manufacturing Agreement would entail
a failure to fulfil the objective of the Novel Adjuvant Agreement and therefore, the avoidance of the
first agreement automatically results in the termination of the subsequent agreement.

B. FUNDAMENTAL BREACH OF NOVEL ADJUVANT AGREEMENT

8. A fundamental breach is said to take place when the breach would render the performance of the
contract fundamentally different from what was undertaken.11 A party to a contract is entitled to
rescind a contract wherein there exists a substantial breach of the contractual terms, or a breach so
substantial that defeats the object of the contract. 12 Article 49(1)(a) CISG grants an aggrieved party
the right of avoidance in the event of a fundamental breach.13 According to Art. 25 CISG, a
fundamental breach will be established if Respondent foresaw that non-delivery would result in such

7
Exhibit C2
8
Exhibit C3
9
Exhibit C4, Article 2.
10
Exhibit C1.
11

12
N.Y. Lenel Systems Intern., Inc. v Smith, 34 A.D. 3d 1284, 824 N.Y.S.2d 553 (2006).
13
 detriment to the other party as substantially to deprive it of what it is entitled to expect under the
contract.14

9. Arguendo that this Tribunal deems the two contracts two be sperate, even in that scenario the
Claimant possess the right to avoid the agreement since there has been a fundamental breach of the
contract. It is the Claimant’s contention that the Respondent’s failure to cooperate with research
pertaining to Nimbus-B lead to a substantial deprivation of the Claimant (i). The refusal to cooperate
was also a breach of contractual expectations of the Claimant (ii) and the Respondent foresaw that the
non-delivery will result in determent to the Claimant (iii).

(i) Substantial Deprivation of the Claimant

10. An essential requirement to constitute fundamental breach is that that is results in the substantial
deprivation of the injured party.15 The determination whether the injury is substantial must be made in
light of the circumstances of each case, for example, the monetary value of the contract, the monetary
harm caused by the breach, or the extent to which the breach interferes with other activities of the
injured party.16 The economic results and the not the formal fulfilment of obligations are given the
priority.17 The factor that needs to be considered is the interest of the injured party that is being
affected by the breach.18

11. In the instant matter, the Claimant had invested in the bioreactor bags and storage facilities of the
Nimbus-B adjuvant.19 The Claimant had also made substantial investments for the commercial rollout
of the AS-Cov-12 vaccine.20 The Claimant in its communication to the Respondent had proposed joint
research for the alternative uses of the Nimbus-B to salvage the cooperation between the parties and
to reduce the loses resulting from the delay of the DTR’s EUA process.21

12. The refusal of the Respondent to cooperate for the purposes of research initiatives resulted in
monetary damages to the Claimant as it was not able to salvage the losses resulting form the delay of
DTR’s EUA approval as well as its investments into the storage and bio-reactor bags. The non-
utilization of these facilities affected the activities of the Claimant as it was not able to fulfil its public
health objectives. The interest of the Claimant in terms of attaining profits from the sale of products

14
Article 25 CISG, Article 7.3.1(2)(a) UNIDROIT Principles.
15
Article 25 CISG.
16
Secretariat Commentary on 1978 Draft Art. 23 (draft counterpart of CISG Art. 25), Comment 3
17
F. Enderlein and D. Maskow, International Sales Law.
18
Zivilgericht (Civil Court) Basel-Stadt, Switzerland, 1 March 2002; No. p 1997/482.
19
Moot Problem, Notice of Arbitration, page 5 ¶19.
20
Ibid.
21
Moot Problem, Exhibit C8, Page 19.
 and the fulfilment of the commitments to WHO were adversely affected as a result of the refusal.
Therefore, there exists substantial deprivation on part of the Claimant.

(ii) Breach of contractual expectations

13. A fundamental breach of a contract is committed by one of the parties when it leads to such a
detriment to the other party that it is deprived of the very thing that the party is entitled to expect. 22
The doctrine of fundamental breach is chiefly predicated on the facts or assumption that a party to a
contract or contract of sale has committed a misnomer in the contract that goes to the root of the
contract, thereby knocking the bottom off its commercial relevance. 23 The expectations of the
aggrieved party are qualified by such phrases as ‘what he is entitled to expect under the contract’. 24
The expectation of the injured party must be discernible from the contract itself. 25 The complete
failure to fulfil the contractual obligation would result in the fundamental breach.26

14. In the instant matter, the parties were supposed to work together to develop Nimbus-B adjuvant for
the purposes of identifying alternative uses for it in context of vaccines and therapeutics. 27 The
communication between the parties would indicate that Nimbus-B adjuvant was to be used for other
therapeutics as well.28 The Claimant in furtherance of the objective that proposed to collaborate on
research pertaining to the use of adjuvant for therapeutics of Ebola and Zika vaccines.29

15. The perusal of the communication between the parties and the provisions of the agreement would
imply that the Claimant was entitled to expect that Respondent shall jointly explore the possible uses
of the adjuvant. The expectation is discernible from Article 7 of the agreement concluded between the
parties. The expectations of the Claimant were undermined by the refusal of the Respondent to
expend resources into the collaborative research. The objective of the agreement was to jointly
collaborate on the research but vehement denial of the Respondent in this regard resulted in the failure
to attain the objective. Further, the Respondent had denied the performance in its entirety entailing a
complete failure to fulfil the obligations. The very act of denial of resources for the join research
resulted in a breach of contractual expectations of the Claimant and can be construed as a fundamental
breach.

22
Article 25, CISG
23
L. Graffi, ‘Case Law on the Concept of “Fundamental Breach” in the Vienna Sales Convention’, (2003), International
Business Law Journal
24
Article 7.3.2(a) UNIDROIT
25
Zivilgericht (Civil Court) Basel-Stadt, Switzerland, 1 March 2002; No. p 1997/482.
26
CLOUT case No. 90 [Pretura circondariale di Parma, Italy, 24 November 1989].
27
Moot Problem, Exhibit C4, Page 15, Article 7.
28
Exhibit C2 and C3.
29
Exhibit C8.
(iii) The Respondent foresaw the detriment to the Claimant

16. The burden with regard to the foreseeability element of article 25 lies with the party in breach. 30
The party that breaches the obligation must show that it did not foresee the damages towards
the injured party as a result of the breach of obligations. 31 The detriment must be foreseeable to
a reasonable person.32

17. While the burden of proof lies on the Respondent, it is prudent to note that the Claimant had
undertaken substantial investments pertaining to the novel adjuvant. 33 Further the
communication dated 17 May 2020 had also expressed that the purpose of the alteration of the
agreement terms was to salvage the cooperation in light of the delay by the DTR. 34 Within this
context it was foreseeable for the Respondent that any breach of the contractual obligations
would result in the financial harm to the Claimant and would also contravene its contractual
expectations arising out of the agreement to jointly develop the vaccine and the adjuvant.

C. THE AVOIDANCE OF THE AGREEMENT IS IN CONSONACE WITH CISG

18. The avoidance of an agreement is the pre-requisite for the assessment of damages under
Articles 75-76 of the CISG.35 Under article 49 (1) (a) any fundamental breach as defined in
article 25 justifies the avoidance of the contract.36 The perusal of Article 26 of the CISG would
establish that the avoidance of the contract must be by the means of a notice. 37 No specific
format for the notice has been prescribed under the CISG. 38 Importantly, Article 49(1) also
provides that the contract may be avoided if the seller fails to deliver within the additional time
set under Article 47 of CISG.39 The buyer is entitled, but not obliged, to fix an additional period
for the seller’s performance under article 47 (1).40

19. In the present matter, the Claimant in its communication dated 24 May 2021 has provided the
notice for the avoidance of the Novel Adjuvant Agreement. 41 The Claimant did not exercise the

30
CLOUT case No. 171 [Bundesgerichtshof, Germany, 3 April 1996].
31
Ibid.
32
A. Lorenz, ‘Fundamental Breach under the CISG’, 1998
33
Moot Problem, Notice of Arbitration, page 5 ¶19.
34
Exhibit C8.
35
CLOUT case No. 470 [Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce
and Industry, Russian Federation, 22 October 1998].
36
Article 49(1)(a) CISG
37
Article 26 CISG
38
CLOUT case No. 938 [Kantonsgericht des Kantons Zug, Switzerland, 30 August 2007].
39
Article 49(1) CISG.
40
Oberlandesgericht Hamburg, Germany, 4 July 1997, Unilex.
41
Exhibit C9.
 right to provide an additional time to the Respondent for the fulfilment of the obligations. 42 The
arguments in the preceding sections of the written submissions evidence the fundamental
breach resulting from the Respondent’s failure to fulfil its contractual obligations. The Claimant
has fulfilled the pre-requisites provided under Article 26 as in the absence of any specific
format for the avoidance, the e-mail communication has to be treated as a valid notice.
Moreover, it was within the discretionary powers of the Claimant to provide the Respondent
with the additional time as prescribed under Article 47 CISG. The use of the word “may” in the
Article further substantiates this argument. The Claimant right to avoid the agreement without
any additional time was within the purview of its powers and cannot be a ground for
challenging the avoidance of the agreement under Article 49(1)(a) of CISG. It can thereby be
evidenced that the avoidance of agreement was within the scope of the provisions of CISG.

20. It can be concluded from the aforementioned arguments that the existence of a relationship
between the Sale and Manufacturing Agreement and the Novel Adjuvant Agreement permitted
the Claimant to avoid the subsequent contract on the grounds of the breach of obligations in the
first contract. Arguendo that the contracts were unrelated to each other, the right to avoid the
agreement arises out of the fundamental breach of the obligations by the Respondent. The
Claimant had satisfied the pre-requisite procedures for the avoidance of the agreement as
prescribed under Article 49(1)(a) of the CISG. Therefore, the avoidance of the Novel Adjuvant
Agreement is justified.

42
Ibid.