Problem 2 - INFLATABLE CHAIRS

by Tat Lim
GENERAL INFORMATION
Wandertoys (“Wander”) is a company incorporated in Wesworld. Wander started as a small shop
selling toys in Wesworld. Over the last 10 years, Wander expanded its line of products. The increasing
use of online shopping for children’s products has enabled Wander to grow its business exponentially
by selling its products online. However, Wander’s growth has tapered in the last year due to the
increasing cost of producing children’s products in Wesworld.
Famous Manufacturers (“Famous”) is a company incorporated in Pacworld, a state located far from
Wesworld. Famous is well-established as a quality manufacturer and supplier of children products in
Pacworld. The lower cost of producing children’s products in Pacworld has fuelled the growth of
Famous, with a substantial increase in orders from abroad in the past 5 years.
In March last year, the CEO (Eka) of Wander met the CEO (Moo) of Famous during a conference.
Eka and Moo got along very well and decided to explore business opportunities. The extensive
discussions between Eka and Moo resulted in the first business transaction between Wander and
Famous. A simple two-page contract, prepared by Eka, was entered into between Wander and Famous
(“Contract”) for Famous to supply and deliver to Wander 100,000 of Famous’s most saleable
product, its “inflatable foam chairs” (“Foam Chairs”) at $20 per chair. The terms of the Contract
expressly provide for the Foam Chairs to be delivered in 3 batches – the first batch of 30,000 by the
first month, the next batch of 30,000 by the sixth month, and the last batch of 40,000 by the twelfth
month. The express terms also state that: (i) the goods supplied by Famous to Wander must be of “a
reasonably satisfactory quality and be reasonably fit for purpose”; (ii) Wander is entitled “to return
any defective goods supplied for repair or replacement by Famous with the costs and expenses of such
return and repair and replacement to be borne by Famous”; and (iii) any allegation of defect by
Wander “must be supported by a report on the defects obtained from a reputable independent expert”.
The Contract is silent on the applicable law and seat of the arbitration, but provided that “All disputes
arising out of or in connection with the present contract shall be finally settled under the Rules of
Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in
accordance with the said Rules”.
Within a month of the Contract being signed, the first batch of 30,000 Foam Chairs was delivered by
Famous to Wander, and payment was made by Wander to Famous for these chairs. However, after
selling the Foam Chairs for 3 months, Wander started receiving complaints and negative reviews from

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2024 | ICC Mediation Competition | Problem | 1

some customers that the Foam Chairs could not fully inflate. Shocked and disappointed, Eka contacted
Moo to request Famous to investigate the issue. On receipt of the news, Moo felt that something must
have gone wrong at Wander’s side as Famous had never received any complaints over its Foam
Chairs. Confused by the situation, Moo arranged for a phone call with Eka, during which time Moo
reiterated Famous’s intention to find a mutually beneficial outcome in order to amicably resolve the
dispute with Wander. During this phone call, Moo also said that Famous “would consider” paying for
the costs of shipping and repair to all defective chairs subject to Famous’s investigation of any faults.
Eka also arranged for Wander to conduct its own internal investigation.
After several weeks, Moo received the results of Famous’s investigation, stating that Famous had not
found any defects with the Foam Chairs. The report concluded that the complaints and negative
reviews were likely to have arisen from customers who did not allow sufficient time for the Foam
Chairs to fully inflate. The Foam Chairs are compressed when packed for shipping and require up to
six hours from the time they are unpacked to fully inflate. The investigation report suggests that
customers may have not read the unpacking instructions stating that users should after unpacking,
leave the Foam Chairs overnight to achieve its full inflation. Moo shared the outcome of Famous’s
investigation with Eka.
In the meantime, Wander had also carried out its own internal investigation into the issue. Eka
informed Moo that Wander was carrying out its own investigation but did not share the outcome of
Wander’s investigation with Moo. Instead, faced with mounting cancellations from customers who
ordered the Foam Chairs, many of whom also took to social media to provide negative reviews on the
Foam Chairs and highlight their complaints, Eka decided to escalate the issue. Consequently, Wander
issued a written notice to Famous demanding that Famous accepts the return of all the Foam Chairs to
Pacworld for repair or replacement and thereafter to re-ship the repaired products to Wander, with
Famous to bear all the costs and expenses relating to the transportation and repair or replacement. In
its written notice, Wander stated that unless Famous complied with its demands, Wander would
terminate the Contract (on the basis that Wander was in breach of the term of the Contract that
requires the Foam Chairs supplied by Famous to be of a reasonably satisfactory quality and be
reasonably fit for purpose) and thereafter commence arbitration against Famous to recover the losses
and damages suffered by Wander.
Famous sent a reply to Wander, stating that Wander had exaggerated the complaints and negative
reviews as an excuse to justify its attempt to prematurely terminate the Contract. Moo also sent text
messages to Eka. During the text exchanges, the conversation between Moo and Eka became heated,
with both accusing the other of dishonesty. After the text exchanges, Famous wrote again to Wander

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to reject the demands made by Wander. In this letter, Famous also requested a further meeting with
Wander for both parties to discuss and negotiate a mutually beneficial outcome.
Wander did not respond to Famous’s request for a further meeting. Instead, on receipt of Famous’s
rejection of Wander’s demands, Wander commenced arbitration against Famous. In its Request for
Arbitration, Wander alleged that the Foam Chairs sold and delivered by Famous to Wander were
defective, not of a reasonably satisfactory quality and not reasonably fit for purpose, and claimed for
payment of all losses and damages suffered by Wander arising from Famous’s breach of contract.
Wander’s claims encompassed: (i) damages (including loss of profit, estimated at $1 million) to be
assessed; (ii) damage to reputation, to be assessed; and (iii) costs associated with delivering the Foam
Chairs to customers and collecting defective / returned Foam Chairs from customers amounting to
around $80,000. Famous responded to Wander’s request for arbitration by submitting an Answer
which denied liability to Wander’s allegations, and wholly rejected Wander’s claims for losses and
damages.
Faced with mounting legal and experts’ costs, Wander accepted Famous’s request to mediate the
dispute under the ICC Mediation Rules. Both Eka and Moo will attend the mediation with their
respective external counsel.

2024 | ICC Mediation Competition | Problem | 3