F1040-C

LAWASIA MOOT COMPETITION

2012

THE GREAT WALL NOODLE SHOP PROBLEM

IN THE KUALA LUMPUR REGIONAL CENTRE FOR ARBITRATION

BALI, INDONESIA

GREAT WALL NOODLE SHOP LLC

CLAIMANT

v

ADI BUDIAMMAN, M.D.

RESPONDENT

MEMORIAL FOR CLAIMANT

1    

TABLE OF CONTENT

TABLE OF CONTENTS ------------------------------------------------------------------1

INDEX OF AUTHORITIES ---------------------------------------------------------------- 5

STATEMENT OF JURISDICTION------------------------------------------------------16

QUESTIONS PRESENTED ---------------------------------------------------------------17

STATEMENT OF FACTS -----------------------------------------------------------------19

SUMMARY OF PLEADINGS ------------------------------------------------------------22

CLAIMANT’S PLEADINGS -------------------------------------------------------------27

I. THE TRIBUNAL HAS JURISDICTION OVER THE PRESENT

DISPUTE. ----------------------------------------------------------------------------27

A. THE CHOICE-OF-LAW CLAUSE IS VALID AND BONA FIDE -27

(i) Singaporean law, being the law chosen by the parties to govern their

relationship, applies to the present dispute-------------------------------27

B. THE ARBITRATION AGREEMENT SHOULD BE GOVENRED BY

SINGPAOREAN LAW --------------------------------------------------------29

(i) Singaporean law, being the law chosen by the parties, governs the

validity of the arbitration agreement. ------------------------------------29

(ii) Alternatively, the law of Malaysia, being the place of arbitration,

should govern ----------------------------------------------------------------30

C. THERE IS VALID CONSENT TO ARBITRATE BETWEEN THE

PARTIES-------------------------------------------------------------------------30

(i) There is valid consent to arbitrate under Singaporean law even if

RESPONDENT was not aware of the agreement ---------------------- 31

2    

(ii) The parties have validly consented to arbitration under Malaysian law,

or even if Indonesian law is applied ------------------------------------- 32

D. THE ARBITRATION AGREEMENT HAS COMPLIED WITH

FORMAL VALIDITY REQUIREMENTS -------------------------------33

(i) The arbitration clause has satisfied formal validity requirements under

Singaporean law and Malaysian law -------------------------------------33

(ii) The tribunal should not apply Indonesian law to formal validity of the

arbitration agreement even if there is no valid express indication of the

governing law ---------------------------------------------------------------34

(iii) The language requirement provided in the Indonesian Language Law,

if found applicable, has been complied with ---------------------------- 34

(iv) Even if there is non-compliance with the Indonesian Language Law,

the contract should not be rendered void --------------------------------35

E. THE MATTERS SUBMITTED TO ARBITRATION ARE

ARBITRABLE ------------------------------------------------------------------35

(i) Indonesian and Malaysian law are applicable laws on arbitrability of

matters submitted to arbitration--------------------------------------------36

(ii) The dispute, despite possibly involving the application of laws on

constitutional rights, is arbitrable ----------------------------------------37

(iii) Even if the dispute over the wearing of hijab is inarbitrable, the

arbitration agreement remains valid and enforceable in part ---------38

II. THE FRANCHISE AGREEMENT IS GOVERNED BY SINGAPOREAN

LAW ---------------------------------------------------------------------------------- 39

A. SINGAPOREAN LAW GOVERNS THE VALIDITY OF THE

FRANCHISE AGREEMENT ------------------------------------------------39

3    

B. INDONESIAN LAW ON FRANCHISES SHOULD NOT BE

APPLIED AS MANDATORY RULES -------------------------------------39

III. THE FRANCHISE AGREEMENT IS VALID UNDER SINGAPOREAN

LAW AND INDONESIAN LAW ------------------------------------------------ 40

A. THE FRANCHISE AGREEMENT IS VALID UNDER

SINGAPOREAN LAW---------------------------------------------------------40

B. THE FRANCHISE AGREEMENT IS VALID UNDER

INDONESIAN LAW -----------------------------------------------------------40

(i) The requirement for use of Indonesian in the agreement is complied

with, or alternatively, does not invalidate the agreement --------------41

(ii) RESPONDENT has waived the requirement on advance provision of a

franchise prospectus and written agreement -----------------------------42

(iii) Non-registration of franchise prospectus does not invalidate the

Agreement ---------------------------------------------------------------------42

IV. The application of “inherent warranty of good faith and fair dealing” in

interpretation and performance of agreements -------------------------------43

A. THE SAID WARRANTY DOES NOT APPLY TO THE

AGREEMENT UNDER SINGAPOREAN LAW ------------------------43

B. THE SAID WARRANTY IS RESTRICTED BY ARTICLE X(2) OF

THE AGREEMENT UNDER INDONESIAN LAW---------------------45

V. THE TRIGGER OF PREMATURE DETERMINATION OF THE

AGREEMENT-----------------------------------------------------------------------46

A. CLAIMANT IS ENTITLED TO TERMINATE ON SUBSTANTIAL

BREACH OF TERMS WHICH CLAIMANT DEEMS

SUBSTANTIAL UNDER SINGAPOREAN LAW ----------------------46

4    

B. CLAIMANT IS ENTITLED TO TERMINATE ON SUBSTANTIAL

BREACH OF TERMS WHICH CLAIMANT DEEMS

SUBSTANTIAL UNDER INDONESIAN LAW ------------------------48

VI. CLAIMANT WAS ENTITLED TO TERMINATE THE AGREEMENT -

-------------------------------------------------------------------------------------------49

A. SERVING CUSTOMERS A SINGLE INDONESIAN DISH

REFERRED TO AS “THE SPECIAL OF THE DAY” AND GIVING

CUSTOMERS THE OPTION OF SUBSTITUTING LAMB FOR

PORK BREACHED ARTICLE III(A) 1 UNDER SINGAPOREAN

AND INDONESIAN LAW -------------------------------------------------49

B. ALLOWING THE FEMALE MUSLIM EMPLOYEES TO WEAR

HIJAB BREACHED ARTICLE IV2 UNDER SINGAPOREAN AND

INDONESIAN LAW -----------------------------------------------------------52

C. PROHIBITING HIJAB AT WORK DOES NOT VIOLATE THE

LAW OR CONSTITUTION OF INDONESIA. --------------------------53

D. IF EVERY INDIVIDUAL BREACH WAS ESTABLISHED,

CLAIMANT WAS ENTITLED TO TERMINATE THE

AGREEMENT UNDER SINGAPOREAN LAW ----------------------54

E. IF EVERY INDIVIDUAL BREACH WAS ESTABLISHED,

CLAIMANT WAS ENTITLED TO TERMINATE THE

AGREEMENT UNDER INDONESIAN LAW --------------------------56

VII. ON THE ASSUMPTION THAT CLAIMANT WAS ENTITLED TO

TERMINATE, THE NOTICE OF TERMINATION WAS A PROPER

AND TIMELY NOTICE AND HENCE THE TERMINATION WAS

                                                                                                               1 Moot Problem, 15-16 2 Moot Problem, 21

5    

VALID ---------------------------------------------------------------------------------57

A. THE NOTICE OF TERMINATION WAS TIMELY AND PROPER

UNDER SINGAPOREAN LAW -------------------------------------------- 57

B. THE NOTICE OF TERMINATION WAS PROPER AND VALID

AND THE TERMINATION OF THE AGREEMENT WAS VALID

IN THE ABSENCE OF AN ORDER OF THE COURT OF

INDONESIA UNDER INDONESIAN LAW ----------------------------- 59

VIII. THE ARBITRATION CLAUSE, WITH RESPECT TO THE

STIPULATION OF REMEDIES AVAIALBLE, IS VALID ---------------60

A. THE CLAUSE EXCLUDING AVAILABILITY OF SPECIFIC

PERFORMANCE IS A VALID CONTRACTUAL TERM UNDER

SINGAPOREAN LAW -------------------------------------------------------61

(i) The clause is binding on the parties --------------------------------------61

(ii) The Singaporean Unfair Contract Term Act is inapplicable on the

circumstances---------------------------------------------------------------61

B. THE EXEMPTION CLAUSE IS NOT CONTRARY TO GOOD

FAITH OR REASONABLENESS UNDER INDONESIAN LAW -- 61

C. THE ARBITRATRAL TRIBUNAL CANNOT DEROGATE FROM

THE CLAUSE -------------------------------------------------------------------62

D. SPECIFIC PERFORMANCE IS AN INAPPROPRIATE REMEDY

FOR RESPONDENT EVEN IF THE CLAUSE IS INEFFECTIVE -63

CONCLUSION AND PRAYER FOR RELIEF ------------------------------------64

6    

INDEX OF AUTHORITIES

Statutes and Treaties

Constitution of

Indonesia

Undang-Undang Dasar Republik Indonesia 1945

Constitution of

Malaysia

Constitution of Malaysia 1957

Constitution of

Singapore

Constitution of The Republic of Singapore 1965

ICC Civil Code For Indonesia (S.1847 No.23) Translated into

English from the Official Dutch text

Indonesian

Arbitration Act

Law No. 30 of 1999, Translated into English by Hadiputranto,

Hadinoto & Partners

Indonesian

Human Right law

Law No.39 of 1999, Indonesia

Language Law Law No. 24 of 2009, Indonesia

KLRCA Fast

Track Rules

KRLCA Fast Track Rules, 2nd Edition (2012)

Malaysian

Arbitration Act

Malaysian Arbitration Act 2005

New York

Convention

Convention on the Recognition and Enforcement of Foreign

Arbitral Awards 1958

Regulation on

Franchise

The Government Regulation on Franchise No 42/2007

Singaporean International Arbitration Act (Chapter 143 A) , Singapore

7    

Scholarly Works and Articles

Alfons Claudia Alfons, Recognition and Enforcement of Annulled Foreign

Arbitral Awards, (Frankfurt: Peterl Lang, 2010)

Amerasinghe Chittharanjan F. Amerasinghe, International Arbitral Jurisdiction,

(The Netherlands: Martinus Nijhoff Publishers, 2011)

Bermann Bermann, George A., “Mandatory rules of law in international

arbitration”, in Ferrari, F, Kröll, S, (eds) Conflict of Laws in

International Arbitration (Munich: Sellier, 2011)

Berger Klaus Peter Berger, “Re-examining the Arbitration Agreement:

Applicable Law – Consenus or Confusion”, ICCA Congress Series

2006 Montreal 13 (Kluwer Law International 2007)

Blessing Marc Blessing, “Mandatory Rules of Law versus Party Autonomy

in International Arbitration” (1997) 14(4) J. Int’l. Arb

Böckstiegel K.H. Böckstiegel, “Public Policy and Arbitrability” in Comparative

Arbitration Practice and Public Policy in Arbitration, ICCA

Congress Series No. 3 (Deventer: Kluwer Law & Taxation, 1987)

Born Gary B. Born, “Formation, Validity and Legality of International

Arbitration Agreements” in Born, International Commercial

Arbitration, (Kluwer Law International 2009) pp. 766-841

Brekoulakis Brekoulakis, Stavros, “Law Applicable to Arbitrability: Revisiting

the Revisited Lex Fori”, in Mistelis, L., Brekoulakis, S., (eds),

International

Arbitration Act

UDHR Universal Declaration of Human Rights

8    

Arbitrability: The International and Comparative Perspectives,

(Wolters Kluwer, 2009),

Brenner Suzanne Brenner, “Reconstructing Self and Society: Javanese

Muslim Women and the Veil”, American Ethnologists, November

1996 vol.23

Case

Comment of

Rice

Case Comment of Rice (t/a Garden Guardian) v GreatYarmouth BC

(2003) 19 Const. L.J. T1 (CA)

Chappuis Christine Chappuis, “A Comparative Overview on Performance as a

Remedy: A Key to Divergent Approaches”, in Michael E. Schneider

& Joachim Knoll (eds), Performance as a Remedy: Non-Monetary

relief in International Arbitration

Cheshire,

Fifoot and

Frumston

Andrew Phang Boon Leong, Cheshire, Fifoot and Furmston’s Law

of Contract Singapore and Malaysian Edition, (Singapore:

Butterworths Asia, 1994)

Chitty H.G. Beale, Chitty on Contracts, (London: Sweet & Maxwell, 30th

edn., 2008)

David Joseph David Joseph Q.C., Jurisdiction and Arbitration Agreements and

their Enforcement (2nd Edition), (England & Wales: Sweet &

Maxwell, 2010)

Dubroff H. Dubroff, “The Implied Covenant of Good Faith in Contract

Interpretation and Gap-Filling: Reviling a Revered Relic”, (2006)

SJLR 559

Frick Joachim G. Frick, Arbitration and Complex International Contracts,

(The Netherlands: Kluwer Law International, 2001)

9    

Graves

Graves, Jack, Court Litigation over Arbitration Agreements: Is it

Time for a New Default Rule? (2012) Scholarly Works, Paper 41

Hadfield Hadfield GK, “Problematic Relations: Franchising and the Law of

Incomplete Contracts? (1990) 42 SLR 927

Hanotiau Hanotiau, Bernard, Caprasse, Oliver, “Public Policy in International

Commercial Arbitration”, in Gaillard & Di Pietro (eds),

Enforcement of Arbitration Agreements and International Arbitral

Awards: The New York Convention in Practice, (Cameron May,

2008)

Herbert

Smith

“Indonesian language requirement for contracts – current position”,

(2009) <http://www.herbertsmith.com/NR/rdonlyres/1CFD1AE8-

82FC-4111-8045-

07B4E8D0AAB6/13692/Newsletter32EDecember2009.pdf>

Hogarth Joel Hogarth, Raith (Ipop) Nawangsar, “The Indonesian Language

Law (No. 24/2009): Updates on the new law requiring contracts

with Indonesian parties to be in the Indonesian language” (2009)

<http://www.omm.com/the-indonesian-language-law-242009-

update-on-the-new-law-requiring-contracts-with-indonesian-parties-

to-be-in-the-indonesian-language-10-14-2009/>

Jaffey A.J.E. Jaffey, Introduction to the Conflict of Laws (London:

Butterworths, 1988)

Joseph Louis Joseph, “A Doctrine of Good Faith in Singapore? A Missed

Opportunity!”, (2010) 5(1) TMC Academic Journal 50

Letter of DG

2009

Letter of Director General Legislation PPE.2.PP.01.02 No. 832 of

2009 dated October 22, 2009 Clarification Regarding Application of

10    

Enforcement and Consequences of Act No. 24 of 2009

Letter of

MOLHR

2009

Letter from the Minister of Law and Human Rights M.HH.

UM.01.01 No. 35 of 2009 dated December 28, 2009 on Petition

Clarification On Implications and Implementation Act Number 24

of 2009

Lew Lew, Julian D M; Mistelis, Loukas A; Kröll, Stefan M,

Comparative International Commercial Arbitration, (The

Netherlands: Kluwer Law International, 2003),

Mckendrick Ewan Mckendrick, contract law, (8th ed) (UK:Palgrave Macmillan,

2009)

Mistelis Mistelis, Loukas A., “Arbitrability – International and Comparative

Perspectives”, in Mistelis, L., Brekoulakis, S., (eds), Arbitrability:

The International and Comparative Perspectives, (Wolters Kluwer,

2009),

Moss Guiditta Cordero Moss, International commercial arbitration –

Party Autonomy and Mandatory Rules, (Tano Aschehoug, 1999)

Mourre Alexi Mourre, “Arbitration and Criminal Law: Jurisdiciton,

Arbitrability and Duties of the Arbitral Tribunal” , in Mistelis, L.,

Brekoulakis, S., (eds), Arbitrability: The International and

Comparative Perspectives, (Wolters Kluwer, 2009),

Okezie Okezie Chukwumerije, Choice of Law in International Commercial

Arbitration (USA: Quorum Books, 1994)

Otto Otto, Dirk, Elwan, Omaia, “Article V(2)”, in Kronke et al (eds.),

Recognition and Enforcement of Foreign Arbitral Awards – A

Global Commentary on The New York Convention, (The

11    

Netherlands: Wolters Kluwer, 2010)

Pietro Pietro, Domenico Di, “General Remarks on Arbitrability under the

New York Convention”, in Mistelis, L., Brekoulakis, S., (eds),

Arbitrability: The International and Comparative Perspectives,

(Wolters Kluwer, 2009),

Pro Futuro

Orders

Muñoz, David Ramos, “The Power of Arbitrators to Make Pro

Futuro Orders”, in Schneider, Michael E., Knoll, Joachim (eds),

Performance as a Remedy: Non-Monetary Relief in International

Arbitration, (USA: JurisNet, LLC, 2011)

Raith Raith (Ipop) Nawangsar, “A Brief Look at Law Number 24 Year

2009: Must All Agreements Involving Indonesian Parties Use the

Indonesian Language?” (2009)

<http://www.omm.com/indonesianlaw09no24/ >

Second Look Patrick M Baron, Stefan Liniger, “A Second Look at Arbitrability,

Arbitration International, (Kluwer Law International 2003 Volume

19 Issue 1)

Singapore Max Ng Chee Weng, Maan Kaur Bajaj, “Singapore”, in Zeidman,

Philip F (ed) Franchise in 33 jurisdictions worldwide 2009, (Getting

the Deal Through: 2009)

Status 1958 United Nations Commission on International Trade Law “Status

1958 – Convention on the Recognition and Enforcement of Foreign

Arbitral Awards”

<http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYC

onvention_status.html>

Sotos Sotos, John, Recent Trends in Franchise Relationship Laws,

12    

<http://www.sotosllp.com/wp-content/uploads/2012/01/John-Sotos-

Recent-Trends-in-Franchise-Relationship-Laws-IBA-Dubai-

2011.pdf>

Sudargo

Gautama

Sudargo Gautama, Indonesia Business Law, (Singapore: FT Law &

Tax Asia Pacific, 1997)

Sunaryati

Hartono

Sunaryati Hartono, The Indonesian Law on Contracts

Treitel G.H. Treitel, The Law of Contract, (London: Sweet & Maxwell, 11th

edn., 2003) 2010 VERSION

Tumbuan Tumbuan, Fred B.G., “Certain Indonesian Contract Law Principles

That Are Relevant in International Arbitration”, Indonesia

Arbitration Quarterly Newsletter, Volume III (2008)

Whittaker S Whittaker, “Termination Clauses” in Contract Terms (eds A

Burrows and E Peel, 2007) 253

William M William M, “What is the content of the common law obligation of

good faith in commercial franchises?”, ABLR, 33(3)

Judicial decisions

AAY v AAZ AAY and others v. AAZ [2009] SGHC 142

Ahmad Ahmad v United Kingdom (1981) 4 EHRR 126

Air Transworld v

Bombardier

Air Transworld Ltd v Bombardier Inc [2012] EWHC 243

(Comm)

Automasters

Australia

Automasters Australia Pty Ltd v Bruness Pty Ltd [2002]

WASC 296

Ballrooms v. Zenith Kammins Ballrooms Co Ltd v. Zenith Investments (Torquay)

13    

Investments Ltd [1971] AC 850

BHP v. Oil Basins BHP Petroleum v. Oil Basins Ltd [1985] V. R. 725

Bunge v Tradax Bunge Corporation v Tradax Export SA [1981] 1 WLR 711

Burger King v Agad Burger King Corp v Agad 941 F Supp 1217

Co-operative

Insurance v Argyll

Co-operative Insurance Soceity Ltd v Argyll Stores

(Holdings) Ltd [1998] AC 1

Crawford Fitting v

Sidney Valve

Crawford Fitting Co v Sidney Valve & Fittings Pty Ltd

(1988) 14 NSWLR 438

David v TFAC David v TFAC Limited [2009] NZLR 239

Denbigh High

School

R (SB) v Governors of Denbigh High School [2006] UKHL

15

Golden Acres v.

Queensland

Golden Acres Limited v. Queensland Estates Pty Ltd [1969]

Qd. R. 378 (S.C.)

Guild Duke of Westminister v Guild [1985] QB 688

Hong Kong Fir

Shipping

Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha

Ltd [1962] 2 QB 26

ICC Award No.

5730

ICC Award No. 5730, Clunet 1990

Interfoto Interfoto Picture Library Ltd v Stiletto Visual Programmes

Ltd [1988] 1 ALL ER 348

Investor

Compensation

Scheme

Investor Compensation Scheme v West Bromwich [1997]

UKHL 28

J.J. Agro v Texuna J.J. Agro Industries (P) Ltd v Texuna International Ltd,

YCA XVIII (1993), 396 (High Court, Hong Kong)

14    

James Spencer v

Tame Valley

Padding

James Spencer & Co Ltd v Tame Valley Padding Co Ltd

Unreported April 8, 1998 CA (Civ Div)

Kahler v Midland

Bank

Kahler v. Midland Bank [1950] AC 24

Kontinnen Kontinnen v Finland (1996) 87-A DR 68

L’Estrange v. F

Graucob

L’Estrange v. F Graucob Ltd [1934] 2 KB 394

Labinal v Mors Labinal v Mors (1993) Rev. Arb. 645

Lee v Tan Lee Chee Wei v Tan Hor Peow Victor and Others and

Another Appeal [2007] 3 SLR 537

Lloyds Bank v Bundy Lloyds Bank Ltd v Bundy [1975] Q.B. 326

Lugate Insurance Ludgate Insurance Company Limited v Citibank NA [1998]

Lloyds LR 221

MacNamara Lymington Marina Ltd v MacNamara [2007] EWCA Civ

151

Malik Malik v BCCI [1998] A.C. 20

Ng Giap Hon Ng Giap Hon v Westcomb Securities Pte Ltd and Others

[2009] SGCA 19

Oceanografia v.

DSND Subsea

Oceanografia SA de CV v. DSND Subsea SA [2006] EWHC

1360

Overlook v Foxtel Overlook v Foxtel [2002] Aust Contracts Rep 90-143

Paragon Finance Paragon Finance Plc v Nash [2001] EWCA Civ 1466

Rice Rice v Great Yarmouth BC (2001) 3 LHLR 4

Rickwood Lockland Builders Ltd v Rickwood (1995) 77 B.L.R. 38

15    

Satterthwaite New Zealand Shipping Co Ltd v A M Satterthwaite [1975]

AC 154

Stedman Stedman v United Kingdom (1997) 23 EHRR CD 168

The Kanchenjunga Motor Oil Hellas (Corinth) Refineries SA v. Shipping

Corporation of India (The Kanchenjunga) [1990] 1 Lloyd's

Rep 391 (HL)

The Mihalis Angelos The Mihalis Angelos [1971] 1 Q.B. 164

The Moorcock The Moorcock [1889] 14 PD 64

The St Raphael Excomm Ltd v. Ahmed AbdulQawi Bamaodah (‘The St

Raphael’) [1985] 1 Lloyd's Rep 40

Tzortzis v. Monark

Line

Tzortzis and Another v. Monark Line A/B [1968] 1 WLR

406

Union Eagle Union Eagle Ltd v Golden Achievement Ltd [1997] A.C. 514

Vigers v Cook Vigers v Cook [1919] 2 K.B. 475

Vita Food Products v

Unus Shipping Co

Vita Food Products Inc. v. Unus Shipping Co. Ltd [1939]

AC 277

Walford v Miles Walford v Miles [1992] 2 WLR 174

Williamson R (Williamson) v Secretary of State for Education and

Employment [2005] 2 AC 246

16    

STATEMENT OF JURISDICTION

CLAIMANT and RESPONDENT have agreed to submit the present dispute to the

Kuala Lumpur Regional Arbitration Centre (“KLRCA”) in conformity with the

KLRCA Fast Track Rules. Each party will accept the decision of this Arbitral

Tribunal as final and binding.

QUESTONS PRESENTED

I. Whether the tribunal has jurisdiction over the present dispute, specifically,

whether the arbitration agreement is valid and enforceable.

II. Whether the Franchise Agreement is valid and enforceable, and in particular,

whether it has violated Indonesian law.

III. Whether the “inherent warranty of good faith and fair dealing” in interpreting

and applying franchise agreements applies to this Franchise Agreement under

Singaporean and Indonesian law.

IV. What kind of violation that would entitle CLAIMANT to terminate the

franchise under Singaporean and Indonesian law – should it be any violation

of the Franchise Agreement, substantial violation of the terms of the Franchise

Agreement which CLAIMANT deems substantial or substantial violation of

the Franchise Agreement or other else.

V. Whether the breach of the terms of the Franchise Agreement by

RESPONDENT, if any, justified the termination of the Franchise Agreement

17    

under Singaporean and Indonesian law. In particular, the following issues will

be addressed:

(a) Whether the serving of a single Indonesian dish referred to as “The

Special of the Day” breached the terms of the Agreement.

(b) Whether giving customers the option of substituting lamb for pork

for menu items breached the terms of the Agreement.

(c) Whether allowing female Muslim employees to wear hijab breached

the terms of the Agreement.

(d) As an incidental issue to (c), whether an employment regulation

prohibiting the wearing of hijab by female Muslim employees

violates the Constitution and/or laws of Indonesia or any

international treaties to which it is a member.

(e) Whether each of the above breaches and/or a continuing disregard of

the franchisee’s obligations as reflected by the above breaches under

the Franchise Agreement entitled CLAIMANT to terminate.

VI. Whether a proper and timely Notice of Termination was given to

RESPONDENT so that the termination was effective under Singaporean law

and Indonesian law.

VII. Whether the clause excluding the availability of specific performance for

RESPONDENT is valid and enforceable.

18    

19    

STATEMENT OF FACTS

BACKGROUND

In 1983, the first Great Wall Noodle Shop Restaurant (“the Restaurant”) was opened

in China by Mr. Ji and Mr. Wang. It serves Chinese cuisine and has been very

successful.

CLAIMANT, Great Wall Noodle Shop LLC, was later founded for the operation of

the restaurant business. Mr. Ji and Mr. Wang are the co-managing directors of the

company. In the past 25 years the company has also franchised numerous Restaurants

in China, Singapore and Malaysia.

RESPONDENT, Adi Budiamman, M.D., is an Indonesian who has been working as a

surgeon. He spent 7 years studying in Singapore and knows English well.

EVENTS LEADING TO THE FRANCHISE

On 20 June 2011, Mr. Wang, the co-managing director of CLAIMANT, met

RESPONDENT in the airport of Singapore. RESPONDENT expressed his interest in

running franchised Restaurants in Indonesia. Mr. Wang agreed, and handed in a

Franchise Agreement (“the Agreement”), which was written in English, for

RESPONDENT to read over. Mr. Wang explained the fee arrangements in detail.

However, knowing that RESONDENT did not have enough time to go over the entire

Agreement, Mr. Wang suggested that RESPONDENT take the Agreement home and

20    

review it before signature. RESPONDENT nevertheless read though the entire

Agreement quickly and thereafter signed it.

EVENTS LEADING TO THETERMINATION OF THE FRANCHISE

Two new franchised Restaurants opened in September 2011, one in Jarkata and one in

Medan.

In late October 2011, Mr. Ji made a visit to both franchised Restaurants in Indonesia

and discovered the following:

(a) There was sale of food products not on the official Menu being served.

(b) An option of substitution of lamb for pork was provided to customers.

(c) Some of the female employees in the Jakarta restaurant and almost all of the

female employees in the Medan restaurant wore a red hijab.

On 4 November 2011, Mr. Ji, acting on behalf of CLAIMANT, sent an e-mail to

RESPONDENT (“the Notice of Deficiency”) notifying him that he committed the

above violations of the Agreement. Mr. Ji explained to RESPONDENT the

importance of maintaining uniformity on the entire franchise system and asked him to

immediately discontinue with all the violations. Mr. Ji reserved the right to terminate

the Agreement if the violations persisted.

Two weeks later, CLAIMANT sent an inspector to visit both franchised Restaurants.

The inspector reported that:

21    

(a) Indonesian food was not listed on the Menu, but a single Indonesian dish of “The

Special of the Day” was available to customers

(b) The option of substitution of lamb for pork still existed.

(c) Most of the female employees wore a white hijab.

On 19 November 2011, CLAIMANT sent a letter (“the Notice of Termination”) to

RESPONDENT terminating the franchise and directing him to close the two

franchised Restaurants and remove the signage within 15 days. RESPONDENT

refused to close the two Restaurants. CLAIMANT thereafter submitted a Notice of

Arbitration in conformity with the KLRCA Fast Track Rules seeking redress.

RESPONDENT asserted a counterclaim for breach of the Agreement.

22    

SUMMARY OF PLEADINGS

I. The tribunal has jurisdiction over the dispute as there is a valid agreement to

arbitrate

First, Singaporean law, being the law chosen by the parties to govern the

entire contract, governs the validity of the arbitration agreement. There is valid

consent between the parties to arbitrate and the agreement has complied with

formal requirements for its validity. All of the matters submitted to arbitration

are arbitrable, even if the issue of applicability of constitutional rights arises.

II. The Franchise Agreement is valid and enforceable, even under the application

of Indonesian laws

First, Singaporean law, as the chosen applicable law, governs the validity of

the Franchise Agreement. Rules of Indonesian law, being neither the chosen

law nor that of the forum, should not be applied as mandatory rules. In any

event, the Agreement is valid under the language requirements and regulations

on franchises under Indonesian law.

III. The application of “inherent warranty of good faith and fair dealing” in

interpretation and performance of agreements:

Under Singaporean law, the doctrine of good faith and fair dealing has no

general application. No implied term can be implied in fact to restrict the

ambit of the discretion of CLAIMANT as well since Article X(2) of the

Agreement already delineates the ambit of the discretion exercisable by

CLAIMANT.

23    

Under Indonesian law, the duty of good faith and the standard of the

reasonableness in interpretation and performance of contract are recognised by

legislation. However, its effect should be restricted by Article X(2) because of

the character of optional law of the ICC.

IV. The trigger of premature determination of the Agreement:

Under Singaporean law, CLAIMANT is entitled to terminate on objectively

substantial breach of terms which CLAIMANT deems substantial although the

discretionary power of classifying term as important must be subject to Article

X(2).

Under Indonesian law, the position is the same. CLAIMANT is titled to

terminate on objectively substantial breach of terms which CLAIMANT

deems substantial, subject to the restriction of discretion by Article X(2).

V. CLAIMANT was entitled to terminate the Agreement:

Under both Singaporean and Indonesian law, the serving of “The Special of

the Day” and the option of substituting lamb for pork breached Article III (A)

of the Agreement. Allowing the female employees to hijab breached Article

IV of the Agreement since prohibiting hijab at work does not violate the

Human Right Law or Constitution of Indonesia.

Under both Singaporean and Indonesian law, the breaches would justify the

termination of the Agreement by CLAIMANT as there was a substantial

24    

failure of performance depriving of the benefit which it was intended from the

Agreement.

VI. On the assumption that CLAIMANT was entitled to terminate, the Notice of

Termination was proper and timely and hence the termination was valid:]

Under Singaporean law, the Notice of Termination was timely and proper and

no implied term can be implied in law or in fact to oblige CLAIMANT to give

a notice period to RESPONDENT prior to termination.

Under Indonesian, the Notice of Termination was timely and proper in the

absence of order of the court of Indonesia because the arbitration agreement

and the Indonesia Arbitration Law preclude the jurisdiction of Indonesian

court to order any dissolution of the Agreement.

VII. Specific performance should not be granted to RESPONDENT

First, the tribunal’s power with regard to remedies is limited by the Agreement,

which excludes the availability of the remedy for RESPONDENT.

RESPONDENT is bound for having signed the Agreement. Even if the clause

is ineffective, specific performance is not an appropriate remedy for

RESPONDENT in view of adequacy of damages and the deterioration of the

parties’ relationship.

25    

CLAIMANT’S PLEADINGS

I. THE TRIBUNAL HAS JURISDICTION OVER THE PRESENT

DISPUTE.

1. Article XII (A) of the Franchise Agreement forms the basis of the tribunal’s

jurisdiction over the present case. 3 The arbitration is to be conducted in

accordance with the KLRCA Fast Track Rules, 4 which incorporate the Malaysian

Arbitration Act. 5 The tribunal is free to determine its own jurisdiction by virtue of

the doctrine of Kompetenz-Kompetenz. 6

A. THE CHOICE-OF-LAW CLAUSE IS VALID AND BONA FIDE

2. Before the tribunal considers the issues raised by the parties, it should first

ascertain laws applicable to each aspect of the dispute.

(i) Singaporean law, being the law chosen by the parties to govern their relationship,

applies to the present dispute

3. The parties expressly agreed in Article XII (B) of the Agreement that Singaporean

law governs “the entire contract”. 7 CLAIMANT submits that this clause should

be enforced, in recognition of party autonomy in choosing the governing law in

                                                                                                               3 Amerasinghe, 55 4 Article XII (A) of the Agreement 5 Article 6(2), KLRCA Fast Track Rules 6 Section 18(1), Malaysian Arbitration Act 7 Supplement Clarifications, 2, SR#3

26    

commercial relationship as a “cornerstone” in international law. 8 The Malaysian

Arbitration Act affirms that the tribunal should “decide in accordance with the

terms of the agreement”. 9

4. RESPONDENT must prove that the choice-of-law clause is not bona fide and not

legal, 10 or amounts to contravention of public policy, 11 to challenge its validity.

The test is whether the “sole” reason of the choice is to evade the mandatory rules

of the law with which the contract is most closely connected. 12 The absence of

connection between the designated law and the transaction is not conclusive. 13

5. From the circumstances, RESPONDENT’s argument must fail. Singaporean law

governs the franchise agreements between CLAIMANT and all the franchisees in

Indonesia, Malaysia and Singapore. 14 Further, the parties signed the Agreement in

Singapore. 15 The choice of Singaporean law is therefore for uniformity and

commercial convenience, made in good faith in furtherance of the parties’

business interests.

6. If RESPONDENT’s challenge on the express choice of law is accepted, the

tribunal should have regard to the widely recognized New York Convention in

determining the laws applicable to the arbitration agreement and the underlying

contract. The Convention, which has been signed by Singapore, Malaysia and

                                                                                                               8 Frick, 45 9 Article 30(2), Malaysian Arbitration Act 10 Vita Food Products v Unus Shipping Co 11 Tzortzis v. Monark Line, 411 per Lord Denning, M.R 12 Golden Acres v. Queensland; Jaffey, at 144 13 BHP v. Oil Basins 14 First Clarifications, 3, Item C8 15 Moot Problem, 2

27    

Indonesia, 16 governs the enforcement of arbitral awards in Member States.

Bearing in mind arbitrators’ “soft obligation” to render enforceable arbitral

awards, 17 the tribunal should not depart from provisions of the Convention except

with “serious reasons”. 18 The effect of the Convention is discussed below.

B. THE ARBITRATION AGREEMENT SHOULD BE GOVENRED BY

SINGPAOREAN LAW

7. The consent of the parties to arbitrate is embodied in the arbitration agreement, the

validity of which is independent from that of the substantive contract under the

doctrine of separability.19

8. The issue of validity encompasses two aspects. Substantive validity relates to the

existence of valid consent to arbitrate, while formal validity concerns the form of

the agreement. 20

9. CLAIMANT’s position is that the arbitration agreement is valid in both aspects

and should be enforced by the tribunal.

(i) Singaporean law, being the law chosen by the parties, governs the validity of the

arbitration agreement.

                                                                                                               16 Status 1958 17 Berger, 16; Brekoulakis, 2-36 18 ICC Award No. 5730, 1033 19 David Joseph, 102 20 Berger, 2

28    

10. CLAIMANT’s primary submission is that Singaporean law applies to both aspects

of validity of the arbitration agreement for governing the “entire contract”, 21 to

uphold party autonomy. 22 CLAIMANT would also address the alternative

position where the tribunal does not uphold the choice-of-law clause.

(ii) Alternatively, the law of Malaysia, being the place of arbitration, should govern

11. If the tribunal finds Singaporean law inapplicable, Malaysian law, being that of

the place of arbitration, should govern. 23 Malaysia is the country most closely

connected to the arbitration agreement for being the place where it is performed. 24

Further, this accords with the approach under Article V (1)(a) of the New York

Convention, whereby an arbitral award may be denied if the agreement is not

valid “under the law of the country where the award was made” in the absence of

indication on applicable law. By virtue of Article 6(2) of the Fast Track Rules, the

award is deemed to be made in Malaysia.

12. In any event, formal and substantive validity of the arbitration agreement are both

satisfied under the laws of Singapore, Malaysia and even Indonesia.

C. THERE IS VALID CONSENT TO ARBITRATE BETWEEN THE

PARTIES

                                                                                                               21 Supplement Clarifications, 2, SR#3 22 Frick, 45 23 Lew, §6-23 24 Berger, 10

29    

(i) There is valid consent to arbitrate under Singaporean law even if RESPONDENT

was not aware of the agreement

13. Both of the parties have signed the Agreement, which contains the dispute

resolution clause. 25 Signature is conclusive indication of consent under common

law. 26 This is illustrated in The St Raphael, in which the court found that the

defendant’s unawareness of the arbitration agreement embodied within a contract

incorporated by a telex referred to in the document signed was “irrelevant”.

14. Further, the parties’ compliance with Article II (2) of the New York Convention,

which requires reduction of the arbitration agreement into writing, leads to a

strong presumption that the parties have given consent. 27

15. In addition, CLAIMANT had unconditionally offered RESPONDENT the chance

to take the contract away for scrutiny before signing it. By declining the offer,

RESPONDENT is estopped from denying the validity of the clause. The principle

of waiver by election extends to condition precedents for conclusion of binding

contracts. 28 By singing the contract immediately, 29 RESPONDENT had elected

to act in a way that is mutually exclusive from conduct that would have indicated

his insistence to exercise his alternative right of refusing to enter into contract

until he had considered the entire agreement. This put CLAIMANT under the

assumption that RESPONDENT was not concerned with the terms and had

approved of the entire contract including the arbitration clause.                                                                                                                25 Moot Problem, 2 26 L’Estrange v. F Graucob; Lew, §7-35 27 Graves, 16 28 Oceanografia v. DSND Subsea 29 Moot Problem, 2

30    

(ii) The parties have validly consented to arbitration under Malaysian law, or even if

Indonesian law is applied

16. RESPONDENT’s signature on the document is equally binding under Malaysian

law, which also applies common law to contracts. 30

17. RESPONDENT should not be able to invoke “non est factum”, as it cannot apply

if the signer is careless or negligent in signing the contract. 31 Having signed the

contract immediately without reviewing it even at CLAIMANT’s offer,

RESPONDENT cannot raise the defence.

18. Validity of consent should also be upheld under Indonesian law, unless

RESPONDENT can prove physical coercion, 32 or fraud, mistake or duress. 33

Mistake refers to “error” as to the substance of the agreement or identity of the

other contracting party. 34 Neither type of mistake is engaged in the present

dispute. RESPONDENT was at most unaware of the arbitration agreement instead

of having a “misapprehension” about its substance. 35

19. There is therefore valid consent to arbitrate under Singaporean, Malaysian and

Indonesian law, thereby indicating substantive validity of the agreement.

                                                                                                               30 Article 3, Malaysian Civil Law Act 31 Chitty, 5-106 32Sudargo Gautama 33 ICC Articles 1321-1328 34 ICC Article 1322 35 Sudargo Gautama

31    

D. THE ARBITRATION AGREEMENT HAS COMPLIED WITH FORMAL

VALIDITY REQUIREMENTS

(i) The arbitration clause has satisfied formal validity requirements under

Singaporean law and Malaysian law

20. As a supplement to the discussion on applicable law above, 36 lex loci arbitri may

have a greater influence than the law chosen by the parties with respect to formal

validity, to the extent that it must be applied. 37 In any event, the clause is valid

under both Singaporean and Malaysian law.

21. The arbitration agreement is in the form of a clause within the Agreement, and

mandates submission of disputes arising from the parties’ contractual relationship

to arbitration. 38 The Agreement was signed by the parties. 39

22. The arbitration clause therefore satisfies the requirement of being reduced into

writing, which is mandatory in Singaporean and Malaysian law, as well as the

New York Convention which significance is discussed above. 40 The clause also

satisfies the additional requirement of being signed by both parties provided under

Malaysian law and the New York Convention. 41 It is immaterial whether the

                                                                                                               36 Supra, §10-11 37 Berger, 15 38 Article XII(A) of the Agreement 39 Moot Problem, 2 40 Supra, §6 41 Section 2A ,Singaporean Arbitration Act and Article 7, UNCITRAL Model Law incorporated therein; Article 9, Malaysian International Arbitration Act; Article II, New York Convention

32    

arbitration agreement is “in the form of an arbitration clause…[or] a separate

agreement”. 42

(ii) The tribunal should not apply Indonesian law to formal validity of the arbitration

agreement even if there is no valid express indication of the governing law

23. Under the “favor negotil” principle, arbitrators should apply the law that would

uphold the validity of the arbitration agreement if conflict-of-laws issues

regarding formal validity arise. 43 Further, it is a general principle that Article II of

the New York Convention “sets a maximum standard” for requirements on this

aspect of validity. 44 Consequently, Indonesian law, which arguably imposes

arguments more stringent language requirements, should not apply.

(iii) The language requirement provided in the Indonesian Language Law, if found

applicable, has been complied with

24. CLAIMANT submits that the language requirement under Article 31(1) of the

Indonesian Language Law has been fulfilled. The provision requires that

Indonesian must be used in contracts involving Indonesian parties. There is no

stipulation on sanction for non-compliance nor time at which the translation must

be provided.

                                                                                                               42 Article 9(2), Malaysian Arbitration Act 43 Berger, 9 44 Berger, 16

33    

25. The Ministry of Law and Human Rights has suggested that the signing of the

contract without the Indonesian version does not contravene Article 31. 45 Instead,

it may be applied as a “condition subsequent” to be fulfilled within a reasonable

time after the signing of the contract. 46

26. CLAIMANT had originally intended to enter into the agreement with a

Singaporean party, 47 and had only concluded the contract on the day because

RESPONDENT volunteered to sign it immediately. 48 By providing the Bahasa

Indonesian translation of the contract the day after its conclusion, CLAIMANT

had not only satisfied Article 31, but had showed more than reasonable diligence

in trying to comply with Indonesian laws.

(iv) Even if there is non-compliance with the Indonesian Language Law, the contract

should not be rendered void

27. It has been indicated in a letter issued by the Director General that the requirement

is only a formal one, non- compliance with which is insufficient on its own to

vitiate the contract, at least until the issuance of implementing regulations. 49 In

the absence of such regulations, CLAIMANT submits that the contract should not

be void on the grounds of non-compliance with the Language Law.

E. THE MATTERS SUBMITTED TO ARBITRATION ARE ARBITRABLE

                                                                                                               45 Letter of MOLHR 2009 46 Hogarth 47 Moot Problem, 2 48 Moot Problem, 2 49 Letter of DG 2009

34    

(i) Indonesian and Malaysian law are applicable laws on arbitrability of matters

submitted to arbitration

28. The tribunal’s jurisdiction can only extend as far as the parties are capable of

granting authority to arbitrate. 50 This leads to the question of whether the issue

can be settled through arbitration. 51

29. In determining arbitrability, Indonesian law is applicable in accordance with

Article V(2) of the New York Convention, as Indonesia is likely to be the country

where the award is to be enforced, being the place of performance of the

Agreement. 52 Malaysian law, as the lex loci arbitri, is also relevant to avoid the

possibility of having the arbitral award set aside by local courts. 53

30. Under Indonesian law, only “disputes in the commercial sector concerning rights

which, according to the law and regulations, have the force of law and are fully

controlled by the parties in dispute”, are arbitrable. 54 Further, the awards must not

be contrary to public order. 55 Similarly, Article 4(1) of the Malaysian Arbitration

Act imposes the restriction that the arbitration agreement must not be contrary to

public policy.

                                                                                                               50 Böckstiegel, 178. 51 Mistelis, 1-6 52 Brekoulakis, 6-31 53 Brekoulakis, 6-4; Mistelis, 1-34; Pietro, 5-23; Otto, 349 54 Article 5(1) , Indonesian Arbitration Law 55 Article 66(c), Indonesian Arbitration Law

35    

31. CLAIMANT submits that all of the matters submitted to the tribunal are arbitrable.

In view of the worldwide pro-enforcement trend, 56 “arbitrability is the rule, non-

arbitrability is the exception”. 57 Party autonomy should only be restricted where

there is a violation of the “most basic notions of morality and justice”.58 Such is

not engaged in the present case.

32. In determining the scope of its jurisdiction, the tribunal should also consider the

subjective reasonable expectations of the parties to settle the dispute swiftly, as

evident in the selection of fast track arbitration for dispute resolution. 59

(ii) The dispute, despite possibly involving the application of laws on constitutional

rights, is arbitrable

33. In contending that an issue is not arbitrable, it must be shown that arbitration on it

is contrary to public policy. The present proceedings deal mainly with issues of

breach of contract, 60 most of which are purely commercia. It is under the issue of

RESPONDENT’s breach of the term relating to employees' uniform that the

arguments on the constitutionality of the restriction on the employees’ wearing of

hijab arise.

34. CLAIMANT’s position is that a matter is not inarbitrable merely for engaging

application of rules of public policy. 61 Constitutional rights, being analogous to

                                                                                                               56 Alfons, 39-42 57 Hanotiau, 819 58 Alfons, 50 59 Second Look, 27-54 60 Moot problem, 6 61 Arbitrability, 11-17, citing Labinal v Mors

36    

criminal law rules as universally binding codes within a jurisdiction, are “no more

and no less than [applicable] mandatory rule”. 62

35. The present dispute involves only the question of the extent of discretionary

power employers have over the uniform of employees. This question should be

within the full authority of the parties to determine for business efficacy, even if

they have to take into consideration applicable laws and treaties in doing so.

(iii) Even if the dispute over the wearing of hijab is inarbitrable, the arbitration

agreement remains valid and enforceable in part

36. CLAIMANT submits that arbitrability is relevant only in determining the limits to

the jurisdiction of arbitral tribunals, as long as the arbitration agreement is not

contrary to public policy per se. 63 This accords with the New York Convention,

under which inarbitrability is a defence to enforcement of an arbitral award, as

opposed to a requirement for validity of the arbitration agreement. 64

37. The arbitration agreement in the present case is of a general scope, the subject

matter of which is not by itself within the exclusive jurisdiction of national courts.

65 The tribunal should therefore proceed with arbitration over the remaining

issues on breach of other contractual terms even it accepts that the contention over

employment regulation is not arbitrable. 66

                                                                                                               62 Mourre, 11-15 63 Brekoulakis, 2-64 64 Brekoulakis, 2-59 65Brekoulakis, 2-64 66 Kronke 413, Born, 769; J.J. Agro v Texuna International Ltd

37    

II. THE FRANCHISE AGREEMENT IS GOVERNED BY SINGAPOREAN

LAW

A. SINGAPOREAN LAW GOVERNS THE VALIDITY OF THE FRANCHISE

AGREEMENT

38. The tribunal’s jurisdiction over the dispute is derived from the arbitration

agreement which terms should bind the tribunal. 67 Singaporean law, being the law

chosen by the parties to govern the “entire contract”, should apply to the

substantive issues of the dispute. CLAIMANT would also address the alternative

position where Indonesian law governs the substance of the dispute.

B. INDONESIAN LAW ON FRANCHISES SHOULD NOT BE APPLIED AS

MANDATORY RULES

39. CLAIMANT’s primary submission is that Indonesian law, being neither the

chosen law nor that of the forum, should not be applied in accordance with the

general common law approach as noted by the editors of Dicey and Morris

Conflict of Laws.

40. The principle of party autonomy is prized in international commerce. Unrestrained

application of rules derived from laws other than the chosen law would effectively

                                                                                                               67 Amerasinghe, 55

38    

defeat the purpose of expressly stipulating the governing law and result in

uncertainty over applicable laws. 68

41. Even if it is accepted that Indonesian laws may be applicable, provisions of its

franchise regulations should not be applicable as mandatory rules. 69 Franchise

regulations concern the internal operation of businesses as agreed upon by

independent capable parties. 70 Wide application of foreign mandatory rules would

effectively undermine party autonomy in international law.

III. THE FRANCHISE AGREEMENT IS VALID UNDER SINGAPOREAN

LAW AND INDONESIAN LAW

A. THE FRANCHISE AGREEMENT IS VALID UNDER SINGAPOREAN

LAW

42. As the parties are not members of the Singaporean Franchising and Licensing

Association,71 they are not governed by any rules specific to franchise agreements.

72 The contract is valid under the general contract laws and regulations of

Singapore.

B. THE FRANCHISE AGREEMENT IS VALID UNDER INDONESIAN LAW

                                                                                                               68 Okezie, 185, 187; see also Moss, 342 69 Bermann, 328 70 David v TFAC, §61 71 Supplement Clarifications, 7, SR#24 72 Singapore, 161

39    

43. If the tribunal accepts the challenge on the validity of the choice-of-law clause or

applicability of Indonesian legislations as mandatory rules, provisions relating to

franchises under Indonesian law may be relevant.

(i) The requirement for use of Indonesian in the agreement is complied with, or

alternatively, does not invalidate the agreement

44. It is provided under Article 4 of the Implementing Regulations that a franchise

“shall be executed on the basis of a written agreement…[which] shall be written

in English language and translated into Indonesian language”. 73

45. There is no stipulation as to when the Article 4 should be fulfilled. Express

language requirements in franchising regulations are often laid down for practical

purposes, such as to facilitate disclosure or government registration. 74

Consequently, the language requirement should not be taken as a condition

precedent for the conclusion of a valid contract as it does not relate to the essential

validity of the contract.

46. In any event, CLAIMANT had translated the contract into Indonesian language

and provided it to RESPONDENT within a day of the signing of the contract.

47. Article 31(1) of the Indonesian Language Law contains a similar provision on

language requirement, the effect of which has been discussed above. 75

CLAIMANT had sought to comply with the requirement expeditiously, and a                                                                                                                73 Regulation on Franchise 74 Sotos, 15 75 Supra, § 24-27

40    

Bahasa Indonesian translation of the contract was provided shortly after the

conclusion of the contract. Alternatively, the requirement may only serve as a

procedural requirement, non-compliance with which would not invalidate the

contract. 76

(ii) RESPONDENT has waived the requirement on advance provision of a franchise

prospectus and written agreement

48. RESPONDENT has waived the requirement for the provision of a prospectus and

written agreement two weeks before the conclusion of contract under Article 18(1)

of the Regulation on Franchise. By declining CLAIMANT’s request for him to

scrutinize the entire contract beforehand, RESPONDENT represented that he was

willing to forego the protection offered by the requirement. 77

(iii) Non-registration of franchise prospectus does not invalidate the Agreement

49. Although the requirement on registration of a franchise prospectus under Article

18(1) of the Indonesian Law on Franchises has not been fulfilled, the certificate of

registration of the Agreement would only be revoked upon non-compliance with

the third written warning issued by the government. 78 Further, this requirement,

which solely relates to facilitation of the registration process, is not “application

worthy” as a mandatory rule. 79

                                                                                                               76 Letter of DG 2009 77 The Kanchenjunga per Lord Goff of Chieveley, 398-399 78 Article 18(1), Regulation on Franchise 79 Blessing, 32

41    

50. The Agreement is therefore valid under both Singaporean and Indonesian laws.

Having determined the validity of the Agreement, the contractual terms and

justifications for termination of contract should then be considered.

IV. THE APPLICATION OF “INHERENT WARRANTY OF GOOD

FAITH AND FAIR DEALING” IN INTERPRETATION AND

PERFORMANCE OF AGREEMENTS

51. The said warranty is a useful device of contract gap-filling or implying standard of

good faith and reasonableness in contractual performance. 80 The Agreement

confers discretionary power to CLAIMANT in making business decisions. The

question of whether the said warranty applies therefore has a great bearing on the

ambit of such discretionary power. The ambit of CLAIMANT’s discretion is

decisive to the substance of the dispute including the issues of breach and

termination.

A. THE SAID WARRANTY DOES NOT APPLY TO THE AGREEMENT

UNDER SINGAPOREAN LAW

52. In Singapore, the concept of “inherent warranty of good faith and fair dealing” is

not generally recognised.81 It is because of the heavy influence of English

common law and equity which forms the foundation of the Singapore law of

contract.82 In modern English contract law, there is no principle of good faith and

                                                                                                               80 Dubroff 81 Joseph 82 Cheshire, Fifoot and Furmston, 5

42    

fair dealing of general application83 where English judges have shown great

reluctance in recognising the doctrine.84

53. The lack of a general recognition of the doctrine of good faith in Singapore was

evidenced in the recent Singapore Court of Appeal decision of Ng Giap Hon, in

which the court rejected the possibility of implying a duty of good faith and fair

dealing in law into the contract in dispute.

54. In exceptional circumstances, the English courts have used the implication of a

term in fact to restrict the ambit of a unilateral discretionary power conferred by

the contract.85 The implied term imposed did not require any decision made to be

objectively justifiable,86 but it cannot be made in bad faith or in an “arbitrary”,

“capricious” or “wholly unreasonable” manner.87

55. Regardless of what the precise restriction should be under such implied term, it

cannot be implied into the Agreement. A term cannot be implied in fact if it

actually conflicts with the express term of the contract.88 Article X(2)89 of the

Agreement clearly delineates the ambit of the discretion exercisable by

CLAIMANT, which cannot be readily overridden by any implied terms in fact.

The question of whether a decision made by CLAIMANT was within the ambit of

the discretion shall be solely governed by the express language of Article X(2).

                                                                                                               83 Chitty, 1-022-1-023; 84 Satterthwaite, 167; Lloyds Bank v Bundy, 339; Interfoto, 353; Walford v Miles, 181; Union Eagle Ltd v Golden Achievement Ltd, §218; James Spencer v Tame Valley Padding 85 Chitty, 1-033 86 MacNamara 87 Paragon Finance; Ludgate Insurance 88Treitel, 204; Guild, 700 89 Moot Problem, 27

43    

B. THE SAID WARRANTY IS RESTRICTED BY ARTICLE X(2) OF THE

AGREEMENT UNDER INDONESIAN LAW

56. Although Indonesian law recognises the “inherent warranty of good faith and fair

dealing” in interpretation and performance of a contract, the effect of it is

restricted by Article X(2) of the Agreement.

57. Recognition of the doctrine stems from Article 133890 and Article 133991 of the

ICC, which provide that “… agreement shall be carried out in a bona fide

manner” and that “Agreements shall be …with regard to all that is required in line

with the nature of such agreements, or in terms of fairness, customs or law.”92

58. Meanwhile, it must be noted that as a consequence of the character of optional law

of Book III of the ICC, parties in Indonesia are free to make contract the terms of

which can deviate from those provisions laid down in the ICC.93Article 1338 of

ICC provides that all contracts which have been legally concluded shall be law to

the parties whereas Article 1339 provides that agreements shall be binding as to

the terms specifically stated thereof and standard of reasonableness is given

“regard” only.

59. It is therefore submitted that any restriction on the effect of Article 1338 and 1339

by an express agreement, if not made unreasonably or in bad faith, should be

                                                                                                               90 ICC, 614 91 ICC, 615 92 See also Sudargo Gautama, 3-096 and 3-099 93 Sunaryati Hartono,10

44    

honoured. Article X(2) of the Agreement interprets the good faith and

reasonableness requirement as embodying only subjective element on the part of

CLAIMANT to benefit the Restaurant system generally. 94 This is not an

unjustified restriction. A franchise relationship is frequently one where with

power imbalance, which is a reflection of the franchisee’s business inexperience

and the consequent need to rely on the franchisor relative superiority.95 A

franchisor always runs the risk that the action of an inexperienced franchisee may

significantly reduces the reputation capital of the franchisor by failing to maintain

quality controls.96 RESPONDENT was previously a surgeon without business

experience.97 It is not unreasonable to give deference to CLAIMANT’s judgment

in making business decisions for the purpose of smoothing the operation of this

franchise.

V. THE TRIGGER OF PREMATURE DETERMINATION OF THE

AGREEMENT

A. CLAIMANT IS ENTITLED TO TERMINATE ON SUBSTANTIAL

BREACH OF TERMS WHICH CLAIMANT DEEMS SUBSTANTIAL

UNDER SINGAPOREAN LAW

60. The approach of interpretation of terms is extensively discussed in Investor

Compensation Scheme. Irrationality must be avoided and the meaning of terms

should be read in light of the relevant background including the context of the

                                                                                                               94 Moot Problem, 27 95 William M, 210 96 Hadfield, 928 97 1st Response, part A

45    

whole agreement.98

61. On this approach, the word “default” in Article XIII(A) and the word “violation”

in XIII (B) 99 should mean the same concept of “breach”. CLAIMANT concedes

that Article XIII(A) must be departed from its literal meaning because it

essentially means “you are in breach if we determine you are in breach”. This is

completely irrational. The question of breach must be assessed objectively in

accordance with the terms of the Agreement. On the other hand, CLAIMANT

submits that the express language of Article XIII(B) should be upheld, under

which substantial default/violation of the terms which CLAIMANT reserves

discretion to deem as important would entitle CLAIMANT to bring the contract

into an end.

62. It has been held by the court that parties are open to agree that, as regards a

particular obligation, any breach shall entitle the innocent party to treat the

contract as terminated.100 In analogy, it is not objectionable for parties to agree

that, as regards a term the innocent party deems substantial, a substantial violation

of which shall entitle the innocent party to treat the contract as terminated.

63. The UK decision of Rice should be distinguished with the present factual matrix.

In Rice, the termination clause stipulated that “If [A] commits a breach of any of

its obligation…[B] may…terminate…”. It was held that since under the clause

“any breach, however small, of any obligation, however small” would justify

termination, the termination clause was “uncommercial” and its literal meaning                                                                                                                98 Investor Compensation Scheme, 912-913 99 Moot Problem, 31 100 Bunge v Tradax, 715E

46    

should not be upheld.

64. Article XIII(B) of the Agreement is entirely different with the termination clause

in Rice. Magnitude of the breach and importance of the term are the two

intertwined components in deciding whether “the whole benefit intended from

the contract” was deprived off, the common law requirement of a breach

justifying termination.101 Under the termination clause in Rice, both components

are not qualified; whereas under Article XIII(B) of the Agreement, the

magnitude of the breach must be objectively “substantial” and the importance of

the term is subject to CLAIMANT’s determination, which must at least be

exercised with intent to benefit the Restaurant system generally.102 Given that

CLAIMANT was the one who prepared the Agreement and knew about the

importance of the terms thereof in relation the whole franchise business, giving

deference to the judgment of CLAIMANT in determining which terms are

substantial for the purpose of termination accords with business commonsense.

65. The decision in Rice has been heavily criticised as undermining certainty.103 It is

submitted that in the absence of saving words in the termination clause preserving

the common law rights, its certainty should be upheld.104

B. CLAIMANT IS ENTITLED TO TERMINATE ON SUBSTANTIAL

BREACH OF TERMS WHICH CLAIMANT DEEMS SUBSTANTIAL

UNDER INDONESIAN LAW

                                                                                                               101 Hong Kong Fir Shipping, 77 102 Article X(2), Moot Problem, 27 103 Whittaker 104Rickwood

47    

66. As regards Article XIII(A), CLAIMANT concedes that it should be departed from

its literal meaning and the question of default must be assessed objectively. This is

because Article 1343 of the ICC requires wordings of an agreement be considered

in light of what might have been the purpose of both parties concerned rather than

attaching too much significance to the literal wording. It is impossible for any

contracting parties in the world to agree that one of the parties have the sole

discretion to determine what amounts to a breach.

67. On the other hand, CLAIMANT submits that Article XIII(B) should be given full

effect having regard the freedom of contract guaranteed by Article 1338 of the

ICC. Since CLAIMANT was more familiar with the importance of the terms,

Article 1343 is not a barrier. It shall have been within the contemplation of the

parties to give deference to the judgment of CLAIMANT, provided that he at least

has the intent to benefit the Restaurant system generally105, in determining which

terms are substantial for the purpose of termination.

VI. CLAIMANT WAS ENTITLED TO TERMINATE THE AGREEMENT

A. SERVING CUSTOMERS A SINGLE INDONESIAN DISH REFERRED TO

AS “THE SPECIAL OF THE DAY” AND GIVING CUSTOMERS THE

OPTION OF SUBSTITUTING LAMB FOR PORK BREACHED ARTICLE

III(A)106 UNDER SINGAPOREAN AND INDONESIAN LAW

                                                                                                               105 Article X(2), Moot Problem, 27 106 Moot Problem, 15-16

48    

68. The questions of breach depends on whether the decisions to forbid the serving of

“The Special of the Day” and the option of substituting lamb for pork was within

the ambit of the discretion of CLAIMANT to designate Menu items under Article

III(A).

69. For the reasons given in paragraph 51 to 59, the only restriction to CLAIMANT’s

discretion should be Article X(2), under which CLAIMANT would be deemed to

have exercised business judgment reasonably and in good faith if the decision

made was intended to benefit the Restaurant system generally. Maintaining

uniformity is listed as one of the items that would benefit the Restaurant system.

70. As shown by the Notice of Deficiency,107 in exercising its discretion to approve

Menu items, the dominant purpose of CLAIMANT was to promote uniformity of

all franchise restaurants. Objection to the service of unauthorised Menu Items

should therefore be deemed to be within the ambit of the discretion of

CLAIMANT.

71. Even if the warranty of good faith and fair dealing applies in full without any

restriction, the decisions made was still bona fide and reasonable and hence within

the ambit of the discretion of CLAIMANT.

72. There was no bad faith or ulterior motive on the part of CLAIMANT. Mr. Ji and

Mr. Wang’s thought that the franchise shall be given to a friend or relative108

played no part in the decision of CLAIMANT of terminating the Agreement. The

                                                                                                               107 Moot Problem, 3-4 108 Footnote 3, Moot Problem, 3

49    

real cause of termination was clearly stated in the Notice of Deficiency, in which

CLAIMANT warned RESPONDENT that it would terminate the franchise unless

RESPONDENT immediately discontinued with all violations. 109 There was

nothing suspicious for Mr. Wang’s son becoming the manager under new

management after the two Restaurants were reopened110 in light of the fact that

out of the other 35 franchise restaurants in Asia 18 were franchised to relatives of

Mr. Ji or Mr. Wang.111

73. Moreover, the decisions made were objectively justifiable. In US jurisdiction

where the obligation of good faith and fair dealing is deeply rooted,112 American

courts favour an approach whereby there will be no breach of the obligation if the

franchisor has made a legitimate business decision or a decision that conforms

with good business practice even if the franchisee may suffer some detriment.113

Defence based on this type of approach can also be found in Australia.114 It is

submitted that this approach should similarly be adopted here.

74. The Restaurant is a Chinese restaurant serving Chinese food, so exclusion of

every single Indonesian dish conformed to its business practice. Substitution of

lamb for pork would destroy the original taste of the dishes and affect customers’

appraisal to the Restaurant. The decisions made by CLAIMANT were all for the

purpose of maintaining the uniformity of the entire franchise system115 and

preserving the value of the “Great Wall Noodle Shop” trademark and thus the

                                                                                                               109 Moot Problem, 4 110 1st Response, 5, Item E7 111 1st Response, 4, Item D1 112 Dubroff 113 Burger King v Agad, 1222 114 Overlook v Foxtel 115 Moot Problem, 4

50    

profits of the 35 franchisees other than the two run by RESPONDENT. It was

completely legitimate for a franchisor to counter the risk of “free-riding” by a

franchisee.116

75. Accordingly RESPONDENT breached Article III(A).

B. ALLOWING THE FEMALE MUSLIM EMPLOYEES TO WEAR HIJAB

BREACHED ARTICLE IV 117 UNDER SINGAPOREAN AND

INDONESIAN LAW

76. The dominant purpose of CLAIMANT was to promote uniformity of all its

restaurants and hence banning the wearing of hijab should be deemed to be within

the ambit of the discretion of CLAIMANT to approve uniforms under Article IV.

77. In case where it was found that the warranty of good faith and fair dealing applies

in full, for the reason set out in paragraph 72, the decision was bona fide.

Forbidding female employees to wear hijab with Chinese-style uniforms was also

perfectly justifiable because the uniform policy of the Restaurant does not permit

adornment which detracts from the uniform appearance of employees.118

78. Accordingly RESPONDENT breached Article IV.

79. In respect of any allegations that the decision procured RESPONDENT to violate

the law or Constitution of Indonesia and hence the presumption of Article X(2) is                                                                                                                116 Hadfield, 949-950 117 Moot Problem, 21 118 Article II(G)(ii), Moot Problem, 13

51    

rebuttable and the decision was wholly unreasonable, it is submitted that

prohibiting hijab at work would not itself be a breach of the law or the

Constitution of Indonesia and such allegations cannot stand.

C. PROHIBITING HIJAB AT WORK DOES NOT VIOLATE THE LAW OR

CONSTITUTION OF INDONESIA.

80. Article 28(E) of the Constitution of Indonesia and Article 22(2) of the Indonesian

Human Right law guarantee the freedom to practise religion, but the religious

right under these provisions is not engaged at all in the present dispute.

81. It has been suggested in the UK and European human right jurisprudence that

what constitutes interference with the right of manifestation of religious belief

depends on all the circumstances of the case, including the extent to which in the

circumstances an individual can reasonably expect to be at liberty to manifest his

beliefs in practice.119 In the House of Lord’s decision of Denbigh High School

concerning the right of wearing hijab at school, it was said that the law does not

require that one should be allowed to manifest one's religion at any time and place

of one's own choosing120. In a number of Strasbourg decisions where an employee

found their duties inconsistent with their beliefs, it was held that the employee was

not prevented from manifesting religion as he was free to relinquish his post.121

82. The donning of hijab is seen as choice by Muslims in Indonesia.122 In choosing to

                                                                                                               119 Williamson, 262 120 Denbigh High School, §50 121 Kontinnen ; Ahmad; Stedman 122 Brenner, 673

52    

work in the Chinese Restaurant serving Chinese food, it shall be within the

reasonable expectation of the female employees at the time of being hired that

there would be strict standards and specifications as to uniforms and they

submitted to those standards on their free will. Moreover, the female employees

were free to leave their employment find other ways to manifest their beliefs. In

fact, some of the female employees at the Medan Restaurant quitted job before the

closure of restaurant because they preferred a red hijab rather than a white one.123

D. IF EVERY INDIVIDUAL BREACH WAS ESTABLISHED, CLAIMANT

WAS ENTITLED TO TERMINATE THE AGREEMENT UNDER

SINGAPOREAN LAW

83. If the literal meaning of Article XIII(B) was upheld, CLAIMANT would have the

discretion to deem Article III(A) and IV as substantial terms as long as it intended

the terms as essential in maintaining uniformity which can benefit the Restaurant

system. Such intention was solidly depicted in the Notice of Deficiency.124 The

only question is whether the magnitude of each breach was substantial.

84. If the literal meaning of Article XIII(B) was not upheld, then CLAIMANT would

at least be entitled to terminate if each individual breach or the accumulative

effect of all the breaches would substantially deprive CLAIMANT of the whole

benefit which it was intended from the Agreement.125

85. It is submitted the test for both cases can be satisfied. Adequacy of damages is one                                                                                                                123 1st Response, 6, Item F3 124 Moot Problem, 3-4 125 Hong Kong Fir Shipping

53    

of factors of assessing whether the breach is substantial126. The Restaurant is a

Chinese restaurant intended for selling only Chinese cuisine.127 Inclusion of

Indonesian dishes was wholly inconsistent with the object of the business.

Allowing female employees to wear hijab was also wholly inconsistent with the

designated red Chinese-style uniform.128 It is submitted these breaches, viewed

individually or cumulatively, were capable of causing irreparable damages to the

trademark value and goodwill of the entire franchise system which cannot be

easily quantified and adequately compensated by damages.

86. The termination of franchise is more justified where there was a persistent course

of misconduct.129 The unauthorised conduct presumably began right after the

opening of the Restaurants. Although the Notice of Deficiency clearly required

RESPONDENT to cure all defects “immediately”, the deficiency persisted for

half months until the Agreement came to an end. RESPONDENT completely

disregarded his duty under Recitals(4)130 to maintain the quality of the entire

franchise system .as a whole. Those steps taken by RESPONDENT after receiving

the Notice of Deficiency were not remedial to the violations. They merely show

that RESPONDENT never respected the obligations of strict adherence he had

undertaken in the Agreement.

87. As such, the main benefit intended from the Agreement by CLAIMANT, namely

the profitability of the entire franchise system as a whole, was substantially

deprived of by RESPONDENT.                                                                                                                126 Treitel, 771; Vigers v Cook 127 Appendix 1, Moot Problem, 34-36 128 Moot Problem, 13 129 Automasters Australia, § 150 130 Moot Problem, 8-9

54    

E. IF EVERY INDIVIDUAL BREACH WAS ESTABLISHED, CLAIMANT

WAS ENTITLED TO TERMINATE THE AGREEMENT UNDER

INDONESIAN LAW

88. Pursuant to Article XIII(B), substantial violations of terms CLAIMANT deems

substantial would justify termination by CLAIMANT. CLAIMANT was entitled

to deem Article III(A) and IV as substantial terms for the reasons set out in

paragraph 83-87.

89. Alternatively if good faith applies in full, the exercise of such discretion was

“legitimate business judgment” since these Articles are part of the “uniformity”

scheme which is crucial to the franchise business.

90. Neither provisions in the ICC nor other laws o in Indonesia prescribe under what

circumstances non-compliance of an obligation or obligations constitutes

substantial breach. It is safe to adopt the reasoning in paragraph 85-87 in showing

that the breaches were substantial violation of Article III(A) and Article IV.

VII. ON THE ASSUMPTION THAT CLAIMANT WAS ENTITLED TO

TERMINATE, THE NOTICE OF TERMINATION WAS A PROPER

AND TIMELY NOTICE AND HENCE THE TERMINATION WAS

VALID

A. THE NOTICE OF TERMINATION WAS TIMELY AND PROPER UNDER

55    

SINGAPOREAN LAW

(i) Propriety

91. The validity of the Notice of Termination would not be defeated by not putting

any reasons of termination in it as long as CLAIMANT was legally entitled to

terminate. 131 In any event, RESPONDENT actually knew the reasons of

termination as he shall have noticed the last paragraph of the notice of

deficiency.132

(ii) Timeliness

92. First, CLAIMANT has no obligation under Article VIII133 of the Agreemen,t

which starts with the conditional phrase “in the event”, to give a Notice of

Deficiency before exercising its right to terminate. Moreover, CLAIMANT had no

obligation to give a second Notice of Deficiency on the same set of breaches given

that it expressely reserved its right to terminate if violations persisted in the first

Notice of Deficiency.

93. Secondly, the Notice of Termination was a timely one. As regards the express

terms, Article XIII(B) of the Agreement imposes no obligation on CLAIMANT to

give any notice before it terminates.

94. Implied term does not assist RESPONDENT’s case either. A term that requires                                                                                                                131 The Mihalis Angelos 132 Moot Problem, 4 133 Moot Problem, 26

56    

CLAIMANT to give timely notice before termination cannot be implied in fact in

light of a contradicting provision indicating the lack of intentions of parties to

have a term as such.134 CLAIMANT and RESPONDENT explicitly agreed on a

termination mechanism, namely Article XIII, which does not prescribe a

requirement of notice period. The proper inference to be drawn is that that they

intended the innocent party having no obligation to offer a notice period prior to

termination.

95. Nor does Article XIV135 help in finding the requisite intentions of the parties for

a term to be implied in fact. Article XIV sets down the agreed mechanism of

winding up the matters which arise out of this franchise relationship when the

relationship comes to an end, whether by termination on expiration of the term

or by termination on exercise of parties’ contractual right. If these obligations

are not particularly onerous for RESPONDENT, it cannot be said that an

additional notice period pre-termination is necessary for winding up the business

and has any “business efficacy”, the practical test for determining intentions of

the parties. 136 Article XIV mainly requires RESPONDENT to close the

restaurant and remove all the signage “promptly”, which in this context must

mean “without unreasonable delay” if one applies the English approach of

construction to which considerations of reasonableness is generally relevant.137

This is not onerous.

96. As a matter of law, no authorities have ever suggested such a term is a “necessary

                                                                                                               134 Treitel, 203 135 Moot Problem, 31-32 136 Moorock 137 Chitty, 1-031

57    

incident” of a franchise agreement.138

97. Save for the above, CLAIMANT did give a fifteen days’ notice before it actually

terminated the Agreement. The Notice of Termination is somehow ambiguous as

to the effective date of termination. CLAIMANT’s position is that by directing

RESPONDENT to close the restaurant and remove the signage within fifteen

days,139 CLAIMANT intended the post-termination obligations came into the play

only after the said fifteen days. Sufficient time had therefore been given to

RESPONDENT to bring the Restaurant business into an end.

B. THE NOTICE OF TERMINATION WAS PROPER AND VALID AND

THE TERMINATION OF THE AGREEMENT WAS VALID IN THE

ABSENCE OF AN ORDER OF THE COURT OF INDONESIA UNDER

INDONESIAN LAW

98. Article 1266140 of the ICC provides that even where the contract specifically

provides for automatic termination, the actual dissolution must await an order of

the court.141

99. Be that as it may, it is submitted that the Notice of Termination was a proper one

in law and the termination remained effective. The arbitration agreement, i.e.

Article XII of the Agreement,142 provides that any controversy arising out of the

Agreement, the operation of the franchise or its termination shall be settled by                                                                                                                138 Malik, 45 139 Moot Problem, 5 140 ICC, 593-594 141 Surdago Gautama, 3-128 142 Moot Problem, 29

58    

arbitration. Article 11 of the Indonesian Arbitration Law prescribes that the

existence of a written arbitration agreement shall eliminate the right of the parties

to seek resolution of the dispute contained in the agreement through the District

Court of Indonesia. In these circumstances, the Indonesian court has no

jurisdiction to order the dissolution of the Agreement on application by any of the

parties. The validity of the termination cannot be defeated by such.

VIII. THE ARBITRATION CLAUSE, WITH RESPECT TO THE

STIPULATION OF REMEDIES AVAIALBLE, IS VALID

100. With regard to remedies available to the parties, RESPONDENT is precluded

from seeking specific performance by virtue of Article XII of the Agreement

under which RESPONDENT has waived such right. Having derived authority to

arbitrate from the arbitration agreement, the tribunal is bound by the express terms

of the contract. 143

101. If the clause relating to specific performance is nullified, it would merely be

severed from the contract, the remainder of which would remain valid and

enforceable. 144

A. THE CLAUSE EXCLUDING AVAILABILITY OF SPECIFIC

PERFORMANCE IS A VALID CONTRACTUAL TERM UNDER

SINGAPOREAN LAW

                                                                                                               143 Pro Futuro Orders, 99, 101 144 Treitel, 559

59    

(i) The clause is binding on the parties

102. The clause, which has been signed by both parties, binds RESPONDENT,

even if he was not aware of it, 145 or if the agreement was unreasonable. 146

Further, RESPONDENT had waived by election his right to examine the whole

agreement before signing it, 147 thereby placing CLAIMANT under an assumption

that he approved of the entire contract no matter what the terms are. 148

(ii) The Singaporean Unfair Contract Term Act is inapplicable on the circumstances

103. The Singaporean Unfair Contract Terms Act should not avail RESPONDENT.

Section 27(1) of the SUCTA provides that the provision regulating exemption

clauses is inapplicable if Singaporean law only governs by the choice of the

parties. In the absence of parties’ express or implied choice on substantive law,

Singapore is unlikely to be applicable for being connected to the contract only as

the country where it was signed. 149

B. THE EXEMPTION CLAUSE IS NOT CONTRARY TO GOOD FAITH OR

REASONABLENESS UNDER INDONESIAN LAW

104. CLAIMANT submits that express terms of the contract should be upheld in

view of parties’ freedom to contract under Article 1338 of the Indonesian Civil

Code.                                                                                                                145 L’Estrange v. F Graucob 146 Mckendrick, 187 147 Moot problem, 2 148 The Kanchenjunga, 398/399 149 Air Transworld v Bombardier

60    

105. If RESPONDENT seeks to challenge the validity of the term based on the

principle of good faith, which mandates the incorporation of fair terms, 150 it must

be shown that the exemption clause in the Agreement is unfair.

106. CLAIMANT, being the franchisor of more than 30 franchised restaurants in

Asia, 151 has the right and obligation to protect the interests of the business. In

restricting the availability of specific performance in favour of the franchisees,

CLAIMANT is merely acting in the best interests of the franchise by asserting

greater control over the management of the franchise. The term is therefore not

unfair. 152

107. Even if the clause is found invalid under Indonesian law, the remainder of

Article XII of the Agreement remains enforceable as the exemption clause

concerns a matter divisible in nature, 153 namely available remedies.

C. THE ARBITRATRAL TRIBUNAL CANNOT DEROGATE FROM THE

CLAUSE

108. The tribunal’s power with regard to remedies should be limited by the clause,

154 to avoid the possibility of setting aside the award under Article V(1)(c) of the

                                                                                                               150 Tumbuan, 27; Article 1337 of ICC 151 First Clarifications, 4, Item D1 152 Article 2(1) of the Usury Act 153 Article 1297 of ICC 154 Pro future orders, 101

61    

New York Convention by raising the defence of “extra petita”, which applies if

the arbitrator makes judgment without jurisdiction. 155

D. SPECIFIC PERFORMANCE IS AN INAPPROPRIATE REMEDY FOR

RESPONDENT EVEN IF THE CLAUSE IS INEFFECTIVE

109. The tribunal’s discretionary power to grant specific performance is governed

by the substantive law, 156 namely Singaporean law in the present case.

110. Specific performance is an exceptional equitable remedy under Singaporean

law, 157 and should only be granted when it is “just and equitable” to do so. 158

Loss of profits from operation of the restaurant of RESPONDENT , being

monetary in nature, can be quantified and damages should be adequate. 159

111. It would be unduly oppressive to compel CLAIMANT to perform the contract,

as the continual operation of RESPONDENT’s restaurant may harm the franchise

in the long run by damaging the uniformity of the franchise.

112. Further, mutual cooperation is required for the operation of the restaurant,

taking into account mechanisms on determining the menu, for example. 160 In

view of RESPONDENT’s unwillingness to cooperate with CLAIMANT on

                                                                                                               155 Lew, 26-92 156 Pro futuro powers, 105-114 157 Chappuis, 62 158 Lee v Tan, § 53 159 Treitel, § 21-018 160 Article III, Moot Problem, 15

62    

compliance with terms, 161 undue hardship would be caused to CLAIMANT if

specific performance is granted for RESPONDENT. 162

113. Even if Indonesian law applies as the substantive law, specific performance is

not available as performance is no longer possible. 163 A new franchise agreement

has been entered into with another party, 164 which disallows the franchisors from

locating another restaurant under the franchise in Jakarta and Medan. 165

114. It is therefore submitted that specific performance should not be granted to

RESPONDENT, even if the tribunal does not consider itself bound by the

exemption clause.

CONCLUSION AND PRAYER FOR RELIEF

WHEREFORE, CLAIMANT, Great Wall Noodle Shop LLC, prays this Tribunal to

adjudge and declare that:                                                                                                                161 Moot Problem, 3 162 Co-operative Insurance v Argyll 163 Sudargo Gautama, 3-122 164 First Clarifications, 5, Item E2 WRONG REFERENCE? 165 Article II(1)(B) of the Agreement

63    

(a) The tribunal has jurisdiction over the present dispute.

(b) Singaporean law governs the substantive issues of the dispute.

(c) The Agreement is valid under Singaporean and Indonesian law.

(d) The “inherent warranty and good faith and fair dealing” does not apply under

Singaporean law and is restricted by Article X(2) under Indonesian law.

(e) A substantial violation of terms which CLAIMANT deems substantial would

entitle CLAIMANT to terminate under Singaporean and Indonesian law.

(f) Article III(A) and Article IV were breached by RESPONDENT and CLAIMANT

was entitled to terminate the Agreement under Singaporean and Indonesian law.

(g) The Notice of Termination was proper and timely and the termination was valid

and effective under Singaporean and Indonesian law.

(h) Article XII is valid and enforceable under Singaporean and Indonesian law.