Cite as Eörsi, in Bianca-Bonell Commentary on the International Sales Law, Giuffrè: Milan (1987) 401-409. Reproduced with permission of Dott. A Giuffrè Editore, S.p.A.
1. History of the provision
2. Meaning and purpose of the provision
3. Problems concerning the provision
Where a contract has been validly concluded but does not expressly or implicitly fix or make provision for determining the price, the parties are considered, in the absence of any indication to the contrary, to have impliedly made reference to the price generally charged at the time of the conclusion of the contract for such goods sold under comparable circumstances in the trade concerned.
1. History of the provision
1.1. - The history of this provision dates back to Article 67 of the 1956 Draft (see vol. 2, Doc. V. Prep./l/, 18). This antecedent required the buyer to pay the usual price charged by the seller at the time of the conclusion of the contract, or instead a reasonable price based on the current market-price. The parties could not plead the provisions of a domestic law which rendered invalid a contract not stipulating a price. This solution was adopted despite strong support in UNCITRAL for the position that there should be no contract without the stipulation of a price. Article 67 of the 1963 Draft (see Doc. V. Prep./4/ Vol. 2, 223) followed the 1956 Draft without substantial changes.
1.2. - Within UNCITRAL the article formed the object of a lengthy discussion. The main question was whether the article should be included in the Convention. There were two major arguments against inclusion: (a) since the price belongs to the essentialia negotii of a contract, there can be no contract if the price is not determined or determinable; and (b) the article involves the problem of validity which is expressly outside the scope of the Convention. Its deletion was advocated by some Socialist delegations from devoloping countries; other delegations from governments and international organizations were in favour of retaining the article. [page 401]
The key words appearing in all drafts were: «generally charged». The discussion centred on two opposing views: (a) «charged by the seller» or -- exceptionally «charged in the trade concerned», and (b) «charged at the time of the conclusion of the contract» or -- exceptionally -- «at the time of delivery».
1.2.1. - At the second session of the Working Group a delegation expressed serious doubts concerning the draft article and, at the same time, indicated that it would be intolerable if there would be an, effective contract where the price was neither fixed nor determinable (Yearbook, I (1968-1970), 173). Two Socialist delegations felt that price constituted an essential element of a contract of sale and therefore a contract without a price was admissible only where the price could be inferred from a previous contract between the same parties (Yearbook, I (1968-1970), 173-174).
At the Working Group's fourth session the «essential element» argument was repeated and supported by a representative from a devoloping country who proposed a text to the effect that no contract should be enforced if there were no determinable price. It was suggested that it was difficult to prove what price was «generally charged» and this proposition was also supported by the same delegation from a developing country. And, although supporting the retention of the article, two delegations observed that the case in which there was no price generally charged by the seller was left unresolved. One of them proposed that the price prevailing in the market should be relevant (Yearbook, IV (1973), 32-33). In the discussion of the progress report of the Working Group several representatives noted that the article might be construed as determining validity and that the Convention was not concerned with formation (as it was the case at that time). Others held that the article would apply only if the applicable law beyond ULIS recognized that the contract was validly concluded and that deletion of the article would result in lack of uniformity. There was a discussion of whether «unless the price is unreasonable» and a reference to the currency of the seller's country should be included (Yearbook, IV (1973),73-74).
It was also suggested that the price prevailing in the market should be given preference over the price generally charged by the seller; this was supported by one delegation only. The [page 402] Working Group adopted a new text which again enlarged the scope of the article and by and large survived at the later meetings of the Working Group. The major new elements were the inclusion of «expressly or impliedly (makes provision)» and of a sentence already present in the drafting history of ULIS which would take care of cases in which there is no price generally charged by the seller. In such cases «the price generally prevailing for such goods sold under comparable circumstances at that time» has to be paid.
Comments and proposals by delegations were discussed at the fifth session of the Working Group. A Socialist delegation repeated its objections to the article that it was difficult to know what price was being charged by the seller since it was not always possibile to find completely identical contracts. A delegation from a developing country which previously supported deletion of the article voiced all his doubts again but added to his former proposal the following words: «unless the parties thereto expressly or by implication otherwise agree». Another delegation from a developing country supported the text adopted by the Working Group (Yearbook, V (1974), 61-64).
At the sixth session several delegations recommended deletion on the ground that the article was concerned with validity. Others were of the opinion that the article could not make a contract if it were otherwise invalid (Yearbook, VI (1975), 57). The decisions of the Working Group survived (Yearbook, VI (1975), 66).
At the seventh session the text of the Working Group underwent some minor changes (Yearbook, VII (1976), 33) and a reservation expressed by one socialist delegation (Yearbook, VII (1976), 113). Of the comments subsequently received by governments and international organization only three were concerned with the article. A delegation from a developing country proposed that the basis for the price determination be clearly defined (Yearbook, VIII (1977), 127); a delegation from a Socialist government declared that the article was not acceptable, insisting that the price must be determined or determinable (Yearbook, VIII (1977), 131). A delegation from an international organization suggested that in commercial situations the price at the time of delivery was understood as definite (Yearbook, VIII, (1977), 141). [page 403]
1.2.2. - At its eleventh session the Commission decided to integrate the Formation Draft with the Sales Draft (Yearbook, IX (1978), 13) and adopted the UNCITRAL Draft Convention. The text of the article as adopted by the Working Group now included the word «validly» (concluded) (Yearbook, IX (1978), 18).
1.3. - At the Vienna Conference eight amendments were filed by ten representatives. Two delegations from Socialist countries proposed deletion, as did the first option from one Western delegation (Official Records, I, 120-121). Altogether fifty interventions were made, indicative of the depth of the controversy.
1.3.1. - At the twenty-fourth meeting of the First Commission thirty-three speakers were heard: deletion of the article was proposed by two representatives from Socialist countries, one delegation from a developing country and a Western delegation. Another Western delegation filed an amendment to this effect but this was withdrawn later (Official Records, I, 363-364). Deletion was opposed on the ground that absent such a provision, national law would apply. Several delegations were concerned with the relationship between Article 12 of the UNCITRAL Draft Convention (now Article 14) and Article 51 (now Article 55). It was thought that Article 51 contradicted Article 12(1) since the latter required that the price be determined or determinable; that in view of Article 12, Article 51 was unnecessary; that to retain the article would create confusion; and that the article would be helpful in the event that the price was not explicitly fixed. Several delegations felt that the article offered a procedure or provided a means or specified the criteria for determining the price or suggested a manner in which the contract should be formulated; it was taken into account that it was possible to exclude the application of Part II or III of the Convention.
1.3.2. - At the twenty-fifth meeting of the First Commitee a second effort to reconcile Articles 12 and 51 was envisaged: the first successful effort was made at the twenty-fourth meeting. Four delegations took part in the discussion.
1.3.3. - At the twenty-ninth meeting the First Commitee took note of the proposal of an ad hoc Working Group. Thirteen [page 404] delegations took the floor. The text proposed by the ad hoc Working Group (Official Records, I, 121) contained the final wording of the article adopted by the Vienna Conference with the only change that «are considered» was substituted for «shall be deemed». The discussion of the First Commitee centred mainly on the word «validly» and on the expression «in the absence of any indication to the contrary». Two delegations proposed the deletion of «implicitly» and one delegation preferred «generally charged by the seller» rather than «generally charged at the time of the conclusion of the contract».
The article was adopted at the eighth plenary meeting by forty votes to three with five abstentions (Official Records, II, 211).
2. Meaning and purpose of the provision
2.1. - It can be safely asserted that in the overwhelming majority of contracts the parties agree on the price or, at least, make provision for its determination. Still, there are cases where there is no indication as to the price. These might be, for instance, in emergency situations -- a steamer is left inoperative on the high sea because some spare part has broken down and a substitute is ordered by cable -- or where the buyer relied upon the price-list of the seller. Such instances have become more and more frequent due to the ever-increasing spread of standardized goods which have standardized prices. Modern means of communication also invite ordering without bargaining.
On the European continent an agreement on the prices was initially considered an essential element of the contract. Therefore a contract without an indication as to the price was void. As a result of what has been stated above, this is no longer the case with the exception of some Socialist law systems and a few other jurisdictions. Still, there is no complete uniformity in the remaining jurisdictions. If, for instance, the common law is compared with French law, the result is not the same. Under French law a contract is void where the indication as to the price is not definite; whereas in the common law in such cases the joker of the common law steps in: the buyer must pay a «reasonable» price (see STARCK, Droit civil. Obligation (Librairies Techniques), Paris, 1973, no 1399; MARMOL-MATRAY; L'importance et l'interpretation du contrat (dans ses relations avec l'arbitrage commercial international), [page 405] in Revue de Droit international et de Droit comparé, 1980, 176; DAVID, Les contrats en droit anglais, Paris (Librairie Generale de Droit de Jurisprudence), 1973, 249).
2.2. - It is a firm policy of the Convention that a contract may be validly concluded even if there is no indication whatsoever in respect of the price. Accordingly, Article 55 determines how the price should be calculated, in such cases. It comes into operation only if (a) the contract between the parties is valid and (b) it does not expressly or implicitly make provision for determining the price. If the contract does not fix the price but contains express or implicit indications as to the price, as for instance if it makes provision for determining the price, Article 14 applies.
2.2.1. - The first requirement is the existence of a validly concluded contract. The word «validly» refers only to factors other than the absence of an indication of the price (see SCHLECHTRIEM, UN-Kaufrecht, 72; Uniform Sales Law, 81 note 319). Since validity is outside the scope of the Convention (see Article 4), the law that would apply in the absence of the Convention should be consulted in order to decide on validity. Two aspects have to be considered. First, if the law of that State deems void contracts without any indication whatsoever as to the price, Article 55 does not apply. Second, if this is not the case, then it must be ascertained that no other ground for invalidity exists under the applicable law.
2.2.2. - The second requirement is that there be no expressly or implicitly fixed or determinable price. As to the meaning of these expressions see the commentary on Article 14(1), supra, § 2.2.4.
At this point, however, a difficulty arises. Article 14(1) provides that an offer must be sufficiently definite and adds that an offer is sufficiently definite if it expressly or implicitly fixes or makes provision for determining the price. This seems to imply that there is no effective offer where the price was not fixed and no provision was made for its determination. A logical conclusion would be that Article 55 would never come into play. There can be no contract where the offer was not definite, in other words where it did not make any provision for determining the price. [page 406] Yet this argument could not be defended since Article 55 provides exactly for cases where the price is not determinable. Very similar reasoning led the Secretariat's Commentary to conclude that Article 55 «has effect only if one of the parties has his place of business in a Contracting State which has ratified or accepted the Convention as to Part III (Sale of Goods) but not as to Part II (Formation of the contract)» (Official Records; I, 45). However, another conclusion is possible. Article 14 is concerned with offers and Article 55 with contracts. Once a contract is concluded; the offer becomes irrelevant and the conclusion of the contract in itself proves that the offer was sufficiently definite, irrespective of whether a provision was made for determining the price. An approach which concentrates on the offer is no longer appropriate after the contract has been concluded. Others have already mentioned this contradiction (see SCHLECHTRIEM, UN-Kaufrecht, 37, 72; Uniform Sales Law, 51, 80; HERBER, U.N.-Übereinkommen, 604; HUBER, UNCITRAL-Entwurf, 439, 511): the conclusion of these authors is that Article 55 has precedence over Article 14(1). This is in accordance with the above reasoning.
2.3. - If Article 55 is applicable, the determination of the price follows. A rebuttable presumption or rather a legal fiction serves to determine the price. Even if the contract does not expressly or implicitly fix or make provision for determining the price, except where there was some indication to the contrary.
This implication of the price will generally be purely fictive, since a condition of the article's application is that no price was determined. The existence of this second implication need not be proved but it can be rebutted.
2.3.1. - The buyer must pay (a) the price generally charged (b) at the time of the conclusion of the contract (c) for such goods (d) sold under comparable circumstances (e) in the trade concerned.
«The price generally charged» does not mean the price generally charged by the party who happens to be the seller in a particular contract of sale. The phrase is but an introduction. The price will be determined by objective criteria such as time, circumstances and branch of trade concerned. [page 407]
The first element in the determination of the price is the time factor. It is the time of the conclusion of the contract (see Article 21). The price prevailing at the time of the delivery of the goods is irrelevant (Official Records, I, 45). Although the provision does not include the place of the conclusion of the contract as a criterion, it can safely be asserted that the market in which the contract was concluded has to be taken into consideration. In case of doubt or in the absence of a contrary indication, the prices on the world market take precedence over regional or domestic prices in the goods sold.
The second element hardly needs comment: the price of the same kind of goods has to be taken into consideration.
The next factor concerns the terms of the contracts for sale of the same goods. These must be comparable to (but not necessarily identical with) the terms of the actual sale, for instance, with respect to modalities of payment or delivery, place of delivery, credit conditions, instalments consequences of a breach of contract, parties' agreements to derogate from or vary the effect of any of the provisions of, the Convention or the interpretation of statements and other conduct of a party.
The last element restricts the relevant market to the trade concerned. For instance, usages within the particular trade have to be taken into consideration.
2.3.2. - These rules and considerations do not apply where there is an indication in the contract that a party or the parties have not even implicitly made reference to the price. Such indications may be threefold: (a) if a party to the contract refers to previous contracts concluded for the same goods between the parties, or to the preliminary negotiations between them and the price can be fixed on these grounds, Article 55 will not apply; (b) if a party stated that an implied reference to the price was not acceptable, the price cannot be fixed and, therefore, the contract will not become operative; (c) if the buyer has asked for and has received the price list of the seller, this will, in itself, certainly not indicate his intention to be bound in case of acceptance. Still, if the contract were concluded without any provision as to the price, the fact of having received the price-list under the circumstances serves as «an indication to the contrary», and the price might be calculated [page 408] according to the price-list of the seller and not on the grounds of Article 55.
3. Problems concerning the provision
3.1. - The first problem with the provision is its relationship to Article 14(1). This latter article requires that the offer fix the price or make provision for its determination. On the other hand, Article 55 applies only where the price was not fixed and no provision was made for determining the price. For the proposed solution to this apparent contradiction, see § 2.2.2., supra.
3.2. - A second difficulty lies in the fact that although the parties have not expressly or implicitly fixed or made provision for determining the price in their contract, nevertheless they are considered, in the absence of any indication to the contrary, to have implicitly made reference to the price. It might be asked how the parties could be considered as having implicitly referred to the price when a condition for the application of the article is that they have not made any explicit or implicit provision for the determination of the price. In substance, the provision is reasonable. It is fair to suppose that the offeror would have fixed the price by and large according to the criteria provided by the article (see STALEV, Vienskata Konvencija, 32-33).
3.3. - An indication to the contrary may under certain circumstances lead to a dead end. The parties may be left without a price despite their having concluded a valid contract for sale. [page 409]