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Cite as Farnsworth, in Bianca-Bonell Commentary on the International Sales Law, Giuffrè: Milan (1987) 175-184. Reproduced with permission of Dott. A Giuffrè Editore, S.p.A.

Article 19

E. Allan Farnsworth

1. History of the provision
2. Meaning and purpose of the provision
3. Problems concerning the provision

ARTICLE 19

(1) A reply to an offer which purports to be an acceptance but contains additions, limitations or other modifications is a rejection of the offer and constitutes a counter-offer.

(2) However, a reply to an offer which purports to be an acceptance but contains additional or different terms which do not materially alter the terms of the offer constitutes an acceptance, unless the offeror, without undue delay, objects orally to the discrepancy or dispatches a notice to that effect. If he does not so object, the terms of the contract are the terms of the offer with the modifications contained in the acceptance.

(3) Additional or different terms relating, among other things, to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party's liability to the other or the settlement of disputes are considered to alter the terms of the offer materially.

1. History of the provision.

     1.1. - This article deals with the effect of a purported acceptance that in some way modifies the offer. Paragraph (1) states the traditional rule that such a purported acceptance is both a rejection of the original offer and a counter-offer. Paragraph (2) makes an exception to the traditional rule for the case in which the modification does «not materially alter the terms of the offer». Paragraph (3) gives a partial list of matters as to which a modification is «considered to alter the terms of the offer materially».

     1.2. - This article proved to be one of the more controversial of the Convention. It became the subject of a tug-of-war between traditionalists, who preferred simply to state only the rule in paragraph (1), and reformers, who sought to depart from that [page 175] rule. The history of the provision is best viewed in this perspective, beginning with its predecessor Article 7 of ULFC (see FARNSWORTH, Formation, 322-323).

     1.3. - Paragraph (1) is derived from Article 7(1) of ULFC, which provided:

An acceptance containing additions, limitations or other modifications shall be a rejection of the offer and shall constitute a counter-offer.

This paragraph engendered little controversy. The Working Group decided to proceed on the basis of a Secretariat proposal that read:

A reply to an offer containing additions, limitations or other modifications is a rejection of the offer and constitutes a counter-offer (Yearbook, VIII (1977) 82).

It was later decided to insert after the fifth word («offer») the words «which purports to be an acceptance». This was done «to ensure that a reply which merely made inquiries or suggested the possibility of additional or different terms did not constitute a counter-offer» (see Yearbook, IX (1978), 42). No further changes were made in paragraph (1).

     1.4. - The history of paragraph (2) is more tumultuous. It goes back to Article 7(2) of ULFC, which was inspired by a provision in Scandinavian legislation (see HONNOLD, Uniform Law, 190-192; SCHMIDT, The International Contract Law in the Context of Some of Its Sources, in American Journal of Comparative Law 1965 (14), 23-25). Article 7(2) of ULFC provided:

However, a reply to an offer which purports to be an acceptance but which contains additional or different terms which do not materially alter the terms of the offer shall constitute an acceptance unless the offeror promptly objects to the discrepancy; if he does not so object, the terms of the contract shall be the terms of the offer with the modifications contained in the acceptance.

It should be noted that, with minor drafting changes, this provision of ULFC is the same as Article 19(2) of the. Convention.

     1.5. - A more significant change in Article 19 came when the traditionalists turned to the attack and succeeded in having a new paragraph (3) added. Paragraph (3) was drafted by the Working [page 176] Group in order to effect a compromise between the traditionalists, who thought that paragraph (2) «should be limited to mere differences in wording, grammatical changes, typographical errors or insignificant matters, such as the specifications of details which are implicit in the offer», and the reformers who thought that paragraph (2) «should have a broader scope of application than to mere matters of wording and the like, since these matters would, even under the test in ... paragraph (1), probably not convert a purported acceptance into a counter-offer» (see Yearbook, IX (1978), 4 3). The Commission therefore approved a paragraph (3) that read:

Additional or different terms relating, inter alia, to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party's liability to the other, or the settlement of disputes are considered to alter the terms of the offer materially, unless the offeree by virtue of the offer or the particular circumstances of the case has reason to believe they are acceptable to the offeror (Yearbook, IX (1978), 43).

     1.6. - Paragraphs (2) and (3) were extensively debated at the Vienna Conference. The reformers defeated an attempt by the traditionalists to delete both paragraphs. However, the traditionalists were successful in having the final clause of paragraph (3) deleted («unless the offeree by virtue of the offer or the particular circumstances of the case has reason to believe they are acceptable to the offeror») (see Official Records, II, 284-289; see also BONELL, La nouvelle Convention des Nations Unies, 20-21).

     1.7. - One other dispute between the traditionalists and the reformers deserves mention. The Secretariat's proposal to the Working Group contained a paragraph under which a rule analogous to that of paragraph (2) would be applied to confirmations: if, after the conclusion of a contract of sale, one party sent a confirmation modifying the terms of the contract, any terms in the confirmation that did not materially alter the contract would automatically become part of the contract unless objected to by the recipient of the confirmation. Although there was some support for this among the reformers, the traditionalists opposed it on the same grounds as they opposed paragraph (2). It was placed in square brackets at the Working Group's eighth session (see Yearbook, VIII (1977), 86) and deleted at its ninth session (see Yearbook, IX (1978), 78). [page 177]

2. Meaning and purpose of the provision.

     2.1. - Article 19(1) reflects traditional contract doctrine in all legal systems. In order for the offeree's expression of intention to constitute an acceptance, it must assent to the terms proposed by the offeror in his offer with no variation. An attempt to add to or change the terms of the offer turns the offeree's response from an acceptance the offer into a rejection of the offer and a counter-offer. The offeree's response has this effect, it should be noted, only if it purports to be an acceptance. A mere inquiry as to whether the offeror would be willing to change the terms of the offer is not necessarily a rejection of the offer. This traditional rule is sometimes called the «mirror image» rule because it requires that an acceptance be the mirror image of the offer (see CISG, Formation of Contracts, 257, 292; DATE-BAH, The United Nations Convention, 58-59).

     2.2. - Courts have, however, devised techniques to mitigate the harshness of the mirror image rule and these techniques are available to a court in applying Article 19(1). One technique is to interpret the offeree's language relating to the variation as a «mere suggestion», which the offeror might accept or reject. The result is to find an acceptance on the offeror's terms coupled with a further offer by the original offeree to modify that contract. Another technique is to read the offer as already containing by implication or by usage the apparent variation made by the offeree. The result is to find an acceptance of a contract on the offeree's terms, which are also regarded as those of the offeror. Furthermore, it is questionable whether the rule should apply in the case of a variation, such as a price concession, that is solely to the offeror's advantage.

     2.3. - Even as mitigated by these techniques, however, the impact of the mirror image rule on negotations for the sale of goods has caused concern. In what has come to be known as the «battle of the forms», the buyer typically sends his printed «purchase order» in response to the seller's catalog or price list. The seller responds by sending his printed «acknowledgement». The back of each form is commonly covered with printed terms. Since each party's form is designed to protect his own interests, [page 178] it is unlikely that these terms will be the same -- the buyer's form may contain express warranties while the seller's may include a disclaimer of warranties. If the essential terms such as price and quantity agree, the parties are unlikely to pay any attention to the discrepancies between terms. And in practice most of these transactions are carried out without incident, even though there is no contract (see FELTHAM, The United Nations Convention, 346-352).

Disputses arise in two types of situations. First, before there has been any performance, there is a change of circumstances, such as a rise or fall in market price, and one of the parties seizes upon the discrepancies in the forms as an excuse for not performing. Second, after shipment of the goods by the seller and their receipt by the buyer, a dispute arises over some aspect of performance, often the quality of the goods, and it becomes necessary to determine the contract terms that govern the dispute. The Convention deals with both kinds of disputes in a remarkably traditional manner.

     2.5. - In the first type of situation, before there has been any performance, paragraph (1) allows either party to seize on a discrepancy in the forms as an excuse for not performing on the ground that no contract was concluded. This conclusion is subject to the mitigating technique discussed earlier and to the exception in paragraph (2).

In the second type of situation, where there has been performance on both sides, it is clear that a contract has been concluded and the dispute is over the terms of that contract. In such a dispute, the traditional approach of paragraph (1) favours the party who fires the «last shot» in the battle of the forms. Since each subsequent form is a counter-offer, rejecting any prior offer of the other party, the resulting contract will be on the terms of the party who sends the last counter-offer, which is then accepted by the other party's performance. In practice, it is typically the seller who fires the last shot, an acknowledgement form, in response to the buyer's purchase order. Paragraph (1) tends to favour the seller, then, in this situation (but see VAN DER VELDEN, Battle of the Forms, 233).

     2.6. - Paragraph (2) makes only a relatively minor exception to paragraph (1). This exception applies only if the acceptance [page 179] does not materially alter the terms of the offer. In most cases, if the acceptance alters the offer, the alteration will be material, the exception of paragrah (2) will not apply, and the traditional rule of paragraph (1) will give the results indicated above (see § 2.5. supra; LANSING-HAUSERMAN, A Comparison, 63, 75; NOUSSIAS, Die Zugangsbedürftigkeit, 119-122; SCHLECHTRIEM, UN-Kaufrecht, 42-43; Uniform Sales Law, 55-56; WINSHIP, Formation, 1, 14; ZIEGEL, The Vienna Sales Convention, 42).

If the acceptance does not materially alter the terms of the offer, then the exception of paragraph (2) applies. Unless the offeror, without undue delay, objects orally to the discrepancy or dispatches a notice to that effect, the acceptance is effective to create a contract. The terms of the contract are those of the offer with the modifications contained in the acceptance. If the offeror objects, there is no contract.

     2.7. - The exception of paragraph (2) will rarely be applicable because of paragraph (3). This paragraph contains an illustrative, non-exclusive, list of modifications that are «considered to alter the terms of the offer materially». Included are modifications relating to «the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party's liability to the other or the settlement of disputes». Therefore all of the following clauses commonly found in printed forms would materially alter the terms of the offer: a disclaimer of warranties (relating to «quality ... of the goods»), a limitation of remedies clause (relating to «extent of one party's liability to the other»), and an arbitration clause (relating to «the settlement of disputes»). It is more difficult to think of clauses that would not come within paragraph (3) but provisions dealing with such matters as the packaging of the goods or the particular carrier or vessel on which shipment is to be made are examples.

     2.8. - A few illustrations will help to explain the operation of Article 19. In these illustrations, it is supposed that Buyer initiates the correspondence by sending a purchase order in response to Seller's catalog or price list.

     Illustration 1. Buyer sent Seller a Purchase Order form offering to buy a stated quantity of textiles. In reply, Seller sent [page 180] Buyer an Acknowledgement of Order form that «accepted» Buyer's offer, repeated the terms of that offer, and added an arbitration clause not contained in that offer. Buyer made no reply to Seller's form. Because of a drop in price, Buyer refused to take the textiles and Seller claims damages for breach of contract. Buyer is not liable to Seller. Under paragraph (3), since the arbitration clause relates to «the settlement of disputes», that clause is «considered to alter the terms of the offer materially». Therefore paragraph (2) does not apply and, under paragraph (1), though the Seller's reply purported to be an acceptance, it was a rejection of Buyer's offer and no contract resulted.

     Illustration 2. The facts being otherwise the same as in Illustration 1, Seller proves that in the textile trade is a widely known and regularly observed usage to arbitrate disputes in the manner stated in the arbitration clause and that Buyer knew or at least ought to have known of this usage. Buyer is liable to Seller for breach of contract, but the dispute must go to arbitration pursuant to the arbitration clause. Under Article 9, Buyer's offer was subject to and incorporated the usage. Therefore Seller's Acknowledgement of Order form did not, in effect, contain an addition to or modification of Buyer's offer and was not a rejection under paragraph (1) (see § 2.2., supra).

     Illustration 3. The facts being otherwise the same as in Illustration 1, Seller shipped the cotton and Buyer accepted it and paid the price and Buyer then claimed that the cotton was defective but refused to arbitrate the dispute. Buyer is bound by a contract on the terms of Seller's Acknowledgement of Order form and must, therefore, arbitrate the dispute. Although under paragraph (1) Seller's Acknowledgement of Order form was a rejection of Buyer's offer and did not result in a contract (see Illustration 1), it was a counter-offer. When Buyer accepted the cotton, he accepted by his conduct Seller's counter-offer under Article 18(1) and is therefore bound by its terms, including the arbitration clause.

     Illustration 4. Buyer sent Seller a Purchase Order form offering to buy a stated quantity of textiles c.i.f. Buyer's city, «shipment to be on S.S. Meteor» on a stated date. In reply, Seller sent Buyer an Acknowledgement of Order form that «accepted» [page 181] Buyer's offer, repeated the terms of that offer, but said «shipment to be on S.S. Shooting Star» on the date specified by Buyer. The two ships are sisterships of the same line, sailed on the same schedule, and Seller made the change after learning that there was no more space on the S.S. Meteor. Buyer made no reply to Seller's form. Because of a drop in prices, Buyer refused to take the textiles when they arrived on the S.S. Shooting Star and Seller claims damages for breach of contract. Buyer is liable to Seller. The variant term on Seller's form is not one of those listed in paragraph (3), and it is probable that a tribunal would not, consider that it materially altered the terms of Buyer's offer. The exception in paragraph (2) therefore applies because Buyer made no objection to the discrepancy, and Seller's form constituted an acceptance. Under paragraph (2), there is a contract on the terms of Buyer's form with the modificatipns contained in Seller's form, that is for shipment on the S.S. Shooting Star.

     Illustration 5. The facts being otherwise as in illustration 4, on receipt of Seller's form, Buyer without delay objected to shipment on the S.S. Shooting Star. Buyer is not liable for breach of contract. The exception in paragraph (2) does not apply because, even though Seller's form may not have materially altered the terms of Buyer's offer, Buyer without delay objected to the discrepancy. The general rule in paragraph (1) thus applies, and Seller's form was a rejection of Buyer's offer.

3. Problems concerning the provision.

     3.1. - The principal problem concerning the provision is that of distinguishing between terms «which do not materially alter the terms of the offer» and terms which do. The importance of the distinction is that the exception in paragraph (2) can only apply to the former.

Although paragraph (3) will solve this problem in many instances, it is not an exclusive listing of clauses that materially alter the terms of the offer. One common type of clause that may materially alter the terms of the offer even though it seems not to be specifically mentioned in paragraph (3) is a merger clause, which provides that prior negotiations shall not supplement or [page 182] modify the written provisions of the contract (see Article 8, .§ 3.3., supra). Another is a no-oral-modification clause, which provides that the contract can not be modified by a subsequent oral agreement (see Article 29(2)).

In determining whether such a clause materially alters the terms of the offer, is it significant that the discrepancy is unrelated to the actual dispute between the parties? For example, the discrepancy might consist of the addition of a no-oral-modification clause, while the dispute might be one over the quality of the goods in a transaction that does not involve an oral modification at all. The traditional rule, which insists that the acceptance exactly match the offer, does not take the actual dispute into account. Article 19 adheres so closely to the traditional rule, that the better reading is one that focuses solely on the discrepancy, without regard to the nature of the actual dispute.

Questions are also bound to arise concerning the scope of some of the language in paragraph (3). For example, while it is clear that a limitation of remedies clause is one relating to the «extent of one party's liability to the other», it is arguable that a force majeure clause relates not to the extent of liability but to the existence of liability in the first place. And while it is clear that an arbitration clause relates to «the settlement of disputes», it is arguable that a choice-of-law clause relates not to the settlement of disputes but to the rules under which they are to be settled. It seems preferable to give a narrow reading to the categories specifically listed in paragraph (3). This would give flexibility in the application of Article 19 and enable a tribunal to reach a just result in the particular case. It would also help to assure a significant field of application to paragraph (2) and give a reasonable effect to the compromise between traditionalists and reformers that lies behind Article 19.

Any uncertainty with respect to what constitutes a material alteration is not likely to cause concern to the offeror. If the offeror, Seller in the examples given, is unaware of the discrepancy between the forms, he will be unconcerned with any resulting uncertainty. If he is aware of the discrepancy but unsure of whether there is a discrepancy, he has it within his power to create a contract or not as he chooses. If he does not want to be bound by a contract, he can object to the discrepancy. If the variation is not material, this will prevent the creation of a contract (see [page 183] paragraph (2)); if the variation is material this is an unnecessary but harmless step (see paragraph (1)). If, on the other hand, he wants to be bound by a contract, he can accept the seller's terms. If the variation is material, this will amount to an acceptance of Seller's counter-offer (paragraph (1)); if the variation is not material, this is an unnecessary but harmless step (paragraph (2)). Thus the offeror can, by taking the initiative, always resolve any uncertainty as to the materiality of the alteration (see generally BARBIC, Uniform Law on the International Sale of Goods, 16; EÖRSI, Problems, 311, 322-323; FARNSWORTH, Formation, 3.044; KAHN, La Convention de Vienne, 951, 966; KELSO, Battle of the Forms, 529, 542-555).

     3.2. - This power of the offeror might conceivably give him a power to speculate on a fluctuating market. In a case that comes under paragraph (2), the offeror can, by choosing to remain silent or object, determine whether he will be bound by a contract or not during a period when the offeree cannot withdraw. This risk of speculation is not great, however, because paragraph (2) will often be applicable and because even when it applies the period of possible speculation is limited by the requirement that the offeror must act «without undue delay». [page 184]


Pace Law School Institute of International Commercial Law - Last updated January 13, 2005
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