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Reproduced with permission of 11 Vindobona Journal of International Commercial Law & Arbitration (1/2007) 113-129

Battle of Forms under the Convention on Contracts for the
International Sale of Goods (CISG): A Uniform Solution?

Andrea Fejös [a1]

  1. Introduction
  2. A brief overview of Article 19 CISG
  3. The first question: Is there a binding contract?
  4. The second question: What are the termsof the contract?
       4.1    Contract terms determined by the 'last shot' rule
       4.2    Contract terms determined by the 'knock-out' rule
       4.3    Alternative solutions to the 'last shot' and 'knock-
                out' rules in determining the terms of the contract
  5. The way to find uniformity in determining the terms of the contract
       5.1    Battle of the forms under the UNIDROIT Principles
       5.2    Battle of the forms under the PECL
  6. Conclusion

1. INTRODUCTION

An example of a typical battle of forms transaction is the following: The buyer sends a purchase order, an offer to which the seller responds, sending an order acknowledgment form that appears to be an acceptance, but contains variant terms among the standard clauses (e.g. a warranty disclaimer clause, while the buyer's form contained an express warranty clause). The question had not been touched upon during negotiations between the parties, but they reached an agreement on all other contractual elements. Not reading each other's forms, the parties perform their obligation under the contract which in their estimation was validly concluded. However, the buyer starts using the goods and realises that they are not in conformity with the contract and notifies the seller. The seller refuses to remedy the non-conformity, pointing to its warranty and disclaimer standard clause to claim the buyer accepted the clause by accepting the goods and paying their price on the basis of its contract. [page 113]

In most cases despite discrepancies in standard terms, contracts are performed voluntarily and disputes are rare. Nevertheless, when disputes arise, the following questions emerge: 'Under the circumstances, is there a contract?' and 'If there is, what are the terms of the contract?'[1] These are the two main questions that have to be solved in the battle of forms transactions.

The search for answers in international transactions when the United Nations Convention on Contracts for the International Sale of Goods (CISG) [2] applies is not an easy task. There is no consensus among scholars whether the issue of battle of forms falls under the CISG or rather the matter should be resolved by recourse to the applicable national law.[3] Usually Art. 19 CISG is applied, however, it deals with non-confirming acceptances in general and is not designed to give solutions when contracts are concluded using standard terms.[4]

This article commences with a brief introduction of Art. 19 CISG, and then searches for answers on the two main questions in battle of forms transactions, pointing out the inconsistent interpretations of the CISG by national courts. All available cases that involve the battle of forms will be examined to show similar factual situations leading to divergent results.[5] Though battle of forms litigation is [page 114] rare, the uncertainty that surrounds it cannot be ignored. All the more that as of 17 July 2006, 68 States adopted the CISG including all major trading states.[6] Today its Contracting States account for over three-quarters of all world trade.[7]

Even if the CISG does not address the problem, it is still better to apply the CISG than to apply non-unified national laws.[8] Therefore at present, the uniform application and interpretation of the CISG is supported, but the question remains how to achieve this uniformity in interpretation. In order to avoid uncertainty and achieve uniformity in international transactions this article will argue that the UNIDROIT Principles of International Commercial Contracts (UNIDROIT Principles) [9] or the Principles of European Contract Law (PECL) [10] should be used either as gap filling or as interpretative instruments to the CISG.

2. A BRIEF OVERVIEW OF ARTICLE 19 CISG

The CISG incorporates the 'mirror-image' rule as the principle rule for contract formation according to which contracts are concluded with an offer and acceptance that correspond in all aspects. If the acceptance contains additions, limitations or alterations the communication is a new offer or a counter-offer: Art. 19(1) CISG.

The 'mirror-image' rule relies on the traditional concept that an essential prerequisite for the formation of contracts is an agreement: a mutual manifestation of assent on all contractual elements.[11] In order to avoid absurd situations when a smallest divergence would amount to a new offer, Art. 19(2) CISG was added to soften the strict compliance between the offer and acceptance and allow contract formation on the terms of the offer with the modifications contained in the acceptance.

Therefore, a reply to an offer which purports to be an acceptance but contains additional or different terms to the offer is an acceptance if: (a) the offeree intended its communication to be an acceptance; (b) the terms contained therein do not materially alter the offer, and (c) the offeror did not object to the non-material [page 115] changes in the offeree's communication. What is especially disputed in the present formulation is whether the alteration is material or immaterial. To this effect, Art. 19(3) CISG contains a non-exhaustive list of alterations that should be considered essential.[12]

3. THE FIRST QUESTION: IS THERE A BINDING CONTRACT?

Following the 'mirror-image' rule as the governing rule in Art. 19(1) CISG for contract formation even minor changes invalidate the contract due to lack of mutual assent. Nevertheless, Art. 19(2) makes an exception from the strict rule and allows the formation of contracts where the acceptance contains only minor alterations. However, the prevailing scholarly opinion is that the non-exhaustive list in Art. 19(3) CISG embraces all terms that usually appear among the conflicting standard terms [13] and thereby turns almost all acceptances into counter-offers and upholds the 'mirror-image' rule as the main rule for contract formation.

This analysis of Art. 19 leads to the conclusion that the 'mirror-image' rule and contracts with standard terms cannot co-exist. However, in searching for an answer on the principle question, whether there is a contract despite discrepancies in the parties' standard terms, the reaction of the respective parties is also decisive. The answer will depend on the stage in which the objection to the discrepancy is raised. [page 116]

One of the possible scenarios is that before any performance, usually due to changed circumstances, one of the parties invokes the discrepancies between the forms as an excuse for non-performance, and claims that no contract was therefore concluded. Following the 'mirror-image' rule in Art. 19(1) and taking into consideration the general policy of the CISG -- which is to restrain from imposing contractual obligations on the parties while they continue to disagree over terms proposed in the course of their negotiations [14] -- besides minor, mostly grammatical changes, courts will decide there is no binding contract concluded. A deviating acceptance will not be an acceptance but a counter-offer.

A counter-offer is a new offer that requires an explicit assent by the initial offeror; in the absence of such assent there is no contract. If there is no performance, there is no additional manifestation of intent, but also no harm done and even after declaring the contract as invalid, parties stay free to proceed with negotiations and eventually reach an acceptable agreement. But the issue is what happens if the parties had performed their obligations under the contract?

If a dispute arises after the parties have actually performed the core elements of the sales contract (delivery of goods, payment of price), they have at a minimum manifested a common intent on the creation of some form of binding mutual obligations.[15] Therefore, if after performance the parties disagree on certain aspects of the contract, it will generally be held that there is a binding contract.[16]

The majority adopt the following line of reasoning: the communication which first contained standard terms was the offer (Art. 14) the second communication constitutes a counter-offer (Art. 19(1)) that had been accepted by the initial offeror by performing some of the contractual obligations (Art. 18).[17] Some court judgments do not go into detailed explanation to acknowledge whether there is a [page 117] valid contract [18] or just proceed in search for contract terms assuming there is a valid contract.[19]

Nevertheless there are other ways of reasoning as well.[20] Wishing to uphold the validity of the contract after the parties performance, the German Lower Court Kehl noted:

However, based on the realization of the contract, both parties were in agreement about the essentialia negotii, and it must be assumed that they waived the validity of their conflicting Terms of Business or that they derogated from the application of Article 19, taking advantage of their autonomy pursuant to Article 6.[21]

Therefore, even if the 'mirror-image' rule requires a perfect match between the offer and acceptance, in practice courts will hold there is a valid contract despite discrepancies in standard terms provided the parties performed and thereby additionally manifested their intent towards a binding contract.

4. THE SECOND QUESTION: WHAT ARE THE TERMS OF THE CONTRACT?

Once it has been established there is a valid contract the next, more complex step follows, namely to determine the terms of the contract. Here the 'last-shot' and the 'knock-out' rules are of equal importance as the 'mirror-image' rule in determining the existence of a valid contract.

According to the 'last-shot' rule, the terms of the contract are determined by the terms that are in the last submitted form. All terms in the last form are potential candidates for contract clauses while terms in the first form have no chance to [page 118] become part of the contract. Clauses in the first form stay completely neglected -- except those terms not modified by the last form.

In contrast, the 'knock-out' rule gives preference to neither form, attempting to establish a balance between the parties. The corresponding terms in the parties' forms will become part of the contract but the conflicting terms will be knocked out and replaced by the underlying statutory provisions.

4.1 Contract terms determined by the 'last shot' rule

The 'mirror-image' rule on offer and acceptance produces the 'last-shot' rule in the battle of the forms.[22] If the additional or different terms in the communication that is intended to be an acceptance are immaterial, the contract will be concluded on the terms of the offer with the modifications in the acceptance: Art. 19(2). Basically on the offeree's terms, provided the offeror does not object. Therefore, when the alterations are immaterial, the 'last-shot' rule will govern to determine the terms of the contract.

However, due to the non-exhaustive list in Art. 19(3), almost all alterations that appear among standard clauses will amount to a material change. If the change is material, the offeree's communication is inevitably a counter-offer. As the CISG does not give any guidance on how to go forward in determining the terms of the contract, it will depend on the judge handling the case. Because Art. 19 CISG is based on the 'mirror-image' rule, and the 'last-shot' rule is already incorporated into Art. 19(2), it can be concluded that the terms of the contracts decided under the CISG should be determined by the 'last-shot' rule. Courts that follow this view justify their decision on the basis that the counter-offer was assented by the initial offeror by accepting the goods and paying the price, in other words, by performance: Art. 18 (1) and (3).

Magellan International Corp. v Salzgitter Handel GmbH [23] illustrates the reality of Art. 19 CISG's strict application of the 'mirror-image' rule, with mitigation of the harshness of the rule depending on a court's discretion.[24] Magellan, an American distributor of steel products, negotiated for with Salzgitter, a steel trader in Germany, on acquisition of steel bars from Ukraine. Magellan provided Salzgitter with written specifications of the product, proposed pricing, and agreed to issue a [page 119] letter of credit. Salzgitter responded by proposing higher prices, which Magellan accepted and issued two purchase orders. Salzgitter replied sending a confirmation form. The parties tried to negotiate the differences in their standard terms, but without agreement. Magellan opened a letter of credit and Salzgitter commenced the delivery.

The court held Magellan's purchase orders constituted offers (Art. 14(1) CISG), Salzgitter's response with price changes was a counter-offer (Art. 19(1) CISG). Subsequent exchanges of offers and counter-offers ended with Magellan's performance, when it issued the letter of credit (Art. 18(1) CISG), thus the terms of the contract were those agreed on at the time the letter of credit was opened. Magellan's performance constituted 'complete (mirrored) assent' to the last form sent by Salzgitter and the terms of the contract included the provisions of Salzgitter's confirmation form that specified vessel loading conditions, dispute resolution, and choice of law.

In other cases where it cannot be determined with certainty whether two or just one form have been involved, courts unambiguously apply the familiar analysis of offer, counter-offer, acceptance by conduct -- thereby accepting the 'last-shot' rule in determining the terms of the contract. The German Appellate Court Saarbrücken held the buyer's taking delivery of the goods constituted conduct indicating assent to the offer and amounted therefore to an implied acceptance of the standard terms therein.[25]

In ICC Arbitration Case No. 8611 of 23 January 23 1997, the arbitrators held that the buyer accepted seller's standard terms printed on each invoice by failing to object.[26] Another German court (Appellate Court München of 11 March 1998) [27] held that where both parties agreed to 'Standard Conditions of the German Textile Industry' the buyer accepted the differing terms in seller's general conditions by accepting the goods. It ruled that the seller's additional terms function as a supplement to the 'Standard Conditions of the German Textile Industry'. Similarly the Appellate Court Frankfurt in its 23 May 1995 decision held that acceptance of delivery indicated assent to a material modification.[28] [page 120]

A very recent case of 24 May 2006 by the German Appellate Court Köln [29] shows the 'last-shot' rule is still in use. The court held 'the interpretation of contracts with conflicting terms leads to the application of at least those provisions which do not differ. Beyond this, the so-called 'last-shot doctrine' applies, according to which the governing terms are those which were exchanged last.

4.2 Contract terms determined by the 'knock-out' rule

Article 19 CISG lacks an explicit solution in determining the terms of the contract when standard terms are in conflict but it gives more incentives for using the 'last-shot' method. Yet some judges follow the prevailing scholarly opinion and international documents and decide in favour of the 'knock-out' rule having thereafter troubles in justifying their decision.

The German Lower Court Kehl in its decision of 6 October 1995 [30] held that neither of the standard terms becomes part of the contract. The fact that the parties had started performance showed their intention to be bound by the contract comprised of terms already agreed upon as well as any standard term common in substance with the exclusion of the conflicting terms. Therefore, the parties' impliedly derogated from Art. 19(1) CISG or they waived the enforcement of their respective standard terms, in accordance with the principle of party autonomy in Art. 6. The principle of party autonomy enables the parties to dispose with their rights, to form the procedure of contract conclusion according to their aspirations and also to deviate from Art. 19 CISG in order to create a binding contract without agreement on all points.

Two other German decisions (Supreme Court, 9 January 2002 [31] and Appellate Court in Düsseldorf, 25 July 2003 [32]), even though with inconsistent reasoning, confirmed that despite conflicting standard clauses, the contract was valid, and the conflicting terms were void being replaced by the provisions of the CISG. [page 121]

Further, the French Supreme Court in two subsequent decisions [33] held that the conflicting terms invalidated each other and there was no valid agreement on the forum selection clauses, but the CISG applied. The Spanish Supreme Court [34] has also held that there is no valid agreement to arbitrate if the clause appears in only one form.

4.3 Alternative solutions to the 'last-shot' and 'knock-out' rules in determining the terms of the contract

Because the CISG itself lacks an explicit solution for determining the terms of the contract when the parties' forms are in battle some courts leave behind the two familiar methods while searching for a just solution -- or maybe being unfamiliar with the CISG [35] -- give alternative solutions.

At one instance, a Dutch court arrived at the so-called 'first-shot' rule in determining the terms of the contract. In ICT v Princen Automatisiering Oss,[36] a Dutch seller and a German buyer concluded an oral agreement for the sale of computer software. Three days later, the buyer confirmed the content of the agreement by means of a written order; the same letter contained a forum selection clause in favour of a German Court printed as a footnote in small characters. Afterwards, the seller confirmed the buyer's written order by fax and declared that its own standard terms were applicable. Upon the buyer's request, the seller forwarded its general conditions whereupon there was no reaction from the buyer's side. After having paid a part of the purchase price, the buyer stopped further [page 122] payment because of defects in the software program and an improper installation. The seller commenced an action to obtain payment in a Dutch Court.

Ruling on its jurisdiction the court held that by replying to the buyer's written confirmation, the seller had expressly excluded the applicability of its own standard terms with regard to 'all terms' conflicting with the ones stated in the buyer's confirmation. The result was that the seller had accepted the buyer's confirmation in its entirety and the terms in the seller's general conditions were applicable insofar as the question was not regulated by the terms in the buyer's form. As both general conditions contained a forum selection clause, according to the courts opinion the seller accepted the one in favour of a German Court and thereby created a 'first-shot' rule in determining the terms of the contract, as the buyer's order form was the first communication between the parties.

In Isea Industrie S.p.A. et al. v. SA Lu et al.[37] a French buyer ordered packaging for biscuits from an Italian seller. The buyer's standard terms, printed on the reverse side of the order form, contained a forum selection clause in favour of a French forum. Some days later, the seller sent a confirmation of order making an express reference to its own standard terms, printed on the reverse side of the same document, which contained a forum selection clause in favor of an Italian forum.

Regarding the validity of the forum selection clause invoked by the buyer, the Appellate Court held that as the buyer placed its standard terms on the reverse side of the order form and in the absence of any reference on the front of the document, the forum selection clause was not to be considered as accepted by the seller. Regarding the forum selection clause invoked by the seller, the Appellate Court stated that the confirmation of order had been sent to the buyer when the contract had already been concluded: Art. 18(2) CISG. Hence, the court ruled neither forum selection clause is applicable. Moreover, as in the buyer's case the reference was not appropriate, and in the seller's case the contract had already been concluded, thus both standard forms with all clauses therein had been invalidated. To arrive at this conclusion, the court analysed whether either of the clauses can become part of the contract.

5. THE WAY TO FIND UNIFORMITY IN DETERMINING THE TERMS OF THE CONTRACT

The relationship between the battle of forms and the CISG is undecided between the commentators, namely whether the issue falls under the scope of the CISG and if it does, which provision should give a solution. National courts generally agree that if the parties performed their obligations, there is a valid contract despite discrepancies in the parties' forms. However, what is more compelling is a [page 123] uniform solution in determining the terms of the contract. The cases analysed above [38] show courts apply both the 'last-shot' and the 'knock-out' rules and sometimes create alternative solutions.

In order to remedy the situation, courts can also decide that the issue constitutes a gap in the regulatory scheme of the CISG and invoke the UNIDROIT Principles or the PECL to fill in the missing term. Alternatively, if being of the opinion the issue is governed by Art. 19 CISG, the UNIDROIT Principles or the PECL could be used for its interpretation. Using the UNIDROIT Principles and the PECL to interpret the CISG or supply the missing provision is possible both according to the UNIDROIT Principles and the PECL on the one hand and the CISG on the other.

The UNIDROIT Principles and the PECL are non-binding, 'soft' laws that contain a comprehensive set of rules applicable in international commercial contracts.[39] The UNIDROIT Principles and the PECL apply exclusively if parties reach an agreement to that effect, but in any event they may be applied to interpret or fill gaps.[40] The UNIDROIT Principles and PECL show great similarities in terms of their content and structure with a substantial number of identical provisions.[41] They have been prepared by international bodies,[42] and inspired by the CISG and some national laws, but also contain solutions not based on the law of any country.[43] One significant difference is in the territorial scope of their application, as the PECL is limited to EU countries.[44] [page 124]

Gaps in the CISG are supplemented based on Art. 7(2), according to which, matters that are governed but are not expressly settled in the CISG are to be settled in accordance with the general principles on which the CISG is based. Therefore, the application of the UNIDROIT Principles and PECL is subject to two conditions: (1) The matter is governed, but not settled by the CISG; and (2) the UNIDROIT Principles and PECL contain general principles on which the CISG is based.

As the UNIDROIT Principles and PECL are instruments that contain general rules of international commercial contracts and they might be applied when parties agree their contract to be governed by 'general principles of law',[45] it can be concluded they are sufficient to provide the missing term in the CISG. However, the area for gap filling covers only matters that are covered by the CISG.[46]

The scope of the CISG is generally defined in Art. 4(a) which provides that the CISG is not concerned with the validity of the contract or any of its provisions. This has led some commentators to argue the issue of battle of forms as being outside the scope of the CISG.[47] However, the prevailing scholarly view and the majority of court decisions agree, the issue of battle of forms falls within the scope of the CISG. In the lack of explicit provision courts can rule it is a gap in the CISG and fill the gap with the appropriate provisions of the UNIDROIT Principles or the PECL.

The UNIDROIT Principles or the PECL could at least be used for interpreting Art. 19 based on Art. 7(1). According to Art. 7(1), in the interpretation of the CISG regard shall be given to its international character and uniformity in its application.[48] The UNIDROIT Principles and the PECL are without a doubt international instruments. None of the national legal systems were a starting point for drafting, but the CISG had substantial influence on the rules relating to formation of contracts. As a result, most of the provisions of the CISG, the UNIDROIT, Principles and PECL are very similar and are even called the 'troika'.[49] [page 125]

Moreover, using the UNIDROIT Principles or the PECL in interpreting Art. 19 CISG would lead to its uniform interpretation and consistent application. The great value of the UNIDROIT Principles and the PECL in the issue of battle of forms is that despite being under great influence of the CISG, both offer explicit solutions for determining the terms of the contact when the parties' standard terms are in conflict.

5.1 Battle of the forms under the UNDROIT Principles

The UNIDROIT Principles takes as a model Part II of the CISG on formation of contracts and in its Art. 2.22, explicitly deals with the battle of forms:

Where both parties use standard terms and reach agreement except on those terms, a contract is concluded on the basis of the agreed terms and of any standard terms which are common in substance unless one party clearly indicates in advance, or later and without undue delay informs the other party, that it does not intend to be bound by such a contract.

In order to apply Art. 2.22 UNIDROIT Principles, (1) both parties use their forms in the course of contract conclusion; and (2) there is a difference between some or all of the standard terms and an agreement on negotiated terms, at least on the essential elements of the contract.

When forms are in battle, the UNIDROIT Principles create a presumption that there is an agreement on negotiated and essential elements and disagreement on standard and conflicting terms. Without an agreement on essential contractual elements there is no contract as one of the conditions for the application of Art. 2.22 UNIDROIT Principles is not fulfilled. On the other hand, the UNIDROIT Principles presume there is no consensus on conflicting standard terms, but there is on those terms that are common in substance. The presumption is rebuttable.[50]

When the above two conditions are satisfied, namely when the forms are in battle, the terms of the contract are determined by the 'knock-out' rule. As the UNIDROIT Principles in principle adopted Part II of the CISG its rule on offer and acceptance would in fact lead to the application of the 'last-shot' rule.[51] However, in the presence of an express provision regulating the issue at hand, the 'last-shot' rule remains appropriate only if a party clearly expresses its unwillingness to contract except on its standard terms coupled with the negotiated terms.[52] The objection can be made in advance, by incorporating a general defense [page 126] clause into the contract or afterwards, within a reasonable time. Hence, the contract may fail on the objection of one or both sides.[53]

Incorporating the general defense clause among standard clauses will normally not be sufficient. The unwillingness to conclude the contract except on its own terms should be placed among 'non-standard' terms where the other party will most likely notice it.[54] Hence, any party may always derogate from the application of the 'knock-out' doctrine but only with an express declaration to that effect. Nevertheless, the 'knock-out' rule remains the principal rule for solving the collision between forms when the UNIDROIT Principles is applied.

5.2 Battle of the forms under the PECL

The provisions of the PECL on contract formation are similar to the UNIDROIT Principles, distinguishing between the conclusion itself and the content of the contract. The PECL in its Art. 2:209 also contains a special provision on conflict of forms offering the following solution:

(1) If the parties have reached agreement except that the offer and acceptance refer to conflicting general conditions of contract, a contract is nonetheless formed. The general conditions form part of the contract to the extent that they are common in substance.

(2) However, no contract is formed

      (a) if one party has indicated in advance, explicitly, and not by way of general conditions, that he does not intend to be bound by a contract on the basis of paragraph (1); or

      (b) if later on, one party, without undue delay, informs the other party that he does not intend to be bound by such a contract.

As can be seen, the offered solution for conflict of forms is in its substance the same as Art. 2.22 UNIDROIT Principles, though it should be observed, PECL is more precise and detailed in cases where one of the parties declines to be bound by the 'knock-out' rule: Art. 2:209(2) PECL. The PECL also explicitly rejects the application of the 'last-shot' rule and accepts the principle that the terms of the contract are only those that are common in substance and supposedly agreed upon by the parties. [page 127]

The PECL and the UNIDROIT Principles have very similar rules on contract formation to the CISG, which would in fact lead to the 'last-shot' rule in the battle of forms, but derogates as well, with a special provision to that effect, explicitly rejecting the 'last-shot' rule and incorporating the 'knock-out' rule.[55]

Any party can fail the validity of the contract by its unilateral action thereby derogating from Art. 2:209 PECL and the 'knock-out' rule therein. This is due to party autonomy in contractual relations, one of the main principles on which the PECL is based.[56] The objection should explicitly show the party's unambiguous intention to that effect. The provision in the PECL is more precise than the UNIDROIT Principles in this regard, stating the derogation cannot be by way of a general defense clause in the respective parties' standard terms.

Therefore, the UNIDROIT Principles and PECL both have explicit provisions that deal with the issue of battle of forms. Both incorporate the 'knock-out' rule in determining the terms of the contract, but allow one exception. If parties so intend, the general rule might be derogated and the last or first shot rule be applied, depending on which party incorporates the general defense clause in the contract.

6. CONCLUSION

After an analysis of Art. 19 CISG and its practical application it can be concluded that there is no certainty and predictability when the parties' forms are in battle. As Murray stated, 'There should be no doubt that "chaos" is an accurate characterization of the state of law in the battle of forms arena'.[57]

In searching for answers to the two questions on the battle of forms transactions, whether there is a contract and if there is, what are its terms, the following can be concluded: Despite the fact that Art. 19(1) CISG incorporates the 'mirror-image' rule as the governing rule for contract formation there is a valid contract, provided the parties performed the core obligations under the contract they contemplated was validly concluded. If there is no performance there is no valid contract.

However, when the terms of the validly concluded contract have to be determined, the situation is much more complex. Some courts apply the 'last-shot' rule, some [page 128] the 'knock-out' rule and some fabricate alternative solutions. The different solutions bring uncertainty in international transactions whereby decisions depend on the judge handling the particular case.

The only way to certainty, predictability and stability in the battle of forms arena is by Art. 2.22 UNIDROIT Principles or Art. 2:209 PECL. The UNIDROIT Principles and the PECL have very similar rules to the CISG on contract formation. They incorporate the 'mirror-image' rule for contact formation that would indeed lead to the 'last-shot' rule in determining the terms of the contract. However, both instruments derogate from general rules on contract formation and provide when the forms are in battle, the terms of the contract are to be determined by the 'knock-out' rule. Therefore, at the present state of the law, the application of the UNIDROIT Principles and the PECL is the only way to clear the doubt and achieve the consistent application of the CISG and corresponding solutions to the battle of forms. Art. 2.22 UNIDROIT Principles or Art. 2:209 PECL should be used for gap filling or interpretative purposes to the CISG. One way or another, the result would be the same: uniformity in the battle of forms arena. [page 129]


FOOTNOTES

a1. Andrea Fejös (Fejes ) holds a Batchelor Degree in Law from the Law Faculty, University of Novi Sad, Serbia. The author also completed an LL.M. program in International Business Law at the Central European University, Budapest, Hungary and is currently a postgraduate student in Commercial Law at the Law Faculty, University of Novi Sad, Serbia.

1. del Pilar Perales Viscasillas, M., 'Battle of the Forms and the Burden of Proof: An Analysis of BGH' (2002) 6 Vindobona Journal of International Commercial Law and Arbitration 217, available at: <http://www.cisg.law.pace.edu/cisg/biblio/perales2.html>.

2. The CISG was adopted at the United Nations Conference on International Sale of Goods in Vienna on 11 April 1980.

3. See for example, del Pilar Perales Viscasillas, M., "'Battle of Forms" Under the 1980 United Nations Convention for the International Sale of Goods: A Comparison with Section 2-207 UCC and UNIDROIT Principles' (1998) 10 Pace International Law Review 97, available at: <http://cisgw3.law.pace.edu/cisg/biblio/pperales.html#general>.

4. There is a certain terminological confusion in theory and practice that surround standard terms and standard forms. For the purposes of this paper 'standard term(s)' will be called the terms themselves, reflecting their non-negotiated, prepared in advance character (These terms are referred to in US theory and practice as 'boilerplate terms'). The term 'general conditions' will be used when referring to a set of standard terms that is incorporated into a separate document and is referred to or attached to the contract in a separate document. On the other hand, standard business forms, pre-printed form contracts with blank clauses to be later filled in with negotiated terms will be further referred to as 'forms' or 'standard forms'. As standard forms contain a set of pre-printed standard terms, if both parties used their forms in the course of contract conclusion, the terms therein will be in a collision, the name of which phenomenon is the 'battle of forms'.

5. The available case law on battle of the forms under the CISG can be found at the CISG database administered by the Pace University, School of Law available at <http://cisgw3.law.pace.edu/cisg/text/anno-art-19.html>. All cases will be classified into categories, but only some will be analysed in depth due to the set space limitation. For the very same reason the facts of the cases will be also omitted.

6. See the list of Contracting States available at: <http://cisgw3.law.pace.edu/cisg/countries/cntries.html>. [The United Kingdom and Brazil are exceptions to the statement that the CISG includes all major trading states.]

7. See the current status of CISG and trends in its further development available at <http://cisgw3.law.pace.edu/cisg/cisgintro.html#current>.

8. One of the main reasons why the battle of forms had not been expressly addressed in the CISG was the uncertainty about the proper solution in domestic laws. Schlechtriem, Peter: Uniform Sales Law, Vienna (1986), at p. 56

9. The 2004 English version is available at: <http://www.unidroit.org/english/principles/contracts/principles2004/blackletter2004.pdf#search=%22UNIDROIT%C20Principles%> .

10. The 1999 English version is available at: <http://frontpage.cbs.dk/law/commission_on_european_contract_law/Skabelon/pecl_engelsk.htm>.

11. See e.g. Calamari, J. D.; Perillo, J. M., The Law of Contracts, West Group, St. Paul, Minn (1998), at p. 25.

12. Article 19 CISG reads the following:

      (1) A reply to an offer, which purports to be an acceptance but contains additions, limitations or other modification 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 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 if the contract are the terms of the offer with the modification contained in the acceptance.

      (3) Additional or different terms relation, among other things, to the price, payment, quality and quantity of the goods, place and time of the 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.

13. van Alstine, M. P., 'Consensus, Dissensus, and Contractual Obligation Through the Prism of Uniform International Sales Law', (1996) 37 Virginia Journal of International Law 1 available at <http://www.cisg.law.pace.edu/cisg/biblio/alstine3.html>; Sclechtriem, P., Commentary on the UN Convetion on the International sale of Goods(CISG), Oxford (1998); See also Honnold, J. O., Uniform Law for International Sales under the 1980 United Nations Convention, Kluwer Law International (1982) pp. 193; Gabriel, H. D., 'A Primer on the United Nations Convention on the International Sale of Goods: From the Perspective of the Uniform Commercial Code', (1997) 7 Indiana International & Comparative Law Review, 284 available at: <http://cisgw3.law.pace.edu/cisg/biblio/gabriel2.html>.; Lookofsky, J., Understanding the CISG in the USA, 2nd ed, Kluwer Law International (2004), at p. 55.

14. Which can be revealed by an examination of the drafting history and its provisions (in particular Arts. 18(1) and 19(1) CISG). See van Alstine, ibid.

15. Perales, supra fn 3.

16. Perales, supra fn 1. If there is no unambiguous agreement on the essential elements of the contract, courts will find there is no binding contract formed. See for example Appellate Court Frankfurt (Germany) 31 March 1995, available at: <http://cisgw3.law.pace.edu/cases/950331g1.html>.

17. Germany, Appellate Court Saarbrücken 13 January 1993, available at: <http://cisgw3.law.pace.edu/cases/930113g1.html>; United States, Federal District Court Illinois (Magellan International v Salzgitter Handel) 7 December 1999, available at: <http://cisgw3.law.pace.edu/cases/991207ul.html>; Germany, Appellate Court München 11 March 1998 available at <http://cisgw3.law.pace.edu/cases/980311g1.html>; Spain, Supreme Court (Nordgemüse Wilhelm Krogmann v Javier Vierto) 26 May 1998, available at: <http://cisgw3.law.pace.edu/cases/980526s4.html>.

18. Germany, Supreme Court 9 January 2002, available at: <http://cisgw3.law.pace.edu/cases/020109g1.html>. 'The fact that the mutual general terms and conditions partially contradicted each other did not prevent the existence of the sales contracts because the parties did not view this contradiction as an obstacle to the execution of the contracts. They did not consider the alteration material within the meaning of Art. 19(3)'; Spain, Supreme Court 17 February 1998, available at: <http://cisgw3.law.pace.edu/cases/980217s4.html> ('Documents presented by the parties is sufficient to show there was a contract').

19. France, Supreme Court (Les Verreries de Saint Gobain v. Martinswerk) 16 July 1998 available at <http://cisgw3.law.pace.edu/cases/980716f1.html>.

20. Germany, Appellate Court Düsseldorf 25 July 2003, available at: <http://cisgw3.law.pace.edu/cases/030725g1.html> ('[...] failure to conclude a contract within the meaning of Art. 19(1) and (3) CISG due to a lack of meeting of minds can only be assumed if the parties would have regarded the lack of consensus as fundamental.').

21. Germany, Lower Court Kehl 6 October 1995, available at: <http://cisgw3.law.pace.edu/cases/951006g1.html>.

22. Gabriel, supra fn 13, at p. 1 054 ('The 'last-shot' rule "is the logical result of the 'mirror-image' rule"'). See also van Alstine, supra fn 13 ('The 'last --shot' merely operates as a self-evidently correct extension of the 'mirror-image' rule').

23. United States, Federal District Court Illinois, 7 December 1999, available at: <http://cisgw3.law.pace.edu/cases/991207u1.html>.

24. Sukurs, C., 'Harmonizing the Battle of the Forms: A Comparison of the United States, Canada, and the United Nations Convention on Contracts for the International Sale of Goods', (2001) Vanderbilt Journal of Transnational Law 1499, available at: <http://www.cisg.law.pace.edu/cisg/biblio/sukurs.html>.

25. Germany, Appellate Court Saarbrücken 13 January 1993 available at: <http://cisgw3.law.pace.edu/cases/930113g1.html>.

26. ICC Arbitration Case No. 8611 23 January 1997 available at: <http://cisgw3.law.pace.edu/cases/978611i1.html>.

27. Germany Appellate Court München 11 March 1998 available at: <http://cisgw3.law.pace.edu/cases/980311g1.html>.

28. Germany, Appellate Court Frankfurt 23 May 1995 available at: <http://cisgw3.law.pace.edu/cases/950523g1.html>.

29. Germany, Appellate Court Köln 24 May 2006 available at: <http://cisgw3.law.pace.edu/cases/060524g1.html>.

30. Germany, Lower Court Kehl 6 October 1995 available at: <http://cisgw3.law.pace.edu/cases/951006g1.html>.

31. For comments see Perales, supra fn 1; Schlechtriem, P., 'Battle of the Forms in International Contract Law, Evaluation of approaches in German law, UNIDROIT Principles, European Principles, CISG; UCC approaches under consideration', "Kollidierende Geschäftsbedingungen im internationalen Vertragsrecht", in: Karl-Heinz Thume ed., Festschrift für Rolf Herber zum 70. Geburtstag, Newied, Luchterhand (1999), at pp. 36-49, with an updated reference to a January 9, 2002 ruling by the Supreme Court of Germany added thereto, available at: <http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem5.html>; Germany, Appellate Court Düsseldorf 25 July 2003, available at: <http://cisgw3.law.pace.edu/cases/030725g1.html>.

[32.]

33. Les Verreries de Saint Gobain v. Martinswerk 16 July 1998, France, Supreme Court, available at: <http://cisgw3.law.pace.edu/cases/980716f1.html>; Mode Jeune Diffusion v Maglificio 2 December 1997, France, Supreme Court, available at: <http://cisgw3.law.pace.edu/cases/971202f1.html>.

34. Nordgemüse Wilhelm Krogmann v. Javier Vierto 26 May 1998, Spain, Supreme Court, available at: <http://cisgw3.law.pace.edu/cases/980526s4.html>; Spain, Supreme Court 17 February 1998 available at <http://cisgw3.law.pace.edu/cases/980217s4.html>.

35. One of the often commented decisions is the ruling in case United States, Federal District Court New York (Filanto v Chilewich) 14 April 1992, available at: <http://cisgw3.law.pace.edu/cases/920414u1.html>. The court was aware the CISG applied and the 'mirror-image' rule incorporated into Art. 19(1) CISG, yet it relied on the parties conduct in resolving the issue of battle of the forms strengthening its reasoning with US cases. For comments see Dodge, W. S., 'Teaching the CISG in Contracts', (2000) 50 Journal of Legal Education 72; available at: <http://cisgw3.law.pace.edu/cisg/biblio/dodge.html>.

36. Netherlands, Appellate Court's-Hertogenbosch (ICT v Princen Automatisiering Oss) 19 November 1996, available at: <http://cisgw3.law.pace.edu/cases/961119n1.html>.

37. France, Appellate Court Paris (ISEA Industrie v. Lu) 13 December 1995, available at: <http://www.cisg.law.pace.edu/cases/951213f1.html>.

38. Court ruling are rendered by different national courts the availability of the same is limited. Because supposedly a number of other ruling exist that involve the battle of the forms under the CISG, in this paper no conclusions have been drawn regarding how frequently the two methods are used in determining the terms of the contract. However, the analysed sample was sufficient to show, similar factual situations can lead to different solutions, depending on the court's discretion.

39. Preamble of the UNIDROIT Principles ('These principles set forth general rules for international commercial contracts'.); Art. 1:101 (1) PECL ('These principles are intended to be applied as general rules of contract law in the European Union.').

40. Preamble of the UNIDROIT Principles; Art. 1:101 (2), (3)&(4) PECL.

41. Around two-thirds of the provisions of the first edition of the UNIDROIT Principles are identical with those of PECL. Bianca, C.M. and Bonell, M.J., Commentary on the International Sales Law: the 1980 Vienna Sales Convention, Giuffré, Milan (1987), at p. 75.

42. The UNIDROIT Principles were prepared under the auspice of UNIDROIT, an independent intergovernmental organisation which purpose is to study needs and methods for modernising, harmonising and co-coordinating private and in particular commercial law. The PECL was drafted by the Commission on European Contract Law, as part of the civil law unification in the EU.

43. Binaca and Bonell, supra fn 41, at p. 75.

44. Art. 1:101(1) PECL.

45. Preamble of the UNIDROIT Principles; Art. 1:101(3)(a) of PECL.

46. Bianca and Bonell, supra fn 41, at p. 75.

47. See e.g. Perales, supra fn 1.

48. As far as the possibility of using the UNIDROIT Principles goes for gap filling purposes, practice shows that judges and arbitrators refer rarely to Art. 7(2) CISG. See Bonell, M.J., 'UNIDROIT Principles 2004 -- The new edition of the Principles of International Commercial Contracts adopted by the International Institute for the Unification of Private Law' (2004) Uniform Law Review 14.

49. Lando, O., 'CISG and Its Followers: A Proposal to Adopt Some International Principles of Contract Law', (2005) 53 American Journal of Comparative Law 382 available at: <http://cisgw3.law.pace.edu/cisg/biblio/lando5.html>.

50. Perales, supra fn 3.

51. Art. 2.1.11 is titled 'Modified Acceptance', which corresponds to Art. 19(1) and (3) CISG, and Art. 2.1.6(1) UNIDROIT Principles corresponds to Art. 18(1) CISG.

52. Murray, J. E., 'The Definitive "Battle of the Forms": Chaos Revisited' (2000) 20 Journal of Law and Commerce 1 available at: <http://cisgw3.law.pace.edu/cisg/biblio/murray2.html#il>; also Perales, supra fn 3; Spanogle, J. A and Winship, P., International Sales Law, 2000, St. Paul, Minn, at pp. 118-9.

53. Schlechtriem, supra fn 31.

54. Murray, supra fn 52.

55. Article 2:209 PECL is an exception from Art. 2:208 on modified acceptance. Though the PECL does not insist on contract formation solely based on an offer and acceptance, the starting point for contract formation is the 'mirror-image' rule in Art. 2:208 PECL. PECL also allows contracts to be formed when the discrepancy does not substantially alter the terms of the offer. Article 2:208 (3b) PECL corresponds to Art. 19(2) CISG. If the requirement thereof is not fulfilled, the new terms will transform the acceptance into a counter-offer: Art. 2:208 (3)(c) PECL.

56. Article 1:103 PECL.

57. Murray, J. E., 'The Chaos of the "Battle of the Forms": Solutions' (1986) 39 Vand. L. Rev. 1307, at p. 1308.


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