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Excerpt from John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed. (1999), pages 147-157. Reproduced with permission of the publisher, Kluwer Law International, The Hague.

Article 14

Criteria for an Offer

Text of Article
A. Indication of Intent to be Bound
      (1) Communication to an Indefinite Group: "Public Offers"
            (a) "Specific Persons
B. Definiteness of an Offer and the Scope of Party Autonomy
      (1) The Goods: Designation and Quantity
            (a) The Role of Article 14: Defining an Offer v. Validity of Contract
            (b) Description of the Goods: Specifications made by the Seller
            (c) Quantity: Requirement and Output Contracts
      (2) The Price
            (a) Scope of the Problem
            (b) The Power of the Parties to Contract without Proving for the Price
            (c) Article 55 and the Two-Point Compromise
              -   Consequences of Invalidity for Lack of Provision for Price
              -   Conclusion
      (3) Decisions Relating to Definiteness and Price
            (a) Prior to Delivery and Acceptance
            (b) Goods Received; Buyer Obliged to Pay

[See also Honnold Text, Formation of the Contract (Articles 14-24):
Introduction to Part II of the Convention.]

§133 The basic criterion for an offer, under prevailing law and the Convention, is whether one party has indicated to another "the intention...to be bound in case of acceptance." In applying this standard, two subsidiary factors need to be taken into account—the number of people addressed and the definiteness of the proposal. These standards are set forth in this opening article of Part II:

Article 14 [1]

"(1) A proposal for concluding a contract addressed to one or more specific persons constitutes an offer if it is sufficiently definite and indicates the intention of the offeror to be bound in case of acceptance. A proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price.

"(2) A proposal other than one addressed to one or more specific persons is to be considered merely as an invitation to make offers, unless the contrary is clearly indicated by the person making the proposal."

§ 134 A. Indication of Intent to be Bound

When one party is in doubt over whether the other intends to be bound or merely to open negotiations the question can usually be resolved quickly by phone or wire.[2] Moreover, doubts suggested by the bare text of the parties’ statements will often be dissipated when (as Art. 8 requires) those statements are interpreted in their full context, including "the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties." In short, the parties’ understanding is a question of fact that is individual to [page 147] each transaction; the general guides in Article 14 for interpreting the parties’ intent, to which we now turn, play subordinate and supporting roles.

§135 (1) Communications to an Indefinite Group: "Public Offers"

Article 14 incorporates the generally accepted premise that a party may make an offer to as large a group as it wishes.[3] However, a communication addressed to a large group, if construed as an offer, can involve practical difficulties and hazards. For example, sellers often give wide distribution to catalogues describing a line of goods and indicating prices. Some months may be required for the preparation, printing, and distribution of the catalogue. During this period some of the goods may become unavailable because of heavy demand, shortage of materials, or other production difficulties, and cost increases may call for readjustment of prices. If supply or production difficulties are widespread, or if the general price level rises sharply, the seller may face a flood of orders. If these orders should be "acceptances" of an "offer," the result could be ruin for the seller and a windfall for the buyers. In these settings a "reasonable person" (Art. 8(2)) would not think that the catalogue "indicates an intention...to be bound" (Art. 14(1)) and courts have been reluctant to construe communications to create such hazards.[4]

These practical considerations are reflected in Article 14(2): If a proposal is not "addressed to one or more specific persons," it is not an offer "unless the contrary is clearly indicated by the person making the proposal."[5]

§136 (a) "Specific Persons"

Even if a proposal is addressed to "one or more specific persons" it is not an offer unless under the basic test of paragraph (1) it "indicates the intention of the offeror to be bound in case of acceptance." This test may be decisive when the line between paragraph (1) and paragraph (2) is difficult to draw.[page 148]

To take a common case: Supplier mails a catalogue to 500 prospective buyers; each envelope is addressed to a specific person. Is this a proposal "addressed to one or more specific persons" and therefore governed by paragraph (1)? The answer should be No. The purpose underlying the dividing line between paragraphs (1) and (2) is to avoid the hazards latent in widespread communications mentioned at §135. To this end, the phrase "addressed to one or more specific persons" should refer to communications that are restricted to the addressees; a seller who mails out a catalogue normally intends as wide a distribution as possible and would be glad for the addressee to pass the catalogue on to others. Thus, such a mailing to named addressees should be governed by paragraph (2): the intent "to be bound in case of acceptance" must be "clearly indicated."[6]

§137 B. Definiteness of an Offer and the Scope of Party Autonomy

(1) The Goods: Designation and Quantity

§ 137.1 (a) The Role of Article 14: Defining an Offer v. Validity of Contract

The provisions on definiteness in Article 14(1) are drafted in terms of the question whether a "proposal" constitutes an "offer". We turn first to the question whether a communication should be construed as an offer (§§137.2–.4). Later (§137.5) we shall consider whether these provisions control the validity of agreements.

As we have seen (§§13436 supra), the "public offer" provisions of Article 14 are concerned only with the question whether a communication should be interpreted as an offer: Under Article 14(2) a clear intent to make a public offer is given full effect. What is the purport of the other provisions of Article 14?

§137.2 (b) Description of the Goods: Specifications made by the Seller

Article 14(1) states that "a proposal is sufficiently definite if it indicates the goods". Does a proposal "indicate the goods" if it states [page 149] that the buyer will later "specify the form, measurement, or other features of the goods"? This does not make a contract too indefinite: Article 65 (§357, infra) states that if the buyer fails to make the specification "the seller may...make the specification himself in accordance with the requirements of the buyer that may be known to him".

§137.3 (c) Quantity: Requirement and Output Contracts

Under Article 14(1) a proposal is sufficiently definite if (inter alia) it "expressly or implicitly fixes or makes provision for determining the quantity...". Long-term contracts often call for the supply of a buyer’s requirements or for the delivery of a seller’s output; Article 14(1) should not be construed to nullify these important transactions on the ground that the quantity will not be fixed until the buyer’s requirements or the seller’s output become known.

Under the Convention, as under domestic law, problems can arise if the quantity can be controlled freely by one party—by artificially increasing output when costs (or prices) drop, or by artificially increasing "requirements" when costs (or prices) rise.[7] Tools to cope with these problems are provided by the flexible principles of Article 8 governing contract interpretation (§§104111 supra) and by the direction in Article 7(1) to interpret the Convention to promote "the observance of good faith in international trade".

(2) The Price

§137.4 (a) Scope of the Problem

In UNCITRAL and at the 1980 Vienna Conference this question arose: Do the parties have the power to make a binding sales contract that does not (Art. 14) "expressly or implicitly" fix or make "provision for determining" the price? As we shall see, the answer calls for close attention to both Articles 14 and 55 (§§137.5.6, 325325.3 infra).

Usually sales contracts specify the price; long-term contracts may make elaborate provision for adjusting the initial price on the basis of changes in cost. See Kritzer Manual Ch. 4. Smaller transactions may make no specific reference to price but the least likely possibility is that the parties have no understanding concerning the price. A common situation in which the price is not expressly stated but (Art. 14) is "implicitly [page 150] fixed" in the course of a series of communications may be illustrated as follows:

Example 14A. Seller distributed catalogues describing various types of goods and listing prices. Buyer sent Seller a telex requesting Seller to ship goods, designated by a model number in Seller’s catalogue, to which the telex referred. Buyer’s telex did not specify the price.

Buyer’s order in response to Seller’s catalogue did not close a binding contract. Under Article 14(1) Seller’s catalogue was not addressed to "specific persons" and is not to be construed as an offer but as an invitation to submit offers. See §§135136, supra. (The catalogue will probably state that the listed prices are subject to change; even in the absence of such a statement Seller may modify the price since the catalogue did not make a binding offer.) Buyer’s order was, however, an offer that implicitly referred to the price stated in the catalogue.

Seller will usually respond to Buyer’s order by an "Order Acknowledgement form" that will state the price.[8] If the price is the same as that stated in Seller’s catalogue a contract will be closed. If Seller’s prices have changed Seller may phone or telex Buyer informing Buyer of a modification in the catalogue price and asking for confirmation of the order at the new price. If Buyer confirms the order, the price has then been fixed and the Order Acknowledgement closes a contract.

If Seller’s catalogue prices have not changed Seller may immediately ship the goods and notify Buyer of the shipment by an invoice that states the catalogue price. Under Article 18(3) Seller’s shipping, followed by appropriate notification, accepted Buyer’s offer "by performing an act, such as one relating to the dispatch of the goods". See §§163164, infra. (Buyer’s offer (Art. 14(2)) had "implicitly fixed" the price as that stated in the catalogue to which Buyer referred in its order.)

Let us suppose that Seller had announced higher prices than those in the catalogue to which Buyer referred but, in haste or carelessness, shipped without securing Buyer’s agreement to the new prices. This placed Seller at risk. If Buyer accepts the goods without knowledge of Seller’s price change the parties are bound by contract at the lower price in Seller’s catalogue: Buyer had reason to expect this price, and Seller’s shipment without notification would reasonably be understood by Buyer as accepting Buyer’s offer at the catalogue’s price. Art. 8(2), §108, Example 8B, supra. If Seller notified Buyer of the price change before Buyer accepted the goods Buyer could either (1) reject the goods or (2) [page 151] accept the goods at the modified price. If Buyer objects to the higher price he would normally phone or telex Seller and an agreement would be reached on the price. (Seller may find it difficult to redispose of the goods in Buyer’s country and may be amenable to a compromise.)

Because of the importance of price to economic success, only rarely will the parties enter into a binding contract without at least (Art. 14(1)) an "implicit" understanding on the price or a means "for determining" the price. Situations that approach the edge involve emergency orders for the manufacture of minor replacement parts or requests to rush a shipment of goods for which the seller has not listed a price. Even here, as the examples suggest, the buyer will seldom accept the goods before he receives an invoice or other notification of the seller’s price. In other cases a method for determining the price will be established by trade usage or by a practice the parties have established (Art. 9, §§112122, supra). Hence, rarely will it be necessary to face the question whether the Convention bars the parties from making a contract that neither "expressly" nor "implicitly fixes or makes provision for determining...the price". However, this question has generated discussion and raises intriguing questions of statutory interpretation and legal theory. It deserves our attention.

§137.5 (b) The Power of the Parties to Contract without Providing for the Price

The contested issue of theory can be exposed and tested in the setting of the following improbable case. (Improbable conduct is more useful to legal theory than to commerce.)

Example 14B. Following negotiations, Seller and Buyer signed a "Contract of Sale" that called for Seller to manufacture and ship goods according to specifications and quantity stated in the agreement. The agreement did not fix a price and instead stated: "We intend to be bound by this agreement, and hereby derogate from any implication of Article 14(1) of the 1980 U.N. Convention that we have not made a binding contract in the absence of fixing or otherwise determining the price". Seller manufactured and delivered the goods which Buyer accepted and used. Thereafter, the parties were unable to agree on the price.

Seller seeks to recover for the goods and invokes Article 55 of the Convention:

"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."[page 152]

Buyer defends on the ground that the agreement did not "expressly or implicitly fix...or make provision for determining the...price" as required by Article 14, and therefore there was no contract.

Buyer’s argument has to face, at the outset, the fact that Article 14 states that the issue is whether a "proposal" is "sufficiently definite and indicates an intention to be bound" to be "an offer". Here the parties did not exchange an "offer" and "acceptance"; instead they signed a "Contract of Sale" that stated that they intended to be bound by contract even though the price had not been fixed. In addition (to lay bare the basic issue of validity) we assumed that the parties expressly stated that they derogated (Art. 6) from any provision of the Convention that would deny effect to their intent. (This intent would normally be evidenced merely by executing a contract of sale.)

In the Introduction to Part II (§132.1 supra), we noted that the Convention’s definitions of "offer" and "acceptance" are useful and necessary for deciding whether a contract was made by an exchange of communications. We found, however, that the Convention recognizes that contracts can be made without following the two-step offer-acceptance pattern: Article 18(3) provides that a contract may be concluded "by performing an act", and Article 8(3) provides that statements (including terms of agreements) are to be interpreted to include trade usages and the parties’ practices and also are to be construed in the light of "any subsequent conduct of the parties".

In the life of commerce, as in the above example, there is often no question as to whether a single communication should be construed as an "offer"; the parties’ understanding will be disclosed by a series of communications, by their conduct (e.g. by delivering and accepting goods) or by executing a contract of sale.

Does Article 14 deal not only with whether a communication should be construed as an "offer" but also with the validity of a "Contract of Sale" that does not determine the price? This reading of Article 14 is difficult to sustain in the face of Article 4 which states that "except as otherwise expressly provided in this Convention, it is not concerned with: (a) the validity of the contract or of any of its provisions...". Deference to the parties’ agreement is also shown by Article 6: the parties may "derogate from or vary the effect of any of [the Convention’s] provisions."[9] In any event, further light is shed by the legislative history of Article 55, infra.[page 153]

§137.6 (c) Article 55 and the Two-Point Compromise

The question whether Article 14 denies validity to the parties’ clearly expressed intent to be bound is important for all States that adopt the Convention without excluding Part II on Formation.[10] As we shall see in discussing Article 55 (§§324325.3 infra), in developing this provision UNCITRAL in 1977 and the Diplomatic Conference in 1980 developed a two-part compromise between delegates that were opposed to and those that supported open-price contracts.

The Working Group draft that led to Article 55 provided: (1) "When a contract has been concluded" but does not make provision for the price, (2) the buyer must pay "the price generally charged by the seller" when the contract was concluded.[11]

(1) In reviewing the above draft UNCITRAL in 1977 changed the opening clause, quoted at (1), to read "If a contract has been validly concluded...". The formal statement of the decision by the Commission (sitting as a Committee of the Whole) stated (VIII YB 49 para. 340, Docy. Hist. 342): "The Committee decided to introduce an express statement into the article to make it clear that it only applied to agreements which were considered valid by the applicable law". The discussion that led to this decision made clear that "applicable law" meant (para. 328) "the applicable national law". Indeed, discussion related to the Convention used the phrase "applicable law" to refer to domestic law "applicable by virtue of the rules of private international law" (Art. 7(2)), in contrast to the uniform international rules set forth in the Convention.

(2) The second part of the compromise was made in 1980 at the Diplomatic Conference. Some delegates objected that the reference to the price charged by the seller gave an unfair advantage to the seller; to meet this objection the reference to the seller’s price was replaced by "the price generally charged at the time of the conclusion of the contract". (These compromises are discussed further under Article 55, §§324325.3, infra.)

As a result of these two compromises, in the formal final votes by the Plenary of the Conference, Article 14 (then draft article 12) was adopted by 41 votes to none with 5 abstensions and Article 55 (then draft article [page 154] 51) was adopted by 40 votes to 3 with 5 abstentions. O.R. 205, 211, Docy. Hist. 740, 746.

In view of this over-all compromise, including the concession to the domestic law of those States that make provision for the price an element of contract validity, it is quite impossible to conclude that Article 14 imposed such a rule of invalidity on all States that adopt Part II of the Convention.

§137.7 (1) Consequences of Invalidity for Lack of Provision for Price

Finally, let us face some of the consequences of holding that the price provision of Article 14(1) reaches beyond the interpretation of the "offer" and invalidates transactions where the parties, by words or conduct, show their agreement to be bound. The consequences can be serious when the seller manufactures or transports goods or when the buyer relies on expected supplies for resale or production; even more serious consequences can result when, in reliance on their agreement, goods are supplied, accepted and put into use.

Part III of the Convention (Arts. 25–88) is premised on the existence of a contract (Arts. 30, 53); denying validity to the agreement deprives the parties of all of the rights provided by the Convention. For example, the seller may not recover the price (Arts. 35, 62) or avoid the "contract" for breach and recover the goods for non-payment (Arts. 64(1), 81(2)). The buyer loses protection of rules on the required quality of the goods (Art. 35) and the right to recover the damages caused by defective goods (Arts. 45, 74). The ultimate irony is that in many situations (e.g., questions as to non-conformity and recovery of damages) the price of the goods is irrelevant.

§137.8 (a) Conclusion

  Article 14(1) provides that a communication that does not state or make provision for the price is not an "offer" so that a reply "I accept" does not close a contract. However, Article 14(1) does not bar the parties from concluding a contract by express agreement or by conduct (e.g., by shipping, receiving and using goods) that shows their "intention...to be bound" (Art. 14(1)). The only rule of "validity" with respect to agreement on price results from the opening phrase of Article 55 which defers to applicable domestic law.[12][page 155]

(3) Decisions Relating to Definiteness and Price

(a) Prior to Delivery and Acceptance

Questions concerning the existence of a contract arise most frequently prior to shipment and receipt of the goods. For example:

(1) ARB: Russian Fed.; Trib. of Int. Comml. Arb., Ch of Comm., 309/1993, 3 March 1995. Negotiations between Ukranian S and Austrian B were completed except for S’s statement that the price would be agreed "ten days prior to the new year". B agreed to this provision but the agreement on price did not occur. S refused to ship; B sued for damages. The tribunal rejected B’s claim, invoking CISG Articles 14 and 55. Article 55 (price generally charged at conclusion of contract) was not applicable since the agreement contemplated that the parties would agree on the price. CLOUT 139, UNILEX D. 1995-7.2.

(2) HUNG. Sup. Ct., Gf.I.31 349/1992/9; 25 September 1992. S made B alternative offers for B’s purchase of aircraft engines, indicating the price for only some types of engines. B agreed to this proposal, but later rejected the contract. No engines were delivered; S sued for damages. Held, reversing the lower court, that the offer was not sufficiently definite: there were "no market prices" for aircraft engines. CLOUT 53, UNILEX D. 1992-20.

(3) GER. OLG Frankfurt a M., 10 U 80/93, 4 March 1994. B invited S to make an offer for lists of screws. S sent lists and prices; B disagreed as to prices for some items. S did not ship. B sued for either delivery or damages. B’s claims were rejected: there was neither delivery nor contract.. CLOUT 21, UNILEX D. 1994-7.1.

(4) ARB. ICC (Paris) 8324/1995. In sale of manganese, parties agreed on a provisional price (which B paid), subject to revision based on the price B received on resale. In view of prior usage of the parties, B was required to pay an additional sum. (French CISG law was applied.) UNILEX D. 1995-35.

(5) SWITZ. Handelsgericht K. Aargau, OR. 96 0001 3, 26 September 1997.  B (Swiss) ordered cutlery from S (Ger.). S shipped the cutlery to B. B rejected the goods. The parties had not agreed on the price. The court awarded damages to S: the contract was sufficiently definite. CLOUT 217.

See also: Murray, D.E., Open Price in World-Wide Setting, 89 Comp. L.J. 491-500; Bonell/Ligouri, ULR (1996-1) 158-160 (citing cases).[page 156]

(b) Goods Received; Buyer Obliged to Pay

The following decisions illustrate the view that, in spite of failure to agree on the price, buyers are bound to pay for goods they have accepted.

(1) AUSTRIA, OG (Sup. Ct.), 2 Ob 547/93, 10 November 1994. Furs, of a range of prices based on quality, were received and resold by B. B was bound to pay; the decision stressed B’s conduct following delivery. CLOUT 106, UNILEX D. 1994-29.

(2) FR. CA Grenoble, Veyron v. Ambrosio, RG 93/1613, 26 April 1995. Goods delivered to B, without prior agreement on price, were considered accepted at the price stated by S—a "reasonable understanding" under Art. 8(2) & (3).  See also: FR. C. de Cass. (Sup. Ct.), Fauba v. Fujitsu, 4 January 1995 (on appeal from C.A. Paris, 22 April 1992). Arrangement that the price was to be "modified by market trends" did not bar contract. CLOUT 155, UNILEX D. 1995-1. See also F. Ferrari, 15 JLC 15, n.79 (1995) (references to numerous studies on contract formation).

Queries re Analysis and Organization. Should cases in which B receives and accepts goods not be considered here under Part II. Formation of the Contract? Surely, the receipt and acceptance of goods shows that a commercial transaction (neither gift nor theft) has occurred. In this setting, the relevant issues center on questions such as defects in the goods, non-payment or damages—matters governed by Part III (Articles 25–88). In that setting we shall return to Article 55, which governs cases where a contract has been concluded, but does not "make provision for determining the price."[page 157]

FOOTNOTES: Chapter on Article 14

1. Art. 14 is the same as Art. 12 of the 1978 Draft Convention. Cf. ULF 4. Legislative history of Arts. 14 and 55; I YB 194, VI YB 73–74, VIII YB 48–49, IX YB 38–39, O.R. 21, 275–277, 292–295; Docy. Hist. 32, 151–152, 341–342, 372–373, 411. 496–498, 513–516.

2. The Convention’s numerous provisions calling for communications to enable a party to know where the other stands suggest a "general principle" (Art. 7(2), supra at §100) that a party may not take advantage of ambiguity when an inquiry could readily remove the doubt. See also the "good faith" provision in Art. 7(1), supra at §95.

3. I Schlesinger, Formation 101–103 (general report); 647–679 reports on the law of U.S.A., Eng., Australia, Can., N.Z., France, Ger., Switz., India, Italy, Poland and Rep. So. Af.). The most famous common law decision is Carlill v. Carbolic Smoke Ball Co., (1893) 1 Q.B. 256 (C.A.) which gave legal effect to an advertisement offering a specified sum to anyone who caught influenza after using a "smoke ball."

4. I Schlesinger, Formation 668 (F.R.G. and Switz.), 678 (So. Af.); Corbin §§25, 28; Restatement Second of Contracts §26; Farnsworth, Contracts 129.

5. W/G 8 paras. 52–54, VIII Yearbook, 78; W/G9 paras. 163–173, IX Yearbook 73, 74; UNCITRAL XI Annex I, paras. 75–78, IX Yearbook 37. Docy. Hist. 279–280, 305–306, 371.

6. If such a catalogue distribution were held to be "addressed to one or more specific persons," the catalogue may not constitute an offer under the basic "intent to be bound" test of paragraph (1). And even if the catalogue was an "offer," orders for goods listed in the catalogue may not be timely under Art. 18(2), which requires acceptance within a reasonable time, due account being taken of the circumstances of the transaction...." See Art. 18, infra at §161.

7. Weistart, 1973 Duke L. J. 599; Farnsworth, Contracts 528–529; (USA) UCC 2–306.

8. See the Prototype Export Transaction, §132.1, note 2, supra.

9. The one exception in Article 6 to the principle of freedom of contract involves domestic requirements of form (such as a signed writing) that, under Articles 12 and 96, may be preserved by a reservation obviating the no-formality rule of Article 11.

10. As has been noted (§131, supra), Article 92 permits a Contracting State to declare that it will not be bound by Part II or Part III. As of the time of writing no State has excluded Part III; the Scandinavian States have excluded Part II.

11. For the full text of the Working Group draft (then draft article 36), the amendment made by UNCITRAL (1977) and the understanding as to its meaning see VIII YB 48–49, Docy. Hist. 341–342.

12. For a fuller development see Honnold, International Sales Law and the Open-Price contract, II Barrera-Graf Festschrift 915. See also vC-S Kommentar (1990) Art. 14, pp. 128–136 (Schlechtriem); Art. 55, pp. 519–521 (Hager); Adami, Open Price Contracts in CISG, 2 Int. Bus. L. J. 103 (1989) (parallel text English and French); Fortier, Le prix dans [CISG], 117 J. D. I 381 (1990) (French). See also references under Art. 55, infra, at §325.3, note 5.

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