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Reproduced with permission from 6 Temple International and Comparative Law Journal (1992) 193-215

Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary

Burt A. Leete [*]

I. Introduction

Trading partners in the international community have sought some degree of uniformity in international business transactions for many years. This is particularly true with regard to contracts for the sale of goods. In 1930, the International Institute for the Unification of Private Law ("UNIDROIT") decided to create two drafts on this subject which were then distributed to governments for comment through the League of Nations.[1] The work was interrupted from 1939 to 1951 by the Second World War but two draft texts were finally presented to the 1964 Hague Conference.[2] One draft was a Uniform Law on the Formation of Contracts for the International Sale of Goods ("ULF"); the other was a Uniform Law on the International Sale of Goods ("ULIS").[3] These uniform laws were adopted by the Hague conference and annexed to the two Hague Conventions.[4] Although both were subsequently entered into force, they were never widely adopted.[5]

In 1965, the United Nations established the United Nations Commission on International Trade Law ("UNCITRAL").[6] Among its charges, UNCITRAL was authorized to create a new uniform law for the international sale of goods.[7] UNCITRAL formed a working group of fifteen members which drafted the Convention on Contracts for the International Sale of Goods ("CISG").[8] The final draft was based on revisions of the ULF and the ULIS.[9] After a remarkably increased level of participation in the draft of the CISG than in previous attempts to draft a uniform sales law,[10] the CISG was adopted in April 1980 at the United Nations Conference on Contracts for the International Sale of Goods; the CISG entered into force on January 1, 1988.[11] This broad representation of states and the resulting success in ratification suggests that the CISG will be widely adopted; to date, it has already been ratified or adopted by thirty-four countries.[12] The United States ratified the CISG on December 11, 1986 and the CISG consequently came into force on January 1, 1988.[13]

The rules of contract formation in the commercial arena have been dramatically liberalized in the United States through the adoption of the Uniform Commercial Code ("U.C.C.") and its amendments.[14] However, since the U.C.C. and its predecessors [15] were first written, American businesses have become increasingly involved in international trade. As a result, the contracts governing these international transactions may be subject to interpretation under laws other than the U.C.C. In some cases, these laws may take an approach to contract formation which is more similar to the old common law than to the U.C.C. This article will demonstrate that in many cases (although certainly not all) the CISG is less flexible than the U.C.C. with regard to the rules of contract formation.

The CISG has made some significant changes in the law regarding contract formation and it is likely that in the next several years it will play an increasingly significant role in the drafting of contracts for the international sale of goods. There are several reasons for its developing role beyond the fact that a large number of countries are considering or have already adopted the CISG. For example, if the parties do not make a choice of law as part of the contract, the CISG will apply.[16]

Although one's first impulse might be to exclude the application of the CISG and operate under the familiar domestic law of the United States, the demands of one of the contracting parties may preclude this option. In the event of a dispute as to the appropriate choice of law for the contract, the CISG is a useful alternative for resolving the problem. As people become more familiar and comfortable with the CISG, it will be used more frequently. However, the choice to use it should not be made without serious thought. Although the CISG is only slightly different than the U.C.C." and "the Convention is basically common law in substance," there are nevertheless significant differences between the two uniform laws.

This article will demonstrate that because of significant influence by civil law and other countries over the development and drafting of the CISG, particularly with respect to the process of contract formation, there are a number of pitfalls that a contracting party may wander into if relying solely on one's knowledge of American law. Specific sections of the CISG will be contrasted with the relevant parts of the U.C.C. and the common law approach to contract formation. The CISG's legislative history will be discussed in order to provide a basis for predicting and understanding how the relevant CISG provisions may be interpreted by courts in this country and, perhaps more importantly, the courts of countries with different legal systems. The paper concludes that in some ways the CISG is a step back toward the more structured approach of contract formation under the common law rather than a step in the direction of a more flexible approach of the U.C.C. as exemplified by Section 2-207.[19]

II. Overview of the CISG

As a result of the United States' ratification of the CISG, contracts made among the ratifying states after January 1, 1988 are now subject to the uniform rules for international sales.[20] The CISG only applies to contracts for the sale of goods between parties that have both ratified the Convention and whose places of business are in different countries.[21] However, it is possible that the parties may designate the law of a particular country in their contract as the applicable law and thus avoid the application of the CISG.[22] Finally, where the CISG is silent, a contract dispute that is otherwise subject to the law of a state in the United States will be interpreted under the U.C.C.[23]

Not all subjects addressed by the U.C.C. are treated by the CISG; examples are contract validity,[24] seller liability for death or personal injury caused by defective goods,[25] capacity of the parties,[26] and commercial fraud.[27] In addition, the CISG does not apply to sales of goods purchased for personal, family, or household use unless the seller either knew or should have known that the goods were bought for that purpose.[28] Other subjects excluded from the application of the CISG are the sale of electricity,[29] ships, and aircraft.[30] The CISG states specifically that it applies to contracts for the supply of goods which are manufactured or produced.[31] It does not apply to contracts where a party supplies a preponderant part of its obligations by furnishing "goods" that are actually services, like labor.[32] This approach seems to be consistent with the U.C.C. application.

Finally, a brief comment regarding oral contracts and the Statute of Frauds is appropriate. American lawyers are accustomed to the U.C.C. provision which states that, subject to a number of exceptions, oral contracts for the sale of goods require a writing "sufficient to indicate that a contract for sale has been made between the parties."[33] The CISG specifically states that contracts for the sale of goods are enforceable without the need for any writing whatsoever.[34] In ratifying the CISG, the United States did not oppose this exclusion to the Statute of Frauds.[35] Therefore, when the CISG is applicable to those in the U.S. who are contracting for the sale of goods in the international market, the U.S. party must abide by the approach used for enforcing purely oral contracts in Great Britain and many other civil law countries.

A. The Offer

1. Price and Definiteness

The CISG is more restrictive and at the same time less comprehensive than the U.C.C. in its treatment of the offer -- the first part of the contract formation process. There is some debate concerning the degree of definiteness that the CISG requires for a statement to qualify as an offer, particularly concerning the specificity of price. At least part of the ambiguity of the CISG in this area stems from the effort to compromise the contrasting approaches taken by different legal systems.

The common law requires a statement to be "definite" in order to qualify as an offer.[36] Statements which do not contain the price or quantity of goods are subject to being construed as lacking sufficient definiteness to qualify as an offer.[37] Similarly, the French civil law system, for instance, provides that a contract of sale which does not give a definite price is null and void.[38] During the negotiations at the Convention, socialist countries also desired specificity with regard to price; further, developing countries did not favor open price terms because of the uncertainty as to terms regarding raw materials.[39]

The Uniform Commercial Code, on the other hand, has a number of provisions that liberalize the common law rule so that the offer need not specifically state a number of items, such as price [40] and quantity,[41] which would be fatal to the formation of a contract if not addressed under the common law. The U.C.C. states that "[e]ven though one or more of its terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy."[42]

As a result of these two positions, the United Nations Conference enacted language stating that "[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."[43] Dissatisfied, the United States found this language to be too restrictive and attempted to amend Article 14(1) to state "[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."[44] The United States' proposal, consistent with the approach taken by the U.C.C., would have deleted any reference to the necessity of a provision to determine the quantity and the price.[45] However, similarly dissatisfied, other UNCITRAL members found Article 14(1)'s language to be too permissive. In an effort to strengthen the language to require at least some reference to price and quantity, the United Kingdom and Norway submitted amendments with language stating that "[a] proposal is sufficiently definite if it contains terms relating to matters such as the goods, the quantity or the price which enable the offeree to decide whether or not to accept the proposal."[46] Both the United States' amendment, and those of other countries, were rejected.[47] The intent of these amendments seems to have been to require a proposal mandating more specificity with regard to quantity and price than the language that was enacted. However, the result is something of a compromise between the two positions.

There was also some controversy among the participants at the 1980 Convention regarding the required amount of definiteness.[48] The conflict about the degree of definiteness required for an offer was not resolved by amending Article 14(1), which is located in the section of the CISG dealing with contract formation, but rather by enacting Article 55, located in the section dealing with buyer obligations.[49] The purpose of the original language of Article 55 proposed by the drafters was to provide "a means for the determination of the price when a contract has been validly concluded but the contract does not state a price or expressly or impliedly make provision for its determination."[50] Several countries favoring language requiring greater specificity as to price made attempts to eliminate this provision but those amendments were rejected.[51]

The effect of Article 55 on the requirement for the statement of a definite price in the offer is the subject of some debate. Some argue that when Articles 14(1) and 55 are read together, there can be an enforceable contract without stating the price while others believe that since Article 55 begins with the phrase "[w]here a contract has been validly concluded," the provision does not apply in the case where an offer does not refer to the price of the goods.[52] The circular reasoning of the latter argument is that since Article 14(1) requires a statement of price in order to have an offer, the language of Article 55 has no effect because there cannot be a "contract . . . validly concluded" unless there is an offer which in turn requires some explicit or implicit reference to price.[53]

Until subsequent case law clarifies the issue, perhaps the most significant point for drafters of contracts in this area to note is that the matter is open to question. The approach taken by the CISG on this matter is certainly far different from that taken by the U.C.C.. For instance, there is no provision in the CISG similar to Section 2-305 of the U.C.C. regarding open price terms. This section makes it quite clear that a contract can be concluded if the parties have the requisite intent, "even though the price is not settled."[54] In fact, under the U.C.C. a contract can be concluded if "nothing is said as to price."[55] This is far different from CISG Article 14(1) which requires an implicit or explicit reference to price.[56] Despite Article 55, and given that all of the proposed amendments to Article 14(1) were rejected, a reasonable interpretation of the CISG is that the offer need not specifically state price but must make reference to a standard for determining it.[57] Thus, a communication could be considered an offer under the U.C.C. even though there is no reference as to price. Conversely, under the CISG, the communication would not ripen into a contract because of the omission of a standard for determining price.

Despite this contrast, it seems that even under the CISG a specific price need not be stated, as long as a means for determining it exists. Clearly, a reference to a catalogue would make it implicit that the buyer is willing to pay the catalogue price.[58] The Commentary on the Draft Convention on Contracts for the International Sale of Goods clarifies the intent of the drafters when it states the following in regard to what was eventually adopted as Article 14(1):

"It is not necessary that the price could be calculated at the time of the conclusion of the contract. For example, the offer, and the resulting contract, might call for the price to be that prevailing in a given market on the date of delivery, which date might be months or even years in the future. In such a case the offer would expressly make provision for determining the price.[59]

"Where the buyer sends an order for goods listed in the seller's catalogue or where he orders spare parts, he may decide to make no specification of the price at the time of placing the order. Nevertheless, it may be implicit in his action of sending the order that he is offering to pay the price currently being charged by the seller for such goods."[60]

One might assume that the interpretation of a contract which leaves the issue of price open will receive an unfavorable reception in those countries where the basic contract law requires specificity as to price. In other countries, such as the United States, where the courts are accustomed to dealing with contracts where price or output remain open, the outcome might be more favorable. In any event, if a contract is to be interpreted under the CISG, the prudent drafter will certainly make some reference to the price in the offer.

2. Quantity

Article 55 of the CISG refers only to price, not quantity.[61] However, Article 14(1) does refer to a "provision for determining the quantity and the price."[62] Thus, in order to be definite enough to qualify as an offer, a statement must include a provision regarding this element. Requirements and output contracts, typically used to specify quantity, are certainly not unique to the common law and are recognized by most legal systems in one way or another.[63] Although the U.C.C. specifically approves of requirements and output contracts,[64] the CISG makes no reference to them. However, since these contracts deal with quantity, their terms are sufficiently definite, under a reading of Article 14(1), to also be covered by the CISG. The comments to the draft of the CISG make clear that the language of Article 14(1) contemplated the validity of requirements and output contracts. The commentary states:

"[A]n offer to sell to the buyer 'all I have available' or an offer to buy from the seller 'all my requirements' during a certain period would be sufficient to determine the quantity of goods to be delivered. Such a formula should be understood to mean the actual amount available to the seller or the actual amount required by the buyer in good faith."[65]

Thus, any valid contract under the CISG should include, preferably in the form of requirements or output contracts, stipulations as to the quantity of merchandise.

3. Invitation to Deal or Negotiate

One issue that often arises regarding contractual intent concerns whether advertisements or circulars are offers or merely invitations to deal. Common law countries typically treat an advertisement sent to the general public as an invitation to deal or negotiate.[66] The U.C.C. has no provision that derogates from the position of the common law relating specifically to this point.[67] In some other legal systems, a "public offer" can be made by an advertisement for the sale of goods to the public at large by displaying goods in a window or other similar situation.[68] The courts in these systems may then determine that a valid offer exists under the circumstances. However, no contract would result under the common law because no intention to contract is expressed by an advertisement to the general public.[69] This is not to say that an advertisement can never result in an offer under the common law but that in order to result in an offer, an intent to enter into a contract must be present.[70] In some other legal systems, however, offers must be restricted to one or more specific people.[71]

The CISG takes a modern approach and states that an offer must be directed to one or more specific persons unless the person making the proposal clearly indicates an intention to make an offer.[72] One may make an offer to the public through an advertisement by stating that it "constitutes an offer" or that the goods "will be sold to the first person who presents cash."[73] Attorneys in the United States should feel fairly comfortable with this approach, which makes clear that mere advertising circulars would not be construed as an offer, as it is consistent with U.S. law.[74] However, some care must be taken with the technicalities. The drafters of the CISG indicated the possibility of different outcomes where "an advertisement or catalogue of goods available for sale sent in the mail directly to addresses would be sent to 'specific persons,' whereas the same advertisement or catalogue distributed to the public at large would not."[75] One can imagine a scenario where there has been some discussion between the parties at the end of which the seller sends a catalogue directly and specifically to a buyer. In that situation the courts might construe the sending of the catalogue as an offer under the CISG; under common law, however, a greater expression of intent to enter into a contract might be required.

III. Communication, Revocation, and Withdrawal of the Offer

A. Communication

There is little difference between the legal systems in the rules concerning communication of the offer. The CISG contains a specific provision making the communication of the offer effective when it "reaches" the offeree.[76] Under the CISG, an offer "reaches" the addressee when it is "made orally to him or delivered by any other means to him personally, to his place of business or mailing address or, if he does not have a place of business or mailing address, to his habitual residence."[77] Although the U.C.C. does not have a similar provision, this language seems to be consistent with the common law approach to the communication of the offer.[78] Thus, under both common law and the CISG, the offer can only be accepted after it has been communicated to the offeree.[79]

B. Revocation

The CISG is significantly different from the U.C.C. and common law on the issue of revocation. An examination of revocability of an offer under the CISG, the U.C.C, and the common law reveals a lack of consistency among the three systems. Ultimately, there may not be a great difference between the CISG and the common law approaches. However, there may be confusion due to the different treatment revocability receives in common law and civil law countries.

Under the common law, an offer is presumed to be revocable at any time, subject to some exceptions, until it is accepted by the offeree.[80] This is true even if the offeror states that an offer must be accepted within a specific time period, or expressly states that the offer is not revocable.[81] The lawyer operating in a common law country would assume that the statement of a time period for acceptance results in the offer being terminated at the expiration of that time. Furthermore, in order for a promise to hold an offer open for a period of time to be enforceable, consideration from the offeree is generally required.[82] The U.C.C. approach to revocation also generally presumes an offer to be revocable until it is accepted by the offeree.[83] However, the U.C.C. creates an exception for "firm offers" made by merchants.[84] Section 2-205 provides for the enforcement of promises, made by merchants, to keep offers open for a period of time, without consideration, provided that such a promise is made in writing and meets certain other restrictions.[85]

The civil law approach to revocability is considerably different. An offer that states a time limit for an acceptance is generally treated as an irrevocable offer by the civil law.[86] Likewise, unless otherwise indicated, an offer with no time limit for acceptance is treated as irrevocable for a reasonable time.[87] Thus, if the offeror states that his or her offer must be accepted within "twenty days," the civil law lawyer would consider the offer to be irrevocable for that period.

The common law lawyer, however, would treat the same offer as revocable at any time before acceptance.[88] In fact, the common law lawyer would generally treat the offer as revocable even if there were a promise to keep it open for a period of time, unless consideration was given by the offeree.[89] In this respect the U.C.C., with regard to contracts for the sale of goods, makes a distinction between an "open offer," which can be revoked before acceptance, and a "firm offer," which cannot be revoked during a stated or reasonable period of time.[90] No such distinction is made in civil law countries.[91]

The CISG adopts the common law approach to revocation with two exceptions.[92] The first exception results from a compromise with the civil law countries; Article 16(2)(a) provides that an offer is irrevocable where the offeror states that an acceptance must be made within a fixed time period.[93] Therefore, the offer stating that acceptance must be made "within twenty days" would be irrevocable for that period. There has been considerable discussion concerning the confusion that will result in this area. Some commentators contend that the language of Article 16(2)(a) still allows for revocation in cases arising between two common law countries even where an offer states a fixed time for acceptance.[94] However, the comments issued with the draft of Article 16(2)(a) state clearly that "this provision does not require a promise on the part of the offeror not to revoke his offer nor does it require any promise, act or forbearance on the part of the offeree for the offer to become irrevocable."[95]

This provision of the CISG might have been written more clearly to avoid such confusion. However, the underlying problem with this language may stem from the drafters' attempt to reach a compromise among the opposing legal traditions. When the contract is drawn by a draftsman who is familiar with the CISG and its history, prudence would indicate that an intent to make an offer irrevocable will be stated clearly. The problems that are likely to arise will occur where the contractual process is carried on by parties from differing legal traditions who are not aware of the history of the CISG. However, if one reads the language of Article 16(2)(a), coupled with the comments to earlier drafts, it is hard to accept the argument that an offer which states a time for acceptance, without more, is still amenable to revocation within that period, even in a court steeped in the common law tradition.

The second exception to the common law approach adopted by the CISG is that an offer cannot be revoked "if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer."[96] While this provision seems to have aspects of an estoppel approach under the common law, it really goes somewhat farther. The comments to this section state that the provision would be applicable in the circumstance where an offeree merely needs time to investigate whether the offer should or should not be accepted.[97] Under the common law, an offer would not be irrevocable merely because the offeree needs time to investigate the feasibility of acceptance.[98] But the comments to Article 14 of the CISG draft (adopted as Article 16 of the CISG) indicate that the offer should not be revocable in this situation even where the offer does not specify irrevocability.[99] This is consistent with the approach of many civil law countries that an offer is presumed to be irrevocable for a reasonable time for the offered to consider it.[100] The differences between the common law and civil law approaches highlight the potential for misunderstanding between contracting parties with different legal traditions.

C. Withdrawal of the Offer

A "withdrawal" of an offer under the CISG differs from the concept of "revocation." Under the common law, the word revocation also includes the concept of withdrawal.[101] However, the CISG takes an approach similar to the civil law and makes a distinction between the terms.[102] Article 15(2) provides that "[a]n offer, even if it is irrevocable, may be withdrawn if the withdrawal reaches the offeree before or at the same time as the offer."[103] The provision is of little consequence unless the offer is otherwise irrevocable and the offeror changes his or her mind after the offer is dispatched but before it "reaches" the offeree. The CISG provision makes clear that even an irrevocable offer may be withdrawn before it becomes effective by reaching the offeree.[104] All that is required to do so is that the communication withdrawing the offer reach the offeree before or at the same time as the offer.[105] A similar result would be reached under the common law.[106]

IV. The Acceptance

A. Manner and Time of Effectiveness of Acceptance

There are some significant differences between the approaches taken to acceptance by the CISG, the U.C.C., and the common law. The CISG states that "[a] statement made by or other conduct of the offeree indicating assent to an offer is an acceptance. Silence or inactivity does not in itself amount to acceptance."[107] This flexible approach to the method of acceptance is similar to that taken by the U.C.C.[108] However, important differences exist in the approach taken by the CISG, the U.C.C., and the common law with regard to when an acceptance is considered effective where the acceptance is either mailed or made by performance.

The CISG rejects the common law rule that when mailing is the authorized method of acceptance and the offeror has not stated otherwise, an acceptance is considered effective when mailed.[109] The CISG states instead that an acceptance is not effective until it reaches the offeror.[110] While the effect of the common law rule is to place the risk of a lost acceptance on the offeror, the effect of the CISG approach is to adopt the approach taken by many civil law countries and place the risk on the offeree.[111] Thus, the CISG is consistent in adopting a receipt theory as opposed to a dispatch theory for all the communications concerned with contract formation.[112] In analyzing the CISG position on acceptance, it is important to recall that the CISG takes a broader approach to the irrevocability of offers than does either the U.C.C. or the common law. It also provides that an offer that is not irrevocable, "may be revoked if the revocation reaches the offeree before he has dispatched an acceptance."[113] Because of the approach taken by the CISG on revocability of the offer, the adoption of the receipt theory does not make the practical difference that it might otherwise.

However, the adoption of the receipt theory is not totally irrelevant. For example, assume that an offeree has dispatched a letter accepting an offer and changes his mind before the acceptance reaches the offeror. If the offeree dispatches a rejection that reaches the offeror prior to the arrival of the offer, a contract does not result under the CISG.[114] This would be true under the CISG even for irrevocable offers.[115] In contrast, a common law rejection does not terminate an irrevocable offer.[116]

The CISG also treats acceptance by performance in a manner somewhat different from what the common law lawyer might expect. Both the CISG and the U.C.C. provide that an offer may be accepted by performance.[117] The CISG provides that acceptance by performance may be made without notice to the offeror and that the acceptance is effective when the act is performed.[118] Article 18(3) states:

"[I]f, by virtue of the offer or as a result of practices which the parties have established between themselves or of usage, the offeree may indicate assent by performing an act, such as one relating to the dispatch of the goods or payment of the price, without notice to the offeror, the acceptance is effective at the moment the act is performed, provided that the act is performed within the period of time laid down in the preceding paragraph."[119]

Note that this constitutes an exception to the receipt theory of acceptance otherwise adopted by the CISG. Clearly, where performance is authorized as a mode of acceptance either by the offer, by prior practices, or by trade usage, the offer is accepted once performance is begun as in the case of "dispatch of the goods."[120] Hence, while an offeree bears the risk of loss of a communicated acceptance, this is not the case where the mode of acceptance is by performance, such as shipment of the goods. One commentator states that the paragraph is not as significant as it may seem at first because sellers in practice will typically notify the buyer that goods have been sent; in any event, if an acceptance is by communication, the speed of telex and other electronic means is so fast, that "any loss of time is negligible."[121] But, as noted below, there is no requirement of notice under the CISG and one cannot presume that notice will be given in all cases.

Perhaps more significant is the difference in the requirement of notice of performance under the U.C.C. and the CISG. The U.C.C. requires notice to the offeror, within a reasonable time, that performance has begun or the offeror may treat the offer as having lapsed.[122] The CISG does not require notification to the offeror that the offeree has begun performance.[123] The United States attempted to amend this provision to make it consistent with the U.C.C. but later withdrew the amendment.[124]

The practical impact of this provision can be seen in the situation where a buyer makes an offer to purchase goods. The seller may go to considerable expense in assembling the ordered goods, packing them for shipping and so on. If we assume that the seller is ready to ship the goods, but has not yet notified the buyer of acceptance, the buyer may still revoke his offer under the U.C.C. but not under the CISG.[125] An American seller who is not familiar with the CISG will most likely have given the notice required by the U.C.C. so the result will be the same.[126] On the other hand, an American buyer who believes the notice requirement of the U.C.C. gives him more flexibility in the bargaining process, should attempt to make the law of the U.C.C. applicable when making the offer to purchase goods, thus requiring notice by the seller within a reasonable time.

B. Acceptance With Different or Additional Terms

Few subjects have received as much attention on the subject of contracts for the sale of goods as the so called "battle of forms" problem. More specifically, the trouble stems from the situation where the purported "acceptance" by the offeree contains new or different terms than were in the offer.[127] The subject is complex and justifies much discussion because of the different approaches taken by common law, Section 2-207 of the U.C.C., and the legal systems of other countries. In order to understand the approach finally taken by the drafters of the CISG, which differs from the U.C.C. in some significant ways, a brief discussion of the various approaches is in order.

1. The "Classical System"

The approach historically taken by the common law is the well known mirror image rule, which requires the acceptance to be in the exact terms as the offer.[128] If it is not, a counter-offer results which is construed as an offer.[129] In order for a contract to result, the mirror image rule requires the parties to continue to make counter-offers until there is total agreement.[130] This has become known as the "classical system."[131] In recent years, the common law approach in the United States has relaxed somewhat but it still requires basic agreement between the offeror and offeree on the terms of the contract.[132] The strict common law approach is still generally the rule in England and France.[133] Germany, on the other hand, takes an approach similar to that of U.C.C. § 2-207, with respect to acceptance with different or additional terms.[134]

Criticism of this structured approach to contract formation, at least for contracts for the sale of goods, centers around the fact that today much of the contracting is done on a high volume basis with exchange of standardized forms between buyer and seller. The classical system is simply not geared to the modern way that business is conducted. The common law approach is better suited to an age where there were fewer contracts of this type and much of the negotiation was done face to face for each individual contract. Today, at least with large businesses, contracts are made in what may be characterized as a production line approach.[135] In this situation, the parties often clearly intend to enter into a contract even though all the terms have not yet been agreed upon. The parties act in a manner that indicates their intent that the "deal is on," even though differences in the fine points of the agreement have not yet been resolved.[136] It is this situation that the strict mirror image rule is not equipped to handle.

Under the more rigid classical approach, the contract that results most likely will have the terms contained in the "last shot" fired by the party in an exchange of forms.[137] If the offeror (buyer) orders with a form containing his terms and the offeree (seller) invoices on a form with differing terms, under the common law no contract results.[138] No contract will result under this classical approach as long as each party replies to the other with a different form. Accordingly, a seller may ship with a "shipment confirmed" form that differs from the seller's form and, unless the buyer accepts the shipment, no contract results. If the buyer does accept the goods, a contract is formed as a result of his or her acceptance of the goods and the terms would be those stipulated by the seller.[139] It is unlikely that an executory contract will result because the parties never come to an agreement on the terms of the contract. Generally, there is no problem and the goods are shipped and paid for. However, in a market where prices are volatile and the parties want to allocate the risk by contract prior to performance, the classical approach has severe limitations.

2. The "Deal Is On"

In Section 2-207, the drafters of the U.C.C. attempted to relax the rigidity of the common law by allowing for the formation of contracts where the acceptance deviates in some way from the offer and even where the parties may not be in total agreement as to all the terms.[140] Section 2-207 seems to take a "deal is on" approach to the contract formation process. Thus, a contract can result even where the acceptance does not replicate the exact terms of the offer and contains different or additional terms.[141] The additional terms become part of the contract for merchants unless one of three situations occur: the offer limits acceptance to the terms of the offer; the terms materially alter the offer; or the offeror timely notifies the offeree of objection to the additional terms.[142] Because materiality is not specifically defined by the U.C.C., the courts have some flexibility in interpreting the additional terms.[143] Unlike the mirror image approach, the likely result under the U.C.C. is that a contract will be formed even when the forms exchanged do not "match up."

The U.C.C. also provides for the situation in which a contract results from performance even though a contract did not result from the exchange of documents between the parties.[144] For example, the order form and invoice of the parties may contain terms that are not compatible because each materially alters the other party's terms in such a way that it precludes the formation of a contract under U.C.C. § 2-207(2). However, the buyer may accept some part of the performance tendered by the seller while the documents are being exchanged, suggesting that a contract exists. The difficulty is determining what the terms of the contract actually are. The U.C.C. attempts to provide a solution by taking the terms that the writings of the parties agree upon and adding to them any applicable U.C.C. provisions.[145] As a result, the U.C.C.'s various provisions as to delivery, risk of loss, payment, trade usage, and so on, would be used in arriving at the terms of the contract.

The effect of this approach is to hold parties to a contract when it is clear from their conduct that a contract was intended. The contract is not escapable merely because there is no agreement or identical terms. As a result of Section 2-207(2) of the U.C.C., the final contract may contain terms which do not reflect the intent of both or either of the parties. The justification for such an outcome is that both parties indicated by their conduct that a contract was desirable.[146]

The approach taken in the United States by the U.C.C. is a clear departure from the mirror image rule applied in other countries like the United Kingdom and France.[147] Germany, like the United States, has adopted a more flexible philosophy to the bargaining process through its court decisions.[148] The result is an approach similar to U.C.C. Section 2-207 where the parties can be bound even though they may not agree on material terms and terms may be supplied by background law.[149] The drafters of the CISG were faced with these differing philosophies in attempting to write a uniform law.

3. The CISG Compromise

As one might expect, the CISG attempts to compromise the two differing philosophies as to the treatment that should be accorded a purported acceptance that contains different or additional terms from the offer.[150] The drafters were well aware of the problems posed by the so called battle of forms. In fact, the Secretariat proposed a solution that provides for an effective acceptance when the additional or material terms are not materially different than the offer.[151] First the proposal stated the traditional rule that a purported acceptance modifying, adding to, or limiting the offer is a rejection.[152] But it also proposed that when terms are contained in a printed form that materially alters the offer, the terms become part of the contract unless they are objected to without delay.[153] The commentary to this suggestion assumed that "employees of both parties will rarely, if ever, read and compare the printed terms. All that is of importance to them are the terms which have been filled in on the forms."[154] Since the parties will normally act as though there is a contract, the proposal provides a solution as to what the actual terms of the contract are when there is performance. While this approach differs from the U.C.C., this proposal was at least more in the spirit of the "deal is on" philosophy, making for a contract when the parties, although not in agreement on all terms, actually manifest an intent to be bound.[155] Unfortunately, the drafters rejected the proposal in favor of the traditional mirror image rule.[156] While recognizing that the proposal addressed a practical problem, the drafters felt that material alterations to the offer should constitute a rejection regardless of whether they were contained in printed form.[157]

Despite the rejection of the Secretariat's suggestion, the proposed draft that came before the 1980 Vienna Convention was somewhat more flexible than that which was ultimately adopted. The draft included in the definition of material terms those that "the offeree by virtue of the offer or the particular circumstances of the case has reason to believe . . . are acceptable to the offeror."[158] An amendment by Bulgaria resulted in this clause's elimination, rendering the CISG approach even less flexible.[159]

As noted, the legislative history of the CISG clearly indicates that a flexible philosophy to contract formation, such as that contained in Section 2-207 of the U.C.C., was rejected by the drafters.[160] While the final draft of Article 19 of the CISG seems to be a compromise between the two philosophies, in reality it is not. Although Article 19(2) allows for material terms which do not "alter the terms of the offer," Article 19(3) defines materiality so broadly that it is hard to imagine a case where an additional or different term would not materially alter the offer.[161] The non-exclusive list of material terms includes matters relating to the settlement of disputes and liability of the parties as well as the price, quantity, and terms of delivery.[162] Thus, the CISG seems clearly to take an approach closer to the traditional mirror image rule than the "deal is on" philosophy of the U.C.C. With regard to the battle of forms issue, it seems clear that the party sending the last form will be the one whose terms prevail.[163]

These proposals illustrate the problems inherent in attempting to draft a uniform law for the international arena. The result is often a compromise that is less than satisfactory. In this case, while the compromise on its face attempts to preserve some degree of flexibility, in practice it has failed to do so. The result is an approach that seems to be particularly inappropriate in situations where the parties are dealing in high volume commercial dealings -- as opposed to those where there are relatively large cost items, making the individual bargaining that must take place in order to arrive at an executory contract more likely and worth while. In the typical battle of forms situation, however, the terms of the agreement will usually be the terms of the party sending the last form that is accepted by performance.[164] On the other hand, the CISG is not nearly as detailed as the U.C.C. with regard to standard terms. An approach similar to the U.C.C., which plugs standard terms into a contract that has been reached through performance, with each party having submitted forms with differing terms, might be too difficult to obtain. It would require the CISG to contain many more terms, which would be difficult to agree upon because of the widely varying legal backgrounds of the participants.

V. Affect of Choice of Law Provision

Finally, one more potential trap for the contract drafter occurs when both the offeror and offeree specify in their forms that the law of the contract is the law of their own jurisdiction. Article 1 of the CISG provides that it applies to parties from different States "(a) when the States are Contracting States; or (b) when the rules of private international law lead to the application of the law of a Contracting State."[165] Thus, if the parties have designated the law of a Contracting State as the law of the contract, then the CISG is applicable even though the parties do not specifically mention the CISG.[166] Notwithstanding this provision, the CISG is not mandatory and the parties may exclude its application or "derogate from or vary the effect of any of its provisions."[167] If these two provisions are read in conjunction with one another, it would seem that simply selecting the law of a Contracting State as the law of the contract would not exclude the CISG. The drafter would have to be more specific and state in his or her choice of law provision that the CISG is not to apply. Therefore, standard forms, sent by businesses located in two Contracting States that simply select the law of their own states as the law of the contract and do not specifically exclude the CISG, would arguably not be conflicting. Rather, they would be electing the CISG due to the application of Article 1.[168]

VI. Conclusion

In the future, the CISG will play an increasingly important role in the formation of contracts for the international sale of goods. The CISG makes significant changes to the common law, civil law, and U.C.C. processes of contract formation. In some cases, the changes reflect a more restrictive approach to contract formation. This is particularly true of the manner in which an offer must be accepted. Although there seems to be some flexibility in the variance from the offer that may be contained in the acceptance, the CISG approach is closer to the old common law mirror image rule than to the "deal is on" approach of U.C.C. § 2-207. The CISG is also arguably more restrictive than the U.C.C. with regard to the amount of definiteness required for a valid offer, although it is certainly more flexible than the common law.

While not more restrictive than the common law, the CISG also makes some important changes with regard to other aspects of the contract formation process. Of prime importance is the change in the law when a written acceptance is considered communicated. The CISG adopts a receipt theory of communication and rejects the common law dispatch theory, thus placing the burden of loss on the offeree if the communication is not delivered.

The CISG, in some cases, may be a useful alternative to the U.C.C. in choosing the law of the contract. In other cases, because of the bargaining process, there may be no choice but to agree to use the CISG as the law of the contract. Generally, where no law is selected, contract disputes will be decided under the CISG, thus making it imperative that American business people and attorneys become familiar with its provisions and the possible interpretations that the courts of foreign jurisdictions may give these provisions. The CISG is likely to have a significant impact on the contract formation process in the future and should be viewed as a useful tool in the negotiation of contracts in the international arena.


FOOTNOTES

* Professor, College of Business and Management, University of Maryland at College Park; B.S., Juniata College; M.B.A., University of Maryland; J.D., American University.

1. See United Nations Conference on Contracts for the International Sale of Goods, at 4, U.N. Doc. A/Conf. 97/19, U.N. Sales No. E.811V.3 (1981) [hereinafter CISG Conference].

2. Id.

3. Id.

4. Id.

5. Id. Only eight states ratified or acceded to the ULF: Belgium, Gambia, the Federal Republic of Germany, Israel, Italy, the Netherlands, San Marino, and the United Kingdom. Id. The ULIS was ratified or acceded to by those same states except Israel. Id. The United States was not a party to the drafting of these documents and did not ratify the conventions. See id. (U.S. not named as party to negotiations or ratification). The draft sessions of the ULF and ULIS were dominated by western Europe and thus heavily influenced by their civil law tradition. Alejandro M. Garro, Reconciliation of Legal Traditions in the U.N. Convention on Contracts for the International Sale of Goods, 23 Int'l Law, 443, 450-51 (1989).

6. See Establishment of the United Nations Commission on International Trade Law, G.A. Res. 2205 (XXI), U.N. GAOR, 21st Sess., Supp. No. 16, at 99, U.N. Doc. A/6316 (1966), reprinted in [1970] 1 Y.B. UNCITRAL 65-66, U.N. Doc. A/CN.9/SER.A/1970.

7. General Assembly Resolution Convening the Conference, G.A. Res. 33/93, U.N. GAOR, 33d Sess., Supp. No. 17, U.N. Doc. A/Conf. 97/1 (1978), reprinted in CISG Conference, supra note 1, at xiii.

8. CISG Conference, supra note 1, at 4.

9. Maureen T. Murphy, Note, United Nations Convention on Contracts for the International Sale of Goods: Creating Uniformity in International Sales Law, 12 Fordham Int'l L.J. 727, 735 (1989).

10. See Garro, supra note 5, at 444 (stating that sixty-two nations participated in the Vienna Conference). By contrast, only twenty-eight countries were represented at the 1964 Hague Conference at which the ULF and the ULIS were adopted. Id. at 451 n.29. Twenty-two of the nations were European. Id. For a discussion of the effect of greater representation among the trading countries of the world in the drafting of the CISG, see generally Garro, supra note 5 (discussing need to secure widespread acceptance of crucial CISG provisions and examining some of compromises reached).

11. United Nations Convention on Contracts for the International Sale of Goods, opened for signature Apr. 11, 1990, S. Treaty Doc. 98-9, 19 I.L.M. 671 (codified at 15 U.S.C. 5528 (1992)) [hereinafter CISG] (entered into force Jan. 1, 1988).

12. The countries are: Argentina, Australia, Austria, Bulgaria, Byelorussia, Canada, Chile, China, Czechoslovakia, Denmark, Ecuador, Egypt, Finland, France, Germany, Guinea, Hungary, Iraq, Italy, Lesotho, Mexico, Netherlands, Norway, Romania, Russian Federation, Spain, Sweden, Switzerland, Syria, Uganda, Ukraine, United States, Yugoslavia, Zambia. United Nations Commission on International Trade Law, Status of Conventions (1992).

13. Status and Promotion of UNCITRAL Texts, [1988] 19 Y.B. UNCITRAL 127, U.N. Doc. A/CN.9/SER.A/1988 [hereinafter UNCITRAL Texts].

14. See, e.g., U.C.C. 2-207 (an offeree can accept a contract offer and offer additional terms to the newly formed contract at the same time). The creation of the official text of the Uniform Commercial Code was sponsored by the American Law Institute and the National Conference of Commissions on Uniform State Laws and finished in 1952. See generally James J. White & Robert S. Summers, Uniform Commercial Code 1 (3d ed. 1988) [hereinafter White & Summers U.C.C.] (providing brief overview of nature and origin of U.C.C.). It was first adopted by the state of Pennsylvania in 1954. Id. 1, at 4. The official text was revised or amended in varying degrees in 1957, 1958, 1962, 1972, and 1977. Id. 1, at 4-5.

15. See, e.g., Uniform Negotiable Instruments Law (1896); Uniform Sales Act (1906); and Uniform Bills of Lading Act (1909).

16. See infra note 21 and accompanying text.

17. Robert S. Rendell, The New U.N. Convention on International Sales Contracts: An Overview, 15 Brook. J. Int'l L. 23 (1989).

18. Id. at 42.

19. See U.C.C. 2-207 (an acceptance can offer additional terms which are considered additions to the contract).

20. See UNCITRAL Texts, supra note 13.

21. CISG, supra note 11, art. 1. Article 1 states: "This Convention applies to contracts of sale of goods between parties whose places of business are in different States: (a) when the States are Contracting States; or (b) when the rules of private international law lead to the application of the law of a Contracting State." Id.

22. Id. art. 6.

23. See White & Summers U.C.C., supra note 14, 1 (stating that each American state has adopted some form of the U.C.C. except Louisiana, the District of Columbia, and the U.S. Virgin Islands).

24. CISG, supra note 11, art. 4(a).

25. Id. art. 5.

26. See id. arts. 1-5 (stating that capacity of parties not expressly included in Article 1 and not expressly excluded from Articles 2-5).

27. Id.

28. Id. art. 2(a).

29. Id. art. 2(f).

30. Id. art. 2(e).

31. Id. art. 3(1).

32. Id. art. 3(2).

33. U.C.C. 2-201(1).

34. CISG, supra note 11, art. 11.

35. Id. art. 12. Article 12 allows for a reservation regarding articles 11, 29, or Part II of the Convention through a declaration under Article 96. Id. The Statute of Frauds was an English common law created to avoid fraud and perjury by requiring certain contracts to be evidenced in writing instead of relying on the memory of the parties. 37 C.J.S. Frauds, Statute of 1 (1943). Most states in America have adopted the English statute in whole or in part. Id. 2.

36. See John D. Calamari & Joseph M. Perillo, Contracts 2-9, at 53 (3d ed. 1987) (stating that when content of contract too uncertain no contract formed).

37. See id. (fatal indefiniteness makes agreement void when material terms uncertain; such material terms include subject matter, price, payment terms, and quantity).

38. See Code Civil [C. civ.] arts. 1129 (Fr.) (1908) (subject matter must be certain), and 1591 (price or method of arriving at price must be agreed upon).

39. Garro, supra note 5, at 463.

40. See U.C.C. 2-305(1) (parties may conclude contract even though price not settled).

41. See U.C.C. 2-306(1) ("quantity" constitutes whatever seller can produce).

42. U.C.C. 2-204(3).

43. CISG, supra note 11, art. 14(1). Article 14 states:

"(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." Id.

The United Nations Conference enacted this originally proposed language without change. Compare Text of Draft Convention on Contracts for the International Sale of Goods Approved by the United Nations Commission On International Trade Law, U.N. GAOR, 33d Sess., Supp. No. 17, art. 12, U.N. Doc. A/33/17 (1979), reprinted in CISG Conference, supra note 1, at 6, with CISG, supra note 11, art. 14.

44. Report of the First Committee, U.N. Doc. A/Conf. 97/11 (1980), reprinted in CISG Conference, supra note 1, at 92 (quoting U.S. proposed amendment).

45. The U.S. amendment proposed to create a contractual offer when the offer was sufficiently definite and indicated the offeror would be bound by an acceptance. Id. at 92-93.

46. Id. at 92 (quoting proposed amendments of United Kingdom and Norway).

47. See supra note 44 and accompanying text.

48. See CISG Conference, supra note 1, at 92 (all amendments deal with possibility of when offer is sufficiently definite to be considered actual offer).

49. CISG, supra note 11, art. 55.

50. Commentary on the Draft Convention on Contracts for the International Sale of Goods, Prepared by the Secretariat, U.N. Doc. A/Conf. 97/5 (1979), reprinted in CISG Conference, supra note 1, at 14, 45 [hereinafter CISG Draft].

51. The USSR and France were among those offering amendments to delete Article 55. Report of the First Committee, U.N. Doc. A/Conf.97/11 (1980), reprinted in CISG Conference, supra note 1, at 82, 120-21 [hereinafter First Committee Report].

52. For a description of opposing positions taken by Professor J. Honnold and Professor A. Farnsworth, both of whom participated in the diplomatic negotiations, see Garro, supra note 5, at 464.

53. CISG, supra note 11, art. 55. Article 55 states:

"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." Id.

54. U.C.C. 2-305(1) states:

"(1) The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if

(a) nothing is said as to price; or

(b) the price is left to be agreed by the parties and they fail to agree; or

(c) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded." U.C.C. 2-305(1).

55. Id. 2-305(1)(a).

56. CISG, supra note 11, art. 14(1).

57. Peter Winship, Formation of International Sales Contracts under the 1980 Vienna Convention, 17 Int'l Law. 1, 5-6 (1983).

58. See CISG Draft, supra note 50, art. 12, cmt. 15.

59. Id. at 21, cmt. 14.

60. Id. at 21, cmt. 15.

61. CISG, supra note 11, art. 55. For full text of Article 55, see supra note 53.

62. Article 14(1) states:

"(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 provisions for determining the quantity and the price. Id. art. 14(1).

63. See CISG Draft, supra note 50, art. 12, cmt. 13 (stating that most if not all legal systems recognize contract where one party agrees, for example, to buy all the ore which is produced from a mine).

64. U.C.C. 2-306(1) states:

"A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded." U.C.C. 2-306(1).

65. CISG Draft, supra note 50, art. 12, cmt. 12.

66. See Lovett v. Frederick Loeser Co., 207 N.Y.S. 753, 755 (1924) (advertisement is invitation to enter negotiations, not an offer); Craft v. Elder & Johnston Co., 38 N.E.2d 416 (Ohio Ct. App.) (1941) (advertisement in newspaper not contract and can be withdrawn if no consideration given); Restatement (Second) of Contracts 26, cmt. (b) (1981) [hereinafter Restatement (Second)].

67. See generally U.C.C. 2-206 (no mention of advertisements as offers).

68. CISG Draft, supra note 50, art. 12, cmt. 4.

69. See Calamari & Perillo, supra note 36, 2-6(e), at 37 (stating that advertisement only invites offers or statements of intention to sell unless quantity and language of commitment are present in advertisement). See Lefkowitz v. Great Minneapolis Surplus Store, 86 N.W. 2d 689, 690 (Minn. 1957) (noting that the following was found to be offer: "1 Black Lapin Stole, Beautiful, Worth $139.50 . . . $1.00 First Come, First Served").

70. See Arthur L. Corbin, Corbin on Contracts 11, at 25 (1963 & Supp. 1992) (statement of will or intention sufficient to lead offeree to reasonably believe power to contract is conferred upon him or her is offer).

71. CISG Draft, supra note 50, art. 12, cmt. 4.

72. CISG, supra note 11, art. 14(2).

73. CISG Draft, supra note 50, art. 12, cmt. 5.

74. Craft, 38 N.E. 2d at 417 (remarking that advertisement in newspaper not offer made to any specific person and thus can be withdrawn at will and without notice unless consideration accepted).

75. CISG Draft, supra note 50, art. 12, cmt. 3.

76. Id. art. 15(1).

77. Id. art. 24.

78. Mayor of Jersey City v. Town of Harrison, 62 A. 765, 766 (N.J. 1905) (illustrating common law approach that communication of offer does not occur unless knowledge of offer acquired with express or implied intention of proposing party).

79. Id. the comments to the draft of CISG Article 22 (adopted as CISG Article 24) state: "an offeree who learns of an offer from a third person prior to the moment it reaches him may not accept the offer until it has reached him." CISG Draft, supra note 50, art. 22, cmt. 2.

80. Restatement (Second), supra note 66, 42, cmt. a.

81. Id.

82. Id.

83. U.C.C. 2-205.

84. Id.

85. Id. Firm offers under 2-205 must be signed by the offeror, irrevocable for a reasonable period of time not to exceed three months, and if the term of assurance is on a form supplied by the offeree, it must be separately signed by the offeror. Id.

86. Garro, supra note 5, at 456.

87. Id. at 455.

88. Id. at 456.

89. Restatement (Second), supra note 66, 42 cmt. a.

90. U.C.C. 2-205.

91. Garro, supra note 5, at 456. In most civil law countries, every open offer is considered a firm offer because "it expressly states that it is irrevocable or implicitly indicates so by stating a fixed period for acceptance." Id.

92. CISG, Article 16 states:

"(1) Until a contract is concluded an offer may be revoked if the revocation reaches the offeree before he has dispatched an acceptance.

"(2) However, an offer cannot be revoked:

(a) if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or

(b) if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer." CISG, supra note 11, art. 16.

93. Id. art. 16(2)(a).

94. See Garro, supra note 5, at 457 (citing history of drafting of Article 16 which also contains comments regarding the disparate treatment it could receive in common law or civil law courts); see also Report of the United Nations Commission on International Trade Law on the Work of its Eleventh Session, [1978] UNCITRAL Y.B. 41, U.N. Doc. A/CN 9/SER.A/1978 (stating that "the mere fact of stating a time for acceptance would not automatically lead to the result that the offer was irrevocable, if, under the circumstances of the case, such a result was not intended" and "where a merchant from one common law country made an offer to a merchant from another common law country, the fixing of a time for acceptance without more would not indicate that the offer was irrevocable"); see also Gyula Eörsi, Problems of Unifying Law on the Formation of Contracts for the International Sale of Goods, 27 Am. J. Comp. L. 311, 321 (1979) (suggesting that businessmen of common law countries could interpret offer stating fixed time for acceptance as revocable, and that meaning they give to their own contract must be respected, but that this would be inconsistent with "the need to promote uniformity" as recommended in Article 6 [sic]).

95. CISG Draft, supra note 50, art. 14, cmt. 6.

96. CISG, supra note 11, art. 16(2)(b).

97. CISG Draft, supra note 50, art. 14, cmt. 8. Comment 8 to Article 14 of the CISG draft (adopted as CISG Article 16(2)(b)) states in part that the section "would be of particular importance where the offeree would have to engage in extensive investigation to determine whether he should accept the offer. Even if the offer does not indicate that it is irrevocable, it should be irrevocable for the period of time necessary for the offeree to make his determination." Id.

98. Garro, supra note 5, at 455 (citing Restatement (Second) 42).

99. CISG Draft, supra note 50, art. 14, cmt. 8.

100. See Garro, supra note 5, at 455 (citing Bürgerliches Gesetzbuch [BGB] art. 147 (F.R.G.); Code des obligations [C.o.] art. 5 (Switz.) (stating that offer irrevocable during time offeror may reasonably expect to receive answer); Código Civil para el Distrito Federal [C.C.D.F.] art. 1806 (Mex.); Venezuelan Civil Code art. 1137.

101. See Corbin, supra note 70, 38 at 61 (using terms "revocation" and "withdrawal" interchangeably).

102. CISG, supra note 11, art. 15(2).

103. Id.

104. Id.

105. Winship, supra note 57, at 7.

106. Id.

107. CISG, supra note 11, art. 18(1).

108. U.C.C. 2-206(1). Section 2-206(1) states: "(1) unless otherwise unambiguously indicated by the language or circumstances (a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances[.]" Id.

109. Restatement (Second), supra note 66, 63(a), cmt. a.

110. CISG, supra note 11, art. 18(2). Article 18(2) states:

"An acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror. An acceptance is not effective if the indication of assent does not reach the offeror within the time he has fixed or, if no time is fixed, within a reasonable time, due account being taken of the circumstances of the transaction, including the rapidity of the means of communication employed by the offeror. An oral offer must be accepted immediately unless the circumstances indicate otherwise."

111. Eörsi, supra note 94, at 317.

112. Id. at 317-19 (discussing receipt theory versus dispatch theory).

113. CISG, supra note 11, art. 16(1).

114. Id.

115. Id. art. 17. Article 17 states that "[a]n offer, even if it is irrevocable, is terminated when a rejection reaches the offeror." Id.

116. Restatement (Second), supra note 66, 37.

117. CISG, supra note 11, art. 18(3); U.C.C. 2-206(1)(a), (2).

118. Id. art. 18(3).

119. Id.

120. CISG Draft, supra note 50, art. 16, cmt. 12 (giving examples of acts that might constitute acceptance). The comment states: "[I]n most cases it [acceptance] would be by the shipment of the goods or the payment of the price but it could be by any other act, such as the commencement of production, packing the goods, opening of a letter of credit or . . . the procurement of the goods for the offeror." Id.

121. Eörsi, supra note 94, at 318.

122. U.C.C. 2-206(2).

123. CISG, supra note 11, art. 18(3) (stating in part "if . . . the offeree may indicate assent by performing an act, such as one relating to the dispatch of goods or payment of the price, without notice to the offeror, the acceptance is effective at the moment the act is performed").

124. Analysis of Comments and Proposals by Governments and International Organizations on the Draft Convention On Contracts for the International Sale of Goods, and On Draft Provisions Concerning Implementation, Reservations and Other Final Clauses, Prepared by the Secretary-General, U.N. Doc. No. A/CONF.97/9/1980, reprinted in CISG Conference, supra note 1, at 71, 75 (art. 16, cmt. 2); First Committee Report, supra note 51, art. 16.

125. Winship, supra note 57, at 11.

126. U.C.C. 2-206(2).

127. See, e.g., Arthur T. Von Mehren, The "Battle of Forms": A Comparative View, 38 Am. J. Comp. L. 265 (1990); Christine Moccia, Note, The United Nations Convention on Contracts for the International Sale of Goods and the "Battle of the Forms," 13 Fordham Int'l L.J. 649 (1989-90); Douglas G. Baird & Robert Weisberg, Rules, Standards, and the Battle of Forms: A Reassessment of 2-207, 68 Va. L. Rev. 1217 (1982).

128. See Restatement (Second), supra note 66, 58 (providing that an "[a]cceptance must be unequivocal in order to create a contract").

129. Id. 60.

130. Von Mehren, supra note 127, at 270.

131. Id. at 268-72.

132. Restatement (Second), supra note 66, 57, 59. Section 57 states that "[w]here notification is essential to acceptance by promise, the offeror is not bound by an acceptance in equivocal terms unless he reasonably understands it as an acceptance." Id. 57. Section 59 states that "[a] reply to an offer which purports to accept it but is conditional on the offeror's assent to terms additional to or different from those offered is not an acceptance but is a counter-offer." Id. 59.

133. Von Mehren, supra note 127, at 268 (quoting Gunther Treitel, The Law of Contract 15-16 (7th ed. 1987). Today under English law, an offer cannot, generally speaking, be "accepted by a reply which varies one of its . . . terms (e.g., specifying the time of performance) or by a reply which introduces an entirely new term." Id. Such replies are not acceptances but counter-offers which the original offeror can accept or reject. Id.

134. Id. at 290-94.

135. Id. at 269-72 (discussing problems with classical system).

136. Id. at 281-82.

137. Id. at 282.

138. Restatement (Second) supra note 66, 59.

139. Id. 69, cmt. e.

140. U.C.C. 2-207. Section 2-207 provides:

"(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on asset to the additional or different terms.

"(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:

(a) the offer expressly limits acceptance to the terms of the offer;

(b) they materially alter it; or

(c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

"(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act." Id.

141. U.C.C. 2-207(1); see also Von Mehren, supra note 127, at 279-82 (discussing how 2-207 differs from rigid approach of common law and other similar legal systems, as well as its failure to totally address issue of one party's control over the differing or conflicting terms).

142. U.C.C. 2-207(2).

143. But see U.C.C. 2-207 official cmts. 5 & 6 (discussing examples of terms that may or may not be considered material).

144. U.C.C. 2-208.

145. U.C.C. 2-207(3).

146. See Von Mehren, supra note 127, at 290 (arguing that innovative interpretation of U.C.C. 2-207(3) results in "deal is on" philosophy with contractual terms that are neutral, i.e., parties are not forced to accept one or the other's proposed terms).

147. Id. at 272-74 (discussing the continued acceptance of the traditional approach in English and French law).

148. Id. at 290-94 (discussing Germany's approach to the bargaining process).

149. Id. at 296.

150. CISG, supra note 11, art. 19. Article 19 states:

"(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 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." Id.

151. Report of the Secretary-General: Formation and Validity of Contracts for the International Sale of Goods, [1977] 8 Y.B. UNCITRAL 90, 100, annex II, U.N. Doc. A/CN.9/128/1977. The relevant suggestion, contained in the proposed alternative text of Article 7, states:

"(2)(a) 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 constitutes an acceptance unless the offeror objects to the discrepancy without delay. If he does not so object, the terms of the contract are the terms of the offer with the modifications contained in the acceptance.

(b) If the offer and a reply which purports to be an acceptance are on printed forms and the non-printed terms of the reply do not materially alter the terms of the offer, the reply constitutes an acceptance of the offer even though the printed terms of the reply materially alter the printed terms of the offer unless the offeror objects to any discrepancy without delay. If he does not so object the terms of the contract are the non-printed terms of the offer with the modifications in the non-printed terms contained in the acceptance plus the printed terms on which both forms agree." Id. art. 7.

152. Id. The proposed alternate text stated that "[a] reply to an offer containing additions, limitations or other modifications is a rejection of the offer and constitutes a counter-offer." Id.

153. Id.

154. Id. art. 7, cmt. 10.

155. Id.

156. Report of the Working Group on the International Sale of Goods on the Work of its Eighth Session, [1977] 8 Y.B. UNCITRAL 73, 82, U.N. Doc. A/CN.9/128/1977.

157. Id.

158. CISG Draft, supra note 50, art. 17, at 24. CISG Article 17 in the original draft was modified and adopted as Article 19 of the CISG. The provision originally stated:

"(3) 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." Id.

159. First Committee Report, supra note 51, at 96. A United States amendment to delete the words "inter alia" and substitute "among other matters" was referred to the drafting committee, and a proposal to change the word "matters" to "things" resulted in the text of Article 19(3) as it was eventually adopted. Id.

160. CISG Draft, supra note 50.

161. CISG, supra note 11, art. 19(2), (3).

162. Id. art. 19(3).

163. Moccia, supra note 127, at 657.

164. Id.

165. CISG, supra note 11, art. 1.

166. CISG Draft, supra note 50, art. 1, cmt. 8.

167. CISG, supra note 11, art. 6.

168. See Rendell, supra note 17, at 25. Rendell suggests the following exclusionary clause: "The parties intend to exclude the application of the United Nations Convention on Contracts for the International Sale of Goods to this contract. Accordingly, this contract shall not be subject to the United Nations Convention on Contracts for the International Sale of Goods, but rather the contract shall be governed by and construed in accordance with the law of the State of Texas." Id.


Pace Law School Institute of International Commercial Law - Last updated August 13, 1999
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