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Reproduced with permission from 25 Indian J. Int'l L. (1985) 26-49

Offer: Revocable or Irrevocable. Will Art. 16 of the Convention on Contracts for the International Sale Ensure Uniformity?

Shahdeen Malik [*]

I. Introduction

The binding force of an offer has been one of the most controversial and debated issues in uniform laws. The controversy arises from the fact that the issue is treated in a different manner in different legal systems. In some legal systems (e.g., English) an offer is generally revocable, while in some others (e.g., German and Swiss) it is irrevocable. To further complicate the issue there are number of countries whose legal systems evidence a middle course between revocability and irrevocability of offers (e.g., French, and U.C.C. to a certain extent). As a result, attempts at unification encounter the hard choice of selecting one of the conflicting rules, or opting for a "compromise-rule" solution. Evidently, the Convention on Contracts for the International Sale of Goods, 1980,[1] has, in Art. 16, accepted the compromise-rule resolution of the conflict.

Efficacy of Art. 16, its pitfalls, conflict and controversy, and the effect of the compromise rule is the subject of this paper. As a prelude to a substantive analysis of the rule, the paper, in section I, purports to discuss the nuances and sometimes flagrant variations in comparative law. Analysis of the substantive rule, in section II, indicates the nature and extent of the compromise and its effects, and in section III, an effort is made to fathom the outcome of dispute. The conclusion recapitulates the analysis and indicates that Art. 16 incorporates two different rules of different legal systems and in most cases statement of a fixed time for acceptance may bind the offeree to irrevocability. Purported revocation of an irrevocable offer is a nullity and in instances where it is unpragmatic for the offeree to ignore purported revocation, he may claim damages similar to damages for contractual breach under the Convention.

II. Binding Force of Offer in Comparative Law

1. National Legislations

a. Revocation means invalidation of an act which was already in force.[2] Revocation of offer is negation by the offeror of the commitment to be bound by the contract, if it were accepted.

The power of the offeror to revoke his offer, prior to acceptance and resultant conclusion of the contract,[3] is the general rule of the common-law world.[4] [5] In German laws on the other hand, the offeror does not have the power to revoke his offer and the offer is irrevocable. This difference in the binding force of an offer crystallized only during the last two hundred years or so.

In the distant past when buyer and seller met face to face, negotiated verbally and concluded the contract, also made payment and took delivery of the goods; the issue of revocation of offer was irrelevant and unnecessary due to the almost instantaneous nature of the transaction. And "there is no doubt that according to the principles of Roman law no binding effect can be attributed to an offer."[7] Departure from this position and "the first legislative evidence of a new policy appeared in the Prussian code of 1794 . . . and in the Austrian Code of 1811. The new conception was that the offer could not be revoked within a certain time fixed by the law."[8] This irrevocability doctrine was unconditionally accepted by the German Civil Code of 1896.[9] The Japanese Code of 1898 and the Swiss Code of 1907 have shaped the offer-and-acceptance provision closely after the German model.[10]

Between these positions, i.e., free to revoke right of the offeror in common law, and no right to revoke till the expiry of the period for acceptance of the German Law, lies the middle course of revocability of the so-called Romanistic Legal System. Nussabaum, writing in 1936, indicates that the necessity of restricting revocability of offer was recognized in French legal literature, adding, "there seems to be sufficient judicial authority for the theory that the irrevocability of an offer in commercial cases may be derived from the terms of the offer or circumstances of the case."[11]

In Italian Commercial Code:

"There is . . . a well established rule under which the offeror may waive his right to revoke, and such a waiver will be presumed where acceptance is required by the offeror within a definite period; the offeror would not be permitted to revoke the offer within that period."[12]

b. Recent trends in national legislation suggest a move towards making offers irrevocable, or at least to restrict the circumstances under which the offeror may revoke his offer without liability. The English Law Commission has commented that the trend since 1937, both nationally and internationally, has been to favor a modification of the rule and to make firm offers binding in some circumstances in which they are not binding.[13] The Commission, after evaluating the current revocability rule of the English Law and the need to change such a rule, has suggested, "An offeror who has promised that he will not revoke his offer for a definite time should be bound by the terms of that promise for a period not exceeding six years, provided that the promise has been made in the course of a business. . . ."[14]

In the United States, the traditional common law rule of revocability of offer has been modified. According to Art. 2-205 of U.C.C., an offer is irrevocable if made by a merchant in writing and assuring that it would be held open. If no time is stated then the offer would be deemed to be irrevocable for a reasonable time, but shall not exceed three months. This is a substantial departure from the rule of James Baird Co. v Gimbel Bros. Inc.,[15] when it was held that a firm offer is not irrevocable and hence not binding on the offeror.

Moreover, certain States have gone further than the U.C.C. in making an offer irrevocable. The New York General Obligations Law is wider in scope than the U.C.C. for the irrevocability is not limited to offers by merchants nor is it confined to a three-months time limit.[16] Culpa in contrahendo, a corollary of the irrevocable offer doctrine, has also become firmly rooted in the American Law.[17]

The other bastion of common law, Canada, is also being affected by the "irrevocability" trend. Ontario Law Reform Commission has advocated changes designed to impart binding force to firm offers.[18] The rule suggested by the Ontario Law Commission is:

"An offer by a merchant to buy or sell goods which expressly provides that it will be held open is not revocable for lack of consideration during the time stated or, if no time is stated, for a reasonable time not to exceed three months."[19]

But nevertheless, revocability of offers continues to be the dominant rule in many other common-law countries. Indian Contract Act of 1872, which is the law not only in India, but also in Pakistan and Bangladesh, provides in section 25: "An Agreement made without consideration is void". This section contains three exceptions [20] whereby a promise without consideration is binding on the promisor, but such exceptions do not affect the general rule of revocability of offers.

In French law, although there is no express rule for irrevocability of offers, the offeror may declare his offer to be irrevocable. However, an offer is often presumed to be irrevocable, at least for a certain period.[21] Moreover, the offeror is bound to keep his offer alive during a period sufficient for the offeree to learn about the offer and examine it.[22]

The trend towards the irrevocability rule is also noticeable in France:

"The Commission charged with the reform of French Code Civil proposed a rule whereby offers stated to be open for a certain period of time could not be withdrawn until that period elapsed, unless the withdrawal reached offeree before the offer; the same was to apply when a period during which the offer was to remain open could be inferred from the circumstances."[23]

Another important aspect of the emerging trend is that a distinction is being made between ordinary or personal transactions and commercial transactions. As highlighted by the U.C.C. 2-205, commercial transactions are being subjected to the irrevocability rule more readily while revocable offers remain acceptable for noncommercial transactions.

Thus the dichotomy in application of irrevocability is largely dictated by the necessity of putting commercial transactions on a more firm footing. Specifically, in our age of complicated and large-scale transactions, both the offeror and offeree need more time to evaluate and assess any given transaction before committing to carry it out. It is only natural that, given the time and effort necessary to weigh any offer, particularly those involving substantial money value, offeree should be allowed reasonable time to so assess and also be assured that his positive determination of the offer would enable him to conclude the contract, without being frustrated by ungainly revocation. One has to keep in mind the fact that the offeror has all the time in the world, before he makes the offer, to weigh and assess his side of the bargain. It is only fair that the offeree should be given an equal opportunity.

Recent trends in French law reflect this distinction between non-commercial and commercial offers regarding revocability. If a commercial offer fixes a term, irrevocability during the term is the operative rule. In fact courts have interpreted this "in such a broad way that little remains of the theory of non-firm offer. In mercantile relations, the offer is to be considered as firm even though no time is thereby fixed".[24] Similarly, under Art. 1331 of the Civil Code of Italy, in the absence of any fixed time, a judge may fix such time during which offer would be considered irrevocable.[25]

Thus it is suggested that, in recent years, both legislation and law reforms in developed common-law countries indicate a trend towards providing a binding force to offers, specially in commercial transactions. Revocability of offers was the rule in earlier times but change was initiated in the 18th century, while the 19th century saw an adherence of opposing rules regarding revocability in German and common-law systems. Finally, developments in the last two decades show a growing influence and greater sympathy for the irrevocability rule in both common-law and Romanistic system countries. This trend is more definitive in the case of commercial transactions.

2. International Legislations

The differences in the binding force to offers in different legal systems have had varied influences on past unification attempts. In one unification law, irrevocability was the rule, while in others revocability dominated, and consequently, there is hardly any discernible trend.

We may consider three major unification laws, namely the 1968 Draft Uniform Law on the Formation of Contracts for the International Sale of Goods (Rome Draft), General Conditions of Delivery 1958 (Comecon Rules), and Uniform Law on the Formation of Contracts for the International Sale of Goods 1964 (Hague Formation [Convention]), to indicate the differences.

Under paragraph 2 of Article 4 of the Rome Draft, "every offer is a firm offer by the nature of an offer, and the contrary must be stated clearly".[26] In the Comecon Conditions, there is no express provision that the offer is binding in itself but there is a strong implication that it is binding for thirty days unless another time is specified.[27]

The Rome Draft, being unambiguous, has settled the issue conclusively in favor of irrevocability. But apparent lack of express provision in Comecon Conditions has given rise to contradictory interpretation. Contrary to the revocability interpretation of Comecon Conditions mentioned above, Goldstajn suggests that the Comecon Conditions solution to this issue is based on conflict rules of Art. 74 of the Conditions, which refers to substantive law of the seller's country.[28] Gigoj argues a Comecon Conditions offer is binding unless otherwise expressly specified in it.[29] Since in the socialist countries irrevocability is favoured,[30] it is only logical that their uniform law would not adopt a rule contrary to their domestic rules. After all, the purpose of all unification laws is to achieve harmony and not to introduce unfamiliar rules.

But the Hague Formation [Convention (ULF)] adheres to the principle of revocability of offers in Art. 5. However, according to para. 2-4 of this article, an offer is irrevocable for any of the following reasons:

a. if the revocation is not made in good faith,

b. if the revocation is made in conformity with fair dealing,

c. if the offer states a fixed time for acceptance,

d. if the offer indicates that it is irrevocable, the indication may also be implied, and

e. if revocation reaches the offeree after he has done any act which is treated as acceptance.

This long list has prompted one commentator [31] to infer that the principle of revocability has been rendered meaningless. Nevertheless, revocability is the general rule of the Hague Formation [Convention (ULF)].

In both the Rome Draft and Comecon Conditions, the participating countries were predominantly irrevocability rule oriented, and therefore reached the predicted solution. But for the Hague Formation [Convention (ULF)], the participating countries represented conflicting rules and this was reflected in Art. 5. Although Art. 5 ostensibly provided for revocability, yet influence of the opposing countries entailed restrictions of revocability in the form of numerous exceptions. This approach was accepted by CISG and the result is Art. 16.

III. Revocability and Irrevocability of Offers

Article 16 of CISG effects an interesting compromise between the revocability and irrevocability oriented legal systems. Article 16 provides that

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

Paragraph (1) of this article contains the common-law principle of revocability of offer, while para. 2(a) is manifestation of the civil law rule on this point, and again the exception stipulated in para. 2(b) is of common-law nature.

Does the article, in the above language, embody the general rule of revocability of common law with certain exceptions or is it an admixture of rules of different legal systems? The answer to this fundamental question will determine the nature of the binding force of offer in many problematic situations.

It needs mentioning that the plain reading of the article indicates that, subject to conditions of para. (1), an offer is revocable, and, on the other hand, it is clearly irrevocable if the offer so provides in no uncertain language. Consequently, the following discussion is mainly concerned with situations wherein terms of statements in the offer do not expressly indicate whether it is revocable or irrevocable.

We shall proceed by examining each paragraph of the article and attempt to deduce the content and rule of the article, in light of certain hypothetical situations.[32]

1. Revocability Rule

Revocability rule of para. (1) of Art. 16, at a glance, appears simple. An offeror is free to revoke his offer until a contract has been concluded if the revocation reaches the offeree before he has dispatched an acceptance.

It needs mentioning that the issue of revocability of offer, i.e., application of Art. 16, arises only when the offer has reached the offeree. Offeror may send an irrevocable offer but may "withdraw" it only before the offer has actually reached the offeree.[33] The offer which has not reached the offeree is not effective and therefore not binding on the offeror though he may have intended it to be binding. This principle of the Convention that a communication enroute may be nullified by another communication that arrives first is used in other rules also.[34]

To be revocable, an offer must satisfy the test of para. (1).

Example 1: Revocable offer reaches the offeree on March 1. Offeror mails a letter of revocation on March 14. Offeree dispatches his letter of acceptance on March 15. Letter of revocation reaches the offeree on March 16.

Applying the first test of para. (1), "until a contract is concluded", we may infer that revocation is effective in the above example because the contract was not concluded on March 16 when revocation reached the offeree. A contract is concluded, according to Art. 23, when an acceptance of an offer becomes effective, and according to Art. 18(b) an acceptance of an offer becomes effective at the moment when the indication of assent reaches the offeror. On the other hand, applying the test of revocation reaching the offeree "before he has dispatched his acceptance", we may infer in the above example, that the revocation was not effective since it did not reach the offeree before he had dispatched, on March 15, his acceptance.

The dichotomy is the outcome of the effort to use both "dispatch" and "receipt" theory in the one rule of Art 16(1). Generally the Convention follows the receipt theory, i.e., communication of intent must "reach" the other party for it to be effective and binding, of the civil law countries, i.e., for offer [Art.15(1)], withdrawal of offer [Art. 15(2)], acceptance of offer [Art. 18(2)], and Art. 24, relating to issues concerning Part II -- "Formation of the Contract". However, the dispatch theory, of the common law, i.e., communication of intent is effective when it is sent (dispatched) by the party who is obliged to communicate, is applicable to issues relating to Part III -- "Sale of Goods". The dispatch principle is, however, subject to a number of exceptions as provided in Articles 47(2), 48(4), 63(2), 65(1) and (2), and 79(4) -- provisions whereby certain communications are effective only when they are received.[35] An exception to dispatch theory in the Formation Part is contained in Art. 18(2) whereby a contract is concluded when offeree "dispatches" goods, though his dispatching a letter would not conclude a contract.[33]

The "until a contract is concluded" test is appropriate in situations where the contract is concluded by offeree's performing an act.

Example 1A: Same as in Example 1, except that on March 15 offeree performed an act such as dispatching goods indicating assent, while offeror's letter of revocation reaches him on March 16.

Here, though there was no dispatch of acceptance, yet the contract was concluded by virtue of Art. 18(3) through performance on March 15. Offeror's "revocation period", therefore, had ended on March 15 and as such the revocation is not effective. Revocation in such situations is not effective even though the offeror may still be unaware of such performance and the resultant conclusion of contract.[37]

We may thus conclude that the revocation "reaching before dispatch" test seems applicable to situations when the contract is intended to be concluded by dispatching an assenting letter, telegram, etc. Otherwise, as apparent in Example 1 above, contradictory results may ensue.

But, after the offeree has dispatched his assent, he cuts off offeror's right to revoke (on March 15 in Example 1) and the offeror is bound by the offer. But the offeree is not bound by his acceptance until his assent (expressed in the dispatched letter) reaches the offeror.[38] The offeree may withdraw his acceptance before or at the same time the acceptance reaches the offeror.[39] [40]

Such possibility, as the documents of UNCITRAL deliberation [41] indicate, did not go unnoticed. But this was accepted because "[this] appears to do little harm and may contribute to an effective compromise between the theory of dispatch and the theory of reception". A little inexactness, it seems, is the price of compromise and unification. However, factual situations whereby an offeree may cut off the revocation period by dispatching an acceptance letter and then withdrawing it before it reaches the offeror, resulting in any detriment to the offeror, are highly improbable and unlikely.

2. Irrevocability Rule

Paragraph (2) of Art. 16 lays down the irrevocability rule of offer. It provides for the situation in which, contrary to rule of para. (1), the offeror may not revoke his offer.

Example 2: Offer contains all necessary terms and conditions and the concluding sentence "The offer will be held open for your acceptance until March 31. The offer reaches the offeree on March 1.

The offer states a fixed time for acceptance, and also indicates that it is irrevocable by the words "will be held open". Therefore in this situation the offer cannot be revoked until the expiry of the stated period, i.e., March 31.

In Example 2 above we have assumed that para. 2(a) of Art. 16 contains two conditions for an offer to be irrevocable: (a) that the offer indicates that it is irrevocable, and (b) the offer states a fixed time for acceptance. But is such interpretation of para. 2(a) correct? There is an apparent ambiguity in whether both the conditions of "indication of irrevocability" and statement of a "fixed time" are the prerequisites for an offer to be irrevocable or whether any of the two conditions would suffice to qualify an offer as irrevocable. The following examples may illustrate the issues involved.

Example 3: The offer contains all the necessary terms and conditions and the concluding sentence is, "The offer will be held open for you if you reply soon enough".

Example 3A: Only the concluding sentence is different: "The offer will lapse on March 31".

Example 3 indicates that it is irrevocable, but does not state a fixed time, while in Example 3A the offer states a fixed time but does not contain any clear indication that the offer is irrevocable.

The first of the two examples above may be characterized as a "firm offer" situation, while the second one is more a "lapse" offer situation.

Firm offer, in common law, designates an offer which cannot be revoked because (i) it has already been accepted, or (ii) the offer was made in a deed under seal, or (iii) offeree has given consideration to have the offer upon for acceptance. On the other hand, a lapse offer merely indicates that the offer would terminate at the expiry of the stated period without in any way curtailing the right of the offeror to revoke within the stated period, i.e., before the expiry of the period. The effect of fixing a time for acceptance is merely to fix time beyond which the offer shall not be accepted. It does not oblige the offeror, without consideration, to keep the offer open during the whole time so fixed.[42]

Unlike orthodox common law "firm" offer, under the Convention, the doctrine of "consideration" is not available to nullify a promise made without corresponding consideration.[43] Indication of irrevocability, without consideration, in the Convention reflects the U.C.C. position, and is also in tune with the recent English and Canadian Reform Proposals.[44]

Under the Convention, in situations similar to Example 3 where indication of irrevocability is sufficiently manifest, revocation will not be effective. The other passing issue of "time", i.e., "how long will the offer remain irrevocable" will be discussed later in this chapter.

Apparent lapse offer of Example 3A above presents much more of a problem. This has been a controversial issue during the UNCITRAL deliberations and the conflict is also reflected in recent commentaries.

Feltham [45] points out:

"Unlike common law, where the statement of a fixed time for acceptance merely indicates a time at the end of which an offer will lapse without precluding its being revoked within that time, the statement of a fixed time for acceptance may be treated as an indication that the offer is irrevocable . . . A fixed time for acceptance is generally likely to be taken as indicating that the offer is irrevocable for that period."

In a similar vein, Date Bah indicates that even when the offeror's intention is to fix a time for lapse, his fixing of a definite time could bind the offeror irrevocably to his offer.[46] But on the other hand Honnold, commenting on a hypothetical offer which mentions that it would lapse at a certain time, seems reluctant to confer binding force on such offer.[47]

Such inconclusive treatment may partly be explained by the fact that legislative history [48] on this particular issue is also inconclusive. Relevant UNCITRAL deliberations [49] indicate that proposers of this rule desired that the test for determining whether an offer is irrevocable is indication of irrevocability, and "the mere fact of stating a time for acceptance would not automatically lead to the result that the offer was irrevocable".[50] While the next paragraph of the report of the deliberations indicates a contrary interpretation: "It was considered that this text clearly adopted the rule that, if the offer stated a fixed time for acceptance, it automatically was irrevocable". Without any further clarification as to where the emphasis of the rule rests and without further ado the record concludes, "The Commission decided to accept the wording of the compromise proposal. . . ."[51] [52]

Finding the relevant legislative history inconclusive, a common-law court may follow its own rule of statutory interpretation to determine this issue, i.e., whether indication is the necessary prerequisite of irrevocability of an offer or mentioning of a time for acceptance would suffice.

The rule of statutory interpretation indicates that para. (2) of Art. 16 is a proviso. A proviso excludes something from and restricts the applicability of the general rule. "The office of a proviso ordinarily is to qualify or restrain or except something from the generality of the enacting clause" -- Chicago B. & Q.R. Co. v. Doyle,[53] McDougal v. State.[54] Since a proviso carves out an area of application of the main rule, it is only logical that it is interpreted strictly. A proviso must be considered with relation to the principal matter to which it stands as proviso -- Abdul Jabbar v. State of Jammu and Kashmir,[55] Dorthy v. Mullick,[56] Consequently the tendency is to preserve the domain of the main section and interpret the proviso restrictively.

Now, if para. (2) is a proviso and we accept the restrictive interpretation rule, we may conclude that since irrevocability is designed as an exception of the general rule, such exception ought to be permitted in restricted situations where the fact justifies by all its indications that offeror willingly and knowingly abandoned his revocability privilege. The revocability rule is, needless to say, advantageous to the offeror, and his abandonment would be inferred if offer so indicates.

Secondly, this position may be further strengthened by the ut res magnis valeat quam pereat rule of statutory construction. This rule assumes that each and every word in a statute is used to express certain meaning, and no words of a statute should be, in interpretation, subtracted without almost a necessity. Tautology or superfluity is not to be imputed to the language of a statute. "The rule that a meaning should, if possible, be given to every word in the statute implies that, unless there is good reason to the contrary, the words add something which has not been said immediately before" -- Hyams v. Stuart-King.[57] Consequently, the words, "if it indicates . . . that it is irrevocable", should be given due weight and an offer which only mentions certain time but does not, in addition, indicate irrevocability, should not be imparted such a connotation. Moreover, it may also be argued that to interpret otherwise would entail unusual hardship on the common-law traders who, by their practice, usage and law, are used to the lapse time revocation rule. Making such offer as irrevocable may jeopardize their expectations and plans. In this vein the U.K. delegate argued,[58] that such interpretation could expose the common-law traders to a trap since their apparent revocable offer would be treated as irrevocable.

These considerations would seem to support Honnold's conclusion that mere mentioning of lapse time in the offer might not make it irrevocable.

However, there are a number of factors which may militate against the above interpretative approach and the resultant inferences. Rules of statutory interpretation are not the appropriate approach and the fact that Art. 16 is a compromise of conflicting rules of different legal systems may lead to different emphasis on the exceptions. Arguments against the "indication" of irrevocability based interpretation may take the following approaches:

Firstly, the argument against interpreting para. (2) as a proviso to the general rule of revocability of para. (1) is that the article under consideration is a compromise of divergent legal systems. Unification laws are almost by definition an exercise in compromise, and this is particularly relevant in the context of Art. 16. The following words of Eörsi [59] on compromises in CISG are singularly pertinent:

"The principle method for drafting a compromise is to use the solution of the one legal system as the principal rule, and than to dovetail solutions of the other legal systems into the text as exceptions. This may well be the most appropriate procedure. What must be avoided is to commingle the solutions of different legal systems within the same element of a rule."

It is suggested that the inconclusive nature of legislative history on this point is another indication of the compromise and that the irrevocable rule of para. (2) is to be read independently of para. (1). Under English law an offer which states a fixed time for acceptance is revocable unless it is made under a seal, for a consideration, and if indication of irrevocability is emphasized in addition to mentioning of fixed time, it would tantamount to accepting the English law.

Compromise, here, it is suggested, implies that the rule of para. (2) is to be taken in the spirit of civil law whose rule it embodies. Consequently stating a fixed time should make the offer irrevocable, unless contrary intent is explicit.

Recent developments in England have set a new judicial approach to the problem of construction and interpretation in Buchanan v. Babco [60] and Fothergill v. Monarch.[61] The emerging approach from these cases emphasizes purposive interpretation and awareness of the fact that the Convention may well represent compromise which should be taken into account.[62] As such, a literal approach may not be appropriate in such circumstances.[63]

The compromise is also indicated by the fact that civil law countries accepted the revocability rule of the common-law countries, and in exchange common-law countries should also make the concession of accepting irrevocability of offer in situations where it is coupled with an indication of a fixed time for acceptance, even if the offeror intended to fix a time for lapse.[64] It may also be suggested, at least theoretically, that if the offeror intends the time mentioned to be a "lapse time", he may clarify so by explaining that the offeror reserves the right to revoke even before the expiry of the "lapse time". But as a practical matter an offer specifically mentioning that the offeror may withdraw it any time may render the "lapse time" meaningless, and also militate against the offeree's treating the offer seriously.

Another conjecture in favour of interpreting a statement of fixed time in an offer as indication, per se, would be the nature and practice of international transactions. International sales presuppose a host of related contracts such as transnational carriage by sea or air, insurance, mode of international payments, etc. An international sale, therefore, by its very nature, is a far cry from simple day-to-day sales and purchases. Consequently, parties involved in any international transaction take into account not only the quality and quantity of merchandise involved and its price, but also the other factors such as carriage, insurance, mode of payment, etc. Besides, apprehension of complexities of litigation in foreign forum under foreign law may not be far outside the ambit of considerations. Fortunately these complicated and multifaced aspects of international transactions have helped the growth of Lex Mercatoria [65] to streamline the conflicting issues through usage and customs, and the assumption of a somewhat higher level of obligations and definiteness of the practices involved. The definitive and exactive approach is also reflected in CISG in forms of detailed regulation of "communication", "reaching of communication", duty to notify, obligation of mitigating damages, etc. Expectations of a degree of exactness and a somewhat "higher" behavioral norm for merchants is also reflected by special provisions in national legislation [66] which require different standards for merchants from ordinary people. Perhaps this prompted the often repeated remark of the English Law Revision Committee:[67] "It is particularly undesirable that on such a point the English Law should accept a lower moral standard", i.e., to allow offerors to revoke their offer even though a fixed period for acceptance is mentioned.

In practice, as a result of the interplay of the above factors, an offer, even by a common-law merchant, may tend to be more definite and irrevocable than apprehended. Offers of merchants in international transactions reflect the level of their calling and are more often irrevocable than revocable, and consequently "trap" apprehension rings more as an exercise in subtle theoretical niceties rather than as an argument of practical consequence.[68]

Thus the compromise and practical expediency arguments indicate that an offer stating a fixed time, particularly if it is not specially mentioned as lapse time, could be treated as indication of irrevocability.

Example 4: A valid offer ends with the phrase, "I expect a reply by March 31" or "I would appreciate a response before March 31".

In situations like these, wherein the time mentioned is not specifically a "lapse time" unlike Example 3A, the offer may be treated as irrevocable.

In addition to the arguments in favour of irrevocability developed above, a further test can be applied in not too clear situations, the test of para. 2 (b) of Art. 16. Although para. 2 (b) deals with somewhat different situations of irrevocability, yet the reliance criterion may well serve as an effective tool of determination of irrevocability of para. 2 (a) situations.

Example 4A: In Example 4, suppose that the offeror had sent a revocation letter only days after the offer which reaches offeree accordingly. We also assume that the offeree did not have reasonable opportunity to examine the offer during these two days.

The question is, relying on the language of the offer that offeror expects or appreciates a reply by March 31, would it have been reasonable for the offeree to infer that the offer was irrevocable had he not received the revocation letter two days later? If the circumstances and other relevant facts, if any, sufficiently indicate that in the absence of an immediate revocation the offeree would have inferred irrevocability of the offer, the conclusion is obvious. Needless to say that if the offeree had acted in reliance on the offer as being irrevocable the situation would wholly be governed by para. 2(b).

The test of "would the offeree have had reasonable belief that the offer was irrevocable, had it not been revoked", is complicated. Nevertheless, other easier approaches may not suffice.. This test may also be applied to situations similar to Example 3. The language of the offer would induce reliance and as such it is irrevocable, while only the period of irrevocability may be disputed.

3. Reliance

Paragraph 2(b) of Art. 16 provides for situations in which an apparent revocable offer could be treated as irrevocable. A revocable offer which does not contain any indication of irrevocability or statement of fixed time for acceptance may become irrevocable if (i) it was reasonable for the offeree to rely on the offer as being irrevocable, and (ii) the offeree acted in reliance on the offer.[69]

Example 5: A, a computer accessory manufacturer, offers to sell B certain accessories suitable for the computer system which B is trying to sell to X. A is aware of B's negotiations with X. Since X wanted the accessories also, B incorporates the quantity and price of A's accessories in his offer to X. But A revokes his offer to B when B was awaiting acceptance of his (B's) offer by X.

Reliance by offeree on the offer being irrevocable is a question of fact. In this example the facts suggest that the reliance was reasonable because A was aware of B's effort to sell the computer system to X, and also B relied on A's offer in making his offer to X. Consequently A's offer has acquired binding force.[70]

Example 5B: Same as Example 5, except that A is an English accessory manufacturer who offers to B, a German computer system manufacturer, and that A is not aware of B's business negotiations.

Here B would assume the offer to be irrevocable not because of certain facts or circumstances but because B, as a German merchant, is used to irrevocable offers. As we have seen,[71] an offer is irrevocable in the German law and it is reasonable for B to treat A's offer as irrevocable, and subsequently act in reliance of that offer. On the other hand, the test of reasonableness is stricter for English merchants because of the general presumption of revocability of offers. Nevertheless, the test according to para. 2(b) seems to be reasonableness on the part of the offeree. For the offeree to rely on the offer as being reasonable may be due both to facts as in Example 5 and also to law and practice as in Example 5A. In both situations, it is suggested, the offer can become irrevocable if the offeree acts on such reliance.

IV. Purported Revocation of Irrevocable Offer: Nullity and Damage

The Convention, according to Art. 4, governs only the formation of the contract and the rights and obligations of the seller and buyer arising from such a contract. Remedial provisions of the Convention (Arts. 71-77) also deal only with breaches of contract. Therefore remed[ies] for situations where the contract has not yet been concluded are apparently outside the scope of the Convention. So the question arises: what are the offeree's remedies when offeror "revokes" his irrevocable offer?

The language of Art. 16, para. (2), "However, an offer cannot be revoked", suggests a reflection of the German Law in respect of purported revocation of irrevocable offer. Article 145 of the German Civil Code states, "[Binding effect of offer] whoever offers to another to enter a contract is bound by the offer, unless he has excluded being so bound". In German Law the offeror has no power to revoke his offer and an attempted revocation has no legal effect; it is a nullity.

Under the Convention this "nullity" treatment of the revocation is available in most cases. The offeree may ignore the "revocation" and communicate his acceptance to conclude the contract and in the event of non-performance, proceed to claim damages. The claimant offeree may easily invoke Art. 71 in his support.[72]

This nullity effect has also been advocated by the English Law Commission.[73] According to its proposal, the offeree may choose to treat the purported revocation as nullity and proceed to conclude the contract. Similarly, the Ontario Law Reform proposal, in Section 4.4(1), suggests that retraction would be a nullity and the offeree may, in spite of the retraction, accept the offer to effect a concluded contract. The nullity effect is also familiar to French law, in spite of the wrongful revocation, the contract would be deemed to be concluded and consequently the offeree may obtain damages according to the specified rules of breach of contract.[74]

One problem with the nullity effect may be that it affords the offeree an opportunity to take benefit of a fluctuating market. A buyer-offeree may easily be tempted to accept the offer, ignoring the purported revocation if, between the period of "revocation" and end of the stated period for acceptance in the irrevocable offer, the market price of the goods offered rises, and conversely seller-offeree may take similar advantage if the price of goods is falling, and conclude the contract.

But in practical commercial transactions, the established usage indicates that for commodities subject to a fluctuating market, the irrevocability period is indeed very short. Where no such period is mentioned the offeree, according to the UN/ECE General Conditions for Sale of Potatoes, Art. 12(ii)(b), has only 24 working hours from the date of offer, within which he may accept. Further, Art. 12(ii)(c) provides that the time limit be reduced to 12 working hours for early potatoes. Consequently, in reality the apprehension of undue gain may not be well founded.[75]

However, the nullity recourse for the offeree may not be optimum in the following situation:[76]

Example 6: Buyer offers to buy machinery from seller at a particular price and which is to be manufactured specifically according to buyer's design. Seller immediately proceeds to design manufacturing procedures and compute cost of production. These steps involve certain expenditures for the seller. But buyer, two weeks later, revokes his offer. Seller thereupon stops his preparatory work on design and cost estimates since it could be uneconomic to invest further funds in preparing to make machinery that buyer would not accept and perhaps not pay for.

In this situation, since the contract cannot be concluded, the offeree's claim cannot be regulated by the Convention. But, in the following, it is suggested, that both in French and Anglo-American courts, computation of offeree's claim may be similar to the damages available under the Convention, even though the claim is beyond the scope of the Convention.

For reliance arising out of situations similar to Example 6, the claimant offeree may base his claim on the theory of promissory estoppel in common-law courts.

We shall confine our analysis to situations where the offeree's reliance is detrimental, i.e., he has suffered some easily measurable loss. Although the language of para. 2(b) of Art. 16 refers only to reliance, and not necessarily detrimental reliance, for brevity's sake we shall ignore any implications that may be drawn from the following hypothetical situation.

Example 7: A offers to buy from B certain manufactured goods up to a stated price. B proceeds to undertake initial preparation and also buys raw materials for the goods. These raw materials are of the nature that they are not always readily available at predictable prices. Before B has completed his cost-analysis, A revokes his offer. Within two days of A's "revocation", the market price of the raw materials shoots up and triples.

Here, B has relied on A's offer, but as a result he is better off than he was before the offer was made.[77]

Traditionally, promissory estoppel was viewed and used as a cause of defense rather than a cause of action. Origin of such a rule is traced to the often-quoted cases of Central London Property Trust Ltd. v. High Trees Ltd [78] and Combe v. Combe.[79] These cases have effected the maxim that "promissory estoppel can be used as a shield, but not as a sword."

But the attack on the "shield only" rule of these cases was mounted in an article appropriately titled "Estoppel as a Sword."[80] It was suggested that the principle of both Hughes and High Trees was that a representation of intention meant to be acted upon and actually acted upon can be enforced, and enforced directly. This conclusion is based on a detailed analysis of the relevant cases.[81]

More recently, In Re Wyvern Developments Ltd. [82] has been cited [83] as an instance of promissory estoppel being used as a sword, i.e., cause of action. The facts of the case, stated simply, are: Based on A's promise, X and Y altered their position and later A refused to carry out his promise. Court, based on the doctrine of promissory estoppel, ordered A to perform his obligation. Templemen J. refused A's argument from High Trees that where a promise is made, which is not supported by any consideration, the promise cannot bring an action. Though Templemen J. did not elaborate his reasoning, implicit in his statement: "In my judgement, the situation is different",[84] and holding that the promisor must fulfill his promise, is the notion that promissory estoppel is gradually being used more as a cause of action rather than as a defensive shield.

In Greasley and others v. Cooke [85] the Court not only allowed the defendant Cooke to plead promissory estoppel defense but also allowed her counter-claim to irrevocable license to occupy the property in dispute for the rest of her life. In this case the promise of Greasley and others not only barred them from asserting otherwise, but the decision also applied the promise as a basis for Cooke's counter-claim. Per Lord Denning M.R., "It is sufficient to raise the equity if the party to whom the assurance is given acts on that faith of it; and it is for the courts of equity to decide in what way the equity should be satisfied."[86] Moreover, allowing Cooke's claim for license to occupy the house, the Court not only satisfied equity but also opened a new horizon for promissory estoppel in that it was allowed to be used as a cause of action.[87]

A number of other recent cases [88] exemplify this new trend. In Amalgamated Investment and Property Co. Ltd. v. Texas Commerce International Bank Ltd.,[89] Brandon L.J., found a way of providing for estoppel to be used as a cause of action without, understandably, overruling the long held limitation of shield concept of estoppel. The pertinent words are:

"I would regard as the true proposition of law, that, while a party cannot in terms found a cause of action on an estoppel, he may, as a result of being able to rely on that estoppel, succeed on a cause of action on which without being able to rely on that estoppel, he would necessarily have failed."[90]

A similar extension of the promissory estoppel doctrine is also gaining ground in Canada. Hicklings,[91] after analyzing recent cases, suggests that proprietary estoppel has been used as a cause of action in Canadian cases, and since the distinction between promissory and proprietary estoppel is being obliterated, promissory estoppel could also be used as a cause of action. In fact, a recent case, Canadian National Railway Co. et al. v. Beatty et al.,[92] though a judicial review of a labor arbitrator's decision, yet "its potential impact is not confined to the field of labour relations", and the "decision" runs counter to a line of both judicial and arbitral authority which has refused to give effect to a claim based directly upon promissory estoppel.[93]

This extended application of the notion of promissory estoppel is also reflected in reform proposals. Both the English Law Commission [94] and the Ontario Law Reform Committee's Report on Sale of Goods [95] advocate cause of action to protect promisee's interest.

It is suggested that recent developments in case law in the U.K. and Canada indicate a trend to break the shell of shield. Obviously direct repudiation of "no cause of action" interpretation of promissory estoppel would be hard to come by, nevertheless courts are trying to find and justify cause of action on promissory estoppel.

Moreover, an examination of damage awards in estoppel cases also indicates that expectation interest as well as reliance interest is protected, leading to the conclusion that if promissory estoppel were only a defense, expectation interest would not have been protected. More importantly, the damage awards indicate that by protecting expectation interests of the promisee (offeree), the courts are in fact awarding contractual damages.[96]

Under English law, award of reliance interest of the injured promisee has been more common than expectation interest. But the reluctance to protect expectation interest in promissory estoppel based cases is explained [97] by two factors: one, where the expectation interest was difficult to measure, and secondly, where the promise relates to representation of fact rather than intent. The conclusion, therefore, is that in promissory estoppel action on representation of intention, expectation interest is and can be protected.

"The vital features of expectation engendered by a promise, are that they are expectations, not merely of being in a certain position, but of being put into that position by the promisor. It is, therefore, perfectly justifiable for the promisee to call upon the promisor to fulfill such expectations."[98]

Since recent decisions are no longer confining promissory estoppel to the status of a shield, award to protect expectation interest is granted more readily, except in the type of cases mentioned earlier.[99]

Consequently, the measure of damage for the offeree who, to his detriment, relied on the "revoked" offer may include the expectation interest.[100] Compensation of the expectation interest is equivalent to the damage award under Art. 74 of the Convention. Article 74 of CISG is based on the common-law rule that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation as if the contract were performed.[101]

In the U.S.A., promissory estoppel is also used to recover expectation interests. However, instances where only reliance interest was protected are not uncommon. In Hoffman v. Red Owl Stores, Inc. [102] only reliance interest was protected. But this seems to be a marked departure from the trend set by the First Restatement of Contracts, Section 90. Section 90 was a reflection of the well known example of Prof. Williston: uncle promises Johnny $1,000, Johnny buys a car for $500. Uncle is liable for full $1,000.[103]

The Hoffman decision produced a flurry of comments and analysis.[104] But the fact that Hoffman is law only in Wisconsin and has not been widely emulated indicates that support for protection of only reliance interest has not been substantial.[105]

From this it is difficult to generalise that protection of expectation interest is the rule in the U.S.A.;[106] nevertheless, this seems to be the dominant practice.[107]

Section 90 of the Second Restatement reflects the conflict, but acknowledges that there will be situations where normal contract damages are appropriate,[108] [109] though promissory estoppel damages should not exceed the promisee's expectation recovery.[110]

The apparent unequivocal position in Section 90 has been harshly criticized.[111] On balance, based on facts, damage to cover expectation interest of the promisee seems to be well founded in American law.

In France, the pendulum of damage also seems to swing back and forth between reliance and expectation. In some cases expectation interest based on the theory of "preliminary contract" and "unilateral binding declaration of will" has been protected, while in others, reliance interest only was the measure of damage in cases based on Art. 1382 of the French Code Civil.[112]

From the above, we may deduce that in situations similar to Example 6, an injured offeree, instead of forcing conclusion of contract, may well recover damages under the theory of promissory estoppel in Anglo-American courts, and also in French courts.[113] This would entitle the offeree to recover expectation interest which would be similar to the measure of damage he would have recovered had he proceeded to conclude the contract ignoring the purported revocation.

It is suggested that instead of attempting to stretch the scope of the Convention to determine the measure of damage in above situations, the courts in Anglo-American system and France can easily reach the same result (measure of damage) based on the notion of promissory estoppel as under Art. 74 of the Convention, which also protects expectation interest for breach of contract.

Hence, without achieving complete uniformity in the theoretical framework through an extension of the scope of the Convention, the same may be achieved in results. Thus the ultimate goal of the Convention to promote uniformity may nevertheless be ensured.

V. CONCLUSION

The Convention on Contracts for International Sale of Goods, 1980, lays down a set of principles and rules for achieving uniformity in international sale of goods. The Convention will necessarily be applied by national courts of the ratifying countries. Therefore, in practice, the terms used by the Convention may easily have different connotations for different domestic courts. Article 16 is one such instance where different meaning may be read into the same language by different courts. For a civil law court, a statement of fixed time makes the offer irrevocable, while for a common-law court, it may merely be an indication of lapse time.

Only the spirit of compromise and the desire to achieve uniformity may impose restraint on such diverse interpretations. Since para. 2(a) of Art. 16 borrows a civil law principle, it ought to be read in that spirit. Similarly, the reliance aspect of para. 1(b) is a common-law concept and, in understanding it, civil law courts could look into the practice of common-law courts.

Any unification attempt is doomed to failure without compromise. It is also clear that the spirit of compromise is comparatively easy to master at conference tables rather than in actual litigation before the courts. Initially, scholarly writings may further this spirit of compromise beyond the conference circuit to the actual world of litigation.

Adherence to the spirit of compromise, and emerging trends in legal developments and court interpretation in the leading common-law countries, have irrevocability been the two basis for our suggestions regarding a resolution of the revocability-irrevocatility dichotomy.

Besides, the following two factors may also influence the outcome of the revocability-irrevocability conflict in the model discussed above.

The spirit of the New International Economic Order may not change the formal legal and political realities of the world, but it may be instrumental in ushering in an era of compassion for those who are, at least at present, comparatively weak. Developing countries are, in most cases, sellers of raw materials and agricultural commodities and buyers of manufactured goods. The merchandise of developing countries is on the whole more subject to fluctuation in market price than their counterparts in developed countries. As a result, some degree of definiteness and certainty in an offer from a trader in a developed country to purchase raw materials from a seller in a developing country, is a natural expectation for the seller. In the backdrop of the fact that the market prices of raw materials are usually determined in far off commodity markets over which the developing country seller has hardly any influence, his need and desire for certainty in the offer he receives becomes more important.

In an era of growing awareness of the differences between the North and the South and the need for mutually beneficial international trade, it is essential that mutual reliance is put on a firmer footing through an appropriate legal framework. In this context, irrevocability of offers is generally desirable for sellers in the South.

Another aspect which may undermine the rigidity of the revocability concept is the recent theoretical developments in contract law.[114] On the one hand, withering away of the laissez-faire economy and intrusion of the State in property and contract relations, and on the other, erosion and restriction of the areas where freedom of choice can still operate to conclude a contract, are substantially influencing the orthodox concept of contract and contract law. Growth of the concept of constructive contract, statutory liability, invasion of standardized contracts, are also undermining traditional contract theory and the consideration requirements.

Consideration requirement is the basis of the revocability rule. Erosion of the consideration and revocation principles was first brought about by intrusion of promissory estoppel, then the expansive theory of contract of Cardozo,[115] and finally, by the combined force of the recent developments mentioned above. Implication of all these for our purpose is that that invincibility of the revocability rule is also substantially undermined.

Consequently, for CISG to become a law of the future, para. 2(a) must not only reflect the compromise, but also accommodate the more liberal irrevocability interpretation. Such an interpretation would also be more considerate towards the interest of developing countries. The suggested damage measure also reflects the same understanding and is in conformity with the present trends and developments.


FOOTNOTES

* Faculty of Law, Dhaka University, Doctoral candidate at the University of Pennsylvania Law School, Philadelphia. The author wishes to acknowledge with gratitude the guidance of Professor John O. Honnold of the University of Pennsylvania Law School in the preparation of this article.

1. Hereinafter the Convention will be referred to as CISG.

2. Stojan Cigoj, "International Sales: Formation of Contract", Netherlands International Law Review, vol. 23 (1976) p. 257 at p. 285.

3. Assuming that the reply of the offeree is a proper acceptance and not a counter-offer or otherwise defective.

4. But there are certain exceptions as when the offer is supported by consideration or made under a seal, it is irrevocable.

5. Presently, common-law World would denote U.K., Canada, etc., but exclude USA. As explained in p. 4 the rule in USA is somewhat different, particularly for merchants.

6. Art. 145 of the German Civil Code states, "(Binding effect of offer) whoever offers to another to enter a contract is bound by the offer, unless he has excluded being so bound.""

7. Arthur Nussabaum, "Comparative Aspects of the Anglo-American Offer and Acceptance Doctrine", Columbia Law Review, vol. 36 (1936), p. 920.

8. Ibid.

9. See n.6.

10. See Nussabaum, n.7.

11. Ibid., p. 924.

12. Ibid.

13. English Law Commission, Working Paper No. 60 – Firm offer, p. 13.

14. Ibid., p. 14.

15. 64 F. 2d (1933), p. 344.

16. See n. 13, p. 12, note 26.

17. See generally, Fridrich Kessler and Edith Fine, "Culpa in Contrahendo, Bargaining in Good Faith and Freedom of Contract: A Comparative Study", Harvard Law Review, vol. 77 (1964), p. 401; John Spencer, "A Call for a Common Law Culpa in Contrahendo Counterpart", University of San Francisco Law Review, vol. 15 (1980-81), p. 587; Archibald Cox, "The Duty to Bargain in Good Faith", Harvard Law Review, vol. 71 (1958), p. 1401.

18. Ontario Law Reform Commission, Report on Sale of Goods (1976), V.I, PP. 91-96.

19. Ibid., V. III, Sec. 4.4.

20. These exceptions are:

(i) where the promise is in writing and registered under the registration act,

(ii) the promise is in exchange for some benefit previously received, and

(iii) he promise to repay a time-barred debt.

21. Rudolf B. Schlesinger (ed). Formation of Contracts: A Study of the Common Code of Legal Systems (Oceana, Dobbs Ferry, 1968), p. 770.

22. Ibid., p. 772 and n.17.

23. Konrad Zweigert and Hein Kotz, An Introduction to Comparative Law (New York, 1977), pp. 32-33, and authorities cited.

24. Ibid., p. 279.

25. Ibid., p. 280.

26. S. Michida, "Possible Avenues to Preparation of Standard Contracts for International Trade on a Global Level in Unification of the Law Governing International Sale of Goods", in John O. Honnold (ed), Colloquium on National and Regional Unification of the Law of Sales (New York, 1966), p. 267.

27. Ibid.

28. Goldstajn, "Formation of the Contract in Unification of the Law Governing International Sale of Goods" in Honnold, Ibid., p. 49 at p. 50.

29. See Gigoj, n. 2, p. 281.

30. Irrevocability rule is contained in Section 108 of I.C.C. Czechoslavakia; Art. 66, para. 2 of Polish Civil Code 1964; Art. 212 of the Hungarian Civil Code 1949; Sec. 14 of the Yugoslav G.U.T.; Arts. 162 and 163 of the RFSSR Civil Code.

31. Zweigert and Kotz, n. 23, p. 36.

32. Since the Convention is not yet in force, there are no actual cases in which the Convention has been applied.

33. Art. 15(2).

34. J. Honnold, Uniform Law for International Sales Under the 1980 United Nations Convention (Kluwer Academic, Netherlands, 1982), p. 172 n. 5.

35. Ibid., p. 207.

36. Gyola Eörsi, "Problems of Unifying Laws on the Formation of Contracts for the International Sale of Goods", American Journal of Comparative Law, vol. 27 (1979), p. 318..

37. For this discussion, the performance is assumed to satisfy the requirements of Art. 18(3) to effectively conclude the contract.

38. Art. 18(1).

39. Art. 22.

40. Kenneth C. Sutton, "Formation of Contract: Unity in International Sale of Goods", University of Western Ontario Law Review, vol. 16 (1979), p. 113, at p. 130.

41. UNCITRAL Yearbook, vol. VIII (1977), p. 97, para. 10; UN Doc. A/CN.9/138, VIII.

42. For example subsection 2 of section 6 of the Indian Contract Act provides:

"A proposal is revoked . . . . (2) by the lapse of time prescribed in such proposal for its acceptance. . . ."

43. Honnold, n. 34, p. 168.

44. See notes 13 and 18 and accompanying text.

45. J.D. Feltham, "UN Convention on Contracts for International Sale of Goods", Journal of Business Law (1981), p. 339, at p. 346.

46. S.K. Date Bah, "UN Convention for Contracts for Sale of Goods: Overview", Rev. Ghana L., vol. 11 (1979), p. 50 at pp. 57-58. However, Date Bah asserts that an offer mentioning lapse time would probably be so treated in common-law court in disputes between common-law offeror and offeree, while the result would be different were the issue raised in a civil law court. Such assertion begs the question whether different results in different courts facilitate the purpose of uniformity and are compatible with the goals of the Convention.

47. Honnold, n. 34, p. 171.

48. We assume that legislative history will be applied for interpretation particularly where the meaning of the rule or intent requires clarification and elaboration. Use of legislative history, as well known, is common in civil law systems and also U.S. As for the English Court, recent developments have favoured qualified use of legislative history. For details of changing English approach in this regard, particularly in matters governed by international convention, see the recent important case of Fothergill v. Monarch Airlines (1980) 2 All E.R. 696 (H.L.). For analysis of this case and also of similar ones of Buchanan v. Babco (1978) A.C. 141, see R.J.C. Munday, "Uniform Interpretation of International Conventions", International and Comparative Law Quarterly, vol. 27 (1978), p. 450; Vanghan Lowe and David Williams, "A Shirt, a Pair of Sandals, a Cardigan", Modern Law Review, vol. 44 (1981), p. 452; and also Honnold, n. 34, pp. 116-18.

49. UNCITRAL Yearbook, vol. IX, p. 41, paras 135-6.

50. Ibid.

51. Ibid., para. 137.

52. Peter Winship, "Formation of International Sales Contracts under the 1980 Vienna Convention", International Lawyer, vol. 17 (1983), p. 1 at pp. 7-8 and n. 11 draws attention to this inconclusive history.

53. 258 III. 624, 102 N.E. 260, 263 (1913).

54. 183 III, 168, 108 N.E. 524, 525 (1915).

55. 1957 A.I.R. (S.C.) 281, 284.

56. 1958 A.I.R. (Pat.) 240, 242.

57. (1908) 2 K.B. 696, emphasis added.

58. Date Bah, n. 46, p. 57.

59. Eörsi, n. 36, p. 323.

60. (1978) A.C. 141.

61. (1981) A.C. 251.

62. For analysis and comment on these cases see generally n. 48, and also Mann, "Uniform Statutes in English Law", Law Quarterly Review, vol. 99 (1983), p. 376.

63. Eörsi, n. 36, p. 375.

64. Date-Bah, n. 46, p. 57.

65. For a detailed exposition, see Harold J. Berman and Colin Kaufman, "The Law of International Commercial Transactions (Lex Mercatoria)", Harvard International Law Journal, vol. 19 (1978), p. 221.

66. E. g., U.C.C., pp. 2-205.

67. Sixth Interim Report of the Law Revision Committee, Cmd. 5449 (1937), para. 38.

68. Needless to say, the situation in a lapse-offer is not altogether ignored.

69. Art. 16(2)(b).

70. This example is based on Honnold, n. 34, p. 172.

71. See n. 6 and the accompanying text.

72. Art. 71:

"(1) A party may suspend the performance of his obligations if, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of his obligation. . . ."

73. English Law Commission, n. 13, paras 41-50.

74. Schlesinger, n. 21, p. 775.

75. Offeree’s attempt to rip off may also be prevented by the doctrine of unconscionability.

76. Honnold, n. 34, p. 175.

77. Instances of protecting reliance interest in such situations where reliance is not detrimental is not uncommon: A.S. Borrows, "Contract, Tort and Restitution – A Satisfactory Division or Not?", Law Quarterly Review, vol. 99 (1983), p. 217 at p. 240, note 90 cites Lord Denning’s opinion in Central London Property Trust Ltd. V. High Trees House (1947) K.B. 130 and Alan v. El Nasr (1972) 2 Q.B. 189 to point out that for promissory estoppel, detrimental reliance is not an absolute prerequisite but simple reliance may, in some situations, suffice.

78. (1947) 1 K.B. 139.

79. (1951) 2 K.B. 215.

80. David Jackson "Estoppel As a Sword", Law Quarterly Review, vol. 81 (1965), p. 84.

81. Ibid., pp. 85-86.

82. (1974) 1 W.L.R. 1097.

83. See Borrows, n. 77, p. 240.

84. In Re Wyvern Development Ltd. (1974) I W.L.R. 1097, 1104.

85. (1980) I W.L.R. 1306.

86. Ibid., pp. 1311, 1312; underlined.

87. Another noteworthy aspect of this case is that only reliance and not detrimental reliance was held sufficient for the defence as well as cause of action.

88. E.g., Pascal v. Turner (1979) 1 W.L.R. 431, and Amalgamated Investment and Property Co. Ltd. V. Texas Commerce International Bank Ltd. (1981) 3 W.L.R. 565, cited by Borrows, n. 77, p. 240, note 90.

89. (1981) 3 W.L.R. 565.

90. Ibid., p. 584.

91. M.A. Hicklings, "Labouring with Promissory Estoppel: A Well Known Doctrine Working Well"?, University of British Columbia Law Review, vol. 17 (1983), p. 183.

92. (1891) 340 R. (2d) 385, 128 D.L.R. (3d) 326.

93. Hicklings, n. 91, pp. 183-4.

94. English Law Commission, n. 13, paras 42-43.

95. Ontario Law Reform Commission, n. 18, Section 4.10, and V. 1, pp. 96-102.

96. For a distinction between reliance and expectation interest see generally L.L. Fuller and William R. Perdue Jr., "The Reliance Interest in Contract Damages", Yale Law Journal, vol. 46 (1936-37), p. 52 at p. 54. Accordingly, expectation interest is "to put the plaintiff in as good a position as he would have occupied had the defendant performed his promise".

97. For details see Borrows, n. 77 and Jackson, n. 81.

98. Borrows, ibid. p. 259.

99. See n. 97 and text accompanying.

100. Among the cases cited by Borrows, n. 77, protecting expectation interest the more recent ones are: Craff v. Arun (1976) Ch. 179; Pascoe v. Turner (1979) 1 W.L.R. 431; Greasley v. Cooke (1980) 1 W.L.R. 1306; New Zealand Shipping v. Satterwaite (1975) A.C. 154; Gibson v. Manchester City Council (1978) 1 W.L.R. 520.

101. The limitation on damage by the condition that it would not include the loss of expectation interest of the aggrieved party which the party in breach could not reasonably foresee is not important for our present purpose.

102. 26 Wis. 2d, 683, 133 N. W. 2d, 267 (1965).

103. Fuller and Perdue, n. 96, p. 64 note 14.

104. Note "Contracts – Expanded Application of Promissory Estoppel in Restatement of Contracts Section 90 – Hoffman v. Red Owl Stores, Inc." Michigan Law Review, vol. 65 (1966), p. 351; Bruce A. Coggeshall, "Contracts: Reliance Losses; Promissory Estoppel as Basis for Recovery for Breach of Agreement to Agree; Hoffman v. Red Owl Stores, Inc.", Cornell Law Quarterly, vol. 51 (1965-66), p. 351; Charles L. Knapp, "Enforcing the Contract to Bargain", New York University Law Review, vol. 44 (1969), p. 673; Moreover many of the recent articles on promissory estoppel also mention Hoffman v. Red Owl Stores, Inc. For example, John Spencer, "A Call for Common Law Culpa in Contrahendo Counterpart", University of San Francisco Law Review, vol. 15 (1980-81), p. 587 at pp. 601-604; Michael B. Metzer and Michael J. Phillips, "The Emergence of Promissory Estoppel as an Independent Theory of Recovery", Rutgers Law Review, vol. 35 (1983), p. 472 at p. 545; Charles L. Knapp, "Reliance in the Revised Restatement: The Proliferation of Promissory Estoppel", Columbia Law Review, vol. 81 (1981), p. 52 at pp. 56-58; Michael B. Metzer and Michael J. Phillips, "Promissory Estoppel and the Evolution of Contract Law", American Journal of Business Law, vol. 18 (1980), p. 139 at pp. 172-3.

105. Comment, "Once More into the Breach: Promissory Estoppel and Traditional Damage Doctrine", University of Chicago Law Review, vol. 37 (1970), p. 559.

106. Because cases allowing or approving of a reliance based measure of damage can be found, though not frequently, e.g., Associated Tabulating Services, Inc. v. Olympic Life Insurance Co., 414 F.2d Bob, 1311 (5 i.n. Circ. 1969); Wheeler v. White, 398 S.W. 2d 93, 97 (Tex. 1965), cited by Metzer and Phillips, n. 104, p. 499, note 198.

107. Though some commentators have gone so far as to qualify promissory estoppel as an independent cause theory of recovery, e.g., see, Comment, "Promissory Estoppel – The Basis of a Cause of Action Which is Neither Contract, Tort, or Quasi Contract", Montaba Law Review, vol. 40 (1975), p. 162; Comment, "Promissory Estoppel in Washington", Washington Law Review, vol. 55 (1980), p. 765; and more elaborate Metzer and Phillips, n. 104, p. 472.

108. Restatement (Second) of Contracts Sec. 90 Comment d, cited from Metzer and Phillips, n. 104, p. 500.

109. Walker v. FC Corp., 515 F. Supp. 612, 617 (1981) allowed the recovery of lost profits in promissory estoppel case, cited by Metzer and Phillips, n. 104, p. 499, note 199.

110. See, n. 108.

111. Knapp, n. 104, p. 55.

112. Zweigert and Kotz, n. 23, p. 32.

113. Ibid., and text accompanying.

114. See generally, Grant Gilmore, The Death of Contract (Ohio State University Press, Columbus, 1976); Patricks S. Atiyah, The Rise and Fall of Freedom of Contract (Oxford University Press, New York, 1979).

115. Gilmore, ibid., p. 62.


Pace Law School Institute of International Commercial Law - Last updated October 6, 1998
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