- PECL comparative
be used to interpret or supplement Article 19 CISG
Pilar Perales Viscasillas [*]
January 2002
- The mirror image rule and modified acceptance
- Resolving the battle of forms (conflicting general conditions)
- Modification of the contract and commercial letters of confirmation
- Conclusions
The mirror image rule and modified acceptance (counter-offer or acceptance?)
An acceptance must coincide with each and every term of an offer in order to conclude a
contract (see articles 19(1) CISG and 2:208(1) PECL). This requirement is known as the
"mirror image rule" since the acceptance must be the very reflection of the offer in a mirror.
An exception is established for the possible introduction of new terms into the acceptance that
do not substantially alter the offer. In that case, the acceptance will be valid; the contract will
consist of both the terms of the offer and those included in the acceptance that do not
substantially alter the offer, so long as the offeror without delay does not object to the new
terms (articles 19(2) CISG and 2:208(3)(b) PECL), or the offer does not expressly limit
acceptance to the terms of the offer (article 2:208(1) PECL);[1] or the offeree does not make his
acceptance conditional upon the offeror's assent to the additional or different terms, and the
assent reaches the offeree within a reasonable time (article 2:208(3)(c) PECL).[2]
On the other hand, if an element that is included in the acceptance adds new terms, modifies
the terms of the offer or introduces any other type of limitation to the offer that substantially
alters it, the contract will not be considered concluded; the response to the offer will be
regarded as a counter-offer - that is, if it meets all requirements under the CISG or the PECL
to be considered an offer in and of itself (see articles 14 CISG, and 2:208(1) PECL).[3]
To determine when an element of an acceptance materially alters the corresponding offer, a list of items is provided by the Vienna Convention. However, the list merely provides examples of such elements, as can be inferred from the expression "among other things", in article 19(3) CISG. Furthermore, the list has a presumptive nature since it predetermines that such "[a]dditional or different terms ... are considered to alter the terms of the offer materially" (emphasis added).[4]
The list provided in the CISG contains only substantive elements that refer to rights and obligations that arise in a sales contract, eliminating certain elements from being considered material alterations, e.g., the initiative of the offeree to negotiate again and any small changes in the wording of the offer that have no affect on the acceptance;[5] also, a modification of an offer whose content benefits the offeror should not be considered material.[6]
The European Principles do not provide a similar rule to the one embodied in article 19(3) CISG. Nevertheless, the PECL Comments to article 2:208 reach a similar result; the PECL regards a term as material "if the offeree knew or as a reasonable person in the same position as the offeree should have known that the offeror would be influenced in its decision as to whether to contract or as to the terms on which to contract."[7] The PECL Comments state that the list contained in article 19(3) CISG was not provided with the European Principles since it could only have been illustrative and not exhaustive.
Under both CISG and PECL, course of dealing and trade practices (see articles 9 CISG and 1:105 PECL), as well as previous negotations and other elements of intent (see articles 8 CISG, 2:102 and 5:101 PECL), can play an important role in the interpretation of materiality. There are also circumstances in which article 4(a) CISG may come into play as validity issues can arise in connection with certain of the terms listed in article 19(3) CISG. For example, where arbitration is the specified method of resolution of disputes, the validity of the arbitration clause can turn on domestic law.[8] In a similar vein, domestic laws on unconscionability can impact upon the validity of limitation of liability clauses.[9]
Resolving the battle of forms (conflicting general conditions)
The battle of the forms is an expression that refers to a situation in which the parties exchange general conditions,[10] usually preprinted forms prepared by one of the parties or its trade association that often add one or more terms that materially modify the offer.
This is a very controversial issue in the CISG; some scholars believe the last-shot rule applies -- a rule which has been rejected by section 2-207(3) UCC; it applies the knock-out rule. The European Principles (in article 2:209 PECL, which follows article 2.22 UNIDROIT Principles) have adopted a variation of the UCC approach. Article 2:209 PECL is an exception to the general rule in article 2:208 PECL on modified acceptance.
The complexity of this issue is increased by the customary practice of sending offers and acceptances that contain general conditions. Such conditions may reveal contradictions and raise the following two questions: "Has a contract been concluded?" and, if so, "What are the terms of the contract?" Practice shows that the answer to the first question is generally affirmative; usually the parties go ahead with the contract although each has referred to its own general conditions, the problem being the determination of the exact content of the contract. Below, some solutions that have been given to the problem under the CISG will be examined to show the different approaches to solving this difficult issue of contract formation, with cross-reference to article 19 CISG.
The PECL has decided to follow a more recent approach, applying the "knock-out rule" to solve the battle of the forms problem, thus adopting the innovative approach of the UCC. According to article 2:209(1) PECL, the general conditions form part of the contract to the extent that they are common in substance; therefore, any conflicting terms would be expelled out of the contract. However, following article 2:209(2) PECL, no contract is formed if one party: a) has indicated in advance, explicitly, and not by general conditions, that it does not intend to be bound by a contract on the basis of paragraph (1), i.e., there is a so-called "clause paramount"; or b) without delay, informs the other party that it does not intend to be bound by such contract.[13]
Modification of the contract and commercial letters of confirmation
In the legal systems of Germany, Austria and Switzerland -- when the contractual relationship is between merchants - silence or inactivity on the part of the recipient of a confirmation letter produces an acceptance by silence of the modifications introduced in the commercial letter of confirmation. Even though the modifications may be accepted, this does not mean that the confirmation letters containing them are held in the same light as the offer and acceptance.
In Anglo-American law, confirmation letters are regulated in a manner similar to the battles of the forms (see section 2-207 UCC), although with certain differences. In particular, jurisprudence has indicated that a confirmation conditional upon the recipient's acceptance to new terms is not acceptable because it would mean imposing new conditions on a contract that has already been concluded.[16]
The CISG is silent on the treatment of commercial letters of confirmation. However, the subject can be analyzed in the familiar context of offer and acceptance; the sending of a writing in confirmation which adds to or modifies the terms previously agreed upon by the parties being treated as an offer to modify the contract which has to be accepted by the addressee for the contract to be concluded on those terms, unless there is an applicable usage or practice to the contrary.[17]
The PEC has an explicit rule that deals with commercial letters of confirmation. The solution offered by the European Principles is to specifically apply the rules of offer and acceptance from Chapter II. With a similar solution to that of article 2:208 PECL (relating to acceptances with modifications), section 2:210 PECL provides that additional or different terms that are included in a confirmation letter become part of the contract unless they substantially alter the terms of the contract or the recipient of the letter objects without delay to their inclusion.
Conclusions
The modification of the offer under both the CISG and the PECL is dealt with in a similar fashion. However, the two instruments differ in their treatment of battles of the forms. In this case, the PECL cannot aid in the interpretation of the CISG, since the solutions under the two regimes are completely different.
However, the treatment of the commercial letters of confirmation adopted by the PECL is in accord with the rules of offer and acceptance under the CISG. Therefore, there should be no impediment to use of the PECL to help interpret the CISG in that regard.
FOOTNOTES
* Doctor in Law. Commercial Law Professor at the University Carlos III of Madrid (Spain). Spanish representative at UNCITRAL.
A match-up of CISG Article 19 and PECL Articles 2:208
[Modified acceptance] and 2:208 [Conflicting general conditions] is available
at <http://cisgw3.law.pace.edu/cisg/text/peclcomp19.html>.
The match-up contains: 1. CISG is silent on this issue.
2. CISG is silent on this issue.
3. See OLG [Appellate Court] Frankfurt am Main, 4 March 1994 (Germany) <http://cisgw3.law.pace.edu/cases/940304g1.html>. See also the Comments to article 2:208 PECL indicating that an acceptance by conduct may contain additional or different terms. These terms may be material, for instance, if the offeree dispatches a much smaller quantity of a commodity than that which was ordered by the offeror, or immaterial if only a very small quantity is missing.
4. The list includes, inter alia, the following elements: price (only those modifications relating to the total amount of the offer price (Supreme Court of Spain (Internationale Jute Maatschappij v. Marin Palomares), 28 January 2000 <http://www.uc3m.es/cisg/sespan7.htm>; <http://cisgw3.law.pace.edu/cases/000128s4.html>, or clauses that modify the price because of increases in costs (Supreme Court of France (Fauba v. Fujitsu Mikkroelectronik), 4 January 1995 <http://cisgw3.law.pace.edu/cases/950104f1.html>), payment method (LG Giessen [District Court], 22 December 1992 (Germany) <http://cisgw3.law.pace.edu/cases/921222g1.html>), place and time, quality and quantity of merchandise (OLG [Appellate Court] Frankfurt am Main, 31 March 1995 (Germany) <http://cisgw3.law.pace.edu/cases/950331g1>), place and time of delivery (OLG Munich, 8 February 1995 (Germany) <http://cisgw3.law.pace.edu/cases/950208g1.html>), the extent of one party´s liability to the other (LG Baden-Baden, 14 August 1991 (Germany) <http://cisgw3.law.pace.edu/cases/910814g1.html>), or the settlement of disputes.
Nevertheless, it is very possible that courts may consider the list in the sense that the aforementioned terms substantially alter an offer in every case. For example, in OLG Hamm, 22 September 1992 (Germany) <http://cisgw3.law.pace.edu/cases/920922g1.html>, an indication of a material alteration was the rejection of packaged bacon "in polyethylene bags" by means of a counter-offer in which the packaging was established as "loose".
To arrive at a clear set of rules for interpreting when a modification to an offer is material, the term "material" should be interpreted in a limited way. See Fritz Enderlein & Dietrich Maskow, International Sales Law: United Nations Convention on Contracts for the International Sale of Goods. New York: Oceana Publications, 1992, p. 100. See also Pilar Perales Viscasillas, La formación del contrato de compraventa internacional de mercaderías. Valencia: Tirant lo blanch, 1996, pp. 625-735.
5. Examples of such non-material alterations are: an acceptance in which certain elements are added ("I accept because I urgently need the merchandise", or "I agree but was hoping for a more satisfactory agreement"), or where recommendations are made or questions are asked ("I accept. Payment should be in bills of 100 euros", or "I accept. Would it be possible to include an arbitration clause?"), or where requests are made ("keep the acceptance confidential until it is announced publicly by both parties"); see Metropolitan Court of Budapest (United Technologies (Pratt and Whitney Commercial Engine Business) v. Malev Hungarian Airlines), 10 January 1992 (Hungary) <http://cisgw3.law.pace.edu/cases/920110h1.html>.
6. See Oberster Gerichtshof [Supreme Court], 20 March 1997 (Austria) <http://cisgw3.law.pace.edu/cases/970320h1.html>.
7. Cf. article 1:301(5) PECL which defines a matter as material "if it is one which a reasonable person in the same situation as one party ought to have known would influence the other party in its decision whether to contract on the proposed terms or to not contract at all."
8. This was the reasoning of Cámara Nacional en lo Comercial, sala E (Inta SA v. MCS Officina Meccanica S.p.A), 14 October 1993 (Argentina), published in El Derecho, 25 abril 1994, (t.157), No. 4, 129-137 <http://cisgw3.law.pace.edu/cases/931014a1.html>. But see, U.S. District Court for the Southern District of New York, 14 April 1992 (United States), Filanto S.p.A. v. Chilewich International Corp., 789 F.Supp. SDNY 1992, pp. 1229-1242 <http://cisgw3.law.pace.edu/cases/920414u1.html>, 4 November 1993, appeal dsimissed, 984 F.2d 58 (2d Cir. 1993).
9. John O. Honnold, Uniform Law for International Sales, 3rd ed., Kluwer Law International, 1999, pp. 182 et seq. See for example, sections 2-302 and 2-719 of the United States UCC.
10. Article 2:209(3) PECL provides a definition: "General conditions of contract are terms which have been formulated in advance for an indefinite number of contracts of a certain nature, and which have not been individually negotiated between the parties."
11. See generally, Comments to article 2:209 PECL and illustrations 1 and 2.
12. Pilar Perales Viscasillas, Battle of the Forms under the 1980 United Nations Convention on Contracts for the International Sale of Goods: A Comparison with Section 2-207 UCC and the UNIDROIT Principles. Pace International Law Review, 1998, vol. 10, no. 1, pp. 97-155.
13. One also has to take into account the rules of interpretation of articles 2:104, 5:103 and 5:104 PECL. See also Court of Appeal of Grenoble (Société Simri v. Société Harper Robinson), 24 January 1996 (France), Unilex - UNIDROIT Principles, Transnational, June 2000, D.1996-1, citing article 2.21 UNIDROIT Principles as a principle in international trade whereby the non-standard term prevails over a standard term in case of contradiction. See Pilar Perales Viscasillas, Formation of the contract under the CISG. In Law and Practice of Export Trade. Münster: Center for Transnational Law, 2001, vol. 3, pp. 97-114.
14. See for example: LG [District Court Hamburg, 26 September 1990 (Germany) <http://cisgw3.law.pace.edu/cases/900926g1.html>; Court of Appeal of Grenoble (Société Cámara Agraria v;. André Margaron), 29 March 1995 (France) <http://cisgw3.law.pace.edu/cases/950329f1.html> and Supreme Court of Spain, 28 January 2000, supra note 4, where the offer of modification of the international sales contract made by a US seller was never accepted by the Spanish buyer; see the comment by E. Fernández Masiá, Sentencia de 28 de enero de 2000, Cuadernos Civitas de Jurisprudencia Civil, abril-septiembre 2000, pp .673-689; and F. Oliva Blázquez, Aceptación, contraoferta y modificación del contrato de compraventa internacional a la luz del artículo 8 del Convenio de Viena. La indemnización de daños y perjuicios y el "deber de mitigar" "ex" artículo 77 CISG. Comentario a la STS de 28 enero 2000 (RJ 2000, 454), Revista de Derecho Patrimonial, 2000, I, no. 5, pp. 203-219.
15. See Pilar Perales Viscasillas, Tratamiento jurídico de las cartas de confirmación en la Convención de Viena de 1980 sobre Compraventa Internacional de Mercaderías, Revista Jurídica del Perú (Trujillo), octubre-diciembre 1997, no. 13, pp. 241 et seq.
16. James White y Robert S. Summers, Uniform Commercial Code. Vol. I. St. Paul, Minn: West Publishing Co, 3rd ed., 1988, §1-3, n. 60, pp. 48 et seq. This would mean that the final part of section 2-207(1) UCC would not be applicable: "[...] unless acceptance is expressly made conditional on assent to the additional or different terms."
17. See CISG article 9. Among the cases applying CISG to commercial letters of confirmation, see Civil Tribunal of Basel-Stadt, 21 December 1992 (P4 1991/238) (Switzerland) <http://cisgw3.law.pace.edu/cases/921221s1.html>, considering in that a contract of sale between an Austrian buyer and a Swiss seller there is an international trade usage (art. 9(2) CISG) whereby silence in response to a commercial letter of confirmation amounts to an acceptance (note that this is more of a regional usage recognized in Germany, Austria, and Switzerland). Cf. OLG [Appellate Court] Dresden, 9 July 1998 (Germany) <http://cisgw3.law.pace.edu/cases/980709g1.html>; OLG Köln, 22 February 1994 (22 U 202/93) (Germany) <http://cisgw3.law.pace.edu/cases/940222g1.html>; OLG Frankfurt am Main, 5 July 1995 (Germany) <http://cisgw3.law.pace.edu/cases/950705g1.html>; reaching a consistent result: denying the value of silence as an acceptance to the usage described when one of the parties does not belong to a country that recognizes that usage of trade; But see: OLG Saarbrücken 14 February 2001 (Germany) <http://cisgw3.law.pace.edu/cases/010214g1.html>, involving a contract of sale between an Italian seller and a German buyer where the tribunal held that "... the contract is binding with the content given to it in the letter of confirmation, unless the sender of the letter has either intentionally given an incorrect account of the negotiations, or the content of the letter deviates so far from the result of the negotiations that the sender could not reasonably assume the recipient's consent. The recipient's silence causes the contract to be modified or supplemented in accordance with the letter of confirmation. ..."
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Comments on these PECL provisions authored by the European
Commission describing and illustrating the manner in which these provisions are to be applied; and
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Notes that compare these provisions with continental and
common law domestic rules, doctrine and jurisprudence.
Pace Law School
Institute of International Commercial Law - Last updated August 28, 2009
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