CROSS-REFERENCES AND EDITORIAL ANALYSIS

Article 19


Editor:

Pilar Perales Viscasillas[*]


Article 19(1)

According to article 19(1), the reply to an offer which does not match exactly with the terms of the offer is a rejection and constitutes a counter-offer. This paragraph states the traditional principle known as the mirror image rule (see footnote 1). There are two cross-references to article 19(1).

Article 17. As the Secretariat Commentary indicates: "An offer may be rejected either expressly or by implication" (see footnote 2). Clearly, article 19(1) shows how an offer can be impliedly rejected. Article 17 states that the result of a rejection of the offer is that the original offer can no longer be accepted, even if it is irrevocable.

Article 14(1). Where there is such a rejection of the original offer, the rejection is deemed to be a counter-offer, which, as a new offer, must comply with the requirements of article 14(1).


Article 19(2)

Paragraph two of article 19 seeks to relax the mirror image rule recited in article 19(1). For this purpose, it carves out from the article 19(1) rule additional or different terms which do not materially alter the terms of the offer. The dividing line between a material and a non-material alteration is of great importance, because only the latter constitutes an acceptance. Nevertheless, it is difficult to draw such a line, despite the paragraph three list of terms which are considered as materially altering the terms of the offer. Three cross-references are identified:

Article 7(1). Two of the most basic policies of the Convention are reflected in article 19(2). One is the intention to abolish formalities that might impede the ability of the parties to freely accomplish their goals (see editor's commentary on article 7); the other is to preserve the existence of the agreement.

Article 18(1). This article recognizes a contrario that silence or inactivity may be considered as acceptance. One of the circumstances in which the Convention gives effect to silence or inactivity is the situation contemplated in article 19(2): if the reply to an offer contains non-material alterations to its terms, these are deemed to be accepted by the offeror as long as he does not object the discrepancies. In such a case "the terms of the contract are the terms of the offer with the modifications contained in the acceptance".

Article 27. Conversely, as stated in article 19(2), if the offeror objects to such discrepancies, the contract is not concluded. Where the offeror so objects, he must, without undue delay, advise the offeree orally or dispatch a notice. The dispatch of the notice is said to be an exception to the rule recited in article 24 (see footnote 3) which requires that any offer-acceptance or other indication of intention "reaches" its addressee in order to be effective. As an exception to this rule, it would seem appropriate to apply to the dispatch of the notice the principles recited in article 27, which adopts the dispatch principle as a general rule of Part III of the Convention.


Article 19(3)

Article 19(3) contains a list of elements deemed to materially alter the terms of the offer. This is a non-comprehensive list as it derives from the expression "among other things" reinforced by the phrase "are considered to alter the terms of the offer materially". There is accord among scholars about the open character of the list. This article must be cross-referenced again to article 7(1) as well as other provisions.

The policy to promote uniformity in the application of the Convention recited in article 7(1) and the desire to preserve agreements should lead to a restrictive interpretation of what constitutes a material alteration, and of the specifics terms listed in paragraph 3: "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" (see footnote 4).

Probably, course of dealing and trade practices referred to in article 9, as well as previous negotiations and other elements of intent referred to in article 8 will play an important role in the interpretation of materiality. There are also circumstances in which article 4(a) may come into play as validity issues can arise in connection with certain of the terms listed in article 19(3). For example, where arbitration is the specified method of resolution of disputes, the validity of the arbitration clause can turn on domestic law (see footnote 5). In a similar vein, domestic laws on unconscionability can impact upon the validity of limitation of liability clauses (see footnote 6).


Battle of the forms

Although it is doubtless that article 19 is applicable when there is a contradiction between terms of the offer and the reply to it contained in documents other than forms, the same cannot be said when the general clauses contained in the forms exchanged between the offeror and the offeree are contradictory. The resolution of "battles of the forms" is one of the most controversial questions under the Convention. There are deep differences among commentators as how such issues are to be resolved. The basic questions that must be answered are: when there is a battle of the forms, is the contract concluded? And, if the answer is positive, what are the terms of the agreement? There are two schools of thought:

One sector of scholars holds that the battle of the forms falls outside the scope of the Convention and that, because it is a question of validity, the solution must be found under the relevant domestic law in accordance with article 4(a) (see footnote 7).

Another sector of scholars holds that the problem should be solved under the norms of the Convention, but there is not a total agreement as the norms to be applied.

a) Some authors are convinced that the battle of the forms is a gap-filling issue governed by the Convention (see footnote 8). They hold that the solution should be found in accordance with article 7 and that priority must be given to the general principles of the CISG in order to regulate a question that is not expressly settled by the Convention. Pursuant to this approach, applying a good faith principle can lead to a solution similar to the United States knock out rule of section 2-207(3) of the Uniform Commercial Code (UCC), the German "partiell dissens" rule of articles 154 and 155 of the Bürgerliches Gesetzbuch (BGB), or article 2.22 of the UNIDROIT Principles (see footnote 9). This point of view holds that the terms of the contract are those with which the parties substantially agree, the rest cancel each other out and, basically, the norms of Part III of the Convention will replace them.

b) Finally, there is the position that the solution may be found under the specific norms of the Convention, without calling into play the general principles of the CISG (article 7). In the typical battle of the forms scenario, this is likely to lead to the application of the last shot rule. Under this view (see footnote 10) the exchange of forms, as offer and acceptance, are comprehensively regulated in Part II (Formation of Contracts) of the Convention. If there is a reply to an offer by a form with material alterations, it is not an acceptance but a rejection of the offer -- article 19, paragraphs (1) and (3) -- coupled with a new offer -- article 14(1). As a new offer, it could be accepted in any way provided in article 18, including silence or inaction. Such a counter-offer may be accepted by conduct of the type described in article 18, paragraphs (1) and (3). Generally the contract is concluded when the buyer accepts delivery of the goods (see footnote 11) and the terms of the contract will be those of the counter-offer (the terms of the party who fires the last shot win the battle).


Modification of the contract

Article 29(1) may also be cross-referenced to article 19. Article 29(1) states that a contract may be modified by the mere agreement of the parties. As an agreement, the modification of a contract can be viewed in terms of offer and acceptance. In that sense, an attempt to modify a contract may be deemed to be an offer of modification of the contract that must be accepted by the other party. At times, after an oral contract is concluded, one party sends a written confirmation of the agreement which has an alteration of the terms of the contract. If this written confirmation amounts to an offer of modification of the contract, article 19(2) can operate to approve non-material alterations contained in the written confirmation (see footnote 12).


FOOTNOTES

* Member of the Business Law Department, University Carlos III of Madrid (Spain).

1. Conflict-compromise lines present throughout the Convention are said to be civil law v. common law, North-South, and East-West. Gyula Eörsi, "A Propos the Vienna Convention on Contracts for the International Sale of Goods", 31 Am. J. Com. L. (1993) 342, n. 4. Eörsi refers to the article 19 conflict-compromise as East-West. Id. A sharper delineation is provided by Farnsworth, who refers to article 19 as a conflict-compromise line between traditionalists and reformers. E. Allan Farnsworth in C.M. Bianca & M. J. Bonell, Commentary on the International Sales Law: The 1980 Vienna Sales Convention (Giuffré: Milan, 1987) 175. Article 19(1), with its mirror image rule, reflects the point of view of the traditionalists.

2. Secretariat Commentary on article 15 of the 1978 Draft, para.2.

3. For this point of view, see for example, Peter Schlechtriem in E. von Caemmerer & P. Schlechtriem, Kommentar zum Einheitlichen UN-Kaufrecht. Das Übereinkommen der Vereinten Nationen über Verträge über den internationalen Warenkauf - CISG - Kommentar, 2d. ed. (C.H. Beck: München, 1995) 177; and Official Records, para. 19-40, pp. 303-304, where a proposal to adopt the dispatch principle was supported by the delegates. Against this point of view, among others, see Karl Neumayer & Catherine Ming, Convention de Vienne sur les contrats de vente internationale de marchandises, (Cedidac: Lausanne, 1993) 178-179.

4. There are few judicial decisions on the materiality of alterations contained in the reply to the offer: Cass. 1re civ., 4 janv. 1995 (France), commented by Claude Witz, "Le premier arrêt de la Cour de cassation confronté à la Convention de Vienne sur la vente internationale de marchandises.-Note sous Cass. 1re civ., 4 janv. 1995", Recueil Dalloz Sirey, 1995, No. 20, 289-292; LG Baden-Baden, 14 August 1991 (4 O 113/90) (Germany), CLOUT 50, A/CN.9/SER.C/ABSTRACTS/3, 24 May 1994, published in Recht der Internationalen Wirtschaftrecht, 1992, 62-63; and OLG Hamm, 22 September 1992 (19 U 97/91) (Germany).

5. This was the reasoning of Cámara Nacional en lo Comercial, sala E, 14 October 1993 (45.626) (Argentina), published in El Derecho, 25 abril 1994, (t.157), No. 4, 129-137. But see, U.S. District Court for the Southern District of New York, 14 April 1992, 91 Civ. 3253 (CLB) (United States), Filanto S.p.A. v. Chilewich International Corp., 789 F.Supp. SDNY 1992, 1229-1242, CLOUT 23, A/CN.9/SER.C/ABSTRACTS/2, 4 November 1993, appeal dismissed, 984 F.2d 58 (2d Cir. 1993).

6. John O. Honnold, Uniform Law for International Sale under the 1980 United Nations Convention, 2d ed. (Kluwer Law International, 1991) 235. See for example, sections 2-302 and 2-719 of the United States UCC.

7. See for example: Ulrich von Huber, "Der Uncitral-Entwurf eines Übereinkommens über Internationale Warenkaufverträge", 43 Rabels Zeitschrift, No. 3, 444-445 (1979); François Dessemontet, "La Convention des Nations Unies du 11 avril 1980 sur les contrats de vente internationale de marchandises" in F. Dessemontet (ed.), Les contrats de vente internationale de marchandises, (Cedidac: Lausanne, 1991), 56; and Monique Jametti, "Der Vertragsabschluss", in P. Doralt, Das Uncitral-Kaufrecht im Vergleich zum österreichischen Recht, (Manz: Wien, 1985) 46.

8. There are basically two points of view supporting the article 7 gap-filling thesis. One says it is a gap filling because the delegates to the Vienna Diplomatic Conference rejected a "Belgian proposal" that sought to adopt a solution based on the Knock out rule (Official Records, para. 87-103, pp. 288-289), see for example: Jan Hellner, "The Vienna Convention and Standard Form Contracts", in P. Volken & P. Šar evi , International Sales of Goods, (Oceana Publications, 1986) 342. The second point of view is that in this situation, acceptance by conduct pursuant to article 18(3) is not a valid way to indicate assent to an offer pursuant to terms that contradict the original offer. See among the scholars: Frans van der Velden, "Uniform International Sales Law and the Battle of Forms", in Unification and Comparative Law in Theory and Practice. Contributions in Honour of Jean Georges Sauveplanne, (Kluwer: Deventer, 1984) 241-243; Christine Moccia, "The United Nations Convention on Contracts for the International Sale of Goods and the "Battle of the Forms", 13 Fordham International Law Journal 667 (1989-1990); François Vergne, "The `Battle of the Forms' under the 1980 United Nations Convention on Contracts for the International Sale of Goods", 32 Am. J. Com. L. 253, especially 255-256 (1985); and probably John O. Honnold, Uniform Law for International Sale under the 1980 United Nations Convention, 2d ed. (Kluwer Law International, 1991) 238-239, who states: "`Last shot' theories have been rightly criticized as casuistic and unfair. They do not reflect international consensus that justifies importing them into the Convention".

9. UNIDROIT "Principles of International Commercial Contracts", International Institute for the Unification of Private Law (Rome, 1994), pp. 61-63. For the German solution contrasted with section 2-207 of the UCC, see Daniel Ostas & Burt A. Leete, "Economic Analysis of Law as a Guide to Post-Communist Legal Reforms: The Case of Hungarian Contract Law, 32 American Business Law Journal 355-398 (1995); and Peter Schlechtriem, "The Battle of the Forms under German Law", 23 The Business Lawyer 655-668 (1968). For a comprehensive view of section 2-207, see two different approaches in: Douglas G. Baird & Robert Weisberg, "Rules, Standards, and the Battle of the Forms: A Reassessment of 2-207", 68 Virginia Law Review 1217-1261 (1982); and John E. Murray, "The Chaos of the Battle of the Forms: Solutions", 39 Vanderbilt Law Review 1307-1385 (1986). See also, the articles of the Symposium on the Revision of Section 2-207 of the Uniform Commercial Code, 49 The Business Lawyer, No. 3 (1994).

10. This solution is supported, inter alia, by: Farnsworth, supra note 1, at 178-179; Schlechtriem, supra note 3, at 168; Karl Neumayer, "Das Wiener Kaufrechts-Übereinkommen und die sogenannte `battle of the forms'", in Freiheit und Zwang: rechtliche, wirtschaftliche und gesellschaftliche Aspekte. Fetschrift zum 60. Geburstag von Hans Giger, (Stämpfli: Bern, 1989), 524; Walter von Petzinger, "`Battle of Forms' und Allgemeine Geschäftsbedingungen im amerikanischen Recht", Recht der International Wirtschaftrecht, 679 (1988); Rolf Herber & Beate Czerwenka, Internationales Kaufrecht, Kommentar zu dem Übereinkommen der Vereinten Nationen vom 11. April 1980 über Verträge über den internationalen Warenkauf, (C.H. Beck: München, 1991), 106; Ugo Draetta, "La Battle of Forms nella prassi del commercio internazionale", 2 Rivista di Diritto Internazionale Privato e Processuale, 326 (1986). See also the citations of Albert H. Kritzer, "Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods", Suppl. 7 September 1993 (Kluwer Law International) 176; and the Secretariat Commentary on article 17 of the 1978 Draft, the counterpart to CISG article 19 (Official Records, para. 15, p. 24).

11. The following German decisions have applied the last shot rule to a conflict of standard terms under the 1964 Hague Formation Convention (ULF): OLG Hamm, 7 December 1978 (2 U 35/78); OLG Hamm, 18 October 1982 (2 W 29/82); and LG Landshut, 14 July 1976 (HK 0 135/75).

12. See Michael Esser, "Commercial Letters of Confirmation in International Trade: Austrian, French, German and Swiss Law and Uniform Law under the 1980 Sales Convention", 18 Georgia Journal of International and Comparative Law, 447 (1988); Herber & Czerwenka, supra note 9 at 107; Huber, supra note 6 at 447. Also the jurisprudence: LG Hamburg, 26 September 1990 (5 0 543/88) (Germany), CLOUT 5, A/CN.9/SER.C/ABSTRACTS/1, 17 May 1993; and OLG Köln, 22 February 1994 (22 U 202/93) (Germany). Against: Neumayer & Ming, supra note 3 at 170; and Clark Kelso, "The United Nations Convention on Contracts for the International Sales of Goods: Contracts Formation and the Battle of Forms", 21 Columbia Journal of Transnational Law 551-552 (1983).


Pace Law School Institute of International Commercial Law - December 1996