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GUIDE TO ARTICLE 16

Comparison with Principles of European Contract Law (PECL)


Match-up of CISG Article 16 with PECL Article 2:202
CISG Article 16

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

(2) However, an offer cannot be revoked: (a) if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or (b) if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer.

PECL Article 2:202 [Revocation of Offer]
(complete revised version 1998)

(1) An offer may be revoked if the revocation reaches the offeree before it has dispatched its acceptance or, in cases of acceptance by conduct, before the contract has been concluded under Article 2:205(2) or (3).

(2) An offer made to the public can be revoked by the same means as were used to make the offer.

(3) However, a revocation of an offer is ineffective if: (a) the offer indicates that it is irrevocable; or (b) it states a fixed time for its acceptance; or (c) it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer.


Editorial remarks on whether and the extent to which the Principles of European
Contract Law (PECL) may be used to help interpret Article 16 of the CISG

N. Orkun Akseli [*]
February 2003

  1. Revocation of an offer - CISG Article 16(1)
  2. Public offers - PECL Article 2:202(2) and the CISG
  3. Irrevocability of an offer - CISG Article 16(2)
  4. Interpretation of the contract
  5. Reliance - CISG Article 16(2)(b)
  6. Conclusions
    a) PECL Article 2:202(1) and CISG Article 16(1)
    b) PECL Article 2:202(2) and the CISG
    c) PECL Article 2:202(3)(a), (b) and CISG Article 16(2)(a)
    d) PECL Article 2:202(3)(c) and CISG Article 16(2)(b)

1. Revocation of an offer - CISG Article 16(1)

     a. Article 16 CISG of the U.N. Convention on Contracts for the International Sale of Goods ("the Convention") and Article 2:202 of the Principles of European Contract Law ("PECL") deal with the problem of whether an offer is binding and when it is irrevocable.

Both the Convention and the PECL distinguish between the revocation of an offer and the withdrawal of an offer. In the Convention, revocation of an offer that has reached the offeree and is effective is regulated by Article 16; withdrawal of an offer that has not yet reached the offeree is regulated by Article 15(2).[1]

Similarly, under the PECL, an offer becomes effective when it reaches the offeree (Article 1:303(2) and (6)) and a subsequent revocation of the offer is regulated by PECL Article 2:202. However, the offer may be withdrawn before it reaches the offeree. In that situation, it will not become effective (PECL Article 1:303(5)).

     b. There is divergence in the way in which different legal systems deal with the matter of revocation of an offer. In common law systems, the offeror, in the absence of consideration given by the offeree, has been granted the freedom to revoke the offer before the contract is concluded, e.g., in the case of written assent, before the offeree dispatches the acceptance, thus weakening the binding force of an offer.

On the other hand, in civil law systems, generally, a firm offer cannot be revoked until its rejection or expiry; therefore, the offeror is bound by the offer for a reasonable time. In the latter regimes, the offeror, with his offer, impliedly grants the offeree a certain reasonable time to consider and respond to the offer. In this context, if the offeror does not indicate otherwise, there is the presumption of irrevocability for a reasonable time, unlike in the common law systems.

     c. Article 16(1) of the Convention provides that an offer is generally revocable;[2] the right of the offeror to revoke his offer terminates at the moment the contract is concluded. However, it must be noted that in the case in which an offer is accepted by a written indication of assent, CISG Article 16 provides that the right of the offeror to revoke the offer terminates at the moment the offeree has dispatched his acceptance, and not at the moment the acceptance reaches the offeror.[3] That common law "mailbox rule" or dispatch rule is adopted in the Convention, even though CISG Art. 18(2) provides that "acceptance is thus effective when it reaches the offeree."[4] It has been commented that the Convention, in article 16(1), assumes the common law presumption of revocability.[5]

Here, it is worthwhile to mention briefly how the UNIDROIT Principles deal with this issue. Article 2.4 of the UNIDROIT Principles regulates the revocation of an offer.[6] Article 2.4 regulates the issue in the same manner as CISG Article 16. In this regard, one can argue that the UNIDROIT Principles also assume the common law presumption of revocability.

PECL Article 2:202(1) adopts an approach to the revocation of an offer that is similar to CISG Article 16(1) and Article 2.4 of the UNIDROIT Principles. PECL Article 2:202 provides that, generally, an offer is revocable, but that it may follow from the offer or from the circumstances of the specific case that it is irrevocable.

PECL Art. 2:202(1) states that an offer may be revoked if the revocation reaches the offeree before he has dispatched his acceptance. Also, an offer may be revoked if the contract has not been concluded by an act of performance or conduct by the offeree under Article 2.205(2) or (3).[7] In this type of acceptance, the contract is concluded when the offeror learns of the offeree's conduct and therefore, the revocation of the offer must reach the offeree before the offeror has learned of the conduct. Furthermore, in the case of acceptance through performance, the revocation should reach the offeree before the performance of the offeree.

2. Public offers - PECL 2: 202(2) and the CISG

     d. Although the Convention does not include a provision dealing expressly with the revocation of an offer made to the public,[8] the PECL 2:202(2) statement that: "An offer made to the public can be revoked by the same means as were used to make the offer" appears consistent with the intent of the Convention. See, for example, the reference to "due account being taken of the circumstances of the transaction" in CISG Article 18(2), and the concept of "reasonableness" as a general principle of the Convention.[9]

3. Irrevocability of an offer - CISG Art. 16(2)

     e. Both the Convention and the PECL indicate that if the offeror states clearly that the offer is irrevocable, the offeror is bound with the offer until the acceptance.

     f. The most controversial part of article 16 of the Convention is paragraph 2(a), which reflects a drafting compromise between the civil law and the common law by accommodating different views and therefore lacks definitional clarity.[10] On the other hand, Article 2:202 of the PECL provides a more clarified regulation on the problem.

At the Diplomatic Conference on the Convention, the wording of CISG Art. 16(2)(a) had caused disagreements among the delegates representing countries from the civil and common law systems.[11] In Article 16(2) of the Convention there are two restrictions to the concept of revocability.[12] One of the restrictions provides that an offer is irrevocable if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; the second restriction provides that offers on which the offeree has acted in reliance are also irrevocable.[13] Generally, for irrevocability, the offeror should intend to make his offer irrevocable and his offer should indicate that fact.[14] However, CISG Article 16(2)(a) has not cleared the controversy as to whether the mere fixing of a time for acceptance makes the offer irrevocable.[15] In the Convention, the question as to whether mere fixing a time for acceptance makes the offer irrevocable has been left to Article 8 of the Convention, which deals with intent and the interpretation of statements.[16] In the PECL, Article 2:202 provides that an offer is revocable, but also provides three exceptions to that general rule: (i) if the offer indicates that it is irrevocable (Art. 2:202(3)(a));[17] (ii) if it states a fixed time for its acceptance (Art. 2:202(3)(b)); (iii) 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 (Art. 2:202(3)(c)).

The wording of PECL Article 2:202(3)(b) clears any doubt in CISG Art. 16(2)(a), by stating that a revocation of an offer is ineffective even if it merely states a fixed time for its acceptance. Accordingly, "the offer if accepted becomes binding even though it was purportedly revoked before it was accepted."[18]

     g. In the common law legal system, if an offer indicates a fixed time for acceptance, the offer lapses after expiry of this certain period;[19] the offeror may revoke his offer any time during this fixed period, unless consideration has been paid by the offeree. On the other hand, in most legal systems where civil law is adopted, "every 'open offer' is a 'firm offer' simply because it expressly states that it is irrevocable or implicitly indicates so by stating a fixed period for acceptance."[20]

However, in the Convention fixing a time for acceptance is one of the pillars indicating the intention to be bound and there must be additional grounds for irrevocability. In this regard, there is a real danger that lawyers from different legal systems may interpret Article 16(2)(a) in divergent directions, representing their different jurisprudential heritage. According to this, there might be two possible types of interpretations. For a civil law attorney, if an offer states a fixed time for acceptance, as provided under CISG Article 16(2)(a), then the offer is irrevocable until the expiration of the stated fixed time. For a common law attorney, however, a fixed time for acceptance means that the acceptance must be given in that period and also that the offeror can revoke the offer any time until the expiration date; therefore, more precise language or additional grounds are necessary to make the offer irrevocable.[21] PECL Article 2:202(3)(b), on the other hand, explicitly obviates the doubt as to whether fixed time for acceptance makes the offer irrevocable. One of the main reasons why PECL regulates this issue explicitly without leaving any doubt might be that the majority of the laws of European states whose lawyers participated in the drafting of the PECL have civil law origin.[22]

4. Interpretation of the contract

     h. Interpretation of the contract gains significant importance in the application of CISG Art. 16(2)(a), because "the rules on interpretation of contract are necessary when the meaning of certain provisions is ambiguous."[23] In this context, "under the CISG [whether mere fixing a time for acceptance makes the offer irrevocable] is to be solved by the rules in [its] Article 8 on intent and interpretation of statements."[24] According to CISG Article 8(3), due consideration is to be given to all relevant circumstances of the case including the negotiations, any practices, which the parties have established between themselves, usages and any subsequent conduct of the parties. In this regard, if the trading parties are both from common law jurisdictions, their understandings and intentions will be interpreted according to common law regulation of the matter; on the other hand, if the parties are both from civil law jurisdictions, it will be interpreted according to civil law regulation of the matter. However, the most important question is: What if the parties are from different jurisdictions? - one from common law, the other from civil law.

     i. Article 8 of the Convention will be decisive in the interpretation of the intention of the parties; it would supplement Article 16(2)(a). As mentioned elsewhere, the intention to make the offer irrevocable and indicating this fact clearly [25] can be sufficient for irrevocability. Also, when the interpretation is made in the light of CISG Article 8(3) the intention of the parties can be found from "circumstances extraneous to the offer."[26] If the parties are from legal systems that regard an offer made subject to a time limit as binding, then according to Article 8(1) of the Convention, it may be presumed that the offeror intended his offer to have such an effect.[27] On the other hand, if the parties are both from common law systems, by virtue of Article 8(2) of the Convention, it may be presumed that unless there are additional grounds to be bound, the offeror does not intend to bind himself with the offer for that period.[28] Article 8(2) requires that the interpretation must be made according to the understanding of the recipient; this is important in an offer made from a country where common law is the legal system to a country where the civil law system governs, otherwise, an offeror from a common law system may be bound with his offer since the understanding of the recipient governs in the aforementioned case. In Article 5:101(1) of the PECL, the common intention of the parties has been used and in Article 5:101(2), only in exceptional circumstances may one party's intention be used to interpret. On the other hand, if CISG Article 8 were read literally, the Convention's way of interpreting intention can be based on one party's intention. In issues regarding irrevocability, common intention of the parties is vital especially when the parties are from different legal systems.

5. Reliance - CISG Article 16(2)(b)

     j. CISG Article 16(2)(b) and PECL Article 2:203(c) are to the same effect. They state that "an offer cannot be revoked" ["a revocation of an offer is ineffective"] "if" ["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.

6. Conclusions

     k. Where it is clear that provisions of the PECL and the Convention embody the same intent, concept or approach, with the PECL text, notes, illustrations fleshing out the matter to a greater extent, the PECL may be of help in interpreting the Convention. However, this is less likely where counterpart provisions adopt different approaches.

a) PECL Article 2:202(1) and CISG Article 16(1)

PECL Article 2:201(1) and CISG Article 16(1) are similar. PECL explanations may therefore be relevant to the interpretation of this provision of the Convention.

b) PECL Article 2:202(2) and the CISG

PECL Article 2:202(2) appears to dovetail with the intent of the Convention. Here also, PECL explanations may be relevant to interpretation of the CISG.

c) PECL Article 2:202(3)(a), (b) and CISG Article 16(2)(a)

This is less apt to be so in the case of PECL 2:202(3)(a), (b) and CISG 16(2)(a): PECL Article 2:202(3)(a), (b) and CISG Article 16(2)(a) take different approaches.

The PECL notes indicate that it is questionable whether PECL Article 2:202 may be used to help interpret CISG Article 16(a). The PECL notes report:

"The wording of [CISG] art. 16 para. 2(a) reflects a disagreement among the delegates of the Diplomatic Conference which in 1980 adopted [the Convention]. The common lawyers wished the offeror's fixing of a period for acceptance to be a time limit after which the offer could no longer be accepted but before which it could still be revoked. The civil lawyers saw the fixing of a time limit for acceptance as a promise by the offeror not to revoke the offer within that time limit (see also [ULF] art. 5(2)). The wording of [CISG] art. [16]2(a) was a compromise. The offer can be made irrevocable, but the provision has not cleared the controversy as to whether the mere fixing of a time for acceptance makes the offer irrevocable. Common lawyers believe that it does not per se make the offer irrevocable, there must be additional grounds for assuming that, see v. Caemmerer Schlechtriem art. 16 note 10 and Honnold no. 141 ff. [Under the Convention] the question is to be solved by the rules in [CISG] art. 8 on interpretation of statements. Article 2:202 of the [PECL] obviates this doubt. The fixing of a time for acceptance will make the offer irrevocable for that period."[29]

d) PECL Article 2:202(3)(c) and CISG Article 16(2)(b)

As PECL Article 2:202(3)(c) and CISG Article 16(2)(b) are substantively identical, the illustrations and interpretive guidance that accompany PECL 2:202(3)(c) could well be relevant to the interpretation of CISG 16(2)(b).

[See also commentary by the author on this subject in: John Felemegas ed., An International Approach to the Interpretation of the United Nations Convention on Contracts for the International Sale of Goods (1980) as Uniform Sales Law, Cambridge University Press (2006) 301-307.]


FOOTNOTES

* LL.B. Dokuz Eylul University School of Law, Turkey; LL.M. University of Georgia School of Law, USA; M.A. Istanbul Bilgi University School of Law, Turkey; PhD Candidate University of Manchester School of Law, 2003. The author is an attorney at law and member of the Izmir and Turkish Bar Associations.

1. CISG Art. 15 reads: "(1) An offer becomes effective when it reaches the offeree. (2) An offer, even if it is irrevocable, may be withdrawn if the withdrawal reaches the offeree before or at the same time as the offer." See also Schlechtriem, Uniform Sales Law - The UN-Convention on Contracts for the International Sale of Goods 52 (1986) [available online at <http://www.cisg.law.pace.edu/cisg/biblio/schlechtriem.html>].

2. See Secretariat Commentary on article 14 of the 1978 Draft [draft counterpart of CISG article 16], Comment 1, which makes clear that this provision "states that offers are in general revocable and that the revocation is effective when it reaches […] the offeree." [Hereinafter, Secretariat Commentary, also available on-line at: <http://www.cisg.law.pace.edu/cisg/text/secomm/secomm-16.html>].

See also CISG Art. 24, which provides a definition of the term "reaches".

3. See Secretariat Commentary, Comment 4.

For comments and comparison with UCC Article 2 see Peter Schlechtriem, Commentary on the UN Convention on the International Sale of Goods (CISG) 119 (Peter Schlechtriem ed. 1998) stating that "[CISG Article 16] restricts [revocability] by providing that not only the conclusion of the contract but even the dispatch of an acceptance rules out the revocation of an offer. The offeror can make his offer binding without the need for 'consideration' or the observance of particular forms and without a time period being prescribed during which the offeror is bound by his offer."

4. CISG Art. 23 reads: "A contract is concluded at the moment when an acceptance of an offer becomes effective in accordance with the provisions of this Convention." The Secretariat Commentary explains that the basic rule - i.e., the offeror's right to revoke the offer terminates at the moment the contract is concluded - applies only in those cases in which the offeree orally accepts the offer and in those cases in which the offeree accepts the offer in conformity with article 18(3); see Comment 2.

CISG Art. 18(3) provides that "if, by virtue of the offer or as a result of practices which the parties have established between themselves or of usage, the offeree may indicate assent by performing an act, such as one relating to the dispatch of the goods or payment of the price, without giving notice to the offeror, the acceptance is effective at the moment the act is performed." In that context, since the acceptance is effective and the contract is concluded at the moment the act is performed, the right of the offeror to revoke his offer terminates at that same moment; see Comment 3.

5. See Alejandro Garro, Reconciliation of Legal Traditions in the U.N. Convention on Contracts for the International Sale of Goods, 23 Int'l Law. 443 (1989) [available online at <http://www.cisg.law.pace.edu/cisg/biblio/garro1.html>; see also Honnold, Uniform Law for International Sales 167 (2d ed. 1987).

Cf. Secretariat Commentary, Comment 5: "The value of a rule that a revocable offer becomes irrevocable prior to the moment at which the contract is concluded lies in the fact that it contributes to an effective compromise between the theory of general revocability of offers and the theory of general irrevocability of offers. Although all offers except those which fall within the scope of article 14(2) [draft counterpart of CISG article 16(2)] are revocable, they become irrevocable once the offeree makes his commitment by dispatching the acceptance."

See also P. Schlechtriem, Uniform Sale Law - The U.N. Convention on Contracts for the International Sale of Goods 52 (1986), who states that "the possibility of withdrawing an offer until, or in any case simultaneously with, its arrival coincides with ULF Article 5(1) and § 130(1) sentence 2 of the German Civil Code"; [available at: <http://www.cisg.law.pace.edu/cisg/biblio/schlechtriem-16.html>].

6. Article 2.4 of the UNIDROIT Principles reads: "(1) Until a contract is concluded an offer may be revoked if the revocation reaches the offeree before it has dispatched an acceptance. (2) However, an offer cannot be revoked (a) if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or (b) if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer."

7. PECL Article 2:205 (2) and (3) read: "(2) In case of acceptance by conduct, the contract is concluded when notice of the conduct reaches the offeror. (3) If by virtue of the offer, of practices, which the parties have established between themselves, or of a usage, the offeree may accept the offer by performing an act without notice to the offeror, the contract is concluded when the performance of the act begins."

8. Schlechtriem, supra note 5, at fn. 170, notes: "Unfortunately, a British proposal […] concerning the withdrawal of a public offer found no support because of the misunderstanding that there is no such thing as a real public offer."

See also Jacob Ziegel, who comments on CISG Art. 16 and the question of revocation of an offer made to the public: "This seems inconsistent with art. 14(2) which […] does recognize the validity of offers made to non-specific persons if this was the intention of the person making the proposal. Presumably the meaning of "reaches" must be relaxed accordingly and, in the case of an offer made to the public, or a part thereof, an offer will be effectively revoked if reasonable steps are taken to bring it to the attention of the offerees." Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods", [available at: <http://www.cisg.law.pace.edu/cisg/text/ziegel16.html>].

On the other hand, PECL Art. 2:202(2) avoids any uncertainty over the matter by making it explicitly clear that "an offer made to the public can be revoked by the same means as were used to make the offer." Accordingly, revocation of offers to the public which are not irrevocable under PECL Article 2:202(2) can be made by the same means as the offer. See PECL Comment C, which states that the revocation must be "as conspicuous as the offer." [PECL Comments and Notes are also available at: <http://www.cisg.law.pace.edu/cisg/text/peclcomp16.html#cnpc>].

9. See Comments on Reasonableness as a general principle of CISG <http://www.cisg.law.pace.edu/cisg/text/reason.html>.

10. Schlechtriem, supra note 3, at 119.

11. See Summary Records of Meetings of the First Committee (9th Meeting), A/Conf.97/C.1/L.48, L.84 [available online at <http://www.cisg.law.pace.edu/cisg/firstcommittee/Meeting9.html>; also see Garro, supra note 5, n.56 and accompanying text.

12. It must be noted that Secretariat Commentary explains that this provision "does not require a promise on the part of the offeror not to revoke his offer nor does it require any promise, act, or forbearance on the part of the offeree for the offer to become irrevocable. It reflects the judgement that in commercial relations, and particularly in international commercial relations, the offeree should be able to rely on any statement by the offeror which indicates that the offer will be open for a period of time." Comment 6.

13. CISG Art. 16(2) provides the instances where 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."

See also the Secretariat Commentary, which explains that the offer may indicate that it is irrevocable in different ways: "The most obvious is that the offer may state that it is irrevocable or that it will not be revoked for a particular period of time. The offer may also indicate that it is irrevocable by stating a fixed time for acceptance." Comment 7.

14. See Schlechtriem, supra note 3, at 120.

15. See Principles of European Contract Law: Parts I and II, 167 (Ole Lando & Hugh Beale eds. 2000)

16. See Id., at 167; Schlechtriem, supra note 3, at 120 et seq.; Summary Records of Meetings of the First Committee (9th Meeting), para. 35, A/Conf.97/C.1/L.48, L.84 [available online, supra note 11].

17. The indication that the offer is irrevocable must be clear; it may be made by declaring that the offer is a "firm offer" or by other similar expressions and it may also be inferred from the conduct of the offeror; see PECL Comment E, available at <http://www.cisg.law.pace.edu/cisg/text/peclcomp16.html#cnpc>.

18. The PECL Comments explain that if the offeror does not perform the contract he could become liable for non-performance, and would have to pay damages under the relevant PECL provisions contained in chapter 9, section 5. See Principles of European Contract Law, supra note 15, at 165; Comment D, also available at: <http://www.cisg.law.pace.edu/cisg/text/peclcomp16.html#cnpc>.

19. See Farnsworth, Formation of Contract, §3.04 sub 3-11(2); Feltham, The United Nations Convention on Contracts for the International Sale of Goods, [1981] 24 J.Bus.L., 346, at 352.

20. See Garro, supra note 5.

21. For different viewpoints see Report of the United Nations Commission on International Trade Laws on the Work of its Eleventh Session (New York 30 May-16 June 1973), [1978], 9 UNCITRAL Y.B. 41 U.N. DOC. A/CN.9/SER.A/(1978); see also Schlechtriem, supra note 1, at 53 & nn.172-172a stating that "[A] fixed time, which was understood by some delegates to be an irrebuttable presumption of an intent to be bound may be subject to different interpretations depending on the legal system in which the offeror lives."

22. Under laws of some European States offers are generally irrevocable see Principles of European Contract Law, supra note 15, at 167, e.g., Germany BGB § 145; Austria ABGB § 862; Greece CC art. 185.

23. See Maja Stanivukovic, "Remarks on the manner in which the Principles of European Contract Law may be used to interpret or supplement Article 8 of the CISG", para C., available on-line at <http://www.cisg.law.pace.edu/cisg/text/peclcomp8.html#er>.

24. See Principles of European Contract Law, supra note 15, at 167. See also, J. Ziegel, op. cit., commenting on the application of CISG Art. 16, who states: "Since it is often in the interests of the offeror that the offeree should have a reasonable opportunity to determine whether or not to accept the offer, the implication of a firm offer as provided in Art. 16(2)(b) seems to be a fair interpretation of the offeror's intention. Whether the implication should be drawn in a particular case will of course depend on all the circumstances, including the relevant trade practices and usages."

25. For unambiguous and clear wording See Schlechtriem, supra note 3, at 121 stating that "'firm offer', 'will be held open' or words which are understood in the particular trade to express an intention to be bound, for example, 'open offer', 'option', 'guarantee'."

26. See Schlechtriem, supra note 3, at 121 & n.25; see also Schlechtriem, supra note 1, at 53 stating that "[The offeror] does not need to do [the declaration of the offer to be irrevocable] expressly, but rather his intent to be bound can be deduced from the circumstances relevant to the interpretation of the offer and particularly from his setting a fixed period during which the offer is open."

27. See Schlechtriem, supra note 3, at 121.

28. See Schlechtriem, supra note 3, at 121.

29. PECL Notes, para. 2, available at: <http://www.cisg.law.pace.edu/cisg/text/peclcomp16.html>.


Comment and notes on PECL 2:202

Like the commentary to the UNIDROIT Principles and the U.S. Restatements, the comments to the PECL help explain the text. The PECL notes identify civil law and common law antecedents and related domestic provisions. With the permission of the Commission on European Contract Law, these comments and notes are presented below. The source of this material is Ole Lando & Hugh Beale eds., Principles of European Contract Law: Parts I and II, Kluwer Law International (2000) 164-168.


COMMENT AND NOTES: PECL Article 2:202: Revocation of Offer

(1) An offer may be revoked if the revocation reaches the offeree before it has dispatched its acceptance or, in cases of acceptance by conduct, before the contract has been concluded under Article 2:205(2) or (3).

(2) An offer made to the public can be revoked by the same means as were used to make the offer.

(3) However, a revocation of an offer is ineffective if: (a) the offer indicates that it is irrevocable; or (b) it states a fixed time for its acceptance; or (c) it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer.

Comment

A. Revocation and withdrawal distinguished

An offer becomes effective when it reaches the offeree, see Article 1:303(2) and (6). However, before it reaches the offeree the offer may be countermanded or withdrawn, and it will not become effective, see Article 1:303(5). It cannot then be accepted by the offeree. However, an offer may be revoked before the offeree has dispatched its acceptance; the offer which is revoked has become effective, and might have been accepted, but if the acceptance has not been dispatched, and if the contract has not been concluded by an act of performance or other act by the offeree, see Article 2:205 (2) and (3), the offer is revoked when the revocation reaches the offeree.

B. Acceptance by conduct

In case of acceptance by conduct the contract is concluded when the offeror learns of it, see Article 2:205(2). In this case the revocation is effective if it reaches the offeree before the offeror has learned of the conduct, see Article 2:202(1). In the cases envisaged in Article 2:205(3), where the offeree can accept by performing an act without notice to the offeror, the revocation must reach the offeree before the latter begins to perform.

C. Offers to the public

Revocation of offers to the public which are not irrevocable under Article 2:202(2) can be made by the same means as the offer. The revocation must then be as conspicuous as the offer. If the offer appeared as an advertisement in a newspaper the revocation must appear at least as visibly in the paper as the advertisement.

The revocation of an offer made in an advertisement which was mailed to the offeree must reach it before it dispatches its acceptance. If the offer has been published in a newspaper the paper bringing the revocation must be in the offeree’s mailbox or available in the news-stands before the offeree dispatches its acceptance. [page 164]

D. Irrevocable offer

Under paragraph 2 there are three exceptions to the general rule in paragraph 1: (a) if the offer indicates that it is irrevocable; (b) if it states a fixed time for its acceptance; (c) if the offeree had reason to rely on the offer as being irrevocable, and has acted in reliance on the offer.

In these cases the offer if accepted becomes binding even though it was purportedly revoked before it was accepted. If the offeror does not perform the contract it may become liable for non-performance, and will have to pay damages under the rules of chapter 9, section 5.

E. Irrevocability stated

The indication that the offer is irrevocable must be clear. It may be made by declaring that the offer is a “firm offer” or by other similar expressions. It may also be inferred from the conduct of the offeror.

F. Fixed time for acceptance

Another way of making the offer irrevocable is to state a fixed time for its acceptance. This statement must also be clear. If the offeror states that its offer “is good till January 1” the offer is irrevocable. The same applies if it states that the offer “lapses on September 1”. If on the other hand the offeror only advises the offeree to accept quickly, its offer will be revocable.

G. Reliance

The third exception to the rule in paragraph 1 concerns cases where “it was reasonable for the offeree to rely on the offer as being irrevocable” and the “offeree has acted in reliance on the offer”. Reliance may have been induced by the behaviour of the offeror. It may also be induced by the nature of the offer

Illustration 1: Contractor A solicits an offer from sub-contractor B to form part of A’s bid on a construction to be assigned within a stated time. B submits its offer and A relies on it when calculating the bid. Before the expiry of the date of award, but after A has made its bid, B revokes its offer. B is bound by its offer until the date of assignment.

An offer of a reward may be irrevocable with regard to persons who have acted in reliance of the offer.

Illustration 2: In an advertisement A promises a “reward” of £1,000 in addition to damages to purchasers of its “high pressure” cooker, which will be on the market the following day, if the cooker explodes. A month later it revokes the promise in another advertisement. Customers who before the offer was revoked have bought a cooker which eventually explodes can claim the “reward”.

See also Comment C. to Article 1:201. [page 165]

H. Incompatible contracts

It may happen that an offeree accepts an offer knowing that it is incompatible with another contract which the offeror has made. A collector accepts the offer of an art dealer to sell a picture knowing that the dealer has already sold the same picture to another collector. A theatre manager accepts the offer of an actor to perform at her theatre for a period during which the actor has engaged himself to perform at another theatre. Knowing that both contracts cannot be performed the offeree may still accept the offer: the contract is not invalid. However, these Principles do not deal with the question which of the collectors or which of the theatres may claim performance. Nor do they deal with the question whether the offeree may incur liability towards the first buyer or towards the owner of the other theatre.

As provided in Article 4:102, neither the fact that at the time of the conclusion of the contract the performance of the obligation was impossible, nor the fact that at that time the party was not entitled to dispose of the assets to which the contract relates, will prevent the contract from coming into existence.

I. Supervening events

A contract which is made through acceptance of an offer which is irrevocable under Article 2:202(3) may nevertheless be terminated if supervening events covered by the rules on excuse due to an impediment make performance of the offer impossible (see Article 8:108), or have to be re-negotiated if changed circumstances make it excessively onerous (see Article 6:111).

Promises which do not need acceptance are irrevocable. However, they are also governed by the rules on change of circumstances in Article 6:111 and on excuse due to an impediment in Article 8:108.

Notes [Match-ups with Continental and Common Law domestic rules, doctrine and jurisprudence]

1. Are offers revocable? Effects of wrongful revocation

In this matter the laws of the Union differ on various questions. Is an offer revocable or irrevocable before it has been accepted? If it is revocable, can an offeror make its offer irrevocable? What are the effects of an improper revocation?

2. Offers are revocable but may be made irrevocable

Like Article 2:202, some laws provide that an offer is revocable, but that it may follow from the offer or from the circumstances that it is irrevocable. If in spite of its revocation the offeree accepts an irrevocable offer in due time, there is a contract.

Art. 1328 of the ITALIAN CC provides that the offeror may revoke the offer until he learns of the offeree's acceptance. However, the offeror's revocation is without effect if he has made the offer irrevocable or has undertaken to keep the promise open for a certain time, see CC art. l329. If the offer is accepted within the time originally envisaged by the offer, there is a contract in spite of the revocation. And if the offeree has acted in reliance on the offer in good faith the offer may be revoked but the offeree may claim damages under the rules on precontractual liability, see notes to Article 2:301 and Bianca, Il contratto I 236; Cass. 8 March l972, no. 664 and 19 July 1972 no. 193. The rules in the DUTCH BW art. 2:119 come close to those of the Italian CC with the exception that an offer can be revoked until the offeree has dispatched his acceptance. In SCOTLAND the offer is generally revocable unless the offeror states otherwise. A firm offer is treated as promise not to revoke the offer for whatever is the stated period, see McBryde, Contract 68-71. In SPANISH case law offers are generally revocable, see Supreme Court 23 March l988, RAJ (1988) 3623 and 3 Nov 1993, RAJ (1993) 8963, but an option given by a seller to a prospective buyer is irrevocable. See Supreme Court 4 February l994 RAJ (1994) 910 and 14 February l995, RAJ (1995) 837. [page 166]

CISG art. 16, and art. 2.4 of the UNIDROIT Principles provide: (1) Until a contract is concluded an offer may be revoked if the revocation reaches the offeree before he has dispatched an acceptance. (2) However, an offer cannot be revoked (a) if it indicates whether by stating a fixed time for acceptance or otherwise that it is irrevocable; or (b) if it was reasonable for the offeree to rely on the offer as being irrevocable, and the offeree has acted in reliance of the offer. The wording of art. 16 para. 2(a) reflects a disagreement among the delegates of the Diplomatic Conference which in 1980 adopted CISG. The common lawyers wished the offeror’s fixing of a period for acceptance to be a time limit after which the offer could no longer be accepted but before which it could still be revoked. The civil lawyers saw the fixing of a time limit for acceptance as a promise by the offeror not to revoke the offer within that time limit (see also ULFIS art. 5(2)). The wording of art. 2(a) was a compromise. The offer can be made irrevocable, but the provision has not cleared the controversy as to whether the mere fixing of a time for acceptance makes the offer irrevocable. Common lawyers believe that it does not per se make the offer irrevocable, there must be additional grounds for assuming that, see v. Caemmerer Schlechtriem art. 16 note 10 and Honnold no. 141 ff. The question is to be solved by the rules in CISG art. 8 on interpretation of statements.

Article 2:202 of the Principles obviates this doubt. The fixing of a time for acceptance will make the offer irrevocable for that period.

3. Tort liability for improper revocation

The FRENCH courts have held that the offeror can revoke his offer until it has been accepted. The offeror may, however, expressly or by implication, for instance by fixing a time limit for acceptance, promise not to revoke his offer; and even if no such promise is made it may follow from the circumstances of the case or from usage that the offeror cannot revoke it without incurring liability. If the offeror nevertheless revokes his offer there will generally be no contract but the offeror will incur liability in damages if he revokes the offer before a reasonable time has lapsed, see notes to Article 2:301 .The amount for which the offeror will be held liable in damages is to be finally settled by the "juges au fond", see Ghestin, Formation no. 301. The rules are reported to be the same in LUXEMBOURG.

4. Even offer stated to be irrevocable may be revoked

In the COMMON LAW the offer is revocable even if it is stated to be irrevocable. By giving a notice to the offeree the offeror may revoke his offer before acceptance.The offeree can make the offer irrevocable with the offeror's consent by furnishing a consideration for holding the offer open, for instance by paying the offeror £1, or by using a deed. Apart from this the offeror cannot by his own act make the offer irrevocable, see Treitel 40 ff.

5. Offers are generally irrevocable

Under some laws the offer is binding and remains so until it lapses, either because it has not been accepted within the time limit set for its acceptance, which is either the time fixed by the offeror or a reasonable time, or because it has been rejected. An acceptance of the offer in due time makes it into a contract even though it has been revoked. The offeror may, however, in his offer state that it is revocable.

These rules apply in GERMANY, see BGB § 145, AUSTRIA, see ABGB § 862, GREECE see CC art. 185, PORTUGAL see CC art. 230, BELGIUM, see Dirix & van Oevelen, "Kroniek verbintenissensrecht 1985-1992" Rechtskundig Weekblad 1992-93, 1210 and in the NORDIC LAW, see Contracts Act §§ 1, 3, 7, and 9. § 9 of the DANISH and SWEDISH Contract Acts provides that where a person has stated in his proposal that it is made “without obligation”, or has used similar expressions, his statement shall be regarded as an invitation to make an offer. In FINLAND, which has not adopted § 9, the same rule applies.

6. Revocation of offers to the public

The general rule seems to be that a proposal to the public which is an offer to make a contract can be revoked by taking reasonable steps to revoke it, see Schlesinger I 113. Thus the ITALIAN CC art. 1336(2) provides that a revocation of an offer to the public, if made in the same form or in equivalent form as the offer, is effective even towards persons who have no notice of it (on rewards see below). A similar rule is found in PORTUGAL, see CC art. 230(3); BELGIUM; DENMARK, see Ussing, Aftaler 51; AUSTRIA; ENGLAND, see Treitel, Contract 41; and IRELAND. In SCOTLAND a proposal which is a promise cannot be revoked but will lapse after a reasonable time. If the proposal is an offer it is on principle revocable by whatever means the proposal itself was made.

In FRANCE and LUXEMBOURG some offers to the public are not revocable for a certain period, see Ghestin, Formation no. 3l5. In GREECE, authors consider proposals to the public as invitations to make an offer and they will therefore never become binding, see Georgiadis/ Stathopoulos CC 199 no. 2, p. 322. In SPAIN the issue is reported not to be regulated. [page 167]

7. Offers of rewards

Under GERMAN and AUSTRIAN law, an offer for a reward is not revocable if its revocation was renounced when it was published, either expressly or impliedly by fixing a time limit for the act to be accomplished, see BGB § 658 (2) and ABGB § 860a. The same rule is adopted in SPAIN, see Diez-Picazo 288f. In the NETHERLANDS and ITALY an offer of a reward may only be revoked or modified for important reasons, see BW art. 6:220 and ITALIAN CC art. 1990. The BW art. 6.220 provides that even in the event of a valid revocation the court may grant equitable compensation to a person who has prepared the requested performance on the basis of the offer. [page 168]

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