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GUIDE TO ARTICLE 18

Comparison with Principles of European Contract Law (PECL)


Match-up of CISG Article 18 with PECL Articles 2:204 through 2:206; see also PECL Article 2:211
CISG Article 18


(1) A statement made by or other conduct of the offeree indicating assent to an offer is an acceptance. Silence or inactivity does not in itself amount to acceptance.


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


(3) However, 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 notice to the offeror, the acceptance is effective at the moment the act is performed, provided that the act is performed within the period of time laid down in the preceding paragraph.

PECL Article 2:104 [Acceptance of Offer]
(complete and revised version 1998)

(1) Any form of statement or conduct by the offeree is an acceptance if it indicates assent to the offer.

(2) Silence or inactivity does not in itself amount to acceptance.

PECL Article 2:205 [Time of Conclusion]

(1) If an acceptance has been dispatched by the offeree the contract is concluded when the acceptance reaches the offeror.

(2) In the 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.

PECL Article 2:206 [Time Limit for Acceptance]

(1) In order to be effective, acceptance of an offer must reach the offeror within the time fixed by it.

(2) If no time has been fixed by the offeror acceptance must reach it within a reasonable time.

(3) In the case of an acceptance by an act of performance under Article 2:205(3), that act must be performed within the time for acceptance fixed by the offeror or, if no such time is fixed, within a reasonable time.

SEE ALSO:

PECL Article 2:211 [Contracts Not Concluded through Offer and Acceptance]

The rules in this Section apply with appropriate adaptations even though the process of conclusion of a contract cannot be analysed into offer and acceptance.


Definitions

For the PECL definition of "reasonable", go to PECL art. 1:302 [Reasonableness] and the comment and notes that accompany this provision.


Editorial remarks

Remarks on the manner in which the Principles of European Contract Law
may be used to interpret or supplement Article 18 of the CISG

Cecila Carrara and Joachim Kuckenburg [*]

February 2003

1. Introduction
2. Art. 18(1) CISG - Meaning of Acceptance
3. Art. 18(2) CISG - Effectiveness of Acceptance

a) Reasonable time
b) Oral offer
4. Art. 28(3) - Acceptance without Notification
a) Overview
b) Conduct vs. performing an act
c) Acts falling under Art. 18(3) CISG
d) Revocation of offer and withdrawal of acceptance
e) Duty to inform?

1. Introduction

Whereas Arts. 14 to 17 CISG deal with the offer, Arts. 18 to 23 CISG deal with the acceptance. Art. 18(1) CISG defines the acceptance in general. This provision is in large part supplemented by Art. 19 CISG which deals with the substantive contents of an acceptance. By contrast, Art. 18(2) and (3) CISG is concerned with the communication of the acceptance and the conditions under which the offeree may be dispensed of such communication. It is thereby supplemented by Art. 20 CISG for computation of applicable time periods and by Art. 21 CISG with respect to late acceptances. Whereas Art. 23 CISG may be regarded as the conclusion of Part II of the CISG defining the moment when a contract is concluded, Art. 24 CISG defines for both offer and acceptance when a certain statement reaches the addressee within the meaning of the CISG.

2. Art. 18(1) CISG - Meaning of Acceptance

Art. 18(1) CISG substantially corresponds to Art. 2:204 PECL, defining in rather broad terms the meaning of acceptance, which may be express or implied by conduct. Both provisions do, however, clearly deny that silence or inactivity per se may constitute an acceptance. Art. 2:204 PECL thereby reconfirms the principle that in commercial dealings silence in itself does not have legal relevance.[1]

3. Art. 18(2) CISG – Effectiveness of Acceptance

     a) Reasonable time

According to Art. 18(2) CISG, an acceptance must reach the offeror within the time open for its acceptance. This provision corresponds to Arts. 2:205(1) and (2) and 2:206(1) and (2) PECL. Both texts thereby reject the mailbox principle to establish when an acceptance becomes effective.[2] Art. 18(2) CISG provides some guidance as to how the words "reasonable time" within which an offer must be accepted should be interpreted, by referring both to the circumstances of the case and to the means of communication employed.[3] Art. 18(2) last sentence CISG provides in addition a special rule in case of oral offers, which, in general, must be accepted immediately.[4] However, the proviso "unless the circumstances indicate otherwise" shows that immediate acceptance is not a strict rule. On the contrary, the PECL contain neither exemplifications nor special rules for oral offers.[5]

     b) Oral offer

The existence of the specific rule of Art. 18(2) last sentence CISG operates as an inversion of the burden of proof in comparison to Art. 18(2) second sentence CISG. Indeed, if the negotiations have been conducted orally and a dispute arises as to whether the offeree could only accept the offer immediately, or whether he disposed of a period for reflection, Art. 18(2) last sentence CISG places upon the offeree the burden to prove that, in the specific case, he could rely on the offer to stand for an additional period of time.[6]

4. Art. 18(3) CISG – Acceptance without Notification

     a) Overview

Art. 18(3) CISG corresponds substantially to Arts. 2:205(3) and 2:206(3) PECL. These provisions constitute an exception to the general rule that an acceptance must reach the offeror to be effective. By merely performing an act, the offeree may render his acceptance effective, and thus conclude the contract without the acceptance reaching the offeror. These provisions raise several questions: How is the distinction drawn between the conduct indicating assent of the offeree (Art. 18(1) CISG), which must reach the offeror (Art. 18(2) 1st sentence CISG), and the act upon the mere performance of which a contract is concluded (infra 4 b))? What kind of acts qualify to fall within the realm of Art. 18(3) CISG and when precisely is the contract concluded in such cases (infra 4 c))? What happens if the offeror revokes his offer, or the offeree withdraws his acceptance, before the offeror knows about the conclusion of the contract (infra 4 d)? In case of conclusion of a contract by mere performance of an act, must the offeree notify the offeror thereof in due course (infra 4 e)?

     b) Conduct vs. performing an act?

One might be tempted to deduce from the difference in terminology used under Art. 18(3) CISG on the one hand ("performance of an act"), and Art. 18(1) CISG on the other ("conduct"), that the distinction between the two possibilities of acceptance must be made by reference to the specific behavior of the offeree. However, the distinction does not lie in the type of behavior on the part of the offeree. The conclusion of a contract without an acceptance reaching the offeror under Art. 18(3) CISG may occur only if the offeror has, or must be deemed to have, renounced to receive the acceptance of the offeree, either because his offer so provided or because this results from practices established between the parties or usages which are widely known and observed and of which the offeror could not have been unaware (Art. 9 CISG).

     c) Acts falling under Art. 18(3) CISG

Art. 2:205(3) PECL does not qualify what kind of act is sufficient to determine the conclusion of a contract without the notification of an acceptance. Surprisingly, Art. 2:206(3) PECL speaks of an "act of performance".[7] Such qualification would limit the possible behavior of the offeree to those acts which are at least directly concerned with the performance of the contract under consideration.[8] Art. 18(3) CISG, however, gives guidance in this respect in the examples provided: the act may be "one relating to" the dispatch of the goods or the payment of the price. Art. 18(3) CISG would therefore be more restrictive than Art. 2:205(3) PECL, but broader than 2:206(3) PECL: The behavior of the offeree does not need to be directly concerned with the performance as such of the contract, but may include preparatory acts.[9] Given such clarification under Art. 18(3) CISG, no specific inferences may be drawn from the wording used in Art. 2:206(3) PECL, also in consideration of the fact that Art. 2.6(3) UNIDROIT Principles adopts the wording "performing an act".

While Art. 2:205(3) PECL makes it clear that the specific moment in time of conclusion of the contract is that of the "beginning" of the act, Art. 18(3) CISG speaks of "the moment the act is performed." It appears that, on this particular point, the PECL provide a more detailed indication, even though this allows for a contract to be concluded upon acts which have only a remote connection to the actual performance of the corresponding contractual obligations. In situations where the acts performed are punctual, the difference in the respective wordings is not significant; however, where the acts are continuative, it is submitted that the stricter rule of Art. 18(3) CISG is to be preferred.[10]

The act in question must manifest the offeree’s will to accept the offer. It is not readily clear whether such act must leave the sphere of control of the offeree [11] or whether purely internal dispositions (such as instructions given to in-house departments or employees) may constitute the acceptance. One may draw upon Art. 16(1) CISG,[12] since, as long as an offer may be revoked, no contract is concluded: the externalization of the accepting party’s will, under Art. 18(3) CISG, has the same rationale as the dispatch of the offeree’s acceptance referred to in Art. 16(1) CISG, i.e., the alienation of the manifestation of will. Accordingly, before this moment, the offer may be revoked and no contract has been concluded.

Dispatch of non-conforming goods unquestionably amounts to acceptance,[13] unless the goods are of a different kind (aliud) than the goods requested. In such case the dispatch will amount to a new offer, except where the offeree was in error in delivering the wrong goods and in fact wanted to accept the offer.

     d) Revocation of offer and withdrawal of acceptance

Under Art. 18(3) CISG and Arts. 2:205(3) and 2:206(3) PECL it is therefore clear that the contract is concluded when the performance of the act begins. The consequences are that both the offer cannot be revoked (arg ex Art. 16(1) CISG, cf. supra 4 b) at fn. 11; for Art. 2:205(3) PECL cf. Comment para. D: the performance "is one which the offeree cannot revoke"),[15] and the acceptance not be withdrawn thereafter (Art. 22 CISG). Therefore, a seller who calls back goods in transit which he shipped in acceptance of a corresponding offer, would be in breach of contract.[16]

In addition, neither the text of Art. 18(3) CISG nor Arts. 2:205(3) and 2:206(3) PECL require the party accepting an offer by performing an act to give notice to the offeror in order to perfect the process of formation of the contract. Absence of such notice, even where it may flow from a general duty of good faith, does not have any effect on the conclusion of the contract.[11]

     e) Duty to inform?

Nevertheless, the further question arises as to whether the accepting party has a "duty to inform" the offeror and, if so, what are the possible consequences in case of breach thereof.[17] Especially in the light of the urgency which usually characterizes cases falling under Art. 18(3) CISG, the offeror has a legitimate interest to be informed as soon as possible of the acceptance of the offeree.[18] It could be argued that if the offeror has a special interest in receiving a confirmation of acceptance, it is on him to request such confirmation from the other party. However, it is submitted that, even if there is no specific request by the offeror, the general duty of good faith and cooperation (Art. 7(1) CISG) imposes on the accepting party the burden of notifying promptly his acceptance to the offeror.[19] Such view may find further support in the wording of Art. 1:201(1) PECL [20] and Art. 1.7 of the UNIDROIT Principles [21] Accordingly, a violation of this duty would entitle the offeror to claim damages suffered as a consequence of failure of prompt notification;[22] the recognition of such a rule would effectively deter all possible attempts by the offeree to "call back" the acts performed at its own volition.

[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) 311-315.]


FOOTNOTES

* Avv. Cecilia Carrara is a research fellow at the CERADI - Luiss Guido Carli University in Rome and an Italian attorney, of counsel to the law firm MACCHI CELLERE GANGEMI; Joachim Kuckenburg, FCIArb, is a German attorney in the Paris law-firm De Busschère Kuckenburg.

1. For silence upon a "commercial letter of confirmation", cf. Art. 19 and Editorial Remarks; silence may amount to acceptance as a result of unequivocal practices established among the parties, cf., eg., France, Calzados Magnanni v. Shoes General International, Cour d'appel Grenoble, (21 October 1999), available online at <http://cisgw3.law.pace.edu/cases/991021f1.html>; US, Filanto v. Chilewich, Federal District Court for the SDNY, (14 April 1992), 789 Fed. Supp 1229 (1992), available online at <http://cisgw3.law.pace.edu/cases/920414u1.html>. This is true in particular on the basis of an ongoing relationship based on a framework agreement, such as distributorship, franchise, etc. The Notes to Art. 2:204 PECL state that, under various national laws, the offeree will generally be bound by his silence if the offer followed an invitation to deal by the offeree. However, this position does not convince, since it cannot be held that the issuer of the bid intends to waive his right to accept an individual offer, unless the contrary may be inferred from the terms of the bid. Even Restatement (Second) of Contracts, Section 69 "Acceptance by Silence or Exercise of Dominion" (for the full text of Section 69 cf. <http://www.law.unlv.edu/faculty/bam/k2000/r2k.html>), referred to in the Notes to Art. 2:204 PECL, para. 2, as an example does not bear out the position taken in the Notes.

2. The receipt rule has thus prevailed over the mailbox rule; the latter however keeps a certain importance in the context of Art. 16(1) CISG, because the offeror may not revoke his offer once acceptance has been dispatched. For the special case where acceptance is effective by performing an act, refer below in the text para. 4 d).

3. With respect to the  general principle of "reasonableness" under the CISG, cf. <http://cisgw3.law.pace.edu/cisg/text/reason.html>.

4. The same rule is provided under Art. 2.7 UNIDROIT Principles.

5. The same exemplifications contained in the text of the CISG are provided, however, by the Comments to Art. 2:206 PECL, para. C.

6. It appears that often in case of oral negotiations, specific offers and counter-offers cannot be traced back in the process of the conclusion of the contract. However, the position generally held under the CISG is that its rules on offer/acceptance also apply to cases where the formation of contracts does not occur according to this rigid scheme (cf. Schlechtriem in Schlechtriem, Commentary on the UN Convention on the International Sale of Goods, II ed. 1998, Introduction to Artt. 14-24, para. 2 et seq.) Art. 2:211 PECL further supports this position.

7. In the view of the authors this terminology, if had been used also in Art. 2:205(3) PECL, would better explain the specification provided therein, i.e., that the relevant moment in time for the conclusion of the contract is when the performance of the act "begins." Furthermore, such a rule would appropriately protect the legitimate interests of the offeror by limiting the kind of acts constituting acceptance, thereby restricting the offeree’s possibility to determine in his own discretion whether or not a contract has been concluded. This solution would contribute to enhance legal certainty. It is worth noting that the same solution is adopted under Art. 1327(1) Italian Cc whereby the contract is concluded when the performance of the obligation begins (cf. Benedetti, Il diritto commune dei contratti e degli atti unilaterali tra vivi a contenuto patrimoniale, Bracigliano, 1991, p. 119 et seq.).

8. Packing of the goods ordered might full under such notion, whereas ordering the goods from a sub-supplier or starting production of the goods will hardly qualify as an "act of performance" of the contract; it only relates to the future performance of the contract.

9. It is however generally recognized that the act must be of a certain significance, cf. Neumayer/Ming, Convention de Vienne sur les contrats de vente internationale de marchandises, Lausanne, 1993, p. 174.

10. For the reasons, see fn. 6 above.

11. Enderlein/Maskow, International Sales Law, New York-London-Rome, 1992, Art. 18, no. 15, p. 96, available online at <http://cisgw3.law.pace.edu/cisg/biblio/enderlein-art18.html>.

12. Heuzé, La vente internationale de marchandises, Paris 2000, p. 171 et seq., fn. 124; Neumayer/Ming, op. cit., no. 8, p. 175.

13. This holds true also in cases of partial delivery, unless the specific circumstances of the case indicate a different solution, e.g., it can be clearly understood that the seller only wanted to accept partially the offer, thereby the partial delivery constituting a new offer, which, as such, requires the buyer’s acceptance in order for a contract to be concluded; cf. for such a solution Germany, Oberlandesgericht [Appellate Court] Frankfurt/M., 23 May 1995, <http://cisgw3.law.pace.edu/cases/950523g1.html>.

14. Schlechtriem, op. cit., Art. 18, no. 7, pp. 129 - 130.

15. It has been pointed out that the solution adopted by the CISG may lead to unsatisfactory solutions under certain circumstances (among others cf. Neumayer/Ming, op. cit., p.176, Enderlein/Maskow, op. cit., p. 96). Indeed, the offeror who is unaware of the beginning of the performance may in good faith believe that he is still entitled to revoke his offer.

16. In the example proposed in the text, the buyer shall be entitled to damages for breach of contract, since the contract was already binding upon the parties as from the beginning of the performance of the act.

17. Again, Art. 1327(2) Italian Cc explicitly regulates the issue: the accepting party is obliged to notify promptly to the offeror that performance has begun, or else the accepting party will be held liable for damages. The damages in question cover the "positive interest" and are those suffered by the offeror as a consequence of having relied on the circumstance that the offeree had not accepted the offer (cf. Bianca, Il contratto, Milano 1987, 244).

18. Indeed, the offeror has a legitimate interest to know as of when he is precluded from revoking his offer, e.g., for the purpose of entering into a more convenient deal, or as of when the passage of the risk has occurred, e.g., for the purpose of insuring the goods.

19. This position is shared by the prevailing opinion of the scholars, although the legal basis for such a duty to inform is not always specifically clarified: cf. Enderlein/Maskow, International Sale of Goods, 1992, p. 96; Neumayer/Ming, op. cit., p. 175, consider such a duty only for the case where the offeror has sent a revocation of the offer after acceptance has occurred: upon receipt of the said revocation the offeree has a duty to inform the other party, which derives from a general "loyautécommerciale"; contra, Schlechtriem, op. cit., no. 23, p. 136, according to whom an ancillary duty to inform on the part of the offeree can only arise on grounds of the practices established between the parties or of usage.

20. Cf., however, the different view taken by J. Felemegas, "Comparative Editorial Remarks on the Concept of Good Faith in the CISG and the PECL", <http://www.cisg.law.pace.edu/cisg/text/peclcomp7.html#er>.

21. Supportive U. Magnus, "Comparative Editorial Remarks on the Concept of Good Faith in the CISG and the UNIDROIT-Principles", <http://www.cisg.law.pace.edu/cisg/principles/uni7.html#um>.

22. E.g., the goods in transit perish and no insurance contract has been concluded by the buyer; the delivery is delayed and the offeror, unaware of the conclusion of the contract, concludes a new contract with a third party, etc. In the specific case considered by Neumayer/Ming, op. cit., p. 175, cf. fn. 18, these authors suggest that in case of breach of the duty to notify the offeror of the acceptance, the offeree loses his right to rely upon the validity of the contract.


Comment and notes on PECL 2:204, 2:205, 2:206 and 2:111

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) 169-175, 187-188.


COMMENT AND NOTES: PECL Article 2:204: Acceptance

(1) Any form of statement or conduct by the offeree is an acceptance if it indicates assent to the offer.

(2) Silence or inactivity does not in itself amount to acceptance.

Comment

A. Acceptance

Like other declarations of intention a party’s acceptance of an offer can be made by a statement and by conduct, e.g. by performing an act, see Article 2:205.

Whether the offeree’s statement or conduct is an assent to the offer is to be decided by the rules on interpretation. See the comments to Article 2:102 on the intention to be legally bound, and chapter 5.

The acceptance must be unconditional. It may not be made subject to final approval by the offeree, or its board of directors, or by a third party, unless the offeror knew or ought to know that the approval of a third party (e.g. government authorities) was required. A modified acceptance may, as provided in Article 2:208(2), be an acceptance. On an acceptance which contains modifications, see also Article 2:209.

On promises which need no acceptance, see Article 2:107.

B. Silence or inactivity

Silence and inactivity will generally not amount to acceptance, see Article 2:204(2). There are, however, exceptions, see Article 2:207(2) on late acceptance.

Nor is acceptance required when it follows from an earlier statement by the offeree, e.g. an invitation to make an offer, or from usage or practices between the parties, that silence will bind the offeror.

Illustration 1: O asks P for a bid to paint the railing surrounding O’s factory telling P that it can start painting a week after it has sent its bid unless before that time O has rejected the offer. Having sent the bid and heard nothing from O, P starts painting. O is bound by the contract.

Further, it may follow from a framework agreement between the parties that a party’s silence to an offer by the other party will amount to acceptance.

Under the usages of some trades, an order to provide goods or services from one professional to the other will be considered as accepted unless it is rejected by the offeree without delay. It may also follow from practices between the parties that silence will be considered as acceptance.

Illustration 2: Between A who runs a maintenance service and B which owns a factory, a practice has developed according to which A sends B a note telling B the day A intends to service B’s machinery. If B does not want A’s services, it informs A immediately. If B keeps silent, A will come. A’s note will oblige A to come at the date fixed by it. B is obliged to receive A if B does not cancel A’s visit immediately upon receipt of the note. [page 169]

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

1. What is acceptance?

Under all the legal systems of the Union, and as provided in Article 2:204(1), acceptance is any statement or conduct by the offeree which manifests assent. In general no form is required, see Rodière, Formation 135. On rejections which reach the offeror before and after the acceptance, see the note to Article 2:203.

2. Silence

There is also general agreement that silence in itself does not amount to acceptance, see on BELGIUM, Kruithof & Bocken 265; NORDIC Contracts Act § 8 and on DENMARK, Ussing, Aftaler 393 and on SWEDEN, Ramberg, Avtalsrätt 122-124; FRANCE, Ghestin, Formation nos. 402 ff.; LUXEMBOURG; GERMANY, Münchener Kommentar (-Kramer) before § 116, Rz 23 and Medicus, § 25 IV, 116; AUSTRIA, Rummel § 863 Rz 15 and OGH 18 December 1991 SZ 64/ 185; GREECE, Simantiras, no. 653; ITALY, Bianca, Il contratto 214 ff.; PORTUGAL, CC art. 218; SPAIN, Supreme Court decisions of 2 February l990 and 19 December l990, RAJ (1990) 10287; and for ENGLAND, Treitel, Contract 30 ff. The same rule applies in IRELAND, see Friel 50 ff., and is provided in CISG art. 18(1) second sentence and in the UNIDROIT Principles art. 2.6, second sentence.

Silence may, however, amount to acceptance if before the offer was made the offeree had indicated to the offeror or let him believe that the offeree's silence would mean acceptance. Thus the offeree will generally be bound by his silence if the offer followed an invitation to deal by the offeree. § 9 of the NORDIC Contract Acts, which deals with an invitation to make an offer, provides that if an offer arrives within reasonable time from anyone invited, and the person who made the invitation must realize that the offer was caused by it, he is bound by the offer unless he rejects it by sending a notice to the offeror without delay. See on this provision note 1(d) to Article 2:202, above. In Finland, which has not adopted § 9, a similar rule is applied. In the AMERICAN Restatement 2d § 69 it is provided generally that the offeree will be bound by his silence if the offer followed an invitation to deal by the offeree.

ENGLISH authors support the proposition that if an offeror has indicated to the offeree that the offeree need not communicate his acceptance, and the offeree, although willing to accept, remains silent, the principle of estoppel will prevent the offeror from arguing that the offer had never been accepted, see Beale, Bishop and Furmston 201 and Miller, Felthouse v. Bentley Revisited [1972] M.L.R. 489. However, the only decided case on the issue seems to be against the rule, see Kerr in Fairline Shipping Corpn v. Adamson [1975] Q.B .180.

Further, silence will be considered an acceptance if the parties have established a practice between themselves to this effect, or if it follows from usage, see on BELGIUM, van Gerven 300; on the NORDIC COUNTRIES, see for DENMARK, Ussing, Aftaler 393, and for SWEDEN Ramberg, Avtalsrätt 122-124. This holds true also of FRANCE, Ghestin, Formation no. 404, LUXEMBOURG, see Cour 26 June 1914, Pasicrisie 11, 89; SCOTLAND, McBryde, Contract 74-77; GERMANY, Münchener Kommentar (-Kramer) § 151 Rz 4a; AUSTRIA, see e.g. OGH 18 October 1968, NZ 1969, 157 and 26 June 1991, WBI 1992, 23; ITALY, Bianca, Il contratto 214 f., PORTUGAL CC art. 218; and SPAIN, Supreme Court decisions of l8 October 1982 and 3 December 1993 RAJ (1993), 9494. The same rule is applied in IRELAND, see Friel 51. In ENGLAND this view is maintained by Treitel, Contract 31 ff., but there is no case authority.

Some laws have provided further exceptions to the main rule, see the NORDIC Law on Commission Agents § 5, art. 22 (2) of the PORTUGUESE decree no. 177/86 on commercial agents, and the SPANISH Retail Trading Act (l996), art. 4l).

§ 362 of the GERMAN and AUSTRIAN Commercial Codes provides that if a merchant is asked to act for another merchant with whom he has business connections or for whom he has offered to act, he is obliged to answer without delay; his silence is then considered as an acceptance.

See also notes to Articles 2:209 and 2:210 and generally, Schlesinger I, 134 and Kötz, European Contract 41. [page 170]

Go to PECL Abbreviations || Go to PECL Bibliography || Go to full texts of Parts I & II of Principles of European Contract Law


COMMENT AND NOTES: PECL Article 2:205: Time of Conclusion of the Contract

(1) If an acceptance has been dispatched by the offeree the contract is concluded when the acceptance reaches the offeror.

(2) In the 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.

Comment

A. Significance of the time of conclusion under Article 2:205

Article 2:208 lays down when the contract is considered to have been concluded. From this moment each party is bound to the other and cannot revoke or withdraw its consent. It may also have effects in other respects, see e.g. Articles 7:101(1) and (2), 7:102(3). However, the time of the conclusion of the contract mentioned in some provisions is not always the same as that provided in Article 2:205. An offeror or offeree will, for instance, be able to invoke hardship under Article 6:110 or an impediment under Article 8:108 if the supervening event occurred after it had dispatched its offer or its acceptance but before the latter reached the other party.

B. Moment of acceptance. Notice

This article deals with the moment when the acceptance becomes effective and the offer cannot any longer be revoked or withdrawn. Article 2:206 deals with the period of time with which an acceptance in order to become effective must have reached the offeror or have been effected by an act of performance.

The general rule is that once the acceptance has been dispatched the offeror can no longer revoke the offer. However, the acceptance becomes binding on the offeree when it reaches the offeror. The offeree cannot then revoke the acceptance, and the contract is concluded.

The statement or conduct must show an intention to be bound, see Article 2:102. The acceptance need not be made by the same means as the offer. An offer sent by letter may be accepted by telefax or even orally by telephone.

C. Conduct

In case of acceptance by conduct the contract is concluded when the offeror learns of it. An offeree may accept by delivering goods ordered by the offeror, by accepting unsolicited goods sent by the offeror, by opening a credit in the offeror’s favour, by starting a production of goods ordered etc. Whether a conduct amounts to acceptance will depend upon the circumstances.

Illustration 1: Having learned from a colleague that B may be interested in buying and reselling A’s goods, A sends unsolicited goods to B. B accepts by advertising the goods for sale in a trade paper which A reads. A learns of the acceptance when she reads the advertisement. [page 171]

In case of a more complicated offer, especially if it is one for a contract of duration, a conduct which shows a positive attitude to the offer may not amount to an acceptance of the offer.

Illustration 2: Having learned from a colleague that B may be interested in selling A’s goods, A sends B goods with a draft distributorship contract by which B is to become A’s sole distributor in B’s country. B’s advertisement of the goods in a trade paper, which A reads, without mention of any distributorship agreement does not amount to an acceptance of the latter.

If, however, the relationship develops, and both parties observe the terms of the draft contract, B’s behaviour will be considered an acceptance of the offer though it never signs the draft contract.

When notice of conduct, such as the production of goods ordered or other preparations by the offeree, will not reach the offeror within the time set for acceptance, an express assent by the offeree will be needed. If the offeree starts performance it does so at its own risk.

Illustration 3: Opera Manager M offers soprano S the part of Susanna in The Marriage of Figaro, which will start in two months time. S immediately starts rehearsing the part, but does not send M any answer. M engages another soprano. S claims to play the part. M is not bound by any contract to S.

D. Acceptance without notice

However, if it follows from the offer or from practices between the parties or from usage that the offeree may indicate assent by performing an act without notice to the offeror, the acceptance is effective at the moment performance of the act begins, see paragraph 3. In these cases the start of production or other preparations makes the acceptance effective even though the offeror does not get notice of these acts.

Illustration 4: The facts are the same as in Illustration 3 except that M in his offer to S advises her to start rehearsing at once and by herself, because the rest of the company will tour the province during the next two weeks and cannot be reached. S starts immediately rehearsing. M and S have concluded a contract when S starts rehearsing.

A similar acceptance which is effective from the moment a performance begins may also follow from practice between the parties, see Article 1:104.

In cases covered by paragraph (3) the acceptance is effective when the act is performed even if the offeror learns of it after the time for acceptance.

The performance which will bind both parties under paragraph (3) is one which the offeree itself cannot revoke. It only applies to acts which are real performances not to acts which prepare a performance. If in view of the offer the offeree addresses its bank to obtain a cash credit in order to increase its available funds this act in itself will not constitute a beginning of a performance covered by paragraph (3). [page 172]

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

1. Significance of the time of conclusion

Among the various effects of the time of conclusion of the contract, the one which is considered here is the time when the parties are bound to the contract and none of them can withdraw from it. Like the Principles, the laws attach various other effects to the time of conclusion, see, for instance, CISG art. 35(2)(b) and (3), 42(1), 55, 66, 74, 79(1) and 100(2), and, generally, Rodière, Formation 136 f.

2. Time of conclusion when acceptance is communicated by language

In determining the moment when a contract is concluded through communication of an acceptance, the laws are divided.

Some laws consider the contract to be concluded when the acceptance reaches the offeror. This is the rule of CISG art. 23 and the UNIDROIT Principles 2.6(2), and the main rule in GERMANY, see Larenz § 27 II; AUSTRIA, see § 862a ABGB; GREECE see CC art. 192; THE NETHERLANDS, see BW art. 3:37 (3); PORTUGAL, see CC art. 224; the NORDIC countries, see Contract Acts §§ 2 and 3. On the “receipt” principle see note 1 to Article 1:303 .

The receipt rule is also the main rule in ENGLAND, but there are important exceptions. The most important is the "postal rule" whereby an acceptance sent by post or telegram takes effect when the letter of acceptance is dispatched (put in the mailbox) or the telegram is communicated to a person authorized to receive it for transmission to the addressee. From that moment a withdrawal of the offer, even if it has been posted previously, has no effect, see Henthorn v. Fraser [1892] 2 Ch. 27, C.A. The acceptance has effect even though the letter or telegram never reaches the offeror, and the contract is considered concluded, Household Fire and Carriage Accident Insurance Co Ltd v. Grant (1879) 4 Ex D. 216, unless perhaps the loss or delay was the fault of the offeree, cf. Adams v. Lindsell (1818) 1 B & Ald 681. But the offeree may prevent conclusion by sending an “overtaking” withdrawal of his acceptance, see Treitel, Contract 27-28. The “postal rule” only applies when it was reasonable to use the post, and it does not apply if the offeror has stipulated that the acceptance must be communicated to him, see Holwell Securities Ltd v. Hughes [1974] 1W.L.R. 155, C.A. . For an acceptance made by instantaneous means of communication, such as email, telefax and telephone, the main rule applies, and so does an acceptance sent through a messenger, see Treitel, Contract 21 ff. The IRISH law is basically the same as the English. However, in Kelly v. Cruise Catering Ltd [1994] 2 ILRM 394 the Irish Supreme Court suggested obiter that the mailbox rule would not apply if the letter of acceptance was lost in the post.

SCOTS law is to the same effect as English law, but there is an official proposal to abolish the postal acceptance rule (Scottish Law Commission, Report No. 144, 1993) which in July 1998 had still not been enacted.

Other laws consider the offeror's knowledge of the acceptance as decisive, however, with the proviso that the offeror is considered or presumed to have the knowledge when the acceptance reaches him. This rule applies in BELGIUM, see Cass. 25 May 1990, Arr. Cass. 1990-91 1218, and in ITALY CC arts. 1326(1) and 1335, which provides as a general rule that a person is presumed to have knowledge of a message at the moment it reaches his address. On these laws and on NORDIC law see note 2 to Article 1:303.

In PORTUGUESE law the contract is also concluded when the offeror gets effective knowledge of the acceptance or if by his fault he has prevented it from reaching him. On the other hand, the contract is not concluded if without his own fault the offeror was prevented in from getting knowledge of it, see CC art. 224

The same rule applies in SPAIN, see CC art. 1262(2); however, the courts will consider a contract concluded when the acceptance reaches the offeror. see Supreme Court decisions of 29 September l960, 22 October 1974, RAJ (1974) 3971, 28 May 1976, RAJ (1976) 2366, 29 September 198l, RAJ (1981) 3247, 10 December 1982, RAJ (1982) 7474 and 22 December 1992, RAJ (1992) 10642 and 24 April l995, RAJ (1995) 3546. For commercial contracts concluded inter absentes, art. 54 of the Commercial Code provides that the contract is concluded when the offeree has expressed his assent, which the courts interpret to mean when the offeree has dispatched his acceptance.

In FRANCE and LUXEMBOURG the question appears to be unsettled. The French Cour de Cassation has considered it a question of fact left to the sovereign appreciation of the lower courts. However, in a case where the acceptance had to be given before a certain date the Court has stated that the acceptance had to be dispatched before that date, see Cass. 7 January 1981, Bull. civ. IV no. 14. This may be considerered a general decision on when a contract by correspondence is concluded, see Ghestin, Formation no. 360. [page 173]

3. Acceptance by conduct

The systems agree that an offer may be accepted by conduct. Under most systems the contract is concluded when a notice of the conduct reaches the offeror, see on ENGLISH law, Treitel, Contract 17 and 21; on the DUTCH BW art. 3:38 (1); for GERMANY, Erman- Hefermehl, §147, Rz 2; for GREECE, Simantiras in ErmAK 189 nos. 2-5.; see also CISG art. 18(2), UNIDROIT art. 2.6 (2). The same rule applies in IRISH law, see Package Investments v. Shandon Park Mills, unreported High Court decision of 2 May 1991, Friel 52.

However, in SCOTLAND the offeror must know of and consent to the acceptance by conduct, see Mc Bryde, Contract 75-77.

In FRANCE the courts oscillate between the moment the act is performed and the moment notice of the performance reaches the offeror, see Terré, Simler & Lequette no 117. The laws of SPAIN, BELGIUM and LUXEMBOURG also seem to be unsettled on that point.

4. Performance of an act without notice

Article 2:205(3) is similar to CISG art. 18(3) and UNIDROIT Principles art. 2.6(3). In all the systems the offeror may stipulate the way by which the offer is to be accepted - except by silence - and practices between the parties and usages may also regulate the mode of acceptance.

The GERMAN BGB § 151 provides that the contract is concluded without a declaration of acceptance by the offeree to the offeror being required, if it follows from general commercial practices that such a declaration is not to be expected or the offeror has renounced it. It seems to be the prevailing view that the act which shows acceptance must be one which manifests itself to the outer world. The mere fact that the offeree has made up his mind that he will accept is not enough, see on the German BGB § 151 Münchener Kommentar I (-Kramer) § 151 note 49. Similar solutions are to be found in or follow from AUSTRIAN ABGB § 864; SCOTS law, McBryde, Contract 74 f.; FRENCH law, Terré, Simler & Lequette no. 117; NORDIC Contracts Act § l (2); GREEK CC art. l93 (1); ITALIAN CC art. 1327(1); PORTUGUESE law, see Cordeiro 1, 616, P.M. Pinto, Declaracào tacita 620 and Almeida, Negocio juridico 794; and ENGLISH law, see Weatherby v.Banham (1832) 5 C&P 228 and Treitel, Contract 23 f. and 36 f. [page 174]

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COMMENT AND NOTES: PECL Article 2:206: Time Limit for Acceptance

(1) In order to be effective, acceptance of an offer must reach the offeror within the time fixed by it.

(2) If no time has been fixed by the offeror acceptance must reach it within a reasonable time.

(3) In the case of an acceptance by an act of performance under Article 2:205(3), that act must be performed within the time for acceptance fixed by the offeror or, if no such time is fixed, within a reasonable time.

Comment

A. Time for acceptance

This Article provides for the period of time within which the offeree’s acceptance must reach the offeror in order to be effective.

B. Time fixed

Acceptance of offers must reach the offeror within the time fixed by it. Acceptance may be made by an express statement or by conduct, see Article 2:205(1) and (2).

C. Reasonable time

If the time for performance has not been fixed by the offeror the offeree’s acceptance must reach it within a reasonable time. Due account has to be taken of the circumstances [page 174] of the transaction. One factor is the rapidity of the means of communication used by the offeror.

Another factor is the type of the contract. Offers relating to the trade of commodities or other items sold in a fluctuating market will have to be accepted within a short time. Offers relating to the construction of a building may need longer time for reflection.

In the cases covered by paragraphs (1) and (2), the acceptance must reach the offeror in time. The offeree will generally be expected to use the same means of communication as the offeror. However, the time for acceptance is to be counted as an entirety. An offeree which receives an offer by mail may, if it has used too much time for reflection, catch up by accepting in a telegram.

See on delays in transmission Article 2:207.

In case of acceptance by conduct as provided in Article 2:205(2), notice of the conduct must reach the offeror within the time for acceptance.

D. Acceptance by performance (Article 2:205(3))

In the situations described in Article 2:205(3), where an act of performance by the offeree will constitute acceptance even before the offeror gets notice of it, the performance must be commenced within the time fixed by the offeror or, if no such time is fixed, within a reasonable time, but it is not required that the offeror learns of it before that time.

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

The rules in Article 2:206(l) and (2) are similar to CISG art. 18(2), and (3), UNIDROIT art. 2.6 and 2.7, NORDIC Contracts Act §§ 2 and 3, GERMAN BGB §§ 147(2) and 148, AUSTRIAN ABGB § 862, GREEK CC art. 189, DUTCH BW art. 6: 221(1) and BELGIAN law. The ITALIAN CC art. 1326(2) provides that the acceptance must reach the offeror within the time set by him, or within the time which is ordinarily required according to the nature of the transaction or usage. Art. 228(l) of the PORTUGUESE CC provides that the acceptance must reach the offeror within the time set by him or within 5 days after the time which is reasonable according to the nature of the transaction.

The rules in Article 2:206(1) and (2) also apply in ENGLISH, SCOTS and IRISH law. In English law it is not clear whether, if the offeror has set a time limit for acceptance, it suffices that the acceptance is dispatched within the period or whether it must reach the offeror within the period, cf. Holwell Securities Ltd v. Hughes [1974] 1 W.L.R. 155, C.A. However, In Scotland and Ireland an acceptance by post or telegraph is timely, if dispatched before the time set for acceptance, see on Scotland, Jacobsen v. Underwood (1894) 21 R 654.

Under FRENCH law the acceptance by correspondence is made in time if dispatched before the time set by the offeror, Cass. 7 January 1981, see note 2 to Article 2:205, above. Unless the offeror has set a time limit, the acceptance must be dispatched within a reasonable time, see Terré, Simler & Lequette, no. l64. The latter rule has also been adopted in SPAIN, see Supreme Court decision of 23 March 1988, RAJ (l988) 2422.

On Article 2: 206(3) on acceptance by performance of an act without notice, see Article 2:205, note 4. [page 175]

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COMMENT AND NOTES: PECL Article 2:211: Contracts Not Concluded through Offer and Acceptance

The rules in this Section apply with appropriate adaptations even though the process of conclusion of a contract cannot be analysed into offer and acceptance.

Comment

A. Other Models than the Offer and Acceptance Model

The conclusion of a contract may not always be separated into an offer and an acceptance. The parties may start with a letter of intent or a draft agreement made by one party or a third party. Then follow negotiations either in each other’s presence or in an exchange of letters. Or they start by sitting down together to negotiate, sometimes with rather vague ideas of where they will end. It is not easy to tell where in this process the parties reach an agreement which amounts to a binding contract, see Comments to Article 2:201. The same may be true of the many contracts that are made by conduct alone, as when a motorist parks his car in a car park and gets a ticket from a machine or a traveller takes out travel insurance by putting money into a slot machine and receiving the policy from the machine.

B. Application of Section 2

The rules in section 2 cannot always be applied to such other models. Sometimes, however, they may apply: [page 187]

Illustration 1: Two parties meet to draft a written contract. When they have made the draft they agree that each party shall have two weeks to decide whether it will accept it. The draft is treated as an “offer”. If after the two weeks each of them has not received the other party’s acceptance there is no contract. The same applies if before that time a party receives the other’s rejection. If during the respite a party makes proposals for additions which materially alter the terms of the draft, this is to be treated as a rejection and a “new offer”.

Illustration 2: After conclusion of an oral agreement the counsel for two professional parties is asked to submit a written contract. She then sends both parties a draft accompanied by a letter saying that she considers this to be their agreement unless she does not hear from any of them. The draft contains the terms which the parties had agreed upon and some additional terms which reflect usual commercial practices in the trade. The rule in Article 2:210 applies so that the parties will be bound by their silence.

Notes

The conclusion of a contract by way of an offer and acceptance is, as was mentioned in the notes to Article 2:201, the principal model in all the legal systems. Other models are only sparsely regulated in the statutes, and several of the problems are not solved in the case law, see for ENGLAND Treitel, Contract 45-47.

It seems, however, to be universally agreed that the rules on the principal model apply by way of analogy to the other models, in so far as this is possible and reasonable. In the civil law countries this follows from the general principle of analogous application of the laws. The authors are in agreement on this; see for GERMANY, impliedly Larenz/Wolf 8 ed. 574 f. and 592 f.; for DENMARK, Lynge Andersen 85 ff.; and for SWEDEN, Grönfors, Avtalslagen 35 f. This also appears to be the position in ENGLAND, see Treitel, Contract 45-47.

See generally Schlesinger II, 1583-1620. [page 188]

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