Go to Database Directory || Go to Table of Contents to the Annotated Text of the CISG

GUIDE TO ARTICLE 19

Comparison with Principles of European Contract Law (PECL)


Match-up of CISG Article 19 with PECL Article 2:208 through 2:210; see also PECL Article 2:211
CISG Article 19

(1) A reply to an offer which purports to be an acceptance but contains additions, limitations or other modifications is a rejection of the offer and constitutes a counter-offer.

(2) However, a reply to an offer which purports to be an acceptance but contains additional or different terms which do not materially alter the terms of the offer constitutes an acceptance, unless the offeror, without undue delay, objects orally to the discrepancy or dispatches a notice to that effect. If he does not so object, the terms of the contract are the terms of the offer with the modifications contained in the acceptance.

(3) Additional or different terms relating, among other things, to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party's liability to the other or the settlement of disputes are considered to alter the terms of the offer materially.

PECL Article 2:208 [Modified Acceptance]
(complete revised version 1998)

(1) A reply by the offeree which states or implies additional or different terms which would materially alter the terms of the offer is a rejection and a new offer.

(2) A reply which gives a definite assent to an offer operates as an acceptance even if it states or implies additional or different terms, provided these do not materially alter the terms of the offer. The additional or different terms then become part of the contract.

(3) However, such a reply will be treated as a rejection of the offer if: (a) the offer expressly limits acceptance to the terms of the offer; or(b) the offeror objects to the additional or different terms without delay; or (c) the offeree makes its acceptance conditional upon the offeror’s assent to the additional or different terms, and the assent does not reach the offeree within a reasonable time.

PECL Article 2:209 [Conflicting General Conditions]

(1) If the parties have reached agreement except that the offer and acceptance refer to conflicting general conditions of contract, a contract is nonetheless formed. The general conditions form part of the contract to the extent that they are common in substance.

(2) However, no contract is formed if one party: (a) has indicated in advance, explicitly, and not by general conditions, that it does not intend to be bound by a contract on the basis of paragraph (1); or (b) without delay, informs the other party that it does not intend to be bound by such contract.

(3) General conditions of contract are terms which have been formulated in advance for an indefinite number of contracts of a certain nature, and which have not been individually negotiated between the parties.

PECL Article 2:210 [Professional's Written Confirmation]

If professionals have concluded a contract but have not embodied it in a final document, and one without delay sends the other a writing which purports to be a confirmation of the contract but which contains additional or different terms, such terms will become part of the contract unless: (a) the terms materially alter the terms of the contract, or (b) the addressee objects to them without delay.

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

The term "materially" is encountered in CISG art. 19(2) and PECL art. 2:210(a). For the PECL definition of its term "material", go to PECL art. 1:301(5) and the comment and notes that accompany this definition.]


Editorial remarks

EDITOR: Pilar Perales Viscasillas [*]
January 2002

The mirror image rule and modified acceptance (counter-offer or acceptance?)

An acceptance must coincide with each and every term of an offer in order to conclude a contract (see articles 19(1) CISG and 2:208(1) PECL). This requirement is known as the "mirror image rule" since the acceptance must be the very reflection of the offer in a mirror. An exception is established for the possible introduction of new terms into the acceptance that do not substantially alter the offer. In that case, the acceptance will be valid; the contract will consist of both the terms of the offer and those included in the acceptance that do not substantially alter the offer, so long as the offeror without delay does not object to the new terms (articles 19(2) CISG and 2:208(3)(b) PECL), or the offer does not expressly limit acceptance to the terms of the offer (article 2:208(1) PECL);[1] or the offeree does not make his acceptance conditional upon the offeror's assent to the additional or different terms, and the assent reaches the offeree within a reasonable time (article 2:208(3)(c) PECL).[2]

On the other hand, if an element that is included in the acceptance adds new terms, modifies the terms of the offer or introduces any other type of limitation to the offer that substantially alters it, the contract will not be considered concluded; the response to the offer will be regarded as a counter-offer - that is, if it meets all requirements under the CISG or the PECL to be considered an offer in and of itself (see articles 14 CISG, and 2:208(1) PECL).[3]

To determine when an element of an acceptance materially alters the corresponding offer, a list of items is provided by the Vienna Convention. However, the list merely provides examples of such elements, as can be inferred from the expression "among other things", in article 19(3) CISG. Furthermore, the list has a presumptive nature since it predetermines that such "[a]dditional or different terms … are considered to alter the terms of the offer materially" (emphasis added).[4]

The list provided in the CISG contains only substantive elements that refer to rights and obligations that arise in a sales contract, eliminating certain elements from being considered material alterations, e.g., the initiative of the offeree to negotiate again and any small changes in the wording of the offer that have no affect on the acceptance;[5] also, a modification of an offer whose content benefits the offeror should not be considered material.[6]

The European Principles do not provide a similar rule to the one embodied in article 19(3) CISG. Nevertheless, the PECL Comments to article 2:208 reach a similar result; the PECL regards a term as material "if the offeree knew or as a reasonable person in the same position as the offeree should have known that the offeror would be influenced in its decision as to whether to contract or as to the terms on which to contract."[7] The PECL Comments state that the list contained in article 19(3) CISG was not provided with the European Principles since it could only have been illustrative and not exhaustive.

Under both CISG and PECL, course of dealing and trade practices (see articles 9 CISG and 1:105 PECL), as well as previous negotations and other elements of intent (see articles 8 CISG, 2:102 and 5:101 PECL), can play an important role in the interpretation of materiality. There are also circumstances in which article 4(a) CISG may come into play as validity issues can arise in connection with certain of the terms listed in article 19(3) CISG. For example, where arbitration is the specified method of resolution of disputes, the validity of the arbitration clause can turn on domestic law.[8] In a similar vein, domestic laws on unconscionability can impact upon the validity of limitation of liability clauses.[9]

Resolving the battle of forms (conflicting general conditions)

The battle of the forms is an expression that refers to a situation in which the parties exchange general conditions,[10] usually preprinted forms prepared by one of the parties or its trade association that often add one or more terms that materially modify the offer.

This is a very controversial issue in the CISG; some scholars believe the last-shot rule applies -- a rule which has been rejected by section 2-207(3) UCC; it applies the knock-out rule. The European Principles (in article 2:209 PECL, which follows article 2.22 UNIDROIT Principles) have adopted a variation of the UCC approach. Article 2:209 PECL is an exception to the general rule in article 2:208 PECL on modified acceptance.

The complexity of this issue is increased by the customary practice of sending offers and acceptances that contain general conditions. Such conditions may reveal contradictions and raise the following two questions: "Has a contract been concluded?" and, if so, "What are the terms of the contract?" Practice shows that the answer to the first question is generally affirmative; usually the parties go ahead with the contract although each has referred to its own general conditions, the problem being the determination of the exact content of the contract. Below, some solutions that have been given to the problem under the CISG will be examined to show the different approaches to solving this difficult issue of contract formation, with cross-reference to article 19 CISG.

a) Under the CISG, the battle of the forms should be considered a gap that must be resolved by applying the general principles upon which the Convention is based. Following this approach, some authors believe that the principle of good faith should apply; they conclude that the clauses contained in the forms that are contradictory would cancel each other out, leaving the issue to be governed by the applicable law, usage or good faith. That is, they adopt a solution such as that followed in certain legal systems, the "knock-out rule" in § 2-207(3) UCC, the "partiell dissens" rule in §§ 154 and 155 BGB [German Civil Code], or the similar solution provided in articles 2:209(1) PECL and 2.22 UNIDROIT Principles.[11] A variation on this theory is that the situation produces an implied exclusion of article 19 CISG.

b) The opinion that is followed most, however, leads to the application of what is known as the "last-shot rule" - the last person to send his form is considered to control the terms of the contract and therefore the one who wins the battle. An example of the application of this rule is: a German buyer ordered doors that had to be manufactured by the seller according to buyer's specifications. The seller sent the buyer a confirmation letter that contained his general conditions of sale on the back. These conditions included the statement that "the seller must be notified of any defects of the merchandise within eight days of delivery." This provision was at variance with the terms of buyer's offer. Subsequently, the seller delivered the merchandise and the buyer accepted it. In this case, seller's confirmation letter was considered to be a counter-offer that was implicitly accepted by the buyer's conduct when he accepted the merchandise. Therefore, the rules of the Convention also apply when forms are used; consequently, any variation in those forms would be a counter-offer. Such a counter-offer could most certainly be accepted through an act of performance.[12]

The PECL has decided to follow a more recent approach, applying the "knock-out rule" to solve the battle of the forms problem, thus adopting the innovative approach of the UCC. According to article 2:209(1) PECL, the general conditions form part of the contract to the extent that they are common in substance; therefore, any conflicting terms would be expelled out of the contract. However, following article 2:209(2) PECL, no contract is formed if one party: a) has indicated in advance, explicitly, and not by general conditions, that it does not intend to be bound by a contract on the basis of paragraph (1), i.e., there is a so-called "clause paramount"; or b) without delay, informs the other party that it does not intend to be bound by such contract.[13]

Modification of the contract and commercial letters of confirmation

a) Modification of the contract. Article 29(1) CISG states that a contract may be modified by the mere agreement of the parties. The modification of the contract can be viewed in terms of offer and acceptance. In that sense, an attempt to modify a contract may be deemed to be an offer to modify the contract that must be accepted by the other party.[14]

b) Commercial letters of confirmation. Sending a confirmation letter following the conclusion of a contract is a very common practice in international commercial transactions. The customary purpose of such a letter is to set in writing that which was previously negotiated, establishing proof of that which was agreed; confirmation letters are generally designed to eliminate or reduce doubts or errors that might arise by setting out the terms by which the contract is governed. When the terms contained in the confirmation letter coincide with those that were actually agreed upon - they are a summary, an exact repetition or confirmation of such - no problems exist. However, what can happen is that prior to (or simultaneous with) the execution of the contract, a confirmation letter or invoice is sent out that alters or adds to the terms of the contract that has already been formalized. Such changes can take place by including certain new elements or general conditions, or an entire set of general conditions that had not been previously discussed by the parties or indicated as included in the contract, or conditions that provide for something different than that which was agreed upon. This issue raises the question of how such confirmation letters should be treated under the law.[15]

In the legal systems of Germany, Austria and Switzerland -- when the contractual relationship is between merchants - silence or inactivity on the part of the recipient of a confirmation letter produces an acceptance by silence of the modifications introduced in the commercial letter of confirmation. Even though the modifications may be accepted, this does not mean that the confirmation letters containing them are held in the same light as the offer and acceptance.

In Anglo-American law, confirmation letters are regulated in a manner similar to the battles of the forms (see section 2-207 UCC), although with certain differences. In particular, jurisprudence has indicated that a confirmation conditional upon the recipient's acceptance to new terms is not acceptable because it would mean imposing new conditions on a contract that has already been concluded.[16]

The CISG is silent on the treatment of commercial letters of confirmation. However, the subject can be analyzed in the familiar context of offer and acceptance; the sending of a writing in confirmation which adds to or modifies the terms previously agreed upon by the parties being treated as an offer to modify the contract which has to be accepted by the addressee for the contract to be concluded on those terms, unless there is an applicable usage or practice to the contrary.[17]

The PEC has an explicit rule that deals with commercial letters of confirmation. The solution offered by the European Principles is to specifically apply the rules of offer and acceptance from Chapter II. With a similar solution to that of article 2:208 PECL (relating to acceptances with modifications), section 2:210 PECL provides that additional or different terms that are included in a confirmation letter become part of the contract unless they substantially alter the terms of the contract or the recipient of the letter objects without delay to their inclusion.

Conclusions

The modification of the offer under both the CISG and the PECL is dealt with in a similar fashion. However, the two instruments differ in their treatment of battles of the forms. In this case, the PECL cannot aid in the interpretation of the CISG, since the solutions under the two regimes are completely different.

However, the treatment of the commercial letters of confirmation adopted by the PECL is in accord with the rules of offer and acceptance under the CISG. Therefore, there should be no impediment to use of the PECL to help interpret the CISG in that regard.

[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) 316-320.]


FOOTNOTES

* Doctor in Law. Commercial Law Professor at the University Carlos III of Madrid (Spain). Spanish representative at UNCITRAL.

1. CISG is silent on this issue.

2. CISG is silent on this issue.

3. See OLG [Appellate Court] Frankfurt am Main, 4 March 1994 (Germany) <http://cisgw3.law.pace.edu/cases/940304g1.html>. See also the Comments to article 2:208 PECL indicating that an acceptance by conduct may contain additional or different terms. These terms may be material, for instance, if the offeree dispatches a much smaller quantity of a commodity than that which was ordered by the offeror, or immaterial if only a very small quantity is missing.

4. The list includes, inter alia, the following elements: price (only those modifications relating to the total amount of the offer price (Supreme Court of Spain (Internationale Jute Maatschappij v. Marin Palomares), 28 January 2000 <http://www.uc3m.es/cisg/sespan7.htm>; <http://cisgw3.law.pace.edu/cases/000128s4.html>, or clauses that modify the price because of increases in costs (Supreme Court of France (Fauba v. Fujitsu Mikkroelectronik), 4 January 1995 <http://cisgw3.law.pace.edu/cases/950104f1.html>), payment method (LG Giessen [District Court], 22 December 1992 (Germany) <http://cisgw3.law.pace.edu/cases/921222g1.html>), place and time, quality and quantity of merchandise (OLG [Appellate Court] Frankfurt am Main, 31 March 1995 (Germany) <http://cisgw3.law.pace.edu/cases/950331g1>), place and time of delivery (OLG Munich, 8 February 1995 (Germany) <http://cisgw3.law.pace.edu/cases/950208g1.html>), the extent of one party´s liability to the other (LG Baden-Baden, 14 August 1991 (Germany) <http://cisgw3.law.pace.edu/cases/910814g1.html>), or the settlement of disputes.

Nevertheless, it is very possible that courts may consider the list in the sense that the aforementioned terms substantially alter an offer in every case. For example, in OLG Hamm, 22 September 1992 (Germany) <http://cisgw3.law.pace.edu/cases/920922g1.html>, an indication of a material alteration was the rejection of packaged bacon "in polyethylene bags" by means of a counter-offer in which the packaging was established as "loose".

To arrive at a clear set of rules for interpreting when a modification to an offer is material, the term "material" should be interpreted in a limited way. See Fritz Enderlein & Dietrich Maskow, International Sales Law: United Nations Convention on Contracts for the International Sale of Goods. New York: Oceana Publications, 1992, p. 100. See also Pilar Perales Viscasillas, La formación del contrato de compraventa internacional de mercaderías. Valencia: Tirant lo blanch, 1996, pp. 625-735.

5. Examples of such non-material alterations are: an acceptance in which certain elements are added ("I accept because I urgently need the merchandise", or "I agree but was hoping for a more satisfactory agreement"), or where recommendations are made or questions are asked ("I accept. Payment should be in bills of 100 euros", or "I accept. Would it be possible to include an arbitration clause?"), or where requests are made ("keep the acceptance confidential until it is announced publicly by both parties"); see Metropolitan Court of Budapest (United Technologies (Pratt and Whitney Commercial Engine Business) v. Malev Hungarian Airlines), 10 January 1992 (Hungary) <http://cisgw3.law.pace.edu/cases/920110h1.html>.

6. See Oberster Gerichtshof [Supreme Court], 20 March 1997 (Austria) <http://cisgw3.law.pace.edu/cases/970320a3.html>.

7. Cf. article 1:301(5) PECL which defines a matter as material "if it is one which a reasonable person in the same situation as one party ought to have known would influence the other party in its decision whether to contract on the proposed terms or to not contract at all."

8. This was the reasoning of Cámara Nacional en lo Comercial, sala E (Inta SA v. MCS Officina Meccanica S.p.A), 14 October 1993 (Argentina), published in El Derecho, 25 abril 1994, (t.157), No. 4, 129-137 <http://cisgw3.law.pace.edu/cases/931014a1.html>. But see, U.S. District Court for the Southern District of New York, 14 April 1992 (United States), Filanto S.p.A. v. Chilewich International Corp., 789 F.Supp. SDNY 1992, pp. 1229-1242 <http://cisgw3.law.pace.edu/cases/920414u1.html>, 4 November 1993, appeal dsimissed, 984 F.2d 58 (2d Cir. 1993).

9. John O. Honnold, Uniform Law for International Sales, 3rd ed., Kluwer Law International, 1999, pp. 182 et seq. See for example, sections 2-302 and 2-719 of the United States UCC.

10. Article 2:209(3) PECL provides a definition: "General conditions of contract are terms which have been formulated in advance for an indefinite number of contracts of a certain nature, and which have not been individually negotiated between the parties."

11. See generally, Comments to article 2:209 PECL and illustrations 1 and 2.

12. Pilar Perales Viscasillas, Battle of the Forms under the 1980 United Nations Convention on Contracts for the International Sale of Goods: A Comparison with Section 2-207 UCC and the UNIDROIT Principles. Pace International Law Review, 1998, vol. 10, no. 1, pp. 97-155.

13. One also has to take into account the rules of interpretation of articles 2:104, 5:103 and 5:104 PECL. See also Court of Appeal of Grenoble (Société Simri v. Société Harper Robinson), 24 January 1996 (France), Unilex - UNIDROIT Principles, Transnational, June 2000, D.1996-1, citing article 2.21 UNIDROIT Principles as a principle in international trade whereby the non-standard term prevails over a standard term in case of contradiction. See Pilar Perales Viscasillas, Formation of the contract under the CISG. In Law and Practice of Export Trade. Münster: Center for Transnational Law, 2001, vol. 3, pp. 97-114.

14. See for example: LG [District Court Hamburg, 26 September 1990 (Germany) <http://cisgw3.law.pace.edu/cases/900926g1.html>; Court of Appeal of Grenoble (Société Cámara Agraria v;. André Margaron), 29 March 1995 (France) <http://cisgw3.law.pace.edu/cases/950329f1.html> and Supreme Court of Spain, 28 January 2000, supra note 4, where the offer of modification of the international sales contract made by a US seller was never accepted by the Spanish buyer; see the comment by E. Fernández Masiá, Sentencia de 28 de enero de 2000, Cuadernos Civitas de Jurisprudencia Civil, abril-septiembre 2000, pp .673-689; and F. Oliva Blázquez, Aceptación, contraoferta y modificación del contrato de compraventa internacional a la luz del artículo 8 del Convenio de Viena. La indemnización de daños y perjuicios y el "deber de mitigar" "ex" artículo 77 CISG. Comentario a la STS de 28 enero 2000 (RJ 2000, 454), Revista de Derecho Patrimonial, 2000, I, no. 5, pp. 203-219.

15. See Pilar Perales Viscasillas, Tratamiento jurídico de las cartas de confirmación en la Convención de Viena de 1980 sobre Compraventa Internacional de Mercaderías, Revista Jurídica del Perú (Trujillo), octubre-diciembre 1997, no. 13, pp. 241 et seq.

16. James White y Robert S. Summers, Uniform Commercial Code. Vol. I. St. Paul, Minn: West Publishing Co, 3rd ed., 1988, §1-3, n. 60, pp. 48 et seq. This would mean that the final part of section 2-207(1) UCC would not be applicable: "[...] unless acceptance is expressly made conditional on assent to the additional or different terms."

17. See CISG article 9. Among the cases applying CISG to commercial letters of confirmation, see Civil Tribunal of Basel-Stadt, 21 December 1992 (P4 1991/238) (Switzerland) <http://cisgw3.law.pace.edu/cases/921221s1.html>, considering in that a contract of sale between an Austrian buyer and a Swiss seller there is an international trade usage (art. 9(2) CISG) whereby silence in response to a commercial letter of confirmation amounts to an acceptance (note that this is more of a regional usage recognized in Germany, Austria, and Switzerland). Cf. OLG [Appellate Court] Dresden, 9 July 1998 (Germany) <http://cisgw3.law.pace.edu/cases/980709g1.html>; OLG Köln, 22 February 1994 (22 U 202/93) (Germany) <http://cisgw3.law.pace.edu/cases/940222g1.html>; OLG Frankfurt am Main, 5 July 1995 (Germany) <http://cisgw3.law.pace.edu/cases/950705g1.html>; reaching a consistent result: denying the value of silence as an acceptance to the usage described when one of the parties does not belong to a country that recognizes that usage of trade; But see: OLG Saarbrücken 14 February 2001 (Germany) <http://cisgw3.law.pace.edu/cases/010214g1.html>, involving a contract of sale between an Italian seller and a German buyer where the tribunal held that "… the contract is binding with the content given to it in the letter of confirmation, unless the sender of the letter has either intentionally given an incorrect account of the negotiations, or the content of the letter deviates so far from the result of the negotiations that the sender could not reasonably assume the recipient's consent. The recipient's silence causes the contract to be modified or supplemented in accordance with the letter of confirmation. …"


Comment and notes on PECL 2:208, 2:209, 2:210 and 2:2111

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) 177-187 187-188.


COMMENT AND NOTES: PECL Article 2:208: Modified Acceptance

(1) A reply by the offeree which states or implies additional or different terms which would materially alter the terms of the offer is a rejection and a new offer.

(2) A reply which gives a definite assent to an offer operates as an acceptance even if it states or implies additional or different terms, provided these do not materially alter the terms of the offer. The additional or different terms then become part of the contract.

(3) However, such a reply will be treated as a rejection of the offer if: (a) the offer expressly limits acceptance to the terms of the offer; or (b) the offeror objects to the additional or different terms without delay; or (c) the offeree makes its acceptance conditional upon the offeror’s assent to the additional or different terms, and the assent does not reach the offeree within a reasonable time.[page 177]

Comment

A. The main principles

Article 2:208 contains the following rules.

(1) A contract is concluded if the reply expresses a definite assent to the offer.

(2) A reply containing terms which materially alter the terms of the offer is a rejection and a new offer.

(3) Additional and different terms which do not materially alter the terms of the offer become part of the contract.

(4) If in the case mentioned in (3) the offeror has limited the acceptance to the terms of the offer, or if without delay it objects to the different or additional terms, the offer is considered to have been rejected by the different or additional terms. The same applies if the offeree makes acceptance conditional upon the offeror’s assent to the additional or different terms, and the offeror does not give assent within a reasonable time.

B. Considerations underlying the main principles

(1) Non-material terms

The notion that non-material additions or modifications become part of the contract has been widely accepted. Such additions and modifications are frequently attempts to clarify and interpret the contract, or to supply terms which would otherwise be considered “omitted terms”. The offeror should object to them if it finds it worthwhile to express its disagreement.

(2) Material terms

The rule that the contract comes into existence in spite of additions or modifications which materially alter the terms of the contract is, as far as is known, provided in certain national laws. It has not been accepted in these Principles. An answer which contains additions or modifications which materially alter the terms of the contract are to be considered as a counter-offer which the offeror may accept either by its express assent or by conduct, for instance by performance of the contract. On the “battle of forms” (conflicting general conditions), see Article 2:209, below.

C. What are material terms?

A term is material if the offeree knew or as a reasonable person in the same position as the offeree should have known that the offeror would be influenced in its decision as to whether to contract or as to the terms on which to contract, see Article 1:301(5).

Consideration was given to providing, as does CISG art. 19(3), a list of additional and different terms which are to be considered material such as terms relating, among other things, to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party’s liability to the other, or the settlement of disputes.

This list was not provided in Article 2:208. It could only have been illustrative. For example, though a clause relating to settlement of disputes is often material, if among merchants in the trade it is usual, though not customary, to refer disputes to [page 178] settlement by arbitration, an arbitration clause in the offeree’s answer will not materially alter the terms of the contract. Equally, the list could not have been exhaustive.

In determining whether a term materially alters the terms of the contract one cannot take into account whether the discrepancy is one relating to the existing dispute between the parties.

D. Modification by conduct

An acceptance by conduct may contain additional or different terms. These terms may be material, for instance, if the offeree dispatches a much smaller quantity of a commodity than that which was ordered by the offeror, or immaterial if only a very small quantity is missing.

E. Acceptance of modification by conduct

A modification is an “acceptance” which makes the answer a rejection and a new offer. It may be accepted by the offeror’s conduct. After having received the modified acceptance the offeror may perform the contract or accept the offeree’s performance and this will amount to an acceptance of the new offer.

Illustration: S offers B a contract under which B is to buy 350 tonnes of coal at a certain price to be delivered in instalments. The contract also contains a jurisdiction clause. B returns the contract in which it has struck out the jurisdiction clause and inserted instead an arbitration clause. The contract is then put into S’s manager’s desk by one of S’s employees. S subsequently delivers the first instalment which B accepts. Before the second instalment is to be delivered there is a sharp rise in the market price of coal, and S then tries to avoid the contract invoking B’s modified acceptance to which, it says, it never has agreed. However, S is to be considered as having accepted the contract by delivery of the first instalment.

F. Modified acceptance and conflicting general conditions

A reference in a typed or hand-written reply to the offeree’s general conditions which contains terms which materially alter the terms of the contract is covered by Article 2:208 when the offeror has not made any reference to general conditions. If it has, the case is covered by Article 2:209 on conflicting general conditions (the battle of forms) even though the reference is made in a hand-written or typed letter.

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

1. Modified acceptance as rejection and a new offer

The rule in Article 2:208(1) is almost identical with CISG art. 19(1) and UNIDROIT art. 2.11(1). It is in accordance with AUSTRIAN law, the NORDIC Contracts Acts § 6(1), GERMAN BGB § 150(1), GREEK CC art. 191, PORTUGUESE CC art. 213, ITALIAN CC art. 1326(5), DUTCH BW art. 2:226(1) and the laws of BELGIUM, see Kruithof & Bocken, TPR 1994 no. 97, ENGLAND, see Treitel, Contracts 18, SCOTLAND, see Rutterford v. Allied Breweries, 1990 SLT 249, and IRELAND.

2. Contract upheld in spite of non-material modifications

With slight modifications the rules in Article 2:208(2) and (3) are the same as in CISG art. 19(2) [page 179] and UNIDROIT art. 2.11(2). They were first introduced in the UCC § 2.207, see also ULFIS art. 7(2) and the DUTCH BW art. 6:225(2).

Several other systems also accept that in case of non-material modifications, the contract is concluded on the terms of the offeree, see on FRENCH law, Ghestin, Formation no. 3l9 and further, note 2 to Article 2:210 below; on SPANISH law, Supreme Court decisions of 26 March l993 and 26 February l994, RAJ (l994) 1198. In LUXEMBOURG and SCOTLAND there is no authority to this effect but the Scottish jurists have advocated the same approach, see for instance McBryde, Contract 79-80.

In BELGIAN law the prevailing view is that the law or usages will determine the terms on which there is disagreement even when the terms differ materially but not when the difference is substantial, Kruithof & Bocken, TPR l994 no. 97, contra Cornelis, TBH 1983, 37

3. Complete agreement required: the "mirror image" rule

Most of the systems do not have rules corresponding to Article 2:208(2) and (3). Several of them seem to require complete agreement between the parties so that even non-material modifications in the offeree's reply prevent the contract from coming into existence - with the proviso that mere trifles are to be disregarded. This seems to be the position in GERMAN law, see Soergel- Wolf § l5o Rz 8-18; AUSTRIAN law, see OGH 31 May 1988 SZ 61/ 136; PORTUGUESE law, see CC art. 232 and Vaz Serra 130 ff.; ITALIAN law, Cass. 9 Jan. 1993 n. 77 in Mass. Foro italiano 1993 and 4 May 1994, no. 4 in Repertorio del Foro Italiano, 1994 727 n. 272; and in ENGLAND, see Treitel, Contract 18, and IRELAND. The same rule applies in the NORDIC countries, see Contracts Acts § 6 (l) and for DENMARK, Lynge Andersen 66, for FINLAND, Telaranta 147. However, under § 6 (2) of the Contracts Acts the “mirror image rule” does not apply where (1) the offeree considered his reply to be in conformity with the offer, and (2) the offeror must have realized this. If in that case the offeror does not wish to be bound by the terms of the reply, he must give notice without unreasonable delay. Otherwise he is bound to the contract as contained in the reply.The “double awareness test” of (1) and (2) does not leave much room for application of the rule in practice, see Ramberg, Avtalsrätt 119.

4. Modification accepted by conduct

When because the acceptance was not in the same terms as the offer a contract has not come into existence, it may nevertheless be "healed" by the subsequent conduct of the parties, e.g. by performance by one party and acceptance of performance by the other party. It seems that several of the legal systems accept this solution. The ENGLISH case Trentham Ltd v. Archital Luxfer Ltd [1993] 1 Lloyd’s Rep 25, 27 supports the view that it will be easier for the courts to infer that the outstanding point of disagreement is inessential and that therefore there is a contract if the parties have begun performance. In SCOTLAND also there may be acceptance by conduct in this situation, see Uniroyal v. Miller 1985 SLT 101. But if negotiations are still pending an English case has held that there was no contract and that any performance made would have to be paid for on a restitutionary basis, see British Steel Corpn. v. Cleveland Bridge Engineering Co Ltd [1994] 1 All E.R. 94, Q.B.

It is often held that by his counter-offer, the offeree becomes the offeror and that the offeror becomes the offeree who by his conduct accepts the counter-offer, see on CISG, Bianca-Bonell (-Farnsworth) 179 and Honnold no. 170 ff. and on FRENCH law, Ghestin, Formation no. 327. On the battle of forms see notes to Article 2:209.

DANISH cases and writers support the rule that performance may heal a contract. An offeror who has received an acceptance with modifications but who acts as if the contract is concluded must be considered to have accepted the modifications of the offeree, see UfR l990 295 H. In other cases of performance where there is no basis for giving preference to one party’s conditions, the conflicting conditions may be disregarded, and the rules of law will apply, see Gomard, Kontraksret 104 f. and Lynge Andersen 73 f. See also on SWEDISH law, Adlercreutz I 62 and Ramberg, Avtalsrätt 142-144. [page 180]

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 2:209: Conflicting General Conditions

(1) If the parties have reached agreement except that the offer and acceptance refer to conflicting general conditions of contract, a contract is nonetheless formed. The general conditions form part of the contract to the extent that they are common in substance. (2) However, no contract is formed if one party: [page 180] (a) has indicated in advance, explicitly, and not by way of general conditions, that it does not intend to be bound by a contract on the basis of paragraph (1); or (b) without delay, informs the other party that it does not intend to be bound by such contract. (3) General conditions of contract are terms which have been formulated in advance for an indefinite number of contracts of a certain nature, and which have not been individually negotiated between the parties. Comment

A. The commercial background. The battle of forms

Today’s standardized production of goods and services has been accompanied by the standardized conclusion of contracts through the use of pre-printed supply- and purchase orders. The form has blank spaces meant for the description of the performance, the quantity, price and time of delivery. All other terms are printed in advance. Each party tends to use conditions which are favourable to it. Those prepared by the supplier, or by a trade organization representing suppliers, may, for example, contain limitations of liability in case of difficulties in production and supply or of defective performance, and provide that customers must give notice of any claim within short time limits. The forms prepared by the customer or its trade association, in contrast, hold the supplier liable for these contingencies, and give the customer ample time for complaints.

A special rule for this battle of forms is called for because it often happens that the parties purport to conclude the contract each using its own form although the two forms contain conflicting provisions. There is an element of inconsistency in the parties’ behaviour. By referring to their own general conditions, neither wishes to accept the general conditions of the other party, yet both wish to have a contract. A party will only be tempted to deny the existence of the contract if the contract later proves to be disadvantageous for that party. The purpose of the rule is to uphold the contract and to provide an appropriate solution to the battle of forms.

B. Scope of the rule

The rule of Article 2:209 is not needed in every situation in which the parties each has a set of general conditions and these are not in identical terms.

First, the parties may have agreed that one or other set should apply. This may happen because they have agreed explicitly that one set should govern their contract, for example when a party has signed a document which is to be treated as the contract, although in previous correspondence that party has referred to its conditions of contract. It may also happen because one party fails to bring its general conditions to the other party’s attention as required by Article 2:104.

Secondly, the question as to which terms govern only arises when the general conditions are in real conflict. This is not always the case. It may be that one party’s general conditions contain terms which are implied in any contract of that kind, or that they merely list technical specifications of the goods or services to be supplied [page 181] or performed by A. Such clauses are often not at variance with the general conditions of B, which do not contain any clauses on these points.

There is, however, a battle of forms even if only one party’s conditions contain provisions on an issue, when its conditions deviate from the general rules of law, and it is to be understood that the other party meant the rules of law to cover the issue. Thus Article 2:209 will govern the situation where in its offer the supplier’s general conditions contain a price escalation clause and the buyer in its acceptance uses a form which says nothing about later changes in the price.

C. The solutions

1. Is there a contract?

Article 2:209 provides that there may be a contract even though the general conditions exchanged by the parties are in conflict. This is an exception to the general rule in Article 2:208 on modified acceptance. Under Article 2:208, an acceptance which is different to the offer will be effective only if the differences are not material. Otherwise, the acceptance would be (i) a rejection of the offer and (ii) a new offer. It is true that, if the party who receives the new offer does not object to it and performs the contract, it will be deemed to have accepted that there is a contract, see Article 2:204. The difference made by Article 2:209, is that the contract may be formed by the exchange of general conditions, rather than only if and when the performance takes place.

Under Article 2:209, a party who does not wish to be bound by the contract may indicate so either in advance, or later.

If done in advance, this must be indicated explicitly and not by way of general conditions of contract. Experience has shown that a party which in its general conditions has provided that it does not intend to be bound unless its conditions prevail (such a clause is often called a ‘clause paramount’) often remains silent to the other party’s conflicting conditions, and acts as if a contract had come into existence. The provision is often contradicted by the party’s own behaviour. To uphold it would erode the rule.

A party, however, may avoid the contract if after the exchange of the documents which purport to conclude the contract, it informs the other without delay that it does not wish to be bound by the contract

2. Which terms govern?

If despite a conflict between the two sets of conditions, a contract does come into existence, the question is: which conditions will apply? Until recently many legal systems would answer the question as follows: By performing without raising objections to the new offer, the recipient must be considered to have accepted the general conditions contained in the new offer(the 'last shot' theory). Under another theory it is argued that a party which states that it accepts the offer should not be allowed to change its terms. Under this theory (the so-called 'first shot' theory) the conditions of the first offeror prevail.

Under Article 2:209 the general conditions form part of the contract only to the extent that they are common in substance. The conflicting conditions ‘knock out’ [page 182] each other. As neither party wishes to accept the general conditions of the other party, neither set of conditions should prevail over the other. To let the party which fired the first or the last shot win the battle would make the outcome depend upon a factor which is often coincidental.

It is then for the court to fill the gap left by the terms which knock each other out. The court may apply the Principles to decide the issue on which the conditions are in conflict. Usages in the relevant trade and practices between the parties (see Article 1:105) may be particularly important here, for example if there is a usage of employing conditions which have been made under the auspices of official bodies such as the General Conditions of the Economic Commission of Europe or standard forms promoted by some other neutral organisation. If the issue is not explicitly covered either by the Principles or by usages or practices, the court or the arbitrator may consider the nature and purpose of the contract and apply the standards of good faith and fair dealing to fill the gap, see Article 6:102.

Illustration 1: A orders some goods from B. A’s order form says that the seller must accept responsibility for delays in delivery even if these were caused by force majeure. The seller’s sales form not only excludes the seller’s liability for damages caused by late delivery where there was force majeure, but also states that the buyer shall not have any right to terminate the contract unless the delay is over six months. The delivery is delayed by force majeure for a period of three months and the buyer, which because of the delay no longer has any use for the goods, wishes to terminate the contract. The two clauses knock each other out and the general rule of the Principles will apply: thus, under Article 8:101(2) the seller is not liable in damages but under Article 8:108(2) the buyer may terminate if the delay was fundamental.

The term “common in substance” conveys that it is the identity in result not in formulation that counts. However, what is 'common in substance', will not always be easy to decide.

Illustration 2: A sends B an order, which has on the back general conditions providing, among other things, that any dispute between the parties will be submitted to arbitration in London. B sends A an acknowledgement accepting the offer. On the back of the acknowledgement is a clause submitting all disputes to arbitration in Stockholm. Although offer and acceptance have in common that they both refer to arbitration, the clauses are not 'common in substance' and accordingly neither of the places of arbitration are agreed upon. But did the parties agree on arbitration?

A court seized with a dispute may conclude that the parties preferred arbitration to litigation in any case. Applying the principle laid down in art. 2 of the Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters, the court may then decide that the place of arbitration is the defendant’s place of business.

If, however, the court finds that the parties or one of them would only have agreed to arbitration if it was to be held at a certain place the arbitration clause may be disregarded and the court may then admit the action. [page 183]

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

1. Is there a contract?

In most of those countries where the courts have addressed the battle of forms it seems to be held that a contract has come into existence by the offer and its purported acceptance unless the offeror objects to the purported acceptance without undue delay. Thus the contract is held to exist even before the parties have acknowledged it in any other way, for instance by tendering performance, see references under note 2. This is also the position of some of the writers in the countries where there is no case law on the subject, see note 2c.

In countries where the classical rules on offer and acceptance govern the battle of forms, a contract only comes into existence when these rules so provide. Under the classical rules on the conclusion of contracts the contract may also come into existence when the parties treat it as concluded expressly or by conduct, for instance by performing the contract . This is the position in COMMON LAW, see Souter Automation Ltd v. Goodman (Mechanical Services) Ltd (1986) 34 Building L.R. 81. See on PORTUGAL, Almeida, Negocio juridico 886 and on SPAIN, Diez-Picaso 211. In FRENCH law the contract is not formed unless both parties consider the conflicting terms as unessential, see von Mehren s. 164.

In sales governed by CISG part II, where the terms of the purported acceptance do not materially alter the terms of the offer, the acceptance will conclude the contract unless the offeror objects without undue delay, see art. 19(2). If the terms of the purported acceptance materially alter the terms of the offer, there is a counter-offer, and therefore no contract until the offeror has shown that he accepts the counter-offer by his statements or conduct, for instance by performing the contract, see arts. 19(1) and 18(1), and Farnsworth in Bianca & Bonell art. 19, ss. 2.3-2.6.

2. Which terms govern?

a. The 'knock out' rule

Article 2:209 is in accordance with the UNIDROIT Principles art. 2.22, see Bonell, International Restatement 124 ff. The GERMAN courts have adopted a similar “knock out” principle. In most of the cases they have solved the conflict by applying the rules of law (das dispositive Recht) governing the issue, see BGH 20 March 1985, NJW 1985, 1838, and BGH 23 January 1991, NJW 1991 1606, and Kötz in Münchener Kommentar Vol. 1, AGBG §2 No 31 and Larenz/ Wolf, AT § 43 Rn 32. Basically the same position has been taken by the AUSTRIAN courts, see OGH 22 September 1982, Sz 55/135 and OGH 7 June 1990, JBL 1991, 120; see also Rummel, ABGB 2ed § 864a No. 3.

In FRENCH and BELGIAN Law the contract is concluded provided the conflicting conditions do not cover an essential element, ‘cause determinante’ of the contract, see note 1 above. It is held that in such cases no conditions have been agreed upon, and the rules of law will fill the gap, see de Ly & Burggraaf 47 and Mahé. b. The 'last shot' theory The last shot theory seems to be the prevailing view in ENGLAND, see B.R.S. v. Arthur Crutchley [1967] 2 All E.R. 285, 287, although the outcome will depend on the exact facts, see Butler Machine Tool Co v. Ex-Cell-O Corporation( England) Ltd [1979] 1 W.L.R. 811, 817, C.A. and Treitel, Contract 19 f. It is also the prevailing view in SCOTLAND, see Stair, vol. 15, § 636.

CISG arts. 19 and 18 seem to lead to the same outcome, both in cases where the conflicting terms of the acceptance materially alter the terms of the offer, see arts. 19(1) and 18(3), and when they do not, see art. 19(2), see v. Caemmerer & Schlechtriem art. 19 section IV, Rn 19-20, who are ‘afraid that this is the solution’, and Farnsworth in Bianca & Bonell art. 19, ss. 2.3-2.6.

c. The first shot rule

The DUTCH BW art. 6:225(3) provides that if offer and acceptance refer to different general conditions, the second reference is without effect, unless it explicitly rejects the applicability of the general conditions contained in the first reference. It appears that the explicit rejection must be one which the offeree communicates for the occasion and not one which only appears in his general conditions.

In the USA § 2-207 of the UCC provides a general rule on additional terms in acceptance or confirmation. It is the prevailing view that the result is similar to that of the Dutch BW. However, if the additional terms do not materially alter the terms of the offer, these additional terms will become part of the contract, unless the offer expressly limits acceptance to the terms of the offer or notification of objection has already been given or is given within a reasonable time after notice of them is received. Several authors have criticised the rules in § 2-207, see von Mehren, ss. 157-180. [page 184]

d. The law is unsettled

In the law of several countries, statutory provisions on the conclusion of contracts do not address the issue or do not provide what the authors consider to be clear and satisfactory answers. There is no case law and the authors are sometimes divided.

There is no general rule in SPAIN, where the authors tend to favour the classical rules on offer and acceptance and on interpretation of contracts. This is also the position of the PORTUGUESE authors. In cases where the offeror accepts the contract by conduct the last shot theory would therefore be adopted.

Many authors assert that there can be no hard and fast rule which solves the conflict. The cases are to be decided individually. This is the attitude of the SWEDISH authors, see Ramberg, Avtalsrätt 143; Göransson, passim, who seems to favour the first shot theory; Adlercreutz, Avtalsrätt II 73; and Hellner, Kommersiell avtalsrätt 50, who is not even sure what is the right approach, and who shows some sympathy for the last shot rule, a sympathy which Ramberg, Avtalsrätt seems to share; see also Bernitz 40.

The question is treated by the FINNISH author Wilhelmsson, Standardavtal 1995, who seems to prefer the knock out principle, see p. 79 f . Among DANISH authors, Lando, Kampen, favours the knock out principle; Gomard, Kontraktsret argues for the last shot rule where the offeror treats the contract as concluded without objecting to the additional or different terms in the acceptance, while in other cases the rules of the law should apply, see p. 105; Lynge Andersen 74 seems to prefer the last shot rule. [page 185]

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 2:210: Professional's Written Confirmation

If professionals have concluded a contract but have not embodied it in a final document, and one without delay sends the other a writing which purports to be a confirmation of the contract but which contains additional or different terms, such terms will become part of the contract unless: (a) the terms materially alter the terms of the contract, or (b) the addressee objects to them without delay.

Comment

A. Background

Between professionals, i.e. persons engaged in business transactions, who have made a contract, it may not be entirely clear on what terms their contract has been concluded. A party may then send the other party a written confirmation containing the terms which it believes were agreed upon, and the terms which it believes to be implied. It needs to send this confirmation in order to be sure of the terms of the contract before it starts performance. In most cases the recipient will assent to the written confirmation by its silence. It will have no reason to reconfirm what has already been agreed upon and confirmed by the other party. Its silence will, therefore, be considered as assent. If it disagrees with the terms, it must object without delay.

In many cases the additional terms provided in the confirmation will take the shape of an interpretation of the contract.

Illustration 1: Upon the termination of a distributorship contract between the supplier S and the distributor D, D requests, and it is agreed orally, that S shall take over D’s stock of machinery “at the usual trade discount”. These words usually [page 210] mean the discount applied in sales from S to D (30%). However, in a letter of confirmation sent to S immediately after the oral agreement D points out that it means the discount which it applies to its customers (28%). Since S does not object to D’s letter, D’s interpretation will prevail.

B. Conditions

In order for the professional’s confirmation to become binding upon the recipient, the following requirements must be met:

(1) The rule only operates between professionals, i.e. persons operating in their business capacity, as distinguished from relationships between professionals and consumers or between private individuals.

(2) The confirmation must be in writing, see Article 1:301 (6).

(3) The contract was incomplete in the sense that it did not materialise into a document which was a record of all the contract terms.

(4) The confirmation must reach the recipient without delay after the negotiations and it must refer to them.

(5) If the recipient does not object without delay to the terms additional to or different from the terms agreed upon in the preceding negotiations, they become part of the contract unless they materially alter the terms agreed upon. On the concept of “materially alter” see Article 2:208, Comments D(2) and E.

Illustration 2: Upon the oral conclusion of a sales contract S sends B a letter of confirmation in which, inter alia, it is provided that B has to make an advance payment of half of the purchase price three months before delivery of the goods. S cannot prove that this was agreed when the contract was concluded; the clause is unusual in the trade, and would materially alter the terms of the contract. B is not bound by the clause on prepayment. S, on the other hand, must perform the contract without getting the advanced payment.

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

1. Unidroit, German and Nordic law

The rule laid down in art. 2:210 is provided in UNIDROIT, art. 2.12. The same rule probably also applies in SWEDEN in contracts between professionals, see Adlercreutz II 75 ff. The same rule applies in DENMARK, FINLAND and GERMANY, see references below.

In these three countries a professional’s written confirmation may also create a contract even though it was not clear that one existed already. The letter of confirmation will bind the addressee to a contract even if he did not believe this, if the sender of the confirmation had reason to believe that the negotiations between the parties had led to a contract, see on DANISH law, Lynge Andersen 94 and the Supreme Court’ s decision in UfR l974 119 H; on FINNISH law, Telaranta 172; and on GERMAN law, Baumbach-Duden-Hopt § 346. However, in these case the recipient will not be bound, if the letter contains surprising terms, or the recipient objects to the writing without delay.

2. The other Civil Law systems

In most other CIVIL LAW countries, a party's silence to a letter of confirmation or other communication purporting to change the terms of the contract will only amount to acceptance if this follows from usages and a practice between the parties, or when under the principle of good faith and fair dealing silence must be interpreted as acceptance. See for instance the LUXEMBOURG Cass. 26 June 1914 [page 186], Pasicrisie 11, 89, where it was stated that under the circumstances “the confirmation of a purchase is implied by the silence of the buyer to the letter of confirmation of the seller.” In AUSTRIAN law a professional’s silence to another professional’s written confirmation which adds to or deviates from the agreement made is not regarded as an acceptance of the written confirmation, see Rummel § 861 Rz 13, and OGH 7 July 1982 SZ 55/106, 28 April 1993 JBI 1993, 782.

In FRANCE, LUXEMBOURG, BELGIUM, ITALY and THE NETHERLANDS there seems to exist a general usage under which the recipient of an invoice is taken to have accepted the terms in the invoice unless he objects to them. A party's acceptance of a performance without objecting to the terms communicated by the performing party before or with the performance, or other similar circumstances may also be interpreted as acceptance of these terms, if good faith and fair dealing so require: see on Belgian law, Rodière, Formation 53 and Storme in TBH 1991, 467 ff.; on French law, Ghestin, Formation nos. 400 and 429 (and cf. Note 2 to Article 2:208, above); on Italian law, Bonell, Enciclopedia guiridica Treccani and Cass. 14 March 1983 n.1888 in Massimario del Foro italiano, 1983, 393 , Schlesinger (-Gorla) 1176; and on Dutch law, Rodière, Formation 100. See also SPANISH CC art. l.224.

3. The Common Law

It is argued that also under the COMMON LAW, usages and practices between the parties may mean that if a party receives a letter of confirmation or similar document modifying the terms of the contract, and does not object, he may nevertheless be bound. Although the principles of good faith and fair dealing are not generally adopted in ENGLISH law, some cases seem to show that even when there are no usages and practices between the parties, silence to such a communication may be regarded as acceptance when it would be unreasonable to hold otherwise, such as when the recipient had initiated the negotiations, see Schlesinger (-Leyser) 116 ff. , Treitel, Contract 33 and Rust v. Abbey Life Ins. Co. [1979] 2 Lloyd’s Rep 355. Although there is little authority in IRELAND to support this view, it appears to be in line with the spirit of the law. The same may be true in SCOTLAND. [page 187] .

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 2:211: 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]

Go to full texts of Parts I & II of Principles of European Contract Law


© Pace Law School Institute of International Commercial Law - Last updated January 5, 2007
Go to PECL Bibliography || Go to PECL Schedule of Abbreviations
Comments/Contributions