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GUIDE TO ARTICLE 23

Comparison with Principles of European Contract Law (PECL)


Match-up of CISG Article 23 with PECL Article 2:205 [Time of Conclusion of the Contract]

CISG Article 23

A contract is concluded at the moment when an acceptance of an offer becomes effective in accordance with the provisions of the Convention.

[See also CISG Articles 18 and 24]

PECL Article 2:205
(complete and revised version 1998)

(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.


Editorial remarks

EDITOR: Pilar Perales Viscasillas [*]
January 2002

Introduction to contract formation in the CISG and PECL

Section II PECL and Part II CISG follow the classic pattern of two declarations of will (offer and acceptance) in deeming a contract concluded. The adoption of this process, which is designed in almost the same terms under both texts, is justified for two reasons: 1) it is adopted by the great majority of legal systems; and 2) it makes analyzing the formation of the contract easy for the parties and judges or arbitrators. Nevertheless, at times it is difficult to determine what exactly is an offer or an acceptance, such as when negotiations are long and complicated. That, however, does not prevent the conclusion of a contract.

Article 23 CISG fixes the time of the conclusion of the contract connecting it with the moment at which the acceptance takes effect in accordance with the provisions of the Convention. It seems clear that, although article 23 is a central piece in Part II of the Convention, it must be viewed in conjuction with the rest of the dispositions of Part II that establish a precise moment at which the indication of assent takes effect, depending on the manner chosen by the offeree to accept the offer. In Part II of the PECL there is no provision similar to article 23 CISG, although article 2:205 PECL (Time of conclusion of the contract) tries to embody in a single disposition the precise time of the conclusion of the contract depending on the way in which acceptance of the offer takes place. However, article 2:205 PECL alone is not enough to fix the time of the conclusion of the contract; to have a complete picture of the exact moment at which a contract is concluded, one must turn to other rules of the PECL. The significance of finding the exact moment of the conclusion of the contract is that the parties are bound to the contract, i.e., they are obliged to fulfill the obligations derived from a contract which is born to the law at that exact moment.

Specific rules concerning contact formation in the CISG and PECL [articles 23 CISG and 2:205 PECL]

Article 23 CISG is directed to the rest of the norms of Part II of the Convention that point out when the indication of assent is effective. This, in turn, must be referenced to the relevant provision in article 18(2) CISG, which must be analyzed in accordance with article 24 CISG. Article 18(1)-(3) and articles 19 and 21 CISG are also relevant to this matter; similarly, article 2:205 PECL has to be analyzed considering other rules of the European Principles - mainly, articles 1:303 (similar to article 24 CISG); 2:204(2) (counterpart of article 18(1) CISG, in relation to acceptance by silence or inaction); 2:207 (for late acceptances, ruled on in article 21 CISG); article 2:208 (modified acceptance, similar to article 19 CISG); and, finally, article 2:209 which refers to conflicting general conditions.

Articles 18(2) CISG and 2:205(2) PECL state that the acceptance becomes effective and therefore the contract is concluded when the indication of assent reaches the offeror. These provisons fix the general rule on the moment at which the acceptance takes effect. In this regard, the Convention, the PECL and also the UNIDROIT Principles for International Commercial Contracts follow the same rule to determine the conclusion of the contract, as do some national legal systems. However, there are other systems which adopt the dispatch principle to deem the contract concluded (see Notes to Article 2:205 PECL).

Both the CISG and the PECL have adopted for their relevant provisions the term "reaches," which is defined in articles 24 CISG and 1:303(3) PECL in a comprehensive way. One consideration in regard to the comparison between the CISG and PECL provisions is the location of article 1:303(3) PECL. Located in Chapter I (General Provisions) of the European Principles, it entails that, different than the Convention (cf. articles 23 and 27 CISG), the receipt rule is applied as a general principle to fix the effectiveness of any notice (i.e., the communication of a promise, statement, offer, acceptance, demand, request or other declaration - article 1:303(6) PECL), not only to establish the time of conclusion of the contract as does article 23 CISG.

Article 24 CISG indicates when a Part II (Formation) communication, including the acceptance, "reaches" the addressee. A Part II (Formation) communication reaches the addressee "when it is made orally to him or delivered by any other means to him personally, to his place of business or mailing address or, if he does not have a place of business or mailing address, to his habitual residence." By the flexible and broad definition given in article 24 CISG, the Convention seems to adopt as a general rule for written statements, the Receipt Theory; and, for oral communications, the Information Theory.[1] The solution adopted by the PECL is slightly different: article 1:303 adopts the Receipt Theory as a general rule for both oral and written notices.

The "Reaching Principle" as a general rule in both CISG and PECL is applied to the following ways of indicating assent:

1) Indication of assent made by written statements [articles 18(1) CISG and 2:205(1) and 1:303(2) PECL]. A written declaration represents the most usual way in which the offeree shows his conformity with the offer.[2] In such a case, the contract is concluded when the communication "reaches" the offeror at his place of business or mailing address; if none exists, at his habitual residence. This means that the contract is concluded, for example, by the delivery of the communication by a messenger; the printing of a fax transmission; leaving the letter in the mailbox; the delivery of the notification informing of the arrival of a letter or telegram at the Post Office;[3] or when an EDI or Electronic-mail message enters into the offeror's computer system of information, or when the message is deposited in the electronic or informatic mailbox.

2) Indication of assent made by oral statements [articles 18(1) CISG, and 1:303(1)(3) and 2:205(1) PECL]. Oral statements are made not only when the parties negotiate face to face, but also when they use other means of communication: phone, radio, video-conference, etc. In such cases, under the CISG the contract is concluded when the offeror has knowledge of the acceptance,[4] whereas under the PECL the oral communication need merely be received.

3) Indication of assent made by conduct [articles 18(1) CISG and 2:205(2) PECL]. There are two types of acceptances by conduct that need to be considered:

      a) Some kind of behavior or conduct (e.g., raising a hand and nodding one's head). Under the CISG, this is deemed effective when the offeror understands the meaning of the conduct. Consequently, this system of information should be adopted by an extensive interpretation of article 24 CISG. The PECL has a specific rule dealing with this matter that follows the general receipt theory: in case of acceptance by conduct, the contract is concluded when notice of the conduct reaches the offeror (article 2:205(2) PECL).[5]

      b) Acts of performance (e.g., dispatch of the goods and payment of the price) which, contrary to the situation regulated in articles 18(3) CISG and 2:205(3) PECL, must reach the offeror in order to conclude the contract: 1) by the goods reaching the offeror's place of business; 2) by the communication that informs of the making of the act indicating assent reaching the other party; or 3) by the payment of the price.[6]

4) Late acceptance due to some irregularity during the transmission process [articles 21(2) CISG and 2:207(2) PECL]. Such acceptances are deemed effective when they reach the offeror.[7]

Besides the general rule established by the aforementioned articles of the CISG and the PECL, there are some other dispositions relevant to the formation of the contract that state exceptions to the receipt rule:

1) Silence or inaction [articles 18(1) CISG and 2:204(2) PECL]. The recognition of silence and inaction as acceptances implies the irrelevance of the communication. Strictly speaking, silence and inaction are not exceptions to the general rule since they cannot be submitted in any of the other classic theories devised to fix the moment of the conclusion of the contract - Declaration and Expedition (the latter known for the contract inter absentes in the common law systems as the Dispatch, Mailbox or Post rule). Silence and inaction, by definition, mean the concession of legal effects to an abstainer attitude of the offeree. The moment of the conclusion of the contract by silence or inaction is diverse and hangs on the factors that contribute to give them legal effect:

      a) When silence or inaction are considered as acceptances by the dispositions of the Convention, their effectiveness is determined by the interpretation of the expression "without delay". In all of the cases the offeror is given an option to confirm (by his silence or inaction) in the situations contemplated by articles 19(2) and 21(2) CISG and 2:207(2) PECL), or to negate (also by his silence or inaction) in the hypothesis regulated by articles 21(1) CISG and 2:207(1) PECL) the conclusion of the contract. Thus, the termination of the period of time to confirm or negate the conclusion of the contract determines the failure or, on the contrary, the effectiveness of the acceptance.

      b) When usages, or the practices the parties have established between themselves and the agreement of the parties give the effect of an acceptance to silence or inaction, the time given to the offeree to accept is determined (expressly, or impliedly) by the agreement (practices) of the parties previously established, or the agreement considered by applicable trade usages. Thus the effectiveness of the agreement will be established by the expiration of the period of time previously agreed on.[8]

      c) When silence and inaction are deemed as acceptances due to any other circumstances - such as the existence of a "duty to speak" derived from the good faith principle - the expiration of the time in which the negative reply should have reached the offeror, leads to the concession of positive effects to the offeree's silence at that moment.[9]

2) Acts of performance [articles 18(3) CISG and 2:205(2) PECL]. These provisions deal with situations in which the offer, the practices already established between the parties or usages, authorize the offeree to accept by performing an act without the need to communicate it to the offeror. In this case, the contract is deemed concluded when the performance of the act begins, i.e., following the CISG, when the dispatch of the goods and the payment of the price are made.[10] Notwithstanding the clear meaning of these provisions, some CISG scholars believe that the acceptance by act of performance under article 18(3) needs to be communicated in order to deem the contract concluded.[11]

Usually the Battle of the Forms involves situations in which a contract is concluded by acts of performance.[12]

3) Late acceptance [article 21(1) CISG]. The last exception to the "Reaching Principle" in the Vienna text, is the one contemplated by article 21(1). This article states that the contract is concluded when the offeror dispatches a notice (Dispatch Principle) informing the offeree of the effectiveness of his declaration or when the offeror orally so informs the offeree (Information Theory). Thus, the CISG adopts the Dispatch Principle to regulate the conclusion of the contract when the offeror sends a written notice.[13] However, some scholars (following the Secretariat Commentary on article 19 of the 1978 Draft Convention),[14] believe that the moment of the conclusion of the contract in the circumstances contemplated by article 21(1) CISG, is the reception of the late acceptance. Precisely the same result is derived from article 2:207(1) PECL (and the corresponding PECL Comments), since the PECL does not adopt the dispatch theory; therefore, under the PECL, the conclusion of the contract in case of a late acceptance is governed by the receipt rule - i.e, when the late acceptance reaches the offeror.

Contract formation outside the traditional model of offer and acceptance

Two relevant questions arise concerning the existence of contracts that have not followed the traditional "offer" and "acceptance" pattern:

(a) Can a contract be concluded under the rules of the CISG when there is no offer and acceptance?

(b) If the answer to the first question is positive, when is the contract concluded?

Both questions receive a positive answer under the PECL.[15]

Under the Vienna Convention, the first answer could also be considered affirmative. There is a general accord among many scholars on this issue.[16] The fact that a contract during its formation process did not follow the traditional scheme and was subsequently (or consequently) concluded without isolating an offer and a corresponding acceptance does not reduce the value of the dispositions in Part II of the Convention.[17] In such cases, the contract regulation is derived from the general principles to be found in Part II of the Convention, always taking into account the need for a uniform interpretation and application of the Convention (as per article 7 CISG). Although finding the precise moment in which the contract is concluded could be very difficult absent any other conclusive proof, in many cases the contract shall be deemed concluded either when there is a sufficient agreement between the parties, or when there is performance of the contract by both parties.

The exact place and time of contact formation

Contracts concluded between parties located in the same place do not raise problems in relation to the place where the contract is deemed to be concluded. However, when the parties negotiate from distance - even when they use means of instantaneous communication - the exact place where the contract was concluded may require further investigation.

Neither the CISG, nor the PECL say anything on this point. The Secretariat Commentary states that the fact that draft article 21 [article 23 CISG], in conjunction with draft article 16 [article 18 CISG], fixes the moment at which the contract is concluded may be interpreted in some legal systems to be determinative of the place at which the contract is concluded.[18] In any case, it seems clear that this is a question that must be solved in accordance with the applicable national law (as per article 7(2) CISG), since there is neither a provision nor a general principle that could point out where the contract is concluded.[19]

Lastly, whether the time of the conclusion of the sales contract may be important to determine the application of some specific matters, like domestic fiscal or regulatory laws, should also be decided by the applicable domestic law.[20]

Conclusions

The PECL and the CISG have adopted the receipt theory as a general rule to deem the contract concluded, following the most modern approach in comparative law.

As an exception, both instruments adopt the dispatch principle or even the information theory in certain circumstances.

Although both texts regulate the contract conclusion in a comprehensive way, the PECL can help to interpret the CISG in some situations (such as late acceptances), or may even be used to supplement the CISG (for instance, in cases in which the contract has not been concluded via the traditional exchange of the two declarations of will - offer and acceptance).

[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) 329-335.]


FOOTNOTES

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

1. There are only few scholars -- a great many are silent about this point -- who hold that when the offeror knows the acceptance, the contract orally made is concluded. See, for example, Pilar Perales Viscasillas, La formación del contrato de compraventa internacional de mercaderías, 1996 (Tirant lo blanch), 232-237. See note 5 infra for an illustration of the Information Theory.

2. As written statatements we can consider those made by letter, telegram, telex, fax, Electronic mail (e-mail, using Internet), Electronic Data Interchange (EDI) and any other that could be included in the concept of "writing". For this solution, see Rafael Illescas Ortiz, La Convención de Viena de 1980 sobre compraventa internacional de mercaderías: ámbito de aplicación y perfección del contrato, 16 Derecho de los Negocios, 7 (1992).

3. Against, Peter Schlechtriem, "Begriff des Zugangs", in Schlechtriem Kommentar zum Einheithlichen UN-Kaufrecht Das übereinkommen der Vereinten Nationen über Verträge über den internationalen Warenkauf -CISG Kommentar-, 3rd ed. (C.H.Beck: München, 2000), no. 12.

4. Information communicated orally by a third person could be also considered as an oral statatement. It is doubtful when the reply to an offer recorded in an answering machine is effective: for Schlechtriem, it is effective when the offeror knows it, i.e., when he hears it (Peter Schlechtriem, "Begriff des Zugangs", in Ernst von Caemmerer & Peter Schlechtriem, Kommentar zum Einheitlichen UN-Kaufrecht. Das Übereinkommen der Vereinten Nationen über Verträge über den internationalen Warenkauf -CISG- Kommentar, 1st. ed. (C.H. Beck: München, 1990) no. 8. However, this author seems to follow another orientation in the second and third edition of his commentary (see, Schlechtriem, supra note 3, at no. 8); for some authors, the moment that fixes the conclusion of the contract is the moment determined by the recording of the message: Karl Neumayer & Catherine Ming, Convention de Vienne sur les contrats de vente internationale de marchandises (Cedidac: Lausanne, 1993) 202; and Perales Viscasillas, supra note 1, at 233.

5. However, the PECL Comments to article 2:205(2) state that the contract is concluded when the offeror learns of the conduct, thus, meaning that the Information Theory applies as shown by PECL 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."

6. LG Krefeld, 24 November 1992 (12 O 153/91) (Germany) <http://cisgw3.law.pace.edu/cases/921124g1.html> made clear that an offer, made by an Italian seller, was accepted conclusively when the German buyer received the goods without objecting to them. The Vienna scholars have not made any especial effort to clarify the structural differences between an indication of assent made by acts of performance under article 18(1) and indicia of assent under article 18(3). When the acts of performance are protected by the factors enumerated in article 18(3) (offer, practices and usages), the offeree can accept without communicating his acceptance, the contract being concluded when he makes the relevant act of performance. On the contrary, if the offeree accepts by an act of performance without the factors contemplated in article 18(3), his indication of assent must reach the offeror in order to conclude the contract -- article 18(1) and (2). In these cases the moment when the contract is concluded is different, as well as the limit to revoke the offer under article 16(1) CISG. The decision of OLG Frankfurt, 27 November 1979 (5 U 15/79) (Germany) established clearly the difference in the predeccesor to article 18 CISG, which is article 6 of the 1964 Uniform Law on the Formation of Contracts (ULF).

7. There is a general accord among the scholars about the moment when the acceptance takes effect in this hypothesis. See, among others, Katharina S. Ludwig, Der Vertragsschluss nach UN-Kaufrecht im Spannungsverhältnis von Common Law und Civil Law: dargestellt auf der Grundlage der Rechtsordnungen Englands und Deutschlands, Studien zum vergleichenden und internationalen Recht- Comparative and International Law Studies, Band 24 (Peter Lang: Frankfurt am Main, 1994) at 344 et seq.

8. See the Secretariat Commentary on article 16(1) of the 1978 Draft of the CISG. Official Records, note 1, p. 23.

9. This solution is supported by Pilar Perales Viscasillas, La perfección por silencio de la compraventa internacional en la Convención de Viena de 1980, 52 Derecho de los Negocios 9-14 (enero 1995), commenting on the first decision on the value of the silence or inaction of the offeree under the Vienna Convention. See U.S. District Court for the Southern District of New York, 14 April 1992, 91 Civ.3253 (CLB) (United States), Filanto S.p.A. v. Chilewich International Corp., 789 F.Supp. SDNY 1992, pp.1229-1242 <http://cisgw3.law.pace.edu/cases/920414u1.html>, appeal dismissed, 984 F.2d 58 (2d Cir. 1993). See also supporting the same solution but extended it to every case in which silence or inaction play the role of acceptance: Ludwig, supra note 7 at 348.

10. See, among the authors who do not demand a communication in such cases: Gyula Eörsi, Formation of Contract, in The 1980 Vienna Convention on the International Sale of Goods. Lausanne Colloquium of November 19-20, 1984. Institut Suisse de Droit Comparé (3) (Schulthess Polygraphischer: Zürich, 1985) 50.

11. The vast majority of the scholars follow the thesis supported by Professor Honnold, who thinks that there is a general principle applicable to article 18: the need to communicate the acceptance, a principle which is also applicable to paragraph (3) of article 18 unless in a given case a quick reaching of the goods could substitute the notice informing the act of acceptance. See, John O. Honnold, Uniform Law for International Sales, 3rd ed. (Kluwer Law International, 1999) no. 164, pp.178-181.

See, against this thesis, the legislative history: during the Diplomatic Conference held in 1980 in Vienna a proposal made by Professor Farnsworth in order to introduce the obligation to notify of the performance of the act was withdrawn due to lack of support (Official Records, pp. 280 et seq.).

12. See editorial remarks (comparative commentary) on article 19 CISG and its PECL counterparts, available at <http://www.cisg.law.pace.edu/cisg/text/peclcomp19.html#er>.

13. Perales Viscasillas, supra note 1, at 606-610. Honnold, supra note 11 at 196, no. 175, footnote 2, so indicates when he comments on the time limit to withdraw the acceptance.

14. The Secretariat Commentary on article 19 of the 1978 Draft [antecedent to CISG article 21] states that "under this paragraph it is the late acceptance which becomes the effective acceptance as of the moment of its receipt, even though it requires a subsequent notice to validate it," Official Records, para. 3, p. 25. See supporting this view, Ludwig, supra note 7 at 341-342 and 405-406. See also comment 2 of article 2.9 of the UNIDROIT Principles of International Commercial Contracts, International Institute for the Unification of Private Law (Rome, 1994) 39.

15. Article 2:211 PECL (Contracts not concluded through offer and acceptance) states that the rules of formation of the contract through offer and acceptance apply with appropiate adaptations to the aforementioned situations.

16. See, supporting this view: Eörsi, supra note 10 at 44; Michael Joachim Bonell, Formation of Contracts and Pre-contractual Liability under the Vienna Convention on International Sale of Goods, in Formation of Contracts and Precontractual Liability (ICC: Paris, 1990, publication no. 440/9), 161 et seq.; Honnold, supra note 11 at no. 132.1, 144 et seq.; and Perales Viscasillas, supra note 1, at 117-124.

Against: Ulrich von Huber, Der Uncitral-Entwurf eines Übereinkommens über Internationale Warenkaufverträge, 43 Rabels Zeitschrift, No. 3, 445 et seq. (1979).

17. See in this sense: John Honnold, International Sales Law and the Open-Price Contract, in Homenaje a Jorge Barrera Graf, tomo II (Universidad Nacional Autónoma de México: México, 1989) 917; and Perales Viscasillas, supra note 1, at 117-124. They adopt the doctrine stated in section 2-204(2) UCC and in section 22(1) Restatement (Second) of Contracts.

Chapter 2 of the UNIDROIT Principles dedicated to the formation of the contract analyzes the formation process in the context of two declarations of will: offer and acceptance. Nevertheless, the UNIDROIT Principles also recognizes the possibility that the contract could be deemed concluded by the conduct of the parties. See Article 2.1 (Manner of Formation) of the UNIDROIT Principles. In this regard, the Ad Hoc Arbitral Award, Rome (Italy) of 4 December 1996, Unilex - UNIDROIT Principles, Transnational, June 2000, D-1996-9, cited Articles 1.2, 2.1, 2.6 and 2.12 to demonstrate the possibility of the valid conclusion of the contract for the sale of fuel oil between an English and Italian company. 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.

18. Secretariat Commentary on article 21 of the 1978 Draft, Official Records, para. 2, p. 26.

19. During the Diplomatic Conference, a proposal made by the Italian delegation was rejected; the proposal suggested the extension of its field of application to the place of performance (Official Records, pp. 291 et seq.).

20. As stated by Honnold, supra note 10 at no. 178, 200.


Comment and notes on PECL 2:205

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) 171-174.


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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