CISG CASE PRESENTATION

Under subsection (2), the "merchant's exception" to the Uniform Commercial Code Statute of Frauds applies, when both parties to the transaction are merchants, if one merchant receives written confirmation of an oral contract from another merchant "sufficient against the sender" the contract becomes enforceable unless the recipient objects within 10 days. L-P argued to the trial court, and argues on appeal, that the order confirmations that plaintiffs allegedly sent to L-P are inadmissible as proof of the agreements and in satisf action of the Statute of Frauds, because, as a matter of law, they are insufficient under ORS 72.2010 to constitute written confirmations of the contracts. The trial court held, as a matter of the law, that the documents were confirmations. The court submitted to the jury the factual questions of whether the confirmations were received by L-P, whether L-P knew their contents and whether L-P sent written notice of objection to plaintiffs. The assignment of error relates only to the trial court's ruling concerning the legal effect of the documents, i.e., that they are, as a matter of law, sufficient to constitute "confirmations" under ORS 72.2010.

"CONDITIONS OF SALES: All orders accepted subject to strikes, labor troubles, car shortages or other contingencies beyond our power to control. Any freight rate increases, sales or use taxes is for buyers account."

Then, beneath that block, in smaller print but highlighted, are the words: "SIGN CON FIRMATION COPY AND RETURN." At the bottom left of the first copy, the "confirmation copy," in small print, are the words: "ORDER ACCEPTED BY:," followed by a line for firm name. Below that is a line for a signature and the title of the person signing, and the date.

Affirmed.

Leeson, J., dissenting.

"ORDER ACCEPTED BY:

SIGNATURE AND TITLE

Neither page is an "original." Neither is a "copy" of the other.

"This letter is a written confirmation of our agreement. Please sign and return to me the enclosed counterpart of this letter signaling your acceptance of the above agreement." 567 F. Supp. at 342.

That trial court explained that the sugar merchant's argument concerning the merchants' exception:

"is at odds with elementary principles of contract law. By requiring the buyer to take further action in order to signal acceptance (signing and returning a copy of the letter agreement), [the seller] indicated to the buyer . . . that the terms quoted were still subject to acceptance or rejection rather than representing a memorialization of an oral contract. A true confirmation requires no response." Id. (Emphasis supplied.)

The court held that, as a matter of law, the writing was not a "writing in confirmation" under UCC section 2-201(2). Id. at 342-43. The court of appeals affirmed:

"While a mere confirmation without timely objection might have been sufficient under the 'merchants' exception,' the trial court correctly concluded that, as the master of its offer, [seller], the sender, had the power to require written acceptance as a prerequisite to the formation of a contract. Since it did, and since none was given, no contract arose." 721 F.2d at 510-11. (Emphasis supplied.)

Courts in other jurisdictions have cited Great Western Sugar for the rule that a writing requiring the recipient to take further action by signing and returning a copy to the sender is merely an offer and, therefore, is not a confirmation of a prior oral contract under UCC section 2-201(2). Kline Iron & Steel v. Gray Com. Consultants, Inc., 715 F. Supp. 135, 142 (D DC 1989); Adams, 754 S.W.2d at 706; see also R.S. Bennett & Co., 606 F.2d at 185-86; Perdue Farms Inc. v. Motts, Inc. of Mississippi, 459 F. Supp. 7, 15-17 (ND Miss 1978); Howard Const. Co., 669 S.W.2d at 227; Trilco Terminal v. Prebilt Corp., 167 N.J. Super. 449, 454-55, 400 A. 2d 1237, 1240 (Law Division 1979).[7]

FOOTNOTES

1. OEC 503(2)(a) provides, in part:

"(a) Between the client . . . and the client's lawyer or representative of the lawyer[.]"

2. OEC 511 provides, in part:

3. OEC 104(1) provides:

4. If there is anything uniform about the way courts have decided the question presented here, it is that each document must be evaluated independently and in the light of its contents, and that there is no single correct answer to the question of the effect of a "sign and return" provision. Contrary to the view expressed by the dissent, our opinion is consistent with that analysis and does not create an Oregon exception.

5. There is no dispute that all parties are "merchants" under the code. ORS 72.1040(1)

6. Plaintiffs contend that the forms satisfy the "merchants' exception," because the "sign and return" clause is "spurious language mostly ignored in the industry" and "absolutely irrelevant to the dealings between the parties." I would reject plaintiffs' attempts to explain the meaning of the forms with extrinsic evidence. Permitting parol evidence on this issue undermines the Statute of Frauds by allowing proof of an oral contract to explain a writing that itself is required to prove the existence of the oral contract. Howard Const. Co. v. Jeff-Cole Quarries, Inc., 669 S.W.2d 221, 230 (Mo App 1983); R.S. Bennett & Co. v. Economy Mech. Industries, 606 F.2d 182, 186 n 4 (7th Cir. 1979)

7. Plaintiffs cite Bazak Intl Corp for its holding that buyer's written confirmation indicating that it was "ONLY AN OFFER AND NOT A CONTRACT UNLESS ACCEPTED IN WRITING BY THE SELLER" was, nevertheless, a writing in confirmation of an oral agreement within UCC section 2-201(2). However, that court acknowledged the general rule and distinguished the case on its peculiar facts. Id. at 123-24, 535 N.E.2d at 638. Plaintiffs also cite Busby, Inc. v. Smoky Valley, Bean, Inc., 767 F. Supp. 235 (D. Kan. 1991), for the proposition that highlighting of a "please sign and return" clause by the sender of a writing was insufficient to turn a written confirmation into an offer. In that case, hoever, the sender's written confirmation expressly stated that "receipt of this contract by the seller without written notice to us of objection or error within ten days is an acknowledgement of acceptance." Id. at 236. The court distinguished both Great Western Sugar and Adams, in which the recipients were required to take further action.

8. I would, however, address plaintiffs' cross-assignment that the trial erred in refusing to apply the United Nations Convention on Contracts for the International Sale of Goods (CISG), 15 USCA App (Supp 1994), instead of the UCC. Article 11 of the CISG does not require a contract to be "evidenced by writing" and, thus, would defeat L-P's statute of frauds defense if the trial court abused its discretion under ORCP 23 B in ruling that plaintiffs' attempt to raise the CISG was untimely and that they had waived reliance on that theory.

Go to Case Table of Contents

A. GPL Treatment: Facts and Reasoning

I would, however, address plaintiffs' cross-assignment that the trial court erred in refusing to apply the United Nations Convention on Contracts for the International Sale of Goods (CISG), 15 U.S.C.A. App. (Supp. 1994), instead of the U.C.C. Article 11 of the CISG does not require a contract to be "evidenced by writing" and thus, would defeat L-P's statute of frauds defense if the trial court abused its discretion under ORCP 23 B [governing the amendment of pleadings to conform to the evidence] in ruling that plaintiffs' attempt to raise the CISG was untimely and that they had waived reliance on that theory."[12]

B. CISG: An Outcome-Determinative Departure

C. CISG as Regional Trade Law: The Impetus for Regionalized Interpretations

CONCLUSION

FOOTNOTES

* Professor, University of Pittsburgh School of Law. A.B. 1973, Harvard College; A.M. 1975, Harvard University; J.D. 1981, Harvard University School of Law. I wish to thank my collegue, Professor Ronald Brand of the University of Pittsburgh School of Law, not only for his insightful suggestions on this particular essay, but more generally for making it possible and enjoyable for me to work in the area of international sales law. I also thank Pittsburgh Law student Jennifer Hanley for her intelligent and energetic assistance.

1. U.N. Conference on Contracts for the International Sale of Goods, Final Act (Apr. 10, 1980), U.N. DOC. A/CONF. 97/18, reprinted in S. Treaty Doc. No. 98-9, 98th Cong., 1st Sess. and 19 I.L.M. 668 (1980) [hereinafter CISG or Convention].

2. 894 P.2d 470 (Or. Ct. App. 1995), rev. granted, 898 P.2d 770 (Or. 1995).

3. 894 P.2d at 471-72.

4. Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.
U.C.C. § 2-201(1).

5. Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received.
U.C.C. S 2-201(2).

The purpose of [U.C.C. § 2-201(2)] is to rectify an abuse that had developed in the law of commerce. The custom arose among business people of confirming oral contracts by sending a letter of confirmation. This letter was binding as a memorandum on the sender, but not on the recipient, because he had not signed it. The abuse was that the recipient, not being bound, could perform or not, according to his whim and the market, whereas the seller had to perform. Obviously, under these circumstances, sending any confirming memorandum was a dangerous practice. Subsection (2) of Section 2-201 of the Code cures the abuse by holding a recipient bound unless he communicates his objection within 10 days.

6. 894 P.2d at 472, 474.

7. Id at 474-75.

8. Id at 476.

9. Id at 475.

10. GPL Treatment, Ltd. v. Louisiana-Pacific Corp., 898 P.2d 770 (Or. 1995).

11. GPL Treatment, 894 P.2d at 477 n.4 (Leeson, J., dissenting); Respondent's Brief to the Oregon Court of Appeals at 28-29, GPL (No. 9209-06143).

12. 894 P.2d at 477 n.4 (Leeson, J., dissenting).

13. CISG Article 12 states:

Any provision of article 11, article 29 [on modifying or terminating a sales contract] or Part II of the Convention that allows a contract of sale or its modification or termination by agreement or any offer, acceptance or other indication of intention to be made in any form other than in writing does not apply where any party has his place of business in a Contracting State which has made a declaration under article 96 of this Convention. The parties may not derogate from or vary the effect of this article.

14. At the time of this writing, nine Contracting States -- Argentina, Belarus, Chile, China, Estonia, Hungary, Lithuania, the Russian Federation, and the Ukraine -- have made declarations under Article 96. See Journal of Law and Commerce CISG Contracting States and Declarations Table, 14 J.L. & COM. 235 (1995) [hereinafter Declarations Table].

15. Had the United States or Canada ratified CISG with an Article 96 reservation, the provisions of Article 11 permitting a contract to be made in non-written form would not apply to the transaction in GPL. CISG Art. 12. In that case, the domestic sales law applicable under choice of law principles would determine whether a writing was required. JOHN O. HONNOLD, UNIFORM LAW FOR INTERNATIONAL SALES UNDER THE 1980 UNITED NATIONS CONVENTION § 129 at188 (2d. ed. 1991). Thus if the court's choice of law analysis pointed to the law of the jurisdiction where the buyer (L-P) was located, then the writing requirements of U.C.C. § 2-201 as enacted in Oregon would apply. This would be the result no matter which country -- the U.S. or Canada -- had made the Article 96 reservation.

16. It is not entirely clear that the parties were located in different Contracting States. The GPL opinion indicates that the seller, while operating primarily in Canada, had at least one office in the United States. See 894 P.2d at 471. According to CISG Article 10(a), if a party has several places of business, the one that determines where the party is deemed located is "that which has the closest relationship to the contract and its performance, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract." Under Article 1(2), furthermore, a sale is not deemed international unless the fact that the parties were located in different countries was apparent "either from the contract or from any dealings between, or from information disclosed by, the parties at any time before or at the conclusion of the contract." Thus to determine whether CISG applied to the transactions in GPL one might need further facts about how the alleged contract was negotiated and what the parties knew (or should have known) at the time the contract was formed concerning the location and planned performance of the other party. GPL's brief to the Oregon Court of Appeals asserted that the seller's communications relating to the transactions (including the mailing of the confirmation forms) took place in its Canadian offices, and that the shakes allegedly sold to L-P were to be produced in its Canadian facilities. Respondent's Brief at 31-32, GPL (No. 9209-06143). L-P's Reply Brief argued that "in the absence of discovery, briefing, and an evidentiary record, it is idle to speculate on what particular factual issues might be involved in the question of the applicability of the CISG in this instance." Appellant's Reply Brief at 15, CPL (No. 9209-06143).

17. According to Article 100(2), the Convention applies under Article l(l)(a) only to sales contracts formed after the dates on which CISG became effective in the countries of both parties. Under Article 99, the Convention takes effect in a country one year after the first of the month following ratification. CISG went into force in the United States on January 1, 1988. Declarations Table, supra note 14, at 242. The Convention's effective date in Canada was May 1, 1992. Id. at 237. Because the alleged sales in GPL occurred in 1992, the timing requirements of Article 100(2) were satisfied. It should be noted that, for contract formation issues, the Convention applies under Article l(l)(a) only if the offer was made on or after the effective dates of CISG in the countries of both parties. CISG Article 100(1).

18. See John E. Murray, Jr., An Essay on the Formation of Contracts and Related Matters Under the United Nations Convention on Contracts for the International Sale of Goods, 8 J.L. & COM. 11 (1988).

19. See Ronald A. Brand & Harry M. Flechtner, Arbitration and Contract Formation in International Trade: First Interpretations of the U.N. Sales Convention, 12 J.L. & COM. 239, 251-52 (1993); Harry M. Flechtner, More U.S. Decisions on the U.N. Sales Convention: Scope, Parol Evidence, "Validity," and Reduction of Price Under Article 50, 14 J.L. & COM. 153, 156-61 (1995).

20. Paul Amato, U.N Convention on Contracts for the International Sale of Goods -- The Open Price Term and Uniform Application: An Early Interpretation by the Hungarian Courts, 13 J.L. & COM. 1 (1993).

21. See James J. Callaghan, U.N. Convention on Contracts for the Sale of Goods: Examining the Gap-Filling Role of CISG in Two French Decisions, 14 J.L. & COM. 183, 198-99 (1995); Eva Diederichsen, Commentary to Journal of Law and Commerce Case I;Oberlandesgericht, Frankfurt am Main, 14 J.L. & COM. 177 (1995); Flechtner, supra note 19, at 169-76; Harry M. Flechtner, Remedies Under the New International Sales Convention: The Perspective from Article 2 of the U.C.C., 8 J.L. & COM. 53 (1988).

22. A variety of guides to and sources of information about CISG are available. In addition to the material published by the Journal of Law and Commerce in its ongoing project to promote understanding of CISG, see HONNOLD, supra note 15; ALBERT H. KRITZER, GUIDE TO PRACTICAL APPLICATIONS OF THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS (1989); BUSINESS LAWS, INC., GUIDE TO THE INTERNATIONAL SALE OF GOODS CONVENTION (1994). Cites to CISG commentary and case law from around the world are collected in MICHAEL R. WILL, CISG, THE UN CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS: INTERNATIONAL BIBLIOGRAPHY, 1980-1995; THE FIRST 150 OR SO DECISIONS, 1988-1995 (1995). Case citations are also available through UNCITRAL, CLOUT: CASE LAW ON UNCITRAL TEXTS, U.N. DOC. A/CN.9/SER.C/ABSTRACTS/1 et seq. (1993 and later) and UNILEX, A Comprehensive and Intelligent Data Base [on floppy disk] on the UN Convention on Contracts for the International Sale of Goods, a project supervised by Professor M.J. Bonell for Transnational Publications of Irvington, New York. A World Wide Web database devoted to CISG ("http:/ cisgw3.1aw.pace.edu" or "http://www.cisg.law.pace.edu") is being constructed by the Institute of International Commercial Law of Pace University School of Law and should soon be available.

23. The other U.S. cases that cite CISG include three involving transactions with parties from Italy (Graves Import Co., Ltd. v. Chilewich Int'l Corp., No. 92 CIV. 3655, 1994 U.S. Dist. LEXIS 13393 (S.D.N.Y. Sept. 21,1994); Delchi Carrier S.p.A. v. Rotorex Corp., No. 88-CIV-1078, 1994 U.S. Dist. LEXIS 12820 (N.D.N.Y. Sept. 7, 1994); Filanto, S.p.A. v. Chilewich Int'l Corp., 789 F. Supp. 1229 (S.D.N.Y. 1994)), two cases involving transactions with Hungarian parties (S.V. Braun, Inc. v. Alitalia-Linee Aeree Italiane, S.p.A., No. 91 CIV. 8484 (LBS), 1994 121680 (S.D.N.Y. Apr. 6, 1994); Interag Co., Ltd. v. Stafford Phase Corp., No. 91 CIV. 3253, 1990 WL 71478 (S.D.N.Y. May 22, 1990)), one case featuring a sale to a party in China (Beijing Metals & Minerals Import/Export Corp. v. American Bus. Ctr., Inc., 993 F.2d 1178 (5th Cir. 1993)), and one case involving a Swiss party (Orbisphere Corp. v. United States, 13 Ct. Int'l Trade 866 (1989)). There are, as yet, no reported decisions on CISG by Canadian courts. See WILL, supra note22, at 243.

24. UNITED STATES BUREAU OF THE CENSUS, STATISTICAL ABSTRACT OF THE U.S.: 1994 § 28 FOREIGN COMMERCE AND AID at 800 (Figure 28.2)(114th ed. 1994).

25. Id.

26. Declarations Table, supra note 14, at 241. The Convention went into force with respect to Mexico on January 1, 1989. Id.

27. 19 U.S.C.A. §§ 3311-3317 (Supp. 1995).

28. European countries that have ratified the Convention include, inter alia, Germany, France, Italy, Austria, the Netherlands, Spain, Switzerland, and the Scandinavian countries. Declarations Table, supra note 14, at 235. Non-ratifying European countries include Belgium, Great Britain, Greece, Ireland and Portugal. Id.

29. Etsuo Abe & Robert Fitzgerald, Japanese Economic Success: Timing, Culture, and Organizational Capability, BUS. HIST., Apr. 1995, at 1.

30. Other Asian-Pacific countries that have not ratified CISG include South Korea, Thailand, Taiwan, Hong Kong, Indonesia and Malaysia. Declarations Table, supra note 14, at 235. The People's Republic of China and Singapore have ratified CISG. Id. China did so on the same day that both the United States and Italy ratified. Id. Perhaps because of differences between China's economic system and the systems of countries like Japan and South Korea, China's ratification did not precipitate ratification by other major players in the Asian-Pacific area.

31. See Errol P. Mendes, The U.N. Sales Convention and U.S.-Canada Transactions: Enticing the World's Largest Trading Bloc to Do Business Under a Global Sales Law, 8 J.L. & COM. 109, 109 (1988) (before Canada ratified CISG, author argued that, because U.S. had ratified the Convention, "Canada, as the United States' largest trading partner, has very little option but to follow suit." [footnote omitted]).

32. See UNITED STATES BUREAU OF THE CENSUS, supra note 24, at 823, 825.

33. The most comprehensive listing of cases citing CISG is in WILL, supra note 22. Of the 162 CISG decisions identified in Professor Will's extremely valuable collection, 73 are from German courts. Of those 73, only four arise from transactions involving a non-European party. Of the 108 CISG cases currently cited in the UNILEX computer database, supra note 22, 46 are from German courts; only one of those 46 features a transaction involving a non-European party.

34. Supra note 23 and accompanying text. One decision by a Mexican court involved a transaction between parties in the United States and Mexico. José Luis Morales y/o Son Export, S.A. de C.V., de Hermosillo Sonora, México v. Nez Marketing de Los Angeles California, E.U.A., D.O. May 27, 1993, 17-19 (COMPROMEX, Comisión para la Protección del Comercio Exterior de México, 1993), abstracted in UNILEX, supra note 22.

35. For articulation of the contradictory roles regionalism may play in the development of an open world market, see Robert D. Hormats, Making Regionalism Safe, FOREIGN AFFAIRS, Mar./Apr. 1994, at 97. See also Prime Minister Goh, Regionalism Stays Open, Address Before the Fortune Global Forum (Mar. 9, 1995), in Regional Links Can Be Pillars of More Open Trade System, STRAIGHTS TIMES (Singapore), Mar. 10, 1995, at 30; Gary G. Yerkey, WTO Trade Ministers Agree to Study Regionalism, Multilateralism Links, BNA INTERNATIONAL TRADE DAILY (Washington, D.C.), Oct. 25, 1995.

36. Even if one accepts the argument that the development of regionalized interpretations of CISG shared by members of a trading bloc could be desirable, it is clear that different "national" interpretations of the Convention by individual countries cannot be justified. Professor Honnold has written eloquently of the importance of resisting the tendency to view the international text of CISG through the lens of one's own national jurisprudence. John Honnold, The Sales Convention in Action -- Uniform International Words: Uniform Application?, 8 J.L. & COM. 207, 208-09 (1988). See also Alejandro M. Garro, The Gap-Filling Role of the Unidroit Principles in International Sales Law: Some Comments on the Interplay Between the Principles and the CISG, 69 TULANE L. REV. 1149, 1151-52 (1995). A major purpose of publishing translations of foreign decisions and commentary on CISG in the Journal of Law and Commerce, a project pursued since 1993, is to provide some tools for combatting this tendency.

37. See Declarations Table, supra note 14, at 235.