Reproduced with permission from 15 Journal of Law and Commerce (1995) 175-199

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The Price

Witz limits his discussion of whether a determinable price is a condition of an offer to an analysis of the Hungarian case, Pratt & Whitney v. Malev,[34] which dealt with that issue. Witz notes in this context that in another case brought in Hungary, the court resolved the issue by reference to Article 9(1) (p. 62) [Fovárosi Biróság 24 March 1992]. [35] In that case, by taking into account the parties' former usage, the court found that the parties did fix the quantity, quality and price of the goods, notwithstanding their contract's silence. Witz concludes that Article 9 section 1 thus allows for flexibility in the application of Article 14 (p. 63).

Witz's criticism of the Malev case is in keeping with criticism which appeared in an earlier volume of this journal.[36] Malev involved negotiations between Pratt & Whitney, the U.S. manufacturer of airplane engines, and Malev, a Hungarian company. Malev wanted to buy engines for, inter alia, use in planes it intended to buy from Airbus or Boeing. Malev engaged in simultaneous negotiations with Airbus, Boeing and Pratt & Whitney. The type of engines it would need from Pratt & Whitney would depend on whose Companies' planes it would buy. On November 9, 1990, Pratt & Whitney proposed an engine denominated PW4056 if Malev were to buy Boeing planes, and an engine denominated PW4156/A if Malev were to buy Airbus planes. On December 14, 1990, Pratt & Whitney gave Malev a document entitled "Purchase Agreement," consisting of an offer to sell engines for two planes with an option to buy a third engine in case it bought a third plane; an offer to sell a spare engine, with an option to acquire an additional such engine. The price varied according to the kind of plane. The "Purchase Agreement" specified prices for the spare engines and for Airbus jet engine systems, but specified only the price of spare engines for the Boeing system. The offer also specified that Malev's acceptance depended on the agreement of the Hungarian and United States governments. Additionally, it contained an expiration date for the offer.

On December 21, Pratt & Whitney added another model of engine for the Boeing planes, without specifying a price. Both companies drafted a letter on that day, stating that Malev had chosen the engines from the PW4000 series. The letter expressly stated that it was an acceptance of the offer of December 14. It was signed by the CEO of Malev and telecopied to Pratt & Whitney's Vice-President. On March 25, however, Malev informed Pratt & Whitney in writing that it would not purchase the PW4000 engines. Pratt & Whitney, relying on the agreement of December 21, declared that Malev had an obligation to notify Boeing of its choice of Pratt & Whitney engines without delay, and to make its decision public.

When Malev did not accede to this demand, Pratt & Whitney brought an action against Malev in Budapest, requesting the court to hold that Malev was legally bound by a valid contract and that Malev was in breach of contract. Malev argued that the offer had been ineffective for lack of definiteness, that Pratt & Whitney's proposal had not stated an intent to be bound, and that the letter of December 21 had not been an acceptance, but, rather, a statement of an intent to be bound at a later date (pp. 63-65).

The lower court ruled in favor of Pratt & Whitney [Fovárosi Biróság 10 January 1992], holding that the parties had formed a valid contract pursuant to the CISG. Pratt & Whitney originally had relied on the laws of Connecticut, and it was Malev which argued that the CISG governed.[37] Pratt & Whitney subsequently conceded that the CISG governed.

The Hungarian lower court reasoned that the proposal of December 14 constituted an offer because it satisfied the conditions of Article 14. The court rejected the defendant's argument that the proposal violated Article 14 section 1 by failing to specify a definite price. The court found sufficient specification because Pratt & Whitney had given a price for each of the three series of engines. The court further found that Malev's letter of December 21 constituted an acceptance. The court deemed that Malev's request that its acceptance remain confidential until the parties could make a joint public announcement did not contradict the existence of a legally binding acceptance, and, more specifically, did not contradict the plaintiff's offer, according to which the buyer was to authorize the seller to have an announcement in the press appear.

Witz's approval of the lower court opinion is not without qualification, however, with respect to the court's failure to refer to Article 8 when analyzing the clause requiring the approval of the Hungarian and United States governments (p. 66).[38] Instead, the court referred to Article 23, which provides that "[a] contract is concluded at the moment when an acceptance of an offer becomes effective in accordance with the provisions of this Convention."

Witz surmises that the Hungarian judges were aware that Article 23, dealing exclusively with contract formation, was not relevant to the issue before the court, since the court later referred to the Hungarian Civil Code with respect to conditions, stating that the CISG has similar provisions (p. 66). The judges then apparently proceeded to try to interpret the condition in accordance with the CISG, pursuant to which the point of departure is that an agreement is deemed to have been concluded in accordance with the relevant provisions of the CISG when the acceptance of an offer takes effect, i.e., when the offeror receives notice of the acceptance (Art. 18(2)). Witz signals that, once again, the judges appeared to confuse issues as to the date of contract formation with issues concerning the effective date of contractual obligations, which can be subject to conditions (p. 66). Witz further notes that Article 23's irrelevance in this context was confirmed by the interpretation of the Hungarian judges relative to identifying the plaintiff's intent, i.e., that Pratt & Whitney had foreseen the need for the Hungarian government's approval, not to make the conclusion of the contract dependent thereon, but rather to avoid a possible violation of Hungarian law.

The lower court's decision was reversed by the Supreme Court of Hungary [Legfelsobb Biróság 22 September 1992]. [39] The Supreme Court held that Pratt & Whitney had not met Article 14 section 1's requirement of definiteness with respect to prices, and that the "Purchase Agreement" did not constitute an offer. The Court also made clear that it would not have deemed Malev bound even if it had found the "Purchase Agreement" to qualify as an offer, for the Court agreed with Malev's argument that the Hungarian company had never given an acceptance, but, rather, only a statement of intent to conclude a contract at a later date.

Witz criticizes the Hungarian Supreme Court for making no reference to Article 8, pursuant to which the parties' intent should have been examined (p. 67). Witz finds the Court's opinion less than straightforward inasmuch as the central issue before it was not, as the Hungarian High Court's opinion would suggest, whether the price was sufficiently definite. The real issue was the legal scope of the contract (p. 68). He notes that the radically different analytical approaches to analyzing the case on the part of the lower and high courts give one cause for reflection.[40]

A French court of appeals rendered another disappointing opinion in a case involving a buyer who tried to avoid a contract by claiming that French domestic sales law applied, rather than the CISG [Cour d'appel de Paris 22 April 1992]. [41] In that case, the contract specified a price which was to be subject to modification, depending on a rise or fall in the market. Since French national law deems contract clauses void if they leave the price up to one of the parties, the buyer argued that French law applied by way of CISG Article 4. The Paris Court of Appeals did not address directly the issue of how French national law compared to the CISG with respect to the price.

The court initially seemed to agree with the buyer, but, in its discussion of the parties' intent, concluded that the parties' agreement as to a possible price modification, due to a rise or fall in the market, did not render the price indeterminable. Witz criticizes the court for its failure to indicate whether it found that the price was determinable pursuant to French national law or to Article 14 of the CISG (p. 69).

France's highest court similarly did not address the jurisprudential issue, holding that, in the absence of an agreement as to the existence of a rise or fall in the market, the buyer had accepted to be bound to the price initially agreed upon, and in fact billed [Cour de Cassation 4 January 1995]. [42] Witz regrets the court's lost opportunity to rule once and for all that French internal law with respect to price is inapplicable to sales governed by the CISG, and that France's more stringent internal laws do not in any way vitiate the existence of a valid offer pursuant to the CISG, provided that, pursuant to Article 14, the "proposal . . . expressly or implicitly fixes or makes provision for determining the . . . price" (p. 70).

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FOOTNOTES

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34. For an English-language translation of Malev, see 13 J.L. & Com. 49 (1993).

35. The case was Fövárosi Bíróság Budapest, 24-03-1992. Unilex 1995, introduced by Alexander Vida, IPRax 193, 263-264.

Pursuant to Article 9 § 1, "[t]he parties are bound by any usages to which they have agreed and by any practices which they have established between themselves."

36. See 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).

37. The CISG had been ratified by both Hungary and the United States.

38. Article 8 provides as follows:

39. Legfelsöbb Bíróság, 25-09-1992. . .

40. In Derridaean terms, the irreconcilable perspectives of the two Hungarian courts would signal a textual point of rupture calling for an analysis capable of exposing an unexpressed dynamic. Without wanting to engage in a full-scale deconstructionist analysis here, one can see in the Hungarian Supreme Court's omission of any reference to Article 8, combined with a progression from (1) reasoning that there was no offer; to (2) reasoning as if there were an offer, but no acceptance, that the opinion becomes comprehensible as a unified text only if seen as motivated primarily by considerations other than adjudicating pursuant to the relevant sources of law. The Court's primary motive, on closer analysis, appears to be to find in favor of the Hungarian defendant, and only secondarily to establish connections of logic between the ultimate findings and the CISG. The paradoxes of the Supreme Court opinion are more salient still when viewed in juxtaposition with the disparate mode of reasoning of the lower court, and in all light of CISG Article 65, which, as Witz points out, explicitly envisages valid contracts which call for the buyer "to specify the form, measurement or other feature of the goods . . . " (p. 68). For the uses of deconstruction as a method for unearthing unarticulated messages in legal discourse, see, e.g., Vivian Grosswald Curran, Deconstruction, Structuralism, Antisemitism and the Law, 36 B.C. L. Rev. 1 (1994).

41. [Paris, 22-04-1992]

42. Cass. civ. 1st, 04-01-1995.

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