Reproduced with permission from the Cornell Review of the Convention on Contracts for the International Sale of Goods (1995) 21-49

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Suppose a German buyer agrees to purchase wood from a Nigerian seller. The buyer seeks to avoid the contract, claiming that the wood did not conform to the contract and was delivered late. The seller responds with two messages sent by fax. The first declares that the seller will come to Germany and resell the wood. The second informs the buyer that the seller located a firm in the Netherlands willing to resell the wood for the seller. The buyer does not respond to either message, nor does it request a delivery of conforming wood or claim damages. The seller ultimately seeks damages from the buyer for breach of contract, claiming that the buyer should have accepted the wood. The buyer defends in part by asserting that the parties had agreed to terminate the agreement for the sale of the wood.[129] Did the parties enter an enforceable termination agreement?

Article 29(1) requires a "mere agreement" to terminate a contract.[130] Under the Convention's provisions for forming an agreement, an offer must be definite and indicate the offeror's intention to be bound upon an acceptance.[131] As previously discussed, the Convention enforces a party's subjective intention when the "other party knew" or "could not have been unaware" of that intention.[132] Otherwise, the Convention bases intention on what a "reasonable person" would believe, taking into account all of the circumstances.[133] Under these provisions, a court entertaining similar facts treated the seller's faxes as an offer to terminate even though the seller did not specifically state that it intended to terminate the wood contract and release the buyer from all claims [OLG Köln (Germany) 22 February 1994].[134]

Did the buyer accept the seller's offer? Under Article 18(1), a statement or conduct of an offeree "indicating assent to an offer" constitutes an acceptance.[135] However, "[s]ilence or inactivity does not in itself amount to acceptance."[136] The court nevertheless held that the buyer's silence, including its failure to request redelivery of the wood or claim another remedy, coupled with its earlier effort to avoid the contract, constituted an acceptance of the seller's offer of termination.[137]

In a comment on the case, Professor Schlechtriem criticized the finding that the buyer's inactivity alone constituted an acceptance of an offer to terminate.[138] Nevertheless, he found support for the court's decision in the Convention's general principles. Schlechtriem argued that although the parties did not follow the course of a typical offer and acceptance, a court should enforce a termination agreement if the parties intended to end their contract.[139]

I agree that, in light of the Convention's general principles of enforcing the parties' intentions and preserving the fruits of an exchange (here the fruits of the termination agreement), tribunals should not have to isolate a technical offer and acceptance in order to enforce an agreement.[140]

Otherwise the formalities of offer and acceptance would impede enforcing many informal deals "formed without identifiable sequence of offer and acceptance."[141] Negotiations between large international companies often do not conclude with a formal offer and acceptance. Instead, the parties form a flexible working relationship and reach more agreements as time progresses.[142] In such continuing relationships there may be less need for advance commitments to shift the risk of market fluctuations.[143] If the parties do not sign a formal contract or engage in traditional offer and acceptance activity, but rather perform as if a contract existed, courts should support the parties' intentions.

Despite acknowledging the potential of the Convention's principles to supply an alternative contract-forming route, the court was probably correct in attempting to find an offer and acceptance in the wood-sale problem. To determine these parties' intentions, a careful analysis requires determining in sequence whether a reasonable person would believe the seller intended to settle the matter by making arrangements to resell the wood (that is, did the seller make an offer to terminate?) and whether a reasonable person would believe the buyer agreed to that arrangement (did the buyer accept the offer?). In other words, assuming the parties intended to terminate, a sequence of offer and acceptance probably existed in this case. This does not mean that the court necessarily reached the correct conclusion on the facts. The seller may have intended only to minimize its loss, while preserving its right to damages.

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FOOTNOTES

* Associate Dean for Academic Affairs and Professor of Law, Cornell Law School. Thanks to Clay Gillette for reading and commenting on a draft and to Albert H. Kritzer for supplying many sources.

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129. The problem is loosely based on Judgment of Feb. 22, 1994, OLG Köln, 1994 RIW 972, 1994 EWiR 867 cmt. P. Schlechtriem.

130. CISG, supra note 1, art. 29(1).

131. Id.

132. Id. art. 14.

133. Id. art. 8(3); see supra note 67 and accompanying text.

134. Judgment of Feb. 22, 1994, OLG Köln, 1994 RIW 972, 1994 EWiR 867 cmt. P. Schlechtriem.

135. CISG, supra note 1, art. 18(1).

136. Id.

137. Judgment of Feb. 22, 1994, OLG Köln, 1994 RIW 972, 1994 EWiR 867 cmt. P. Schlechtriem.

138. See Peter Schlechtriem, Kurzkommentar, 1994 EWiR 867.

139. Id.

140. Such a conclusion does not conflict with express language of the Convention. Article 18(1) states that silence "does not in itself amount to acceptance," suggesting that the Convention recognizes nontraditional routes of contract formation when the context supports them. CISG, supra note 1, art. 18(1); see also Perillo, supra note 51, at 284 (UNIDROIT principles do not require an offer and acceptance); Rosett, supra note 3, at 292 (criticizing the Convention's apparent "retention of the abstract structural formalism of the concepts of offer and acceptance" ).

141. Rudolph B. Schlesinger, Manifestation of Assent Without Identifiable Sequence of Offer and Acceptance, II Formation of Contracts 1583-87, 1591-92 (1968). On the informality of many international transactions, see Honnold, supra note 10, at 155.

142. See, e.g., Robert A. Hillman, Court Adjustment of Long-Term Contracts: An Analysis Under Modern Contract Law, 1987 Duke L.J. 1, 4-8 (1987).

143. Restatement (Second) Contracts § 22, cmt. b (1979).

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