lumsa – international commercial law 7 november 2014 prof. avv. roberto pirozzi email:...

LUMSA – International Commercial Law 7 November 2014

Prof. Avv. Roberto PirozziEmail: [email protected]

LUMSA – International Commercial Law

CISG - OFFERCISG Article 14Intention to be bound, paragraph (1)In order for the proposal to conclude a contract to constitute an offer it must indicate “the intention of the offeror to be bound in case of acceptance”. Since there are no particular words which must be used to indicate such an intention, it may sometimes require a careful examination of the offer in order to determine whether such an intention existed.


CISG - OFFERCISG Article 14Intention to be bound, paragraph (1)This is particularly true if one party claims that a contract was concluded during negotiations which were carried on over an extended period of time, and no single communication was labelled by the parties as an "offer" or as an "acceptance". Whether there is the requisite intention to be bound in case of acceptance will be

established in accordance with the rules of interpretation.


CISG - OFFERCISG Article 14Intention to be bound, paragraph (1)The requirement that the offeror has manifested his intention to be bound refers to his intention to be bound to the eventual contract if there is an acceptance. It is not necessary that he intends to be bound by the offer, i.e. that he intends the offer to be irrevocable.


CISG - OFFERCISG Article 14

An offer must be sufficiently definite, paragraph (1)

Paragraph (1) states that a proposal for concluding a contract must be "sufficiently definite" in order to constitute an offer. It goes on to state that an offer is sufficiently definite if it indicates the goods, and expressly or implicitly fixes or makes provision for determining the quantity, and expressly or implicitly fixes or makes provision for determining the price.


CISG - OFFER CISG Article 14Quantity of the goods, paragraph (1)Although, according to Art. 14, the proposal for concluding a contract will be sufficiently definite to constitute an offer if it expressly or implicitly fixes or makes provision for the quantity of goods, the means by which the quantity is to be determined is left to the entire discretion of the parties. It is even possible that the formula used by the parties may permit the parties to determine the exact quantity to be delivered under the contract only during the course of performance.


CISG - OFFER CISG Article 14Quantity of the goods, paragraph (1)For example, an offer to sell to the buyer "all I have available" or an offer to buy from the seller "all my requirements" during a certain period would be sufficient to determine the quantity of goods to be delivered. Such a formula should be understood to mean the actual amount available to the seller or the actual amount required by the buyer in good faith.


CISG - OFFER CISG Article 14Article 14 provides the same rule in respect of the price that it does in respect of quantity. Thus, for the proposal to constitute an offer it must expressly or implicitly fix or make provision for the price. It is not necessary that the price could be calculated at the time of the conclusion of the contract. For example, the offer, and the resulting contract, might call for the price to be that prevailing in a given market on the date of delivery, which date might be months or even years in the future. In such a case the offer would expressly make provision for determining the price.


CISG - OFFER CISG Article 14Where the buyer sends an order for goods listed in the seller's catalogue or where he orders spare parts, he may decide to make no specification of the price at the time of placing the order. This may occur because he does not have a price list of the seller or he may not know whether the price list he has is current. Nevertheless, it may be implicit in his action of sending the order that he is offering to pay the price currently being charged by the seller for such goods. If such is the case, the buyer has implicitly made provision for the determination of the price and his order for the goods would constitute an offer.


CISG - OFFER CISG Article 15(1) An offer becomes effective when it reaches the offeree.(2) An offer, even if it is irrevocable, may be withdrawn if the withdrawal reaches the offeree before or at the same time as the offer.


CISG - OFFER CISG Article 15Article 15 provides that an offer becomes effective when it reaches the offeree. Therefore, until that moment even though the offeree may have learned of the dispatch of the offer by some means, he cannot accept it.For most purposes the rule as stated above is only of theoretical interest. However, it assumes practical importance if the offeror changes his mind after dispatch of the offer but prior to the time the offer reaches the offeree.


CISG - OFFER CISG Article 15If the offeror withdraws the offer and the withdrawal reaches the offeree before or at the same time as the offer, the offer never becomes effective. Therefore, an offer which, once it became effective, would be irrevocable under article 16(2), can nevertheless be withdrawn so long as the withdrawal reaches the offeree no later than the offer reaches him.


CISG - OFFER CISG Article 15Electronic communicationsThe term "reaches" corresponds to the point in time when an electronic communication has entered the offeree's server.An offer, even if it is irrevocable, can be withdrawn if the withdrawal enters the offeree's server before or at the same time as the offer reaches the offeree. A prerequisite for withdrawal by electronic communication is that the offeree has consented, expressly or impliedly, to receive electronic of that type, in that format and to that address.


CISG - OFFER CISG Article 15In traditional means of communication this rule enables the offeror to withdraw his offer by a faster means of communication. He may, for instance, send an offer by letter through ordinary mail (snail mail) and then later withdraw it by sending a fax that reaches the offeree before the letter.


CISG - OFFER CISG Article 15The problem in relation to electronic means of communication is that there are rarely any practical means of faster communication than electronic messages sent by e-mail or communicated over websites or other arrangements. Thus, a question of practical importance arises when the offer is sent by a traditional letter written on a paper and sent by traditional mail while the withdrawal is sent electronically.


CISG - OFFER CISG Article 15The difficulty from a conceptual point of view is that the addressee of an electronic withdrawal does not have to be physically present at the place where the message arrives. The place of the message is a functional concept rather than a physical one.


CISG - OFFER CISG Article 15The message could be located on any server in the world, including the sender's - the important question is whether the addressee can retrieve it. The following are the most important situations that are likely to be considered in relation to the term "reaches" in the context of electronic communications.


CISG - OFFER CISG Article 15Situation "A". From a pragmatic point of view it is clear that the addressee of an electronic communications withdrawal may read it as soon as it is located on his server. He may have problems reaching his server due to internal problems in his network system. This is normally within his "sphere of influence". Irrespective of how harsh it may be for the offeree that messages have arrived to his server but cannot be read by him due to internal problems, it is not appropriate to put the risk on the offeror for the offeree's technical problems. The offeree may reduce the risk by choosing appropriate internet service providers or designing an adequate technical infrastructure to make sure that the internal communication functions satisfactorily. The sender of an electronic communication ought not to assume this risk.


CISG - OFFER CISG Article 15Situation "B". It is not sufficient that a withdrawal has entered the offeree's server. The offeree's willingness to accept electronic communications must be taken into account in determining whether an electronic communication withdrawal has "reached" the offeror. The consent of the offeree may be evident CISG Art. 8, governing the interpretation of the conduct of the parties. CISG Art. 9(1) may also be relevant if the parties have established a practice in their business. CISG Art. 9(2) may apply in connections to trade usages which the parties knew or ought to have known and which in international trade are widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned.


CISG - OFFER CISG Article 15Situation "C". A related problem is when the e-mail address is not correctly stated in the message containing a withdrawal. Such messages may enter the addressee's server - but never reach the addressee personally, so that it cannot be accessed by the addressee. For such situations the risk is on the sender, since the receiver has not indicated his willingness to receive electronic messages incorrectly addressed. Sometimes an electronic communication with an incorrect address is forwarded by the postmaster to the correct address. If the forwarded communication reaches the addressee's server in time, the withdrawal is effective. The addressee has in such a situation informed the postmaster that e-mails incorrectly addressed in a certain way should be forwarded to him, and by doing so he has expressed his general willingness to receive also electronic messages incorrectly addressed.


CISG - OFFER CISG Article 15Situation "D". Another problem in relation to "reaches" is whether the offeree is able to process and understand the electronic communication. Due to incompatible computer programs, the text appearing at the offeree's computer may be incomprehensible. The situation is rather close to the problem of a message being written in a language that the offeree is unable to understand. The question at issue here is whether an electronic withdrawal that cannot be accurately processed by the offeree has "reached" the offeree when it has entered his server. The crucial issue is to what extent the offeree has indicated that he is willing to receive that type of electronic communications. It is not sufficient that the offeree has agreed to generally receive electronic communications. He must have consented to receiving electronic messages of that type, in that format, and to that address. Here again, CISG Art. 8 will be relevant for the interpretation of the conduct of parties, CISG Art. 9(1) will be relevant for any practices established between the parties, while CISG 9(2) may indicate, as a matter of trade usage, whether the offeror has impliedly or expressly agreed to receive electronic messages of a certain type.


CISG - OFFER CISG Article 16(1) Until a contract is concluded an offer may be revoked if the revocation reaches the offeree before he has dispatched an acceptance.(2) However, an offer cannot be revoked:(a) if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or(b) if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer.


CISG - OFFER CISG Article 16Article 16 CISG deal with the problem of whether an offer is binding and when it is irrevocable.Both the Convention and the PECL distinguish between the revocation of an offer and the withdrawal of an offer. In the Convention, revocation of an offer that has reached the offeree and is effective is regulated by Article 16; withdrawal of an offer that has not yet reached the offeree is regulated by Article 15(2).


CISG - OFFER CISG Article 16Under article 16(2), an offer will be irrevocable if its express terms indicate irrevocability. The offeror need not use the words, "I promise not to revoke." An assurance that "I will hold this offer open until June 15" will make the offer irrevocable until June 15. It has also been suggested that words like "this is a firm offer" unambiguously indicate irrevocability


CISG - OFFER CISG Article 16Recall that under CISG article 16(2)(b), an offer is irrevocable "if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer. Even if the words of the offer do not indicate irrevocability under paragraph (2)(a), the offeree may be able to establish irrevocability under paragraph (2)(b) if he has reasonably relied on an implied promise not to revoke.


CISG - OFFER CISG Article 16Paragraph (2)(b) looks very much like common law promissory estoppel doctrines, although it does not expressly require that the offeree's reliance must have been foreseeable to the offeror and does not expressly require that the offeree's reliance be detrimental. Despite these omissions, we can expect that many tribunals will apply paragraph (2)(b) in much the same fashion as common law courts have used promissory estoppel.


CISG - OFFER CISG Article 16If the offeree's reliance was not reasonably foreseeable to the offeror, a court applying paragraph (2)(b) could usually find that the offeree's reliance on the offer's being irrevocable was unreasonable. And courts could easily assume that "reliance" means detrimental reliance. To rely on a belief (for example, a belief that the offeror will not revoke) is to act in a way that will impair one's future well-being if the belief turns out to be false. Cases arise under paragraph (2)(b) because an offeree's belief that the offeror would not attempt to revoke has turned out to be false.


CISG - OFFER CISG Article 16The critical issue under paragraph (2)(b) is whether the offeree reasonably relies on the offer's being irrevocable. Presumably, the offeree (1) must have had a good reason for believing that the offer was irrevocable and (2) must also have acted reasonably in relying on that belief (did not engage in a foolhardy form of reliance). Both requirements will probably be met when the parties understand that the offeree might use the offer in preparing his own offer to a third person, as in cases where a supplier of goods makes an offer to a general contractor who is bidding for a construction contract or when the parties understood that the offeree would have to undertake a costly investigation in order to decide whether to accept the offer.


CISG - OFFER CISG Article 16It is not clear whether an offeree can satisfy the requirements of paragraph (2)(b) when his reliance takes the form of inaction (an omission or forbearance). The English version of paragraph (2)(b) uses the word "acted." A court might decide that an offeree has not acted in reliance if his only reliance was a failure to act. At least one commentator, however, suggests that the word "acted" means not only a positive act, but also a failure to act, for example, a demonstrable failure to solicit other offers.


CISG – OFFER AND REJECTION CISG Article 17An offer, even if it is irrevocable, is terminated when a rejection reaches the offeror.Article 17 was designed for a simple, limited purpose: the protection of the reasonable expectations of the offeror. Having received a rejection from the offeree, the offeror should be free to take his business elsewhere. Indeed, even if the offeror was originally bound by an irrevocable offer, the offer dies when the rejection is received.


CISG - ACCEPTANCE CISG Article 18(1) A statement made by or other conduct of the offeree indicating assent to an offer is an acceptance. Silence or inactivity does not in itself amount to acceptance.(2) An acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror. An acceptance is not effective if the indication of assent does not reach the offeror within the time he has fixed or, if no time is fixed, within a reasonable time, due account being taken of the circumstances of the transaction, including the rapidity of the means of communication employed by the offeror. An oral offer must be accepted immediately unless the circumstances indicate otherwise.


CISG - ACCEPTANCE CISG Article 18(3) However, if, by virtue of the offer or as a result of practices which the parties have established between themselves or of usage, the offeree may indicate assent by performing an act, such as one relating to the dispatch of the goods or payment of the price, without notice to the offeror, the acceptance is effective at the moment the act is performed, provided that the act is performed within the period of time laid down in the preceding paragraph.


CISG - ACCEPTANCE CISG Article 18According to the rule in paragraph (1), an acceptance may consist of a statement or of other conduct, e.g., shipping goods which the buyer has offered to buy. Whatever the form, for a statement or conduct to constitute an acceptance, it must provide some indication of the offeree's assent.On the other hand, since the CISG does not impose upon the offeree a general duty to reply, silence or inactivity does not - in itself - amount to acceptance. Therefore, the offeror cannot bind the offeree in advance merely by stating that silence will be treated as an indication of the offeree's assent.


CISG - ACCEPTANCE CISG Article 18Paragraph (2) of Article 18, which determines the point in time at which an acceptance (under the first paragraph) becomes effective. By virtue of the rules set forth in paragraph (2), an acceptance becomes effective upon the timely anival of the offeree's indication of assent.In other words, to be effective, the acceptance must arrive, and it must arrive 'in time'.


CISG - ACCEPTANCE CISG Article 18Receipt TheoryAn important consequence of the 'receipt theory' of acceptance, as adopted by the CISG in Article 18(2), is that the sender of the acceptance (the offeree) must bear the risk of transmission, i.e., the risk that the acceptance may never really arrive, e.g., if the acceptance is lost in the mail. In other words, absent contrary prior agreement, the offeree's notice of acceptance must in some manner actually reach the offeror, in order to bring about the legal consequences generally associated with the acceptance of a CISG offer.


CISG - ACCEPTANCE CISG Article 18Acceptance Within Time Fixed or Reasonable TimeIn accordance with the principle that the offeror is the master of the offer, the acceptance must reach the offeror within the time which the offeror has fixed. If no time has been fixed, the CISG default rule is that the acceptance must reach its destination within a 'reasonable' time, taking due account of all the circumstances. Thus, an offer sent by telefax will require a more prompt reply than an offer sent by post. Absent contrary indication, an oral offer requires an 'immediate' acceptance.


CISG - ACCEPTANCE CISG Article 18Assent By Performance of Act – Paragraph 3Sometimes, the offeror will request - or at least impliedly condone – that the offeree accept without actually making such a statement. For example, the offeror may request or condone that the offeree accept by performing an act, e.g. shipping the goods ordered by the offeror. A similar understanding may follow from a 'course of dealing' established between the particular parties concerned or from a broader usage among merchants within the particular trade.In all such cases, assuming the act is performed within the time fixed by the offeror or within a reasonable time, the offeree's acceptance becomes effective at the moment the act is actually performed.And from this it follows that the offeror cannot revoke (even an otherwise revocable offer) if the purported revocation reaches the offeree after the act requested has been performed.


CISG - ACCEPTANCE 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.


CISG - ACCEPTANCE CISG Article 19(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.


CISG - ACCEPTANCE CISG Article 19Article 19 qualifies article 18 by providing that a purported acceptance which modifies the offer is a rejection of the offer and is considered instead to be a counter-offer.PParagraph (1) of article 19 states this basic proposition, while paragraph (2) makes an exception for immaterial modifications to which the offeror does not object. Paragraph (3) lists matters which are considered material.


CISG - ACCEPTANCE Material modificationsParagraph (1) provides that a reply to an offer that adds to, limits or otherwise modifies the offer is a rejection of the offer. Paragraph (3) lists matters as to which modifications are to be considered material: price; payment; quality and quantity of the goods; place and time of delivery; settlement of disputes. However, notwithstanding paragraph (3) one decision has stated that modifications of matters listed in that paragraph are not material if the modifications are not considered material by the parties or in the light of usages.


CISG - ACCEPTANCE Immaterial modificationsOne court has stated that modifications that favour the addressee are not material and do not have to be accepted expressly by the other party(Austrian Supreme Court 1997)The following modifications have been found to be immaterial: a reply that modified an offer by stating that the price would be modified by increases as well as decreases in the market price and deferring delivery of one item; seller's standard term reserving the right to change the date of delivery; a request that buyer draft formal termination agreement; a request to treat the contract confidential until the parties make a joint public announcement; contractual requirement that buyer must reject goods delivered within stated period.


CISG - ACCEPTANCE Conflicting standard termsThe Convention does not have special rules to address the issues raised when a potential seller and buyer each uses standard contract terms prepared in advance for general and repeated use (the so-called "battle of the forms"). Several decisions conclude that the parties' performance notwithstanding partial contradiction between their standard terms established enforceable contracts.


CISG Formation of the contract - Artt. 18-19 (Acceptance)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 ). 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.


CISG Formation of the contract – Artt. 18-19 (Acceptance)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), or the offer does not expressly limit acceptance to the terms of the offer ; 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).

lumsa – international commercial law 7 november 2014 prof. avv. roberto pirozzi email:...

Documents