Prof. Dr. Eckart Brödermann and

Christoph Oertel

Brödermann Jahn Rechtsanwaltsgesellschaft mbH

Friday, 31 October 2014

The Incorporation of Standard Terms under the CISG

I. Introduction

II. The Legal Framework

1. Scope of Application of the CISG

2. Guiding Principles related to Incorporation of Standard Terms

III. Case Law on Incorporation of Standard Terms

1. Reasonable Opportunity to Take Notice of Standard Terms

2. Clarity to a Reasonable Person

3. Further Issues

IV. Conclusion

Prof. Dr. Eckart Brödermann│The Incorporation of Standard Terms under the CISG│31 October 2014│Seite 2

Table of Content

Definition of Standard Terms:

A party which wants to rely on its Standard Terms cannot impose them

unilaterally but has to make sure that these are included in the contract

which it concludes with the other party .

How is that question answered for CISG contracts?

Seite 3

Provisions which are prepared in advance for general and repeated use

by one party and which are actually used without negotiation to the other

party.

Introduction

Prof. Dr. Eckart Brödermann│The Incorporation of Standard Terms under the CISG│31 October 2014│

Overview of ContentsThe Legal Framework

Seite 4

Formation of Contract

(Art. 4 s.1 CISG)

Guiding principles

e.g. Art. 7 (good faith), Art. 9 (bilateral and

international usages), Art. 11 CISG (freedom

of form)

Offer and Acceptance (Art. 14 ff. CISG

in connection with Art. 8 CISG)

Validity:Questions of validity not

covered(Art. 4 (a) CISG)

Domestic Law:

CISG:

Prof. Dr. Eckart Brödermann│The Incorporation of Standard Terms under the CISG│31 October 2014│

Overview of ContentsBasic Texts

Seite 5

Art. 8 para 2 CISG (standard of a

reasonable person):

• „… [S]statements made by and other conduct of a party are to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances.“

Art. 14 para 1. sentence 1 CISG (qualification of

an offer)

• „A proposal for concluding a contract addressed to one or more specific persons constitutes an offer if it is sufficiently definite and indicates the intention of the offeror to be bound in case of acceptance.“

Art. 18 Para 1 sentence 1 CISG (qualification of

an acceptance)

• „A statement made by or other conduct of the offeree indicating assent to an offer is an acceptance.“

Prof. Dr. Eckart Brödermann│The Incorporation of Standard Terms under the CISG│31 October 2014│

Overview of ContentsBasic Conditions Governing the Incorporation of Standard Terms in CISG Contracts

Seite 6

Two Criteria for Establishing when a Standard Term is Incorporated in a

CISG Contract

Reasonable Opportunity to

Take NoticeClarity Incorporation

Reasonable Opportunity to Take Notice of Standard

Terms

Clarity of Standard Terms to a

Reasonable Person

Prof. Dr. Eckart Brödermann│The Incorporation of Standard Terms under the CISG│31 October 2014│

Seite 7

1.Reasonable Opportunity to Take Notice of Standard Termsa) Standard Terms Without Express Reference at the Time of Formation

b) Reference Without Attached Standard Terms

c) In Particular: Electronic Publication

2.Clarity to a Reasonable Persona) Issues of Form

b) Language of Standard Terms

3.Further Issuesa) Surprising Terms

b) Individual Negotiated Terms vs. Standard Terms

c) Interpretation against the draftsman

d) Battle of Forms

Case Law on Incorporation of Standard Terms

Prof. Dr. Eckart Brödermann│The Incorporation of Standard Terms under the CISG│31 October 2014│

Overview of ContentsBasic Texts

Seite 8

First Precondition: Reasonable Opportunity to Take Notice of Standard Terms

1

Prof. Dr. Eckart Brödermann│The Incorporation of Standard Terms under the CISG│31 October 2014│

First Situation: Standard Terms on a Later Document (Invoice etc.)

• Standard Terms printed on Invoice

No incorporation according to District Court Neubrandenburg (GER), 03.08.2005 (Pitted sour cherries case):

“Decisive […] is the reasonable possibility for the recipient to gain awareness at the time of conclusion of the contract. The subsequent reference to standard terms of business is not sufficient […].”

• Liability Disclaimer printed on a Notice at Delivery

Incorporation according to Fed. Dist. Court State of Washington (USA), 13.04.2006 (Barbara Berry case) through subsequent assent (Art. 18)

“Even if the CISG did apply, the exclusionary clause is still enforceable because the Plaintiff paid the price for the goods and opened the package where the exclusionary clause was prominently displayed on top in red.”

First Group of Cases: No Express Reference in the Offer at the Time of Formation

Seite 9

A

Prof. Dr. Eckart Brödermann│The Incorporation of Standard Terms under the CISG│31 October 2014│

Overview of Contents

Seite 10

Second Situation: Standard Terms on the Back of a Document

Mere imprint of Standard Terms on the back of contractual documents without

proof that the parties once expressly agreed upon them is not sufficient

(Appellate Court Hamm (GER), 06.12.2005 - Used motorcar parts case)

First Group of Cases: No Express Reference in the Offer at the Time of Formation

A

Prof. Dr. Eckart Brödermann│The Incorporation of Standard Terms under the CISG│31 October 2014│

Overview of Contents

Seite 11

Third Situation: Standard Terms in a Separate Document but Attached to

the Same E-Mail

If Standard Terms are contemporaneously attached to the terms of sales quote

in an e-mail, an acceptance to that e-mail includes an (indirect) acceptance to

the attached Standard Terms (Federal District Court California (USA),

21.01.2010 - Golden Valley Grape Juice case)

First Group of Cases: No Express Reference in the Offer at the Time of Formation

A

Prof. Dr. Eckart Brödermann│The Incorporation of Standard Terms under the CISG│31 October 2014│

Overview of Contents

Seite 12

First Situation: Publicly Available Standard Terms (INCOTERMS, Industry

Standard, etc.)

Basis for Incorporation: Article 9 (2) CISG• Federal District Court New York (USA), 26.04.2002: “The use of “CIF” term in the

contract demonstrates that the parties agreed to the detailed oriented INCOTERMS in

order to enhance the Convention. Thus, pursuant to CISG art. 9(2), INCOTERMS

definitions should be applied to the contract despite the lack of an explicit

INCOTERMS reference in the contract.”• Federal Appellate Court (USA), 11.06.2003 (BP Oil Int. v Empresa Estatal

Petroleos de Ecuador): “Even if the usage of Incoterms is not global, the fact that

they are well known in international trade means that they are incorporated through

article 9(2) [bilateral or international known usages].”

Second Group of Cases: Reference to Standard Terms Without their Enclosure

B

Prof. Dr. Eckart Brödermann│The Incorporation of Standard Terms under the CISG│31 October 2014│

Seite 13

Second Situation: Prior Agreements Subject to the ´Same Standard Terms

Basis for Incorporation: Article 9 (2) CISG, but precondition: Standard Terms must

have been validly incorporated in former contracts.

Not the case, when seller (only) refers orally to Standard Terms at the

conclusion of the first contract and only prints them on subsequent invoices -

District Court Hannover (GER), 21.04.2009 (Roller case);

Not the case, when seller has printed Standard Terms on the back of his

contractual documents without referring to them in the contract text. This is even

true if former contracts have been concluded between the parties in the same

manner - Higher Regional Court Düsseldorf (GER), 23.03.2011 (Loin Ribs case).

Second Group of Cases: Reference to Standard Terms Without their Enclosure

B

Prof. Dr. Eckart Brödermann│The Incorporation of Standard Terms under the CISG│31 October 2014│

Seite 14

CENTRAL QUESTION!

STRICT•Standard Terms need to be attached physically (some lower courts in Germany and in the Netherlands) Unpracticable, too strict standard

MEDIATORY

•Standard Terms must be attached or made available in another way (Federal Supreme Court (GER), 31.10.2001 – Machinery Case).

LAX•Mere reference suffices without physical attachment (Supreme Court (Austria), 06.02.1996 – Propane Case) Unfair risk allocation, since offeree must request a copy although offeror wants to incorporate them

Third Question: “Making the Terms Available” or “Mere Reference”?

How sure can you be to incorporate your standard terms?

Prof. Dr. Eckart Brödermann│The Incorporation of Standard Terms under the CISG│31 October 2014│

Overview of ContentsAn actual issue: Electronic Publication on the Internet

Seite 15

Literature asks, whether the effort to obtain knowledge of the Standard Terms published on the internet can be expected from the other party.

Diverging opinions in the literature. Criteria for incorporation:

?

Contract itself

concluded via internet

Reference in the

contractual documents

Generally accessible

over the internet at

time of contracting

Clear indication

on website, which

Standard Terms are meant by

used

Downloadable und

printable

Prof. Dr. Eckart Brödermann│The Incorporation of Standard Terms under the CISG│31 October 2014│

Seite 16

Second Precondition: Clarity of Standard Terms to a Reasonable Person

Basic Texts

2

Prof. Dr. Eckart Brödermann│The Incorporation of Standard Terms under the CISG│31 October 2014│

Overview of ContentsIssues of Form

Seite 17

Art. 11 sentence 1 CISG: Freedom of Form

Standard Terms must be legible to the naked eye and understandable to a

reasonable person.

Appellate Court Colmar (F), 24.10.2000

(Pelliculest v. Morton International):

•Standard Terms in small print and only readable with difficulty• No incorporation

Higher Regional Court Düsseldorf (GER),

21.04.2004 (Mobile car phones case):

•Print in very small text size and in pale-blue color on light-grey, thin paper• No incorporation

Higher Regional Court Saarbrücken (GER), 12.06.2008: •Offeree recognizes text as Standard Terms, but is not able to read it without difficulty• decision: Standard Terms were included as he is obliged to ask for a legible version of the Standard Terms

Prof. Dr. Eckart Brödermann│The Incorporation of Standard Terms under the CISG│31 October 2014│

Contract Language

Language of Negotiations

Language of Standard Terms

RESULT

?(+), if reference to Standard Terms is stated in language B(District Court Utrecht (NL), 21.01.2009; Supreme Court Austria, 06.11.2008)

(+)(Art. 8 II, III CISG; Supreme Court Austria, 29.11.2005)

(+)

Overview of ContentsLanguage of Standard Terms

Seite 18

Issue of “World Languages”

Seite 19

Case-law applies „World Languages“ in some individual cases, e.g.:

Supreme Court Austria, 17.12.2003, (Powdered tantulum case): Incorporation, if Standard Terms formulated in a language the addressee is familiar with or in one of the few internationally common languages, such as English, French and German [sic!]

Questions:• What is a World Language? English, French, German? Why not

Indian, Chinese, Arabic, Russian?• Even if there were world languages, is everybody supposed to

understand them? Spanish and Portuguese fishers: Do they have to understand English Standard Terms?

?Prof. Dr. Eckart Brödermann│The Incorporation of Standard Terms under the CISG│31

October 2014│

Seite 20

Further Issues

Basic Texts

3

Prof. Dr. Eckart Brödermann│The Incorporation of Standard Terms under the CISG│31 October 2014│

Overview of ContentsFurther Issues

Seite 21

Question of formation of contract (CISG

provides rules) or of validity (to be decided according to national

law)?

Individually negotiated clauses prime over

standard terms

Interpretation against draftsman „contra proferentem“• Rule recognized in

CISG jurisprudence

see Fabio’s and Burghard’s

presentation

Prof. Dr. Eckart Brödermann│The Incorporation of Standard Terms under the CISG│31 October 2014│

Prof. Dr. Eckart Brödermann and Dr. Christoph OertelRechtsanwaltBrödermann Jahn Rechtsanwaltsgesellschaft mbH

Neuer Wall 7120354 Hamburgwww.german-law.com 31 October 2014

Thank you for your attention!