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CISG CASE PRESENTATION

Hungary 10 January 1992 Metropolitan Court (Pratt & Whitney v. Malev) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/920110h1.html]

Primary source(s) for case presentation: Case text; case commentaries


Case Table of Contents


Case identification

DATE OF DECISION: 19920110 (10 January 1992)

JURISDICTION: Hungary

TRIBUNAL: FB Budapest [FB = Fovárosi Biróság = Metropolitan Court]

JUDGE(S): Piskolti

CASE NUMBER/DOCKET NUMBER: 3 G 50.289/1991/32

CASE NAME: United Technologies International Inc. Pratt and Whitney Commercial Engine Business v. Magyar Légi Közlekedési Vállalat (Málev Hungarian Airlines)

CASE HISTORY: 2nd instance LB (Supreme Court) 25 September 1992 [reversing]

SELLER'S COUNTRY: United States (plaintiff)

BUYER'S COUNTRY: Hungary (defendant)

GOODS INVOLVED: Airplane engines


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 2(e) ; 3(1) ; 8 ; 14(1) ; 18(1) and 18(2) ; 19(1) ; 23 [See also: Article 55 ]

Classification of issues using UNCITRAL classification code numbers:

2E [Exclusions from Convention: ships, vessels, hovercraft, aircraft (aircraft engines distinguished from aircraft)];

3A [Scope of Convention: goods to be manufactured];

8A ; 8B ; 8C [Intent of party making statements or engaged in conduct; Interpretation based on objective standards; Interpretation in light of surrounding circumstances];

14A11 ; 14A12 [Criteria for an offer, basic criterion (intention to be bound in case of acceptance: definitiveness of key conditions: indication of goods; Determination of quantity and price];

18A1 ; 18B [Acceptance (time and manner): criteria for acceptance (statement of acceptance); Effectiveness of acceptance: time limits for acceptance];

19A [Acceptance with modifications: reply purporting to accept but containing additions or modifications];

22A [Withdrawal of acceptance: permissibility of withdrawal];

23A [Time of conclusion of contract: contract concluded when acceptance becomes effective]

Descriptors: Offers ; Acceptance of offer ; Open-price contracts ; Intent

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=43&step=Abstract>

French: Witz, Les premières applications jurisprudentielles du droit uniforme de la vente internationale (L.G.D.J., Paris: 1995), 63-66

Italian: Diritto del Commercio Internazionale (1994) 852 No. 33

CITATIONS TO TEXT OF DECISION

Original language (Hungarian): Unavailable

Translation (English): 13 Journal of Law & Commerce (1993) 49-78 [text presented below]

CITATIONS TO COMMENTS ON DECISION

English: Ferrari, International Legal Forum (4/1998) 138-255 [221 n. 749 (choice of CISG after legal proceedings started)]; Amato, 13 Journal of Law & Commerce (1993) 1-29; Curran, 15 Journal of Law and Commerce (1995) 175-199 [175-199] [English summary of comments by Witz cited below]; Petrochilos, Arbitration Conflict of Laws Rules and the CISG (1999) n.71; Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at nn.206, 316; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 2 para. 35

French: Witz, Les premières applications jurisprudentielles du droit uniforme de la vente internationale (L.G.D.J., Paris: 1995), 63-66

Hungarian: Szekely, Friss Hirek a nemzetközi kereskedelmi jog világából, No. 3/1992, 29 et seq.

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Case text (English translation)

Reproduced with permission from 13 Journal of Law and Commerce 49-78 (1993)

Metropolitan Court Budapest

Markó u. 27.
1363 Bp. P.O.B. 16.
Docket No. 3.G.50.289/1991/32

Journal of Law and Commerce Headnote

Summary of Facts

MALEV Hungarian Airlines planned to buy two jumbo jet aircraft, either from Boeing Aircraft Co. or Airbus of France. The engines for those aircraft were to be purchased separately. The Plaintiff, United Technologies International, Pratt & Whitney, filed a declaratory judgment action in the Metropolitan Court of Budapest for a determination that Pratt & Whitney and MALEV had a valid contract for the sale of the jet engines needed by MALEV.

Holding

The Metropolitan Court, applying Article 14 of the Vienna Convention on the International Sale of Goods, determined that a valid contract did exist.

Reasoning of the Court

1. Under Hungarian Law, in a lawsuit the representative of the client is not the law firm, but the attorney himself. Representation of a client may create a conflict of interest for an individual attorney without creating a conflict for his firm.

2. Where a case is being tried in a foreign court of competent jurisdiction, a United States District Court will deny a Motion to Show Cause to Compel Discovery. The parties must obtain information through the foreign jurisdiction's discovery procedures.

3. An offer may be valid even without a fixed price or number of goods, if it contains provisions for the definition of the price and quantity.

4. Under Article 14 of the CISG, a proposal for a contract addressed to one or more definite persons can be regarded as an offer if it is binding on the offeror and adequately specific.

5. Under Article 18 of the CISG, an acceptance is the statement of the addressee of the offer indicating acceptance. The acceptance of the offer comes into force as soon as the offeror receives notice of acceptance.

6. Where an acceptance of an offer is conditional upon receiving appropriate approvals of the governments of the trading corporations, such a condition will not be grounds for voiding a contract. Rather, such approvals are a precondition of the conclusion of an agreement, and the parties must be ready to fulfill their obligations as soon as such license is granted.

TRANSLATED TEXT [1]

IN THE NAME OF THE HUNGARIAN REPUBLIC

The Metropolitan Court of Budapest hereby brought and delivers the following

PARTIAL JUDGMENT

in the lawsuit initiated by United Technologies International, Pratt & Whitney Commercial Engine Business (East Hartford, Connecticut, USA), the Plaintiff, represented by Dr. László Szlávnits of Balintfy & Partners International Business Law Office, against MALEV Hungarian Airlines (Budapest), the Defendant, represented by Dr. György Obert, Legal Adviser, for a declaratory judgment on the validity of the contract between the two parties.

The Metropolitan Court established that on basis of Plaintiff's offer of December 14, 1990 and Defendant's letter of acceptance dated from December 21, 1990 as well as the ongoing negotiations from December 16 through 21, 1990 and the attached documents a contract has been concluded between the Plaintiff and the Defendant.

The present Partial Judgment may be appealed against within 15 days from its delivery.

REASONING

I.

1. Plaintiff filed a complaint against the Defendant which complaint was received by the Court on July 23, 1991 and was registered under the above docket number. Plaintiff addressed the complaint to the Economic Board of the Budapest Metropolitan Court and referred to Section 367, para. 1, subpara. (a) of the Civil Procedure Code.

Plaintiff claimed in its complaint for a declaratory judgment establishing the validity and enforceability of the contract concluded between the Plaintiff and the Defendant, that the contract is valid since December 21, 1990 in all aspects and that the Defendant committed a breach of the same contract, furthermore, that the Defendant is also obliged to fulfill its contractual obligations. Finally, Plaintiff prayed the Court to oblige the Defendant to reimburse the Plaintiff for all the documented costs and expenses incurred on account of this lawsuit.

With regard to the jurisdiction Plaintiff referred to Section 54 of Law-Decree 13 of 1979 on Private International Law ("PIL"), since according to Sections 56 through 61 of the same Decree the jurisdiction of a Hungarian court is not excluded either with respect to the person of the complaining parties or to the subject matter of the lawsuit.

2. Plaintiff delivered the following statement of facts in its complaint: Plaintiff Pratt & Whitney, airplane engine manufacturer, is a subsidiary of United Technologies Corporation. Defendant started the modernization of its fleet by purchasing two Boeing 767-200 ER widebodied aircraft from Boeing Aircraft Co. (hereinafter: "BOEING"). Both aircraft require two engines each, generally with an eventual spare engine. The Defendant concluded a contract with BOEING which entitles the Defendant to choose the engines to be installed to its aircraft. In this habitual contractual situation the purchaser airline company pays the complete purchase price of the aircraft, including the engines to the aircraft framer, in this case to BOEING, whilst BOEING pays to the manufacturer of the engine the price of the engines. In a likewise habitual way, the Defendant acquires the spare parts directly from the manufacturer of the engines. According to the Plaintiff the decision of the Defendant has an international significance extending far beyond the present lawsuit. Plaintiff attributes extreme importance to that one of the most significant airlines of the region chose its engines, since this would contribute greatly to the creation of the proper service network and to the future image and good reputation of the Plaintiff in the region.

The representatives of Plaintiff and the Defendant have carried on thorough negotiations partly in Budapest, partly in New York City which was followed by the delivery of a meticulously elaborated written proposal on 15 pages by the Plaintiff to the Defendant. Such proposal included a several million USD worth credit package as well for the benefit of the Defendant in case if the latter chose Plaintiff's PW4000 series of engines for its new fleet. This proposal containing extremely beneficial conditions of payment for the Defendant was handed over to the Defendant on December 14, 1990. Plaintiff set the deadline of the proposal in December 21, 1990. The Defendant accepted Plaintiff's proposal in its letter dated from December 21, 1990 by informing the Plaintiff that it has chosen PW4000 engines for its new wide-bodied aircraft. Defendant indicated that its decision was based on technical economical evaluation. lt also pointed out that the statement of acceptance must be interpreted in conformity with all the terms and conditions included in P&W's proposal of December 14, 1990.

On basis of the abovementioned Plaintiff occupied the legal standpoint that it has concluded a valid contract with the Defendant on basis of its proposal and the acceptance of same by the Defendant.

Defendant informed Plaintiff in its letter of March 25, 1991 that "it does not seem likely" the former would choose PW4000 engines for its new BOEING 767 aircraft. Since the Defendant expressed its opinion in the above letter and in its later correspondence that no contract had been made between itself and the Plaintiff, the latter initiated a lawsuit claiming a declaratory judgment. Due to the outstanding importance of the lawsuit and its international significance extending far beyond this lawsuit the Plaintiff requested this court to hear this case out of turn.

3. With regard to applicable substantial law the Plaintiff referred to clause (W), para. 3 on page 13 of its proposal (page 27 of the Hungarian translation of same) which expressly calls the attention to the Standard Terms and Conditions of Sale applied by the Plaintiff. According to such terms and conditions the contract is governed by the law of the State of Connecticut, USA. Since Law-Decree 13 of 1979 on Private International Law expressly allows for the contracting parties to choose the governing law, the validity of the contract concluded between the parties must be judged according to the provisions of the Uniform Commercial Code ("UCC") as adopted in State of Connecticut.

4. The court summoned the Plaintiff by its decision delivered on July 31, 1991 to remedy some defects, like to pay in the court fee; to attach an additional copy of the Exhibits attached to the complaint; and to provide the full text of the UCC together with its Hungarian translation. Plaintiff satisfied the court's request in its document dated from August 15, 1991 except for providing the Hungarian translation of the UCC, which was later dispensed with by the court, since due to the agreement of the parties concerning applicable substantial law the attachment of the UCC has become unnecessary.

The court delivered Plaintiff's complaint to the Defendant with the Exhibits by its writ dated from September 3, 1991 and summoned the Defendant to answer the complaint in the merits of the case within 8 days and to attach evidence. At the same time the court fixed the day of September 20, 1991 for a hearing.

II.

1. Defendant informed in its document called brief of defense and received on September 13, 1991 that it would put forward its standpoint regarding the applicable substantial law and its motion regarding the exploration of facts and it would provide evidence at hand in the hearing.

Otherwise, the Defendant did not contest in its document mentioned above the jurisdiction of the Hungarian court considering Section 54 of Law-Decree 13 of 1979 on Private International Law, pursuant to which "A Hungarian court or other authority can proceed in every matter in connection with which the present Law-Decree does not exclude the jurisdiction of the Hungarian court or another authority."

In its document the Defendant referred in general to Law-Decree 13 of 1979 on Private International Law with respect to the applicable procedural law. Presumably, it intended to refer to Section 63 of the Law-Decree, pursuant to which "The procedure of a Hungarian court or another authority shall be governed by the Hungarian law, if not otherwise provided by the present Law-Decree."

The Defendant did not refer to such "otherwise provision", consequently it regards Act III of 1952 as amended, that is the Hungarian Civil Procedure Code (hereinafter: HCP) as applicable. Defendant, otherwise, referred to Section 26 of the HCP in its document, according to which "the value of the subject matter of the lawsuit must be indicated by the Plaintiff as per Sections 24 and 25. . ." Pursuant to Section 24, para. (1) of the HCP "The verification of the value of the subject matter of a lawsuit shall be governed by the claim enforced by the action." The Defendant did not point out if it held the competence of the court determinable based on Section 22, 23, or 366 of the HCP. It could, however, be concluded from its standpoint concerning jurisdiction that it holds the court's jurisdiction examinable on basis of the abovementioned Sections 22 and 23. It pleaded the obligation of the Plaintiff to denominate the value of the action and to justify it.

With regard to jurisdiction the Defendant contested in its document that the court's competence would stand on basis of Section 367, para. (1), subpara. (a) of the HCP. It represented that Plaintiff being a legal entity with a foreign seat cannot be regarded as an economic organization under the Hungarian law, consequently Chapter XXV of the HCP cannot be applied in its case. This statement of the Defendant lead to the conclusion that the Defendant does not contest the jurisdiction of the Metropolitan Court of Budapest considering Section 29, para. (1) of the HCP. Defendant noted that since the jurisdiction of the Metropolitan Court stands based on other than Section 376, para. (1), subpara. (a) of the HCP, its judgment does not fall under the competence of the Economic Board of the Metropolitan Court.

With respect to the form of Plaintiff's complaint, the Defendant contested that the pleadings contained by clause 25 of Plaintiff's complaint could be claimed jointly, since one of them calls for a declaration and the other for a condemnation. It referred to the second sentence of Section 123 of the HCP pursuant to which "a declaratory judgment can only be claimed if the requested declaratory judgment is necessary for the protection of plaintiff's rights against the defendant and the plaintiff is not in the position to obtain a fulfillment due to the nature of the legal relationship or in default of the termination of the obligation or for another reason."

Defendant contested the right of representation of the assigned law firm in its document. As per its allegation there would have been an incompatibility in the person of said law firm, since the Defendant concluded a mandate agreement on June 10, 1991 with the assigned law firm, whereas the assignment of the same law firm for the case of this lawsuit is dated from July 15, 1991.

2. Defendant submitted the following counterclaims and petitions:

- Defendant requested a court fee deposit based on Section 89, para. (1) of the HCP, since according to its view the enumerated exceptions are not valid here. Based on Section 89, para. (2) of the HCP, the Defendant requested the obtainment of a statement of the Ministry of Justice regarding the lack of reciprocity.

- Defendant requested the abatement of the lawsuit based on Section 157, para. (a) of the HCP, since according to its standpoint the complaint should have been dismissed on account of prematurity pursuant to Section 130, para. (1), subpara. (f) of the HCP. Defendant also requested the establishment of the fact that a declaratory judgment may not be claimed in the present case.

- Defendant requested the examination of the right of representation of the Plaintiff partly on account of incompatibility, partly in order to ascertain if the power of attorney was issued by the competent officer of the Plaintiff.

III.

1. The court established that the competence of the Metropolitan Court is valid based on Section 23, para. (1), subpara. (a) of the HCP, and its competence is based on Section 29, para. (1) of the HCP, not Section 367, para. (1), as referred to by the Plaintiff.

Section 367, para. (1), subpara. (a) of the HCP is applicable only in the case of [Hungarian] economic organizations, whereas the Plaintiff may not be regarded as an organization enumerated under Section 685, para. (C) of the Civil Code according to Section 396 of the HCP. Nevertheless, the contents of the complaint indicated that regardless of the abovementioned the lawsuit is still one of an economic character which can be judged expediently by the Economic Board of the Metropolitan Court considering the in-house division of work of the latter. With regard to the abovementioned President of the Metropolitan Court assigned the case to the Economic Board, that is the original addressee of the complaint. In consideration of the above the court disregarded Defendant's note concerning the Economic College under II. (1), since the decision upon choosing the proper division of the Metropolitan Court in a case belonging to the competence of the county court and the Metropolitan Court falls under the exclusive competence of the President of the Metropolitan Court.

With this respect the court deemed the provisions of Part I and ll of the HCP applicable in the procedure.

2. Upon request of the Plaintiff under 1. (2), the President of the Metropolitan Court by its decision dated from August 26, 1991 ordered to hear this case out of turn.

3. With respect to Defendant's request concerning a court fee deposit the court ordered the obtainment of the statement of the Ministry of Justice with respect to reciprocity based on Section 89, para. (2) of the HCP.

4. The court did not grant Defendant's request of dismissing the action on basis of Section 157, para. (a) of the HCP. It established that Plaintiff's complaint makes it clear that the Plaintiff unambiguously submitted a case for a declaratory judgment which it was in the position to do based on Section 123 of the HCP. Plaintiff's complaint does not include a request for condemnation; what the representative of the Defendant assumed to be so belongs also to the scope of declaratory claim. Since the Defendant contested the existence of the contract before the commencement of the lawsuit, therefore, upon the existence of the conditions, the Plaintiff had the right to demand the declaration of the existence of the contract. In such cases the court's practice leaves place to the initiation of a case for declaratory judgment.

This practice was followed by the case-by-case judgments of the Supreme Court as second instance court in multiple occasions.

5. With respect to the examination of the representation rights of Plaintiff initiated by the Defendant the court decided that Defendant's standpoint concerning incompatibility is not conclusive. Balintfy & Partners International Business Law Office functions according to the provisions of Act XXIII of 1991 on Legal Profession as of July 18, 1991; its members functioning as attorneys. Plaintiff's legal representative, Dr. László Szlávnits, was admitted to the Budapest Bar under resolution # 639/1991 (Attorney's Certificate #: 1560). The court deemed Plaintiff's reference conclusive to the fact that the assignment is taken by the attorney. Section 8, para. (1) of Law-Decree 4 of 1983 as amended by Act XXIII of 1991 provides that the assignment is taken by the attorney who also agrees upon the attorney's honoraria. This leads indeed to the conclusion that in the lawsuit the representative of the client is not the law firm, but the attorney himself.

Section 9, para. (4) of the same Law-Decree provides for the so called rule of incompatibility, namely that the attorney may not take an assignment from a third person opposing his client. An incompatibility could therefore exist in the person of the attorney but not in that of the law firm in this case. With respect to this rule of incompatibility by no means can "attorney" be interpreted as "law firm."

Furthermore, the court ordered the examination if the power of attorney issued for Dr. László Szlávnits, attorney was issued by an officer of Plaintiff entitled to this purpose. Plaintiff's representative complied with the request and attached the new Power of Attorney under #16 certified by the Main Consulate of the Hungarian Republic in New York City.

6. The court summoned the representative of the Defendant in the hearing of September 20, 1991 to develop its standpoint with respect to applicable substantial law, as well as to produce the facts of the case and to produce evidence.

IV.

1. With respect to applicable substantial law, the Defendant informed in the hearing that it prepared a written statement which it submitted to be attached to the records of the hearing and a copy of which it handed over also to the representative of the Plaintiff. (Exhibit A/7/1)

The Defendant made clear in its statement that it disagreed with Plaintiff's standpoint according to which the parties would have agreed in the application of the UCC. It represented that no agreement has been made with respect to the application of the general conditions of agreement either.

According to its view the applicable law in the present case is the Vienna Convention on the International Trade of Goods which was ratified by the USA in 1986 and by Hungary in 1983 and promulgated by Law-Decree 20 of 1987. It noted that for the present case not even the exclusion under para. (e) of the Article 2 of the Convention is valid, namely that the Convention does not relate to the sale of river and sea boats, hovercraft and aircraft. The present case is about aircraft components, namely engines, not aircraft. Otherwise, it reminded to the significance of Article 14 of the Convention in the judgment of the case which article determines in what cases a proposal for an agreement can be regarded as an offer.

Defendant made its first statement in the merits of the case during the hearing in relation to Article 14 of the Convention according to which Plaintiff's letter (presumably Plaintiff's letter of December 14, 1990) was of a general informative character, not an offer, whilst Plaintiff's letter of December 21, 1990 was only a letter of intent and did not bring about the contract. Beyond these abovementioned statements which can be regarded as in the merits, the Defendant did not file a counter-claim and it informed that it reserved the right to itself to recover. It adverted to the fact that the action and the press surrounding it influence its reputation to a great extent. All this made the court to conclude that the Defendant's representative prays for the dismissal of the case on the merits.

2. In the hearing of September 20, 1991 the Defendant's representative informed that in order to ease the procedure it initiated a discovery procedure by way of its American attorney in order to obtain evidence. It attached a document dated from September 16, 1991 and handed over a copy therefrom to Plaintiff's representative together with the Hungarian translation of same (Exhibit A/7/2), whereby the District Court of Connecticut (Hartford), USA issued the "Order to Show Cause" based on the Defendant's petition.

The proceeding judge questioned the Defendant's representative during the hearing about the amount of time necessary to complete the discovery procedure already started by the Defendant. Defendant's representative informed that he can attach the documents with the Hungarian translation of same within three weeks.

Since the Defendant did not produce its statement of facts up to that hearing either, neither did it produce evidence and indicated that it initiated the discovery procedure for the purpose of obtaining evidence, the proceeding judge approved the completion of the already started procedure and to the attachment of the documents thereof.

3. The Plaintiff's representative qualified the discovery procedure unnecessary in his statement and objected to the court approving this announcement from the Defendant's part. He also represented that some 150 pages of the material of the procedure was delivered to him the day before at 16:30 pm which he did not have the opportunity to study so far.

4. Plaintiff's representative put in a Motion on Irregularity of Procedure on September 23, 1991 based on Section 114 of the HCP. According to his view the court committed an irregularity of procedure when it decided to allow for the Defendant to conduct the discovery procedure before hearing Plaintiff's statement with this regard. He pointed out that Defendant's purpose with such procedure was solely the protraction of the legal procedure, therefore he requested the court to oblige the Defendant to reimburse the Plaintiff for its costs incurred on account of the discovery procedure.

The court overruled Plaintiff's motion by its decision dated from September 23, 1991. The court determined that Plaintiff's representative's argument was based on a mistaken presumption and he misrepresented the position of the court. It pointed out that according to Section 164, para. (1) of the HCP the facts required for the adjudgment of a case must be proven usually by the party interested in their acceptance by the Court as true. Up to this phase of the procedure the Defendant's defense did not contain any representation as to the facts of the case; it only indicated that the Defendant intended to put in a motion in the hearing aiming the exploration of facts. Accordingly, the Court directed Defendant's representative to provide the facts of the case and to produce evidence in the hearing. In spite of the court's direction, Defendant's representative offered no evidence at all, but rather stated that it had commenced a discovery procedure through its American counsel which has the objective of exploration of the facts and to collect evidence.

The court explained in its decision that Defendant's representative did not request the court to order preliminary evidence pursuant to Section 207 of the HCP, but rather disclosed that it had commenced a discovery procedure which is already in progress. The means used to obtain disclosure and marshal evidence by the party seeking evidence is exclusively up to that party. The conduction of such a procedure also in this case is for the party seeking evidence to decide; the court only acknowledged Defendant's declaration in this respect all the more so since Defendant's counsel undertook to provide its documentary proofs in full within three weeks with their Hungarian translation. On basis of such undertaking, the court ordered the submission of the abovementioned documents. For the court did not see the probability of the danger that the Defendant undertaking to submit proofs within a specific deadline would protract the proceedings by supplementing its defense. Otherwise, the fact that the discovery procedure was already in progress at the time of the hearing, that is on September 20, 1991, was also confirmed by Plaintiff's counsel when he declared that he had already received the day before the hearing the first 150 pages of the discovery procedure.

The court finally pointed out that the Defendant's counsel made no preliminary evidence motion with respect to evidence at the hearing, but rather declared the means by which it desired to present its motion and to put its evidences together. Accordingly, the court was not in a position to rule on the motion; it only acknowledged without a formal decision the declaration of Defendant's representative.

The court indicated in the reasoning of its overruling decision on Plaintiff's challenging the irregularity of procedure that it would estimate the evidence to be provided by the Defendant on basis of the rule of estimation indited under Section 206, para. (1) of the HCP and that it would consider all the above upon its directions relating to the reimbursement of costs.

5. Plaintiff represented in its document received on October 8, 1991 that the competent American court ruled on the motion for discovery on September 30, 1991 and refused Defendant's request by finding it premature and unnecessary. The Plaintiff attached to its court document a Hungarian translation for the decision of the District Court of Connecticut brought on September 30, 1991. The decision establishes that after hearing argument on the matter and a review of the relevant case law the court found Defendant's request premature and unnecessary. The court established citing the reasoning of the decision refusing Plaintiff's challenging the irregularity of procedure that "the court has no reason to doubt that MALEV can obtain the relevant information it seeks through the Hungarian procedures. This court's involvement would unnecessarily complicate the case and bring with it significant reciprocal discovery problems. Absent a request from the Hungarian court to become involved in the oversight of discovery, MALEV's request is DENIED. SO ORDERED."

6. Defendant's representative made a declaration similar to that of the Plaintiff's in his document received on October 14, 1991 with regard to the discovery procedure stating that their attorney filed an appeal against the denial with the US Court of Appeal for the Second Circuit.

Defendant's representative attached its petition relating to the discovery procedure with the Exhibits as well as other statements of its representative and the decision of the court.

V.

1. In the next hearing held on December 6, 1991 the court advised the parties within its activity conducting the procedure that it still does not desire to order preliminary evidence and to address a letter rogatory to the competent [US] court to conduct discovery. Since the three weeks granted for the possibility to attach the complete material of the discovery procedure by the order delivered on September 20, 1991 have elapsed, this court regards it irrelevant to the present lawsuit if the Defendant has appealed against the denial and in the positive what will be the result of such appeal.

2. The court established on this same hearing that with Plaintiff's preparatory document No. I. received on November 1, 1991 the first preparatory phase of the procedure has ended. According to Plaintiff's representation Plaintiff agrees to the adjudgment of the validity of the contract subject of this case on basis of provisions of the Vienna Convention on the International Trade of Goods promulgated by Law-Decree 20 of 1987.

3. In the hearing the proceeding judge called the parties' attention to the possibility of a short litigation agreement; therefore he ordered a recess upon request of the parties. However, the parties announced later in the hearing that no such agreement has been reached.

4. In the hearing of December 6, 1991 the court did not decide on the request of Defendant concerning court fee deposit, or the petition of Plaintiff to be reimbursed for the costs incurred on account of the discovery procedure. The reason for this was that the parties did not indicate the exact amount claimed so far. In connection with the court fee deposit the ruling of the Ministry of Justice was received, according to which there is no such international treaty between the United States of America and the Republic of Hungary under which the nationals or legal entities of these countries would be exempt from the delivery of a court fee deposit.

In the hearing the Defendant claimed a HUF 5 million court fee deposit. Plaintiff held this claim exaggerated representing that he considered a HUF 300,000 court fee deposit justified at the most. The HUF 5 million court fee deposit is all the more exaggerated, since the Defendant employed the external and foreign expert referred to by itself in connection with the unnecessary [US] discovery procedure. Therefore the Plaintiff did not wish to bear such costs. On the other hand, the Plaintiff could not indicate its own costs emerged in connection with the discovery procedure, since the Defendant continued such procedure in the second circuit.

5. The court decided in the hearing on the following motions:

(a) The court denied

- that motion of the Defendant the purpose of which was to oblige the Plaintiff to submit the documents relating to the price of PW4000 engine, the contract concluded with ANA Japanese Airlines, and the translation of the contract concluded with Indian Airlines;

- the concordant motion of the Plaintiff and the Defendant aiming that the court order the attachment of the contract concluded between MALEV and BOEING;

- that motion of the Defendant which requested the court to examine the circumstances of the letter signed by Defendant's General Manager on December 21, 1991, since the duty of the court is to interpret the text of the letter, and it is not decisive for the lawsuit what were the circumstances of its signature or its coming into being;

- that motion of the Plaintiff which requested the court to hear Mr. Hajek, Marketing Manager of the Plaintiff about the relevant circumstances emerging during the negotiations;

- that motion of the Defendant which requested the court to take a statement from the Plaintiff about its purpose with the present declaratory action and what would be its second step after this action is over. For according to the court it is beyond the scope of the present procedure to examine what Plaintiff's intentions were with the action and what are its purposes with it once it is over.

(b) The court granted

Plaintiff's and Defendant's motion suggesting the court to take evidence concerning the negotiations going on between the parties from December 16 through 21, 1990. Within this scope the court ordered the Plaintiff by its decree delivered in the hearing to attach within 15 days all the minutes, records, notes, memos and similar documents together with the Hungarian translation of same, and also obliged the Defendant to make a statement within 5 days after Plaintiff submitted and directly delivered to it the above documents if this material covers completely the negotiations between December 16 and 21 or does it have any further documents, in which case it should provide them together with their Hungarian translation.

VI.

The Defendant expressed its standpoint concerning the case in its statements in the merits on November 12, December 6, 1991 and on January 9, 1992, whilst Plaintiff did the same in its complaint, then on December 3, 1991, January 6, and on January 9, 1992.

1. The Defendant contested in its statements that the parties' representations would have indicated the goods themselves. Defendant made reference to that there were negotiations going on in this matter between representatives of the Plaintiff and the Defendant from October through December 1990. During this period it received from the Plaintiff four different documents, one deleting the other. It represented that between December 14 and 21, 1990 it received not only the document attached by the Plaintiff to the complaint under Exhibit 2, but it received information data on the PW4152 or PW4156/A engine as well. At the same time, the representative of Plaintiff amended the proposal (Exhibit 2 of the complaint) of December 14, 1990 relating to the PW4056 engine during the negotiations of December 21, 1990. In order to decide if the proposal of Plaintiff's letter can be regarded as an offer and if Defendant's letter of December 21 can be regarded as an acceptance, it should be clarified what types of engines and what series the letters were referring to. This is important because the enumerated PW4056, PW4060, PW4152 and PW4156/A engines differ from each other from several respects. According to Defendant's view the goods could not be indicated because it did not chose the type of aircraft yet in the period between October and December of 1990, whilst the type of engine could be decided upon only afterwards. The type of aircraft was decided upon only on December 29, 1990. Defendant represented that it received technical data from the Plaintiff mainly after December 21, 1990 and there were negotiations going on relating to several technical questions. According to Defendant all this would prove that the merchandise was not properly defined. It represented that Defendant's letter of December 21, 1990 indicates not more than the series of engines, which is adequate neither from the legal, nor from the technical or financial point of view for the parties to comply with their obligations.

2. Defendant contested in its statements that the parties' statements would have indicated the quantity of the goods. With respect to the letter of December 14, 1990 it referred to the fact that the first subpara. of para. Y of the same letter deals with three aircraft, its second subpara. deals with two aircraft, whilst its third subpara. deals with a separate option agreement to be made with the aircraft framer. According to Defendant, therefore, Plaintiff's letter does not even roughly indicate the quantity of engines, which can be 4 or 6 engines or even more if we count the spare engines.

3. Defendant's statement contested that the parties would have indicated the price. According to Defendant the correspondence of the parties does not show the price of the engines.

4. Plaintiff pointed out in its statements that its proposal of December 14, 1990 adequately defined and described the subject of the agreement, the goods. It did not contest that it had amended its proposals before December 14, 1990 on several occasions and represented that the newer proposal always deleted the former one, however, the reason for this was that it had been carrying on negotiations with the Defendant and it adjusted to Defendant's needs. It indeed proposed the enumerated engines, among which PW4152 or PW4156/A engines can be used for Airbus, whilst PW4056 and PW4060 engines can be used for BOEING wide-bodied aircraft. Since at this time Defendant has not decided yet upon the type of aircraft it would purchase, it was only natural that Plaintiff's proposal related to the PW4000 series, among which Defendant could choose any type of engine depending on the aircraft it would purchase. Plaintiff's amendments affected in fact the commercial and financial terms, not the types of the engines. Plaintiff pointed out that the expression "indication of the price" does not mean that the goods should be defined to the minutest details. Plaintiff's proposal was unambiguous in that it relates to PW4152 or PW4156/A and PW4056 engines belonging to the PW4000 series. The amendment of the proposal of December 14 on December 21 by Mr. Hajek with respect to the definition of the merchandise meant only that Plaintiff extended its proposal to the PW4060 engine as well.

5. Plaintiff pointed out in its representations that according to him the quantity of the goods was also adequately defined in the offer. In the period preceding the offer Defendant has not decided yet if it would choose Airbus or BOEING aircraft, which fact was made clear by it to the Plaintiff, and therefor did Plaintiff make a proposal to the Defendant on December 14, 1990 in which it left the choice open for the Defendant. It was obvious from the proposal that any of the aircrafts Defendant chose, it would buy two aircrafts and it would have right of option for the purchase of an additional aircraft. Accordingly, the proposal treated four engines and one spare engine, a total of five engines, whilst if Defendant were to buy further aircraft based on its right of option, then six engines and one spare engine, a total of seven engines would be needed according to Plaintiff's offer.

6. As to the definition of prices

Plaintiff reminded as early as the hearing of September 20, 1991 to Exhibit 2/A of the complaint, that is para. W. of Plaintiff's offer of December 14, 1990, which fixed the price of the spare engine unambiguously and separately in $5,877,675. From the aspect of the value of the amount in dispute, therefore, this amount must be multiplied by five, since we are talking about five engines at the least. In addition to the above, Plaintiff's offer described in detail the credit facilities which Defendant would be granted in case it were to purchase the engines. Mr. Hajek amended the offer on December 21, 1990 exclusively in respect of the guarantee plan of engine maintenance costs by decreasing the originally proposed $106,00 multiplicator of the cost base to $102,00. The next amendment of the price effected on December 20, 1990 was also made for the benefit of the Defendant, whereby the amount of credit granted in clause B (Introduction Support Credit) and clause C (Fleet Expansion Credit) was increased by $1 million (Annex F/ 10).

VII.

Based on the parties' representations, the documentary evidence and attached proofs the Metropolitan court established the following:

1. The offer

Defendant delivered an offer to its General Manager on December 14, 1990 the subject of which offer was the Revised PW4056 Engine Support Proposal. As the reference shows, this partly amended the offer of November 9, 1990 with the same subject, and partly included the Guarantee Plan attachment of the PW4000 series engines. The offer clearly refers to those negotiations carried out earlier, with reference to which the Plaintiff "is pleased to submit this revised Proposal in Support of MALEV Hungarian Airlines' acquisition of two firm ordered and one option 767-200ER aircraft, powered by Pratt & Whitney PW4056 engines, as well as one new firm ordered and one new option PW4056 spare engines, all scheduled for delivery as shown in Attachment I." The introduction of the offer gives the particulars of the technical and other advantages of said engines, including the most prominent technical characteristic of the PW4000 engine, the Full Authority Digital Electronic Control (FADEC) reminding to the fact that the PW4000 series are the only engines that FADEC is used for every wide bodied aircraft. In order to encourage the customer to choose the PW4056 engine, the offerer guaranteed different financial support, engine warranties, product maintenance and service facilities. It attached engine warranties under Annex B. Within the framework of the chapter containing introduction support credit the Plaintiff offered to credit the customer's balance with $3,100,000 after each of the 767200ER aircraft described in the offer, a total of $6,200,000 in order to facilitate for the customer to introduce said aircraft equipped with PW4056 engines. In order to facilitate for the customer to expand its 767-200ER fleet with the 767-200 ER aircraft described in the offer and equipped with the optional PW4056, the offeror credits the customer's balance with the amount of $8,500,000. As a spare engine credit, the offeror offered to credit the full price of the first new PW4056 spare engine in the value of $6,300,000. In addition to the above, the offer includes Spare Engine QEC Credit, Maintenance Facility Credit, Al Line Stations Spare Parts Credit, and Engine Condition Monitoring Kit Credit Facilities. With regard to this latter it emphasizes that the customer's balance would be credited with $75,000 "for each of the four PW4056 engines and one spare PW4056 engine of the proposal." Para. W of the offer states that the basic price of the new PW4056 spare engine is $5,847,675.

Para. Y of the offer entitled "Purchase Agreements" states that the customer buys and the seller sells two new PW4056 engines according to the attached schedule to be mounted to the 767-200ER aircraft and two additional new PW40S6 engines in case if the option granted for an additional 767-200ER aircraft is exercised. According to para. 4 of the sales agreement the buyer thereby places a firm and unconditional order with the offerer for one new PW4056 spare engine which will be delivered also according to the schedule attached. Pursuant to para. 5 of the sales agreement the buyer agrees that the accepted offer constitutes a valid, binding and legally enforceable agreement for the purchase and sale of the new PW4056 engines and spare engines described therein. The seller pointed out that it fixes the deadline for buyer's statement of acceptance until December 21, 1990. It proposed that if buyer had any questions with regard to the offer, its experts would personally be at disposal. Finally, the offer stated that the effect of buyer's statement of acceptance is subject to the approval of the governments of Hungary and the USA, respectively.

In the document attached under Exhibit 2.D. according to the record dated from December 21, 1990 the Plaintiff extended the former offer to the PW4060 engine by the following words: "5.(a) Conditions of the present proposal shall also be applied if MALEV chooses to purchase PW4060 engine."

2. The extension of the offer

According to the proof of the documents attached under Exhibit 2.E-J, Plaintiff proposed to Defendant also on December 14, 1990 to deliver PW4152 and PW4156/A engines as well. This was the supporting proposal relating to the abovementioned engines dated from November 9, 1990. Plaintiff here also refers to the result of the former negotiations fixing the purpose of supporting the Defendant in purchasing the two firmly ordered and one optional A310-300 aircraft equipped with PW4152 or PW4156/A engine and one new firmly ordered and one new optional PW4152 or PW4156/A spare engine according to the schedule attached. The text and conditions of the offer conform with the offer detailed above under para. 1 with the exception that para. W entitled "the Price of the spare engine" states that the unit basic price established for the new PW4152 is $5,552,675, whilst the unit base price of each firmly ordered new PW4156/A spare engine is $5,847,675. In the conditions of sale the Plaintiff pointed out that the deadline of validity of this offer will be also December 21, 1990 for the buyer.

This offer was completed with the letter dated from December 20, 1990 which explains with reference of the above offer that in case if Defendant chose Airbus A310-300 aircraft for the expansion of its wide-bodied fleet, Plaintiff, the deliverer would increase the initial fleet expansion credit facilities by the amount of $1 million for each aircraft.

Exhibits 2.F-J. are the annexes of the abovementioned offer relating to the PW4152 and PW5156/A engines about Service Policy, the Summary of Service Policy Support, description of the engines, reliability of the engines, the Price Escalation Formula, and the Standard Conditions and Terms of Sale, referring each time to the PW4000 engine series.

Under Exhibit 13 the Plaintiff attached the technical charts and diagrams providing detailed technical data of the PW4000 series.

Under Exhibit 2.B Plaintiff attached the offer relating to the PW4000 series turbofan engines addressed to the Defendant about Plaintiff's Service Policy together with the Annex containing the Guarantee Plan addressed to the Defendant on December 14, 1990.

3. With respect to the two offers and the extension and completion of same detailed under paras. 1 and 2 above the court established that they conform with relevant provisions of the applicable law designated jointly by the parties. According to Article 14, para. 1 of the Vienna Convention on the International Trade of Goods promulgated by Law Decree 20 of 1987 and repeatedly referred to by both parties, a proposal for a contract addressed to one or more definite person can be regarded as an offer if it is adequately specified and it indicates the offerer's intention to bind itself by it in case of its acceptance. According to the above-cited provision the proposal is adequately defined if it indicates the goods and fixes the quantity and the price expressly or according to the sense, or contains provisions for the definition of same.

According to the court's opinion in the present case it is obvious that the addressee of Plaintiff's proposal is the Defendant. Therefore, the court had to examine during the process of evidence if the proposals detailed above can be regarded adequately defined, that is if they indicate the goods, that is the subject of sale, or not. According to the court's view this is beyond doubt either, since one of the offers and its extension (Exhibit 2.A and 2.D) unambiguously indicate the PW4056 and PW4060 engine, while the other offer, or rather its extension (Exhibits 2.E-2.J) unambiguously indicates the PW4152 and PW4156/A engines. Each of these belongs to the PW4000 series. According to the court's opinion, therefore, the proposal leaves no doubt about its subject, that is it indicates unambiguously the goods subject of this sale. The proper indication of the goods is not affected by the condition that according to the proposal the buyer could choose from among the enumerated engines depending on the fact if it were to choose BOEING 767-200ER aircraft which would require PW4056 or PW4060 engine, or Airbus A310-300, both being wide-bodied aircraft, which would require PW4152 or PW4156/A engine. According to the court the proposal allowed unilateral power to the buyer in respect of its choice of engines depending on its decision on the type of aircraft. The 'unilateral power' is not unusual in legal and commercial practice; it is a rather frequently applied method which affects seller's position considerably and means a significant favor to the buyer. The court, therefore, did not hold conclusive those repeated allegations of the Defendant according to which the provision of Article 14, para. (1) of the Convention relating to the indication of the price had not been fulfilled, consequently the proposal could not be regarded as an offer. The proposals attached and described in detail above together with the correspondence of the parties attached by the Plaintiff under Exhibit 12 unambiguously prove that there was no doubt in the parties as regards the goods being the subject matter of their negotiations.

Defendant's allegation is likewise not conclusive as regards its statement that Plaintiff's proposals could not be regarded as an offer because they do not establish the quantity. This argumentation of the Defendant is all the more unacceptable, since the Plaintiff ensured unilateral power to the buyer also with respect to the quantity, obviously as an expression of the above detailed interests.

Defendant was able to define the quantity on basis of Plaintiff's proposal depending on how many aircraft it would purchase. Depending on the number of aircraft purchased, it could not be doubted that two engines must be considered for each aircraft besides the firmly defined pieces of spare engines for each aircraft. In this respect the court found Plaintiff's reasoning set forth in its preparatory document No. 2 (para. 27) fully founded stating that it is perfectly unambiguous that the Defendant intended to purchase two aircrafts regardless if it were BOEING or Airbus, while it had right of option for an additional aircraft. If the Defendant does not use its right of option, the quantity to which Plaintiff's offer relates is four engines and one spare engine, a total of five engines, whilst if it does, the quantity in question is six engines and one spare engine.

In the court's opinion that allegation of the Defendant is also unfounded according to which Plaintiff's proposal could not be regarded as an offer because it does not indicate the price. This allegation of the Defendant is biased and false. According to documentary evidence the price of the PW4056 engine is $5,847,675 and the price of the PW4152 and PW4156/A engine is $5,552,675 as the above enumerated offers and their completions detailed under paras. 1 and 2 unambiguously indicate. These proposals were so much definite that they even included different credit facilities as well, also they defined those rates for the services by the help of which the counter value of the services can be calculated.

In addition to the abovementioned, Plaintiff's proposals included in every aspect the deadlines for delivery as well, thus these could not be uncertain either before the Defendant.

Considering the abovementioned the court established that Plaintiff's proposal addressed to the Defendant on December 14, 1990 qualifies as an offer beyond doubt since it is adequately defined due to the fact that, besides ensuring unilateral power, it unambiguously indicated the price, as well as the quantity of the goods and also established the price according to the sense and the deadlines as well. Hence, according to the court's opinion Plaintiff's proposal satisfied every requirement of the provisions of Article 14, para. (1) of the cited Convention.

4. The acceptance.

Defendant addressed a letter of acceptance to the Plaintiff on December 21, 1990 within the deadline determined in Plaintiff's offer (Exhibit 3.A). In the letter of acceptance Defendant informed the Plaintiff that it had chosen the PW4000 engine for its new fleet of wide-boded [sic] aircraft. It even explained the reasons for its decision, namely that such decision had been based on technical and economical evaluation. The letter of acceptance even gives details of the technical and economical advantages pointing out that the credit facilities granted by the Plaintiff for the introduction of PW4000 engine were essential in bringing such decision.

The letter unambiguously stated that it was based in every respect on the terms and conditions included in the proposal for PW engines dated from December 14, 1990. Defendant added only that it requests to treat the letter confidentially until the parties make a joint public announcement. Such a request does not mean a difference of opinion with respect to para. Y.6 of Plaintiff's offer whereby the Defendant agrees for the Plaintiff to publish a press release announcing Defendant's choice of engine.

In order to judge if Defendant's letter can be regarded as an acceptance, Article 18 of the Vienna Convention had to be examined. According to para. 1 of Article 18 an acceptance is the statement of the addressee of the offer aiming acceptance or its attitude indicating acceptance. It is beyond doubt that the above cited statement of the Defendant is totally unambiguous with respect to the acceptance. When judging the request at the end of Defendant's letter of acceptance the court originated its evaluation from the provision of para. 1 of Article 19 of the Convention which says that if the answer to an offer indicating acceptance contains amendments, restrictions, or other changes, it means the refusal of the offer and is to be regarded as a new offer. According to the court's opinion neither of the cases enumerated relate to the present case, since Defendant's simple request cannot be considered as an amendment, restriction, or other change, moreover it expresses Defendant's intention to participate in the communication of the press release claimed by the Plaintiff under para. Y.6 and prepares for a joint public announcement. Hence, if this cannot be regarded as the amendment, restriction, or changes referred to by Article 19, para. 1, then Defendant's answer means clearly acceptance which was competent to bring about the contract with the contents of Plaintiff's offer of December 14, 1990.

With regard to the abovementioned the court described totally unfounded Defendant's argumentation claiming that its statement of December 21, 1990 could only be considered as a letter of intent.

5. During the procedure neither of the parties commented in the merits on that condition of Plaintiff's offer following the provision determining the deadline of the offer, according to which "MALEV's acceptance of this proposal is conditional upon the appropriate approvals of the governments of Hungary and the United States", or rather they regarded it as a suspensive condition under Hungarian law, and they presented their respective argumentation accordingly.

In this respect both parties' argumentation is misconstructed. In judging the question, here also, the court had to examine the provisions of the Vienna Convention which the parties unanimously designated as applicable substantial law. Pursuant to Article 23 of the Convention a contract becomes valid when, under the terms of the Convention, the acceptance of the offer comes into force. According to para. 2 of Article 18 the acceptance of an offer comes into force as soon as the offeror received the notification of acceptance.

In the court's estimation these provisions clearly lead to the conclusion that the present contract became valid between the parties when Plaintiff received Defendant's letter of acceptance, or to put it in another way, when Plaintiff received Defendant's letter of acceptance to its detailed offer accepting all the aspects of said offer, a contract was concluded between the parties.

The court notes here, that none of the parties contested during the procedure that Plaintiff's offer of December 14, 1990 was received by the Defendant on the same day and that Defendant's letter of acceptance dated from December 21, 1990 was also received by the Plaintiff on the same day. This fact seemed quite realistic under the circumstances that the parties both claimed to have carried on direct negotiations in person, not to mention the highly developed communicational facilities that can be applied nowadays. Besides what has been mentioned above, neither has the acceptance been withdrawn in conformity with Article 22 of the Convention, therefore, Defendant's written statements dated from several months later could not be estimated as such a withdrawal. These statements of the Defendant could be estimated by the court at the best as initiatives to terminate the contract.

With regard to the type of contract the provisions of Article 3, para. (1) of the Convention were to be taken into consideration. In pursuance of such provisions the contracts relating to the future manufacturing or production of goods qualify as sales contract. Exceptions listed by the provision and para. 2, like the prevalence of entrepreneurial elements, were out of the question, consequently in terms of the Convention this sale corresponds to the sales contract under Hungarian law.

Returning to the "condition" and evaluating its legal nature the court started from the following.

Several provisions of the Hungarian Civil Law contains rules relating to the conditions of concluding an agreement, among them the institution of official approval. According to Section 215, para. (1) of the Hungarian Civil Code if the conclusion of an agreement necessitates the approval of a third person, or official approval, the contract does not come into force until the obtainment of such approval, however, the parties are bound by their statements. Pursuant to Section 228, para. (1) of the Civil Code if the parties made the coming into force of the agreement dependent on an uncertain future event (suspensive or delaying condition), the agreement comes into force by the fulfillment of such condition. According to para. (2), if the parties made the termination of the force of the agreement dependent on an uncertain future event (condition of termination), the fulfillment of the condition will bring about the cessation of the force of the agreement. The Convention does not know such conditions, does not enumerate such conditions, thus the conclusion of the agreement cannot be connected with such conditions. Accordingly, the agreement in question has been concluded in compliance with the abovementioned and it is a sales agreement.

On the other hand, the Convention does not restrict in general the parties' right of disposition, neither did it restrict it in this respect, therefore Plaintiff could rightfully apply in its offer the above cited condition: "MALEV's acceptance of this proposal is conditional upon the appropriate approvals of the governments of Hungary and the United States." The interpretation of the condition, however, must originate from the fact that an agreement is considered concluded according to relevant provisions of the Convention when the acceptance of the offer comes into force, however, the acceptance of the offer comes into force when the notification of acceptance is received by the offerer. The parties could not ignore these cogent rules of the provisions in spite of the fact that they were otherwise free to set the terms and conditions of the contract.

It became well evident during the evidence that Plaintiff's intentions were aimed at introducing the condition excluding the eventual termination of the contract and not that of preventing the conclusion of the same. This is confirmed by the fact that the Plaintiff was expecting decisions of the Defendant promoting the fulfillment of the agreement (e.g. decision on the choice of aircraft, and accordingly the supply of specifications).

According to the correct interpretation the Plaintiff did not make the force of Defendant's letter of acceptance depend on the above-cited condition, as it was not in the position to do so under the imperative provisions detailed above, but the fulfillment of the contract from Plaintiff's part.

Plaintiff, who did not have yet the necessary information on the Hungarian economic administration in transformation and the changing rules of economy back at the end of 1990, obviously did not stipulate "the necessary approval" of the Hungarian Government to make the conclusion of the agreement depend on it, but rather in order to avoid the possible infringement of any Hungarian provision of law or governmental measure. This is also confirmed by the stipulation that, evidently aiming to reinforce its position in the international market, Plaintiff requested Defendant's consent to the immediate public announcement of the agreement.

In course of the procedure it turned out that Defendant's firm is an independent company owned by the State which makes its decisions independently and such decisions do not depend on the approval of its founding authorities. Although the Ministry of Transportation, Communication and Construction made a statement in connection with this case, such statement indicated the lack of interference in the decision and developed a legal standpoint only with regard to the conclusion of the agreement. Even more obvious than the abovementioned is the fact that Plaintiff meant by the necessary approval of the Government of the USA only the issuance of the export license which on the other hand is a precondition of the conclusion of the agreement and also that the parties be ready to fulfill their obligations as soon as such license is granted.

In summary of the above, therefore, it could be established that the parties agreed in the terminating condition and not in the suspensive or delaying condition according to the terminology of the Hungarian Civil Code as regards the initiative in Plaintiff's offer. Taking into consideration all the above the court established that a valid agreement has been made between the parties.

VIII.

1. During the evidence the court did not honor Defendant's motion to oblige the Plaintiff attach the document on the price of PW4000 engine, for the court established that Defendant's defense is groundless in claiming that no contract has been concluded between the parties as the proposal did not include the definition of prices. According to the abovementioned reasons the price of the proposed engines was beyond question, therefore, the court deemed it unnecessary to conduct evidence in this matter.

The court also denied Defendant's motion to oblige the Plaintiff to attach the translations of its contracts concluded with ANA Japanese Airlines and Indian Airlines. The court estimated the review of these contracts irrelevant from the point of view of the present case.

Likewise, the court refused Defendant's motion to conduct evidence with respect to the circumstances under which the letter of December 21, 1990 signed by Defendant's General Manager and CEO came into existence. The court deemed such evidence unnecessary and held the interpretation of the letter its own duty, which it did according to the aforementioned. In possession of a definite, written statement the court held the accompanying circumstances of the signature irrelevant.

The court found that motion of Defendant unprecedented in its practice and also irrelevant with respect to the present case which aimed at the court's taking a statement of the Plaintiff about its purpose with the present declaratory suit. The fact that Plaintiff's purpose with respect to the present lawsuit as well as its second step planned is not clear before the Defendant cannot serve as a reason to such examination.

The court denied Plaintiff's motion of evidence to hear Mr. Thomas Hajek as a witness who conducted the negotiations carried out with the Defendant from Plaintiff's side. The court deemed the evidence provided and detailed above satisfactory for the foundation of its abovementioned decision.

The court dismissed Plaintiff's and Defendant's concordant motion to have the court order the attachment of the contract concluded between MALEV and BOEING. The court estimated such contract irrelevant from the aspect of the present case.

On the other hand, on basis of the concordant motion of Plaintiff and the Defendant, the court ordered to conduct evidence with respect to the negotiations that went on between December 16 through 21, 1990 between the parties. However, the court did not wish to take evidence by examining depositions, but ordered the Plaintiff to provide records, minutes, memos and other similar documents of such negotiations together with the Hungarian translation of same. The court, on the other hand, ordered the Defendant in this respect to make a statement with regard to the completeness of the documents attached by Plaintiff (if the documents attached by Plaintiff include all the documents) or does the Defendant possess any further such documents. The court deemed necessary to examine the parties' statements in order to establish if the statements made during the negotiations modified, and in the positive, to what extent, Plaintiff's offer of December 14, 1990 or the Defendant's letter of acceptance dated from December 21, 1990.

2. In the scope of evidence ordered by the court in view of what has been mentioned above, the Plaintiff attached a certified translation of Exhibit 2/D which includes Plaintiff's statement of December 21, 1990 and the expansion of the original offer to the PW4060 engine. Plaintiff attached under Exhibit 10 the so called Amendment No. 1 dated from December 20, 1990 which includes that if Defendant chose Airbus A310-300 aircraft, Plaintiff would increase the credit package described by paras B and C of the original offer by $1 million after each aircraft.

The court evaluated these documents before bringing its decision according to the manner detailed above.

Before the hearing Defendant attached to its counterclaim (32/A/ 1) Plaintiff's letter of November 12, 1990 as amended on December 21, 1990 under No. A-C/1 with a certified Hungarian translation. This letter contains the conditions of the so called signing bonus. To this evidence Defendant attributed such a meaning according to which since the Plaintiff did not transfer the signing bonus to Defendant's behalf, this would prove that Plaintiff did not consider its letter dated from December 21, 1990 as a contract. The court established that Defendant's interpretation of this letter is mistaken. Plaintiff's letter is totally unambiguous in the sense that Plaintiff opens this signing additional credit as of December 15, 1990 as soon as it receives Defendant's written notification about the latter's order of an aircraft described in one of the abovementioned proposals. According to the information at hand, Defendant did not issue such an order for any aircraft until December 15, 1990, neither until December 21, consequently Plaintiff could reasonably conclude the delay in ordering the aircraft instead of the invalidity of Defendant's statement of acceptance of December 21, 1990.

Defendant also attached to its counterclaim under Exhibit A-C/2 Plaintiff's letter dated from February 11, 1991 and interpreted the contents of this letter also in a way according to which the contract concluded by Defendant's statement of December 21, 1990 was not considered valid by the Plaintiff either. The letter confirms those subjects which were negotiated in New York the previous week. The letter states in detail that the $65,000 promotion budget will be added to the signing bonus, furthermore, that Plaintiff will help the Defendant in choosing the maintenance partner and co-operate in the establishment of Line Maintenance Sparepart Pool in Budapest.

Only after confirmation of the contents and an expression of courtesy follows that part of the letter which relates to the negotiations about the re-engining of TU 154 aircraft and the finalization of the PW4000 contract. The court established that Defendant's conclusion attached to the second half of the letter is mistaken and the letter's contents are not suitable to raise any doubts with respect to the validity of the sales agreement concluded by Defendant's letter of acceptance. According to the court's view, the correct interpretation of the letter's meaning is that the parties have carried on negotiations in Budapest in the subjects confirmed by the letter, namely the promotion budget and the engine maintenance partner and the establishment of the Line Maintenance Sparepart Pool and complete in these respects the contract relating to the PW4000 engine.

Finally, Defendant attached to its counterclaim (Exhibit 32.A/1) under A-C/3 the letter addressed by Mr. J.M. Schoefield to Mr. Barna Tarnoczi, personal secretary of Defendant's General Manager dated from December 20, 1990. Defendant attached said letter with the intention to verify that Defendant's statement of acceptance dated from December 21 was not even mentioned on December 20. Defendant did not attach the certified Hungarian translation thereof, however, Plaintiff's interpreter present in the hearing communicated the Hungarian meaning of the text. The court attached this sound-recorded Hungarian translation to the records of the hearing under 32/1. The court established in connection with the letter that it does not bear any significance at all with respect to the sales contract concluded between the parties. The letter was addressed by Plaintiff's representative to the personal secretary of Defendant's General Manager and CEO thanking for the former's stay in Budapest. The fact that Plaintiff's representative thanks for the hospitality he was extended to Plaintiff's delegation by the addressee and other Hungarian business and government officials in Budapest and the fact that the letter did not mention Defendant's statement of acceptance issued on December 21, the next day, does not mean that no such statement of acceptance has been made, quite the contrary has been proven as a matter of fact. The addressee of the letter and its contents clearly show that Plaintiff's representative made a statement independent of the contract to be concluded and it is totally absurd to conclude from his statement that the letter's not mentioning the parties' sales contract would have the least legal effect.

3. Defendant's representative represented in the hearing that he agreed with Plaintiff in that no further document has been drafted in connection with the negotiations between December 16 and 21, 1990 besides the two documents attached to his counterclaim.

The court examined the evidence conducted with respect to these negotiations and evaluated it according to the abovementioned.

Defendant represented in its counterclaim (32.A/1) that Plaintiff's complaint can be dismissed solely based on legal argumentation on basis of the documents at hand, hence no further evidence is necessary in the case. This representation was repeated by Defendant's representative during the hearing, therefore the court decided to finish the evidence with respect to the main subject of the lawsuit. The parties unanimously stated that they have no further motion and representation in connection with evidence.

4. The court established that further evidence is necessary in the subject of Plaintiff's claim with regard to the Defendant's obligation to reimburse Plaintiff's costs incurred in connection with the discovery procedure initiated by the Defendant. Plaintiff did not attach the permission of the foreign exchange authorities to the expansion of its complaint aiming its damages, and it could not determine the final amount of its claim for damages during the hearing.

Due to the abovementioned the court has brought the present partial judgment and will continue the evidence in the subject of procedural costs and Plaintiff's claim for damages.

Done in Budapest, on this 10th day of January, 1992.

Signature of

Dr. Sndor Piskolti

Judge

Rubber stamp #40 of the

Metropolitan Court of Budapest

Authenticated by

Ms. Olga Ligner


FOOTNOTE

[1] case translation was prepared by Dr. and Mrs. László Szlávinits. Dr. László Szlávnits was the attorney for the Plaintiff. Any reader who intends to rely on this case must consult the original text, a copy of which can be obtained from the Journal of Law & Commerce.

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