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Reproduced with the permission of Oceana Publications

excerpt from

INTERNATIONAL SALES LAW

United Nations Convention on Contracts for the International Sale of Goods

Convention on the Limitation Period in the International Sale of Goods

Commentary by
Prof. Dr. jur. Dr. sc. oec. Fritz Enderlein
Prof. Dr. jur. Dr. sc. oec. Dietrich Maskow

Oceana Publications, 1992

Article 16 [Revocability of offer]

[TEXT OF THE UNIFORM LAW]

(1) Until a contract is concluded [2] an offer may be revoked [1] if the revocation reaches [3] the offeree before he has dispatched [4] an acceptance.

(2) However, an offer cannot be revoked [5]:

(a) if it indicates, whether by stating a fixed time [7] for acceptance or otherwise [6], that it is irrevocable;
(b) if it was reasonable for the offeree to rely [8] on the offer as being irrevocable and the offeree has acted in reliance on the offer [9].

[WORDS AND PHRASES, CONCEPTS

1. exceptions to the principle of revocability of an offer
2. revocation only possible before conclusion of contract
3. revocation must reach the offeree
4. before he has dispatched an acceptance
5. two exceptions to revocability of an offer
6. offer defined by offeror as firm, binding or irrevocable
7. significance of time limit for acceptance: relevance of origin of parties
8. protection of the good faith of the offeree
9. offeree has acted in reliance on the offer ]

[COMMENTARY]

[1] [exceptions to the principle of revocability of an offer]

Here we are dealing with a principle that is taken from the Anglo-American legal family: the principle of revocability of the offer. The binding to an offer is an exception there. This rule is the most important deviation from the rule that governs the conclusion of contracts under German law.

The CISG, however, makes some major exceptions to the principle of revocability so that principle is put into question again (c. notes 4 and 5). According to W. v. Marschall, who refers to E. v. Caemmerer (Freiburg, 174), an offer is, therefore, irrevocable as a rule. Rehbinder (Freiburg, 177), however, talks of a "feeble assumption of revocability". Sono draws attention to the fact that the Convention meets practical needs and should not be considered as being a compromise between Common Law and other legal systems, but rather brings to light the common basis of the two (K. Sono, "Restoration of the Rule of Reason in Contract Formation: Has There Been Civil and Common Law Disparity?", Cornell International Law Journal, 1988/3, p. 478).

[2] [revocation only possible before conclusion of contract]

Revoking is only possible before the conclusion of the contract. The contract is concluded when the acceptance becomes effective (Article 23). The date when the acceptance becomes effective is determined by Article 18, paragraphs 2 and 3. Consequently, only in the case of oral negotiations or in the case of acceptance by conduct. implying an intent can the offer be revoked up until the conclusion of the contract. When acceptance is given in writing, the possibility of revoking is further limited (c. note 4). Revoking is thus as a rule not possible up until the conclusion of the contract but only until the statement of acceptance is dispatched. If the offeror revokes his offer, he has to be aware that it may be too late to do so because the offeree by this time may have already dispatched his statement of acceptance (Eörsi/BB, 160).

[3] [revocation must reach the offeree]

For the revocation of an offer to become effective it needs to reach the offeree just as does the offer itself (Article 15, paragraph 1). (As to the definition of "reach" compare Article 24). [page 88]

[4] [before he has dispatched an acceptance]

Should the offeree receive a revocation even before he accepted the offer, he could no longer accept the offer because it is terminated. On the other hand, a revocation remains ineffective if the offeree has already dispatched a statement of acceptance even though a contract has not yet been formed. In this case, the offeror does not have the possibility to revoke his offer until the conclusion of the contract. The purpose of this rule is to cut short the time available for revocation (Eörsi/BB, 156).

[5] [two exceptions to revocability of an offer]

Two important exceptions are made here to the principle of revocability of an offer, which to a large extent annul the principle" itself: First, an offer can express not only that it is irrevocable (see note 6); and, second, an offer can be made out in such a way that the offeree could consider it as irrevocable (note 8).

According to Eörsi (BB, 156) the two exceptions, stipulated under (a) and (b), refer to identical situations both in Civil Law and Common Law language.

If an offer is revoked, even though the revocation is not admissible, then that revocation is not effective and the offer can still be accepted. In that case, however, the offeree has to take non-fulfilment of the contract by the offeror into account and has the obligation to reduce the damages under Article 77 (Honnold, 176).

One rule suggested by the former GDR concerning pre-contractual liability (e.g. unjustified breaking off of negotiations when through reliance on the conclusion of the contract project costs were incurred; A/Conf. 97/C.1/L.9S) was not adopted.

[6] [offer defined by offeror as firm, binding or irrevocable: relevance of origin of parties]

An offer is doubtlessly irrevocable only if the offeror expressly defines it as firm, binding or as irrevocable (Eörsi/Lausanne, 48).

[7] [significance of time limit for acceptance]

Whether or not the determination of a time limit for acceptance leads automatically to irrevocability, or whether additional statements by the offeror are necessary; was strongly disputed at the Vienna Conference (O.R. 278) since that determination can have different meanings. It may mean that the offer should be binding and irrevocable, or, as under Anglo-American law, that the offer lapses thereafter. It was, therefore, not stipulated that a time limit for acceptance should automatically mean irrevocability (Honnold, 171). In the CISG the time limit for acceptance is only an indication (Rehbinder/Freiburg, 158; Schlechtriem, 40). Bydlinski (Doralt, 67) would like the time limit for acceptance to be sufficient, just as according to the ULF the time limit for acceptance meant irrevocability. Thus the fixing of a time limit for acceptance alone does not suffice. The offer is not yet irrevocable if it states a fixed time for acceptance but only [page 89] if that statement of a fixed time is to express irrevocability (Eörsi/BB, 157). In interpreting the intention of a party (c. Article 8), the origin of the parties is also to be taken into consideration. If both come from the Anglo-American legal order then, in the case of the mere statement of a time limit for acceptance, a court having recourse to Article 9 would come to the conclusion that the offer is not irrevocable.

[8] [protection of the good faith of the offeree]

Reference is made here to the protection of the good faith of the offeree (Rehbinder/Freiburg, 160). It is not sufficient that the addressee of an offer relies on the irrevocability of that offer. Rather, he should reasonably be able to rely on it, i.e. another party in the same situation should have reached the same conclusion, and he must have become active. The irrevocability of the offer may be the result of circumstances, e.g. the ordering of replacement parts in the case of an accident. However, the offeree will under certain circumstances rely on the offer also if the acceptance of the offer requires time and cost-consuming investigations (O.R., 22) or if he has informed the offeror that he will participate in a tender, the offeror thus to be the sub-contractor (Honnold, 172). Eörsi (BB, 159) raises the question of whether an analogous situation is possible in that the offeror, e.g. because of his conduct in previous negotiations, may rely on the other party accepting an offer.

[9] [offeree has acted in reliance on the offer]

Such act could be, for instance, the participation in a tender on the basis of the offer (Honnold, 171) or the conclusion of contracts with third parties or also the preparation of production or other measures, provided such acts or conduct were considered as normal in the branch concerned, or were supported by previous negotiations, or could be foreseen by the offeror (Eörsi/BB, 159). It should be taken into account that the offeree in any case has to make a decision in favour of acceptance within the period fixed for acceptance (c. Article 18). [page 90]

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