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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 55 [Calculation of the price] [1]

[TEXT OF THE UNIFORM LAW]

Where a contract has been validly concluded [2] but does not expressly or implicitly [3] fix or make provision for determining the price [4], the parties are considered, in the absence of any indication to the contrary [5], to have impliedly made reference to the price [6] generally charged [8] at the time of the conclusion of the contract [7] for such goods sold under comparable circumstances [10] in the trade concerned [9].

[WORDS AND PHRASES, CONCEPTS

1. agreement of a price, necessity of; contradiction between article 55 and article 14(1)
2. where a contract has been validly concluded
3. implicitly fixing the price
4. methods of fixing the price
5. in the absence of any indication to the contrary, parties are considered to have impliedly made reference to
6. trend to maintain the contract by way of different juridical constructions
7. price generally charged at the time of the conclusion of the contract
8. calculating the price
9. the price generally charged in the trade concerned
10. the price for such goods sold under comparable circumstances ]

[COMMENTARY]

[1] [agreement of a price, necessity of; contradiction between article 55 and article 14(1)]

      [1.1] Under the law of some countries, the agreement of a price is an essential part of the contract without which the contract is not made. According to the law of other countries, the conclusion of a contract is permitted without fixing a price and it is prescribed how that price is then calculated. (These differences are visible even within the western European industrialized countries, as shows the comparative analysis by Tallon.) The view held by the former countries is expressed in Article 14, paragraph 1, sentence 2, even though in a more feeble version. The fixing of a price is required as part of a contract offer, but it can be implied, and it is possible also that the offer only makes provision for it. The importance of fixing a price is also underlined in Article 19, paragraph 3. The opposite view finds its expression in Article 55. There is a contradiction between the two articles. It was covered in such a way that Article 55 would apply only when a State is bound by Parts I and III, but not Part II of the Convention and when the law applicable to the conclusion of the contract permits such conclusion without fixing a price (O.R., 45). This interpretation, however, is tantamount to evading the problem in the typical case, namely that the Convention is accepted as a whole. We believe that the total solution found at the diplomatic conference is also favourable to the formation of a contract without fixing a price. A point in favour of this view is, in particular, the fiction of a reference (note 6). Account of the opposite view is taken also by hinting to a valid conclusion of a contract (note 2). Therefore, the contradiction has to be overcome though delimiting the scopes of application of the rules where they do not harmonize. [page 208]

      [1.2] [currency of the price] In those cases where there is no agreement of a price, the currency of the price will not be agreed either. The CISG does not include a direct rule for such cases. Established practices may then serve to determine the relevant currency, e.g. it is customary to express and pay the price for a number of commodities in a specific currency, like U.S. $. The same goes for usages in existence between the parties (Article 9, paragraph 1). Also international agreements to which the respective States are parties, e.g. bilateral payment agreements, may be consulted in this regard. If no solution can be found in this way, the currency is to be determined taking account of the foreign exchange rules of those States which have a close and relevant relationship with the contract in question (Article 4, subpara. (a)). In case of doubt, this can be the currency of the seller's country as Magnus (130) suggests, when that country allows international sales contracts to be performed in its own currency. The currency should, in the absence of a provision to the contrary, generally be considered as the currency in which all payments under the contract are to be made, including damages, liquidated damages, and refunding of expenditures. For foreign exchange reasons, we have reservations of a general nature against the consideration of Magnus (135) to adopt the currency in which a damage is caused as the currency of the obligation to pay damages. Whereas, it seems indeed logical that claims for repayment are made in the currency in which the payment was made (ibid. 141).

[2] [where a contract has been validly concluded]

Herewith reference can be made to the prerequisites for validity as contained in the CISG and to national validity conditions (Article 4, subpara. (a)). Some authors, therefore, proceed on the assumption that without having fixed a price there is no offer under Article 14, paragraph 1, sentence 2 and, therefore, no delivery can be taken. Hence, there will be no contract so that the rules governing the substance of the contract including Article 55 are irrelevant where there are no exceptions (Plantard/Lausanne, 112 fol). Others suppose, and the text speaks in favour of this assumption, that the validity of a contract in this case is to be judged only according to national law (Kahn, 980). Leaving the problems which this view also entails out of consideration (note 6), there are, as we believe, a host of exceptions. It may thus follow from established practices and usages that the contract can be formed even without an agreement of the price. Furthermore, Article 14 is not mandatory so that the parties may renounce it, e.g. in frame contracts, or may agree differently. Such modifications may be brought about when the contract provides for the parties to agree on a price later. This may even be considered as an agreement of the method of fixing the price. Sevón (Dubrovnik, 211) holds that an invoice sent in advance which is not protested by the buyer could mean his agreement with the price indicated therein. The conclusion of a contract by joint signature of [page 209] the relevant document at the end of negotiations without a price agreement could be considered as a modification of Article 14, paragraph 1 if the parties held the contract as valid (in this sense also Eörsi/BB, 497 and Lüderitz/Freiburg, 188).

Finally, mention should be made of the possibility of curing a possibly existing non-validity of the contract, which could be assumed when a delivery was made and taken already (ordering urgently needed spare parts). We believe that the possibility of a cure should be deduced from the CISG, namely from the analogous application of Article 29, paragraph 2, sentence 2 or directly from the prohibition of the venire contra factum proprium as a general principle of the Convention (note 10.1. of Article 7). In the case described above, no party could rely on the non-validity of the contract, so that the price would have to be determined according to Article 55.

[3] [implicitly fixing the price]

An implicit fixing of the price can be assumed, in particular, when the seller sells his goods according to price lists which the buyer knows or should know, or when constant prices were used in a continuing business relationship.

[4] [methods of fixing the price]

The methods of fixing the price can also be determined expressly or implicitly. Widely used methods of fixing a price are reference to a stock market or market price, to the valid price lists of the seller, to the price most favourable to the buyer which the seller asks third parties to pay, commercial most-favoured-party clause, etc. It is important in any of those cases to indicate the time relevant for the fixing of the price. We hold that it should be admissible that reference be made to a price which a party, in practice particularly the seller, has to fix individually, i.e. not on the base of generally applicable lists, (doubting even if it is the price generally calculated for this kind of goods at the time of the delivery, Sevón, 209). Even when no reservation is made in this context, e.g. that the price is reasonable, that it is the usual price on the market, etc. and that there has to be a reasonable proportion between the price and the seller's prime costs, the fixing of an unjust price would nevertheless not be binding. This can be inferred from Articles 7, 8 or 9. The methods used to fix a price, which seemingly are gaining importance, include the calculation of the price on the basis of the procurement price plus fees, or of the prime cost plus reasonable profit. An agreement of price fixing methods eventually has also to include cases where a third party or an arbitral tribunal from the beginning, or only when the parties do not reach agreement, is instructed to fix the price. [page 210]

[5] [in the absence of any indication to the contrary, parties are considered to have impliedly made reference to ]

Clues to the contrary may be an indication that the contract is to be formed only when there is agreement on the price. Those clues are in existence also when the price cannot be fixed pursuant to Article 55 because there is no generally calculable price for the goods concerned, e.g. collectors' prices as they are relevant in art trade.

[6] [trend to maintain the contract by way of different juridical constructions]

The legal assumption of a price agreement which is substantiated herewith may be interpreted in such a way as to make ineffective the requirement to fix or make provision in the offer for determining the price insofar as such offer is accepted. This is what the arguments given by Bonell, DPCI (24 fol) and Honnold (164) aim at, the latter joining Tallon (Parker, 7-10 fol) in stressing the problem (compare also Lüderitz/Freiburg, 188 fol). Bonell, DPCI (25) basically believes that the determination of the price as a condition for a contract to be valid under national law applies only where a State has not ratified Part II of the Convention and where the law of the State which provides for such a condition is the decisive law.

There is thus an overwhelming trend in publications to maintain the contract by way of different juridical constructions (like, in the end, the comparative analysis of Tallon, too; note 1.1., particularly 107 fol). Article 55 is thus to be attached greater weight than Article 14, paragraph 1. However, account has to be taken of the fact that those domestic laws which, like the French law regard an agreement of the price as a condition for the contract to be valid, will rely on Article 4, subpara. (a) and circumvent application of Article 55 (Tallon/Parker, 7-11 fol). It is, therefore, a simplification when Bonell, DPCI (25) declares the Eastern European and developing countries as countries which require the price to be a condition for the validity of the contract, and the Western countries as not requiring it.

[7] [price generally charged at the time of the conclusion of the contract]

Since it is not the price which is decisive in the event of delivery, the seller will not enjoy later increases in, and the buyer will not enjoy later reductions of, the price.

[8] [calculating the price]

By contrast to ULIS according to which that price is to be paid "which the seller at the time of the conclusion of the contract usually has requested" (Article 57), the CISG aims to achieve an objectivization of the price determination. Where there is a relatively uniform price level for the goods in question, from which only a few sellers deviate, this level has to be taken as a basis. Where the prices differ, however, an average price has to be calculated on the basis of the prices of representative sellers which hold the overwhelming share in the market concerned. Price modifications which are the result of economic considerations, e.g. technical parameters or other qualitative features, design and marketability of [page 211] the goods, for instance in connection with the trade-mark situation, have to taken into account.

According to Eörsi (BB, 408), in the case of doubt the prices on the world market take precedence over the regional or domestic prices of the goods sold. If a price can be calculated which is typically agreed between partners from the countries where the parties have their place of business, this should in our view be the decisive price even if it deviates from a price existing in the world market. If no price can be calculated for a market covering both parties, that price should be decisive which is generally calculated where parties of the kind of buyer usually make their purchases. Under conditions of competition, the buyer will naturally choose the most favourable offer. At any rate, it would serve economic effectiveness to make such conduct the norm.

Although the CISG does not define the party who is to take the initiative in fixing the price, it will in most cases be the seller for he makes out the bill. (This is absolutely necessary in very many cases if only for the customs clearance of the goods.) This being so, the seller is actually in a preferential position because the buyer has to prove that the price does not meet legal prerequisites. Honnold (339) goes even farther and concedes the price by the seller, unjustly in our view, a priori a certain dominance and thus interprets the CISG in the meaning of ULIS.

We hold that in the case of non-agreement of the parties a decision regarding the price can be taken by the competent deciding organ.

[9] [the price generally charged in the trade concerned]

If the same goods are traded in different trades, e.g. sale of laboratory equipment to schools, hospitals, institutions of scientific research, or industrial enterprises, prices have to be based on comparable proportions.

[10] [the price for such goods sold under comparable circumstances]

Reference is made here to circumstances that are relevant for the calculation of the price, like the commercial terms, which takes into account territorial criteria which are not expressly provided for in the rule; ordered quantity, because of possible rebates; periods of order, in case special delivery charges are relevant; liability assumed by the seller, in particular guarantees such as price surcharges because of especially long guarantee periods; and terms of payment, discount in the case of payment in cash and others. All in all, it matters which price the buyer would have had to pay had he bought a comparable good in comparable conditions from another seller. [page 212]

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Pace Law School Institute of International Commercial Law - Last updated September 25, 2002
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