Excerpt from John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed. (1999), pages 195-198. Reproduced with permission of the publisher, Kluwer Law International, The Hague.
[See also Honnold Text, Formation of the Contract (Articles 14-24):
Introduction to Part II of the Convention.]
§172 The present article, like Article 20, extends and elaborates the basic rule of Article 18(2) that an acceptance "is not effective if the indication of assent does not reach the offeror within the time he has fixed or, if no time is fixed, within a reasonable time...." Under this rule the following two questions can arise. (1) The offeree’s reply indicating assent "does not reach the offeror within the time he has fixed": When a late reply reaches the offeror can he make it "effective" by notifying the offeree? (2) A reply that normally would have arrived on time is subject to delays in transmission: Must the offeror notify the offeree that the offer has lapsed?
Answers to these questions may be found in the following article:
"(1) A late acceptance is nevertheless effective as an acceptance if without delay the offeror orally so informs the offeree or dispatches a notice to that affect.
"(2) If a letter or other writing containing a late acceptance shows that it has been sent in such circumstances that if its transmission had been normal it would have reached the offeror in due time, the late acceptance is effective as an acceptance unless, without delay, the offeror orally informs the offeree that he considers his offer as having lapsed or dispatches a notice to that effect."
§173 A. Notice Giving Effectiveness to Late Acceptance
The offeree’s reply may fail to be effective as an acceptance either (1) because it was sent too late or (2) because of delays in transmission.
Example 21A. On June 1 Seller mailed Buyer an offer that stated: "Your acceptance must reach me by June 30." Mail between Seller and Buyer normally takes 5 days. On June [page 195] 29 Buyer mailed a letter expressing acceptance of the offer; the letter reached Seller in due course on July 4. On July 4 Seller sent the following telegram to Buyer: "Your June 29 letter was mailed too late to reach me by the June 30 limit set in my offer but I am treating it as an acceptance."
Although Buyer immediately objects to the closing of the contract, and even if the Buyer had dispatched a letter on June 30 withdrawing the acceptance, both parties are bound by contract. True, the market level or other conditions affecting Buyer’s interest in the contract may have changed during the five-day period between June 29 and July 4 while Buyer’s acceptance was in the mails. Nevertheless, Buyer bears the burden of such changes. Buyer chose a medium of communication that required five days for arrival, and failed to make use of this opportunity under Article 22, infra at §177, to overtake his letter by a withdrawal communicated by phone or wire.
It may now be useful to examine Article 21 (1) when this provision is subject to stress. The following problem will not occur frequently but it may help us to explore the relationship between several provisions of the Convention.
Example 21B. As in Example 21A, on June 1 Seller mailed an offer that stated, "Your acceptance of this offer must reach me by June 30." On June 15 Buyer posted a reply that stated "I accept your June 1 offer." This letter, dated June 15, would normally have reached seller on June 20, but was delayed in the mails and did not reach Seller until a month later, on July 20. In mid-July the price-level for the goods in question had fallen sharply and Seller was glad to close a deal at the higher level reflected in his June offer. Consequently, on July 20 Seller wired Buyer, "In spite of late arrival of your June 15 letter I am treating it as an acceptance." Buyer objected on the ground that conditions had changed during the month while his letter was in the mails.
Article 21(1), read in isolation, suggests that Seller’s wire would close a contract based on Buyer’s reply, even though the reply otherwise would have lapsed because of its late arrival. In cases where the delay in transmission of the reply is not extreme, this view must be accepted in order to give effect to the policy expressed in paragraph (1). However, when [page 196] the reply has been subject to extended delay and conditions have radically changed during this period, the scope of Article 21(1) may need to be considered in relation to other provisions of the Convention.
As we have seen, Article 21 provides an extension of the principle of Article 18(1) that an acceptance is made by a statement of other conduct that indicates "assent" to an offer—an assent that, under Article 18(2), is effective only when "the indication of assent reaches the offeror." Accord, Art. 22, infra. In Example 21B, the sharp price-drop, during an extreme delay in the transmission of the offeree’s reply, might support on finding that the offeree’s June 20 letter, when read by the offeror on July 20, did not indicate to the offeror that the offeree still assented to the June 1 offer.
Article 18(2) states that an acceptance "is not effective if the indication of assent does not reach the offeror" within the prescribed time limit. In that setting we noted (Art. 18 at §162) that this provision places transmission risks on the offeree. This proposition might suggest that in Example 21B the offeree bore the risk of the offeror’s action. But the risk that Article 18(2) places on the offeree is the risk of failing to close a contract. A different and grave risk would result if, after a substantial change of circumstances, an offeror could elect to take up an "acceptance" that had lapsed because of delay in transmission. The period of such a delay could be indefinitely long; the period within which an acceptance must be received under Article 18(2) would be more circumscribed. And if an offeree fails to close a contract because of a delay in transmission (Art. 18(2)), the results do not lead to an unfair advantage to either party: there is no contract regardless of whether this favors the offeror or the offeree. But if the offeror is given a free choice to approve or disapprove an "acceptance" that has been delayed in transmission while conditions radically change, the offeror will notify the offeree that the offer has lapsed if the change in conditions has made the transaction less attractive (Art. 21(2)) and will notify the offeree that he treats the reply as an acceptance if the change in conditions makes the transaction more favorable to him—an opportunity to speculate at the expense of the other party. See also §§95, 144, and 285.
This opportunity will be avoided in such extreme cases by construing Article 21(1) in relation to the basic rule of Article 18(1) that a statement is an acceptance only if it indicates "assent" to the offer in the light of the objective facts available to both parties when (Art. 18(2)) the reply [page 197] "reaches the offeror." This result would also respond to the rule of Article 7(1) that "in the interpretation of this Convention, regard is to be had...to the need to promote...the observance of good faith in international trade." (See the discussion of Art. 7, supra at §94).
§ 176 B. Obligation to Notify Offeree of Apparent Delay in Transmission of Acceptance
We may now explore further the role of paragraph (2) of Article 21.
Example 21C. On June 1 Seller sent Buyer an offer like the one in Example 21B. Buyer’s reply, dated June 15, was similarly delayed in transmission and reached Seller only on July 20. But in this case Seller did not respond to Buyer’s acceptance; Buyer learned of the delay only on August 1 when he called Seller to ask why the goods had not arrived. Seller replied that he had ignored the Buyer’s June 15 acceptance because it had not reached him by June 30, the date specified in the offer. Buyer claimed that he assumed that his July 15 letter had arrived in time to close the contract, and had expected to receive the goods.
Buyer’s reply was dated June 15; the delay in the transmission was obvious. Consequently, under Article 21(2), the failure of the offeror (Seller) to inform the offeree (Buyer) that the offer had lapsed made the late reply "effective as an acceptance." The parties are bound by contract and Seller will be responsible to Buyer for breach of contract.
In common-law systems there has been no occasion to deal with this question since the "dispatch" (or "post-box") rule makes the acceptance effective when it is sent. See Art. 18, supra at §162. Many civil law codes, with "receipt" rules like Art. 18(2), have legislative provisions similar to Article 21(2) of the Convention."[page 198]
FOOTNOTES: Chapter on Article 21
1. A late "acceptance" (Example 21A) can be withdrawn until the offeror "dispatches" (Art. 21(1)) his notice that the offer is effective. Withdrawal of a timely acceptance must reach the offeror before or at the same time as the acceptance. Arts. 18(2) and 22. See: Schmidt, The International Contract Law in the Context of Some of Its Sources, 14 Am. J. Comp. L. 1, 26–28 (1965); Schlechtriem, Com. (1998) 149–156.
2. Courts have strongly resisted attempts by one party to speculate at the expense of another. See the discussion under Arts. 46 and 62, infra.
3. Cigoj, International Sales: Formation of Contracts, 23 Neth. Int. L. Rev. 257, 302 (1976) quotes somewhat similar provisions from Germany (BGB 149), Switzerland (Code of Obligations 5(3)), the USSR (Civ. Code 67), Czechoslovakia (Int. Comm. Code 111), Hungary (Civ. Code 214) and Yugoslavia (G. U. T. 24).