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Published in J. Herbots editor / R. Blanpain general editor, International Encyclopaedia of Laws - Contracts, Suppl. 29 (December 2000) 1-192. Reproduced with permission of the publisher Kluwer Law International, The Hague.

[For more current case annotated texts by this author, see Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed. (2003) and Lookofsky, Understanding the CISG in the USA, 2d ed. (2004).]

excerpt from

The 1980 United Nations Convention on Contracts
for the International Sale of Goods

Joseph Lookofsky

Article 16
Offeror's Right to Revoke

A. Revocability is General Rule
B. Modification: Offer Indicating Irrevocability
C. Offer Fixing Time for Acceptance
D. Modification: Action in Reliance

105. Once an offer, not effectively withdrawn, has reached the offeree, the issue is the offeror's right to revoke (call back) his offer.

In some legal systems, the default rule is that every offer received is deemed to be irrevocable (binding), at least for a reasonable time;[1] in other (e.g. Common law) systems, the starting point is that offers do not generally bind the offeror until such time as the offeree actually accepts the offer.[2]

Article 16 of the CISG, which represents a compromise between these domestic extremes, provides as follows:

'1. Until a contract is concluded an offer may be revoked if the revocation reaches the offeree before he has dispatched an acceptance.

2. However, an offer cannot be revoked:
a) if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or
b) if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer.'

1. This is the view taken in Scandinavia: see paragraph 1 of the Uniform Contracts Acts.
2. This is the traditional Common law view and the view still held in England. Regarding the American view see infra No. 106.

A. Revocability is General Rule

106. The starting point in Article 16, paragraph (1) is that CISG offers are revocable, in that, an offer (which, having reached the offeree, has become effective) may be revoked if the revocation reaches the offeree before he has dispatched an acceptance. .

Although paragraph (1) seems to accord with, the view traditionally taken in some Common law systems, two comparative points may be noted. The first point is that the CISG rule in Article 16(1), that an offer may be revoked before an acceptance is dispatched, does not imply that a CISG contract is concluded when the acceptance is dispatched.[1] [page 66]

The second, particularly important point is that Article 16(1) represents but a starting point which must be read in conjunction with the two significant modifications contained in Article 16, paragraph (2); both of these modifications (exceptions to the revocability rule) find analogues in the corresponding American law of contracts and sales.[2]

1. Note that under the Common law view, an acceptance made by a non-instantaneous means of communication is effective upon dispatch, thus concluding the contract, whereas the rule in CISG Article 23 is closer to the Civilian view: see infra No. 132.
2. See 2-205 of the Uniform Commercial Code and 87 of the Restatement (2d) of Contracts.

B. Modification: Offer Indicating Irrevocability

107. The first exception to the Article 16(1) rule derives from the already familiar principle that the offeror is the master of the offer. This is confirmed by subparagraph 2(a): an offer to enter an international contract of sale which itself 'indicates ... that it is irrevocable' cannot be revoked. The offeror may make the requisite indication of irrevocability either by 'stating a fixed time for acceptance' or by some other means.

The clear and simple main message of subparagraph 2(a) thus is that the CISG offeror is bound by his word. If, for example, the offeror makes his offer on 1 February and states that the offer 'will be held open' until a given date (e.g. until 15 February), this represents a clear indication of irrevocability - in effect, a promise that the offer will be held open - and the offer cannot be revoked during the time stated, even if the offeror should later change his mind.

C. Offer Fixing Time for Acceptance

108. At least one aspect of subparagraph (2)(a) has provoked some doctrinal debate.[1] The issue is whether an offer which merely 'fixes a time for acceptance' should - for that reason alone - be interpreted as irrevocable.

Suppose, for example, that the offeror states that the offeree's 'acceptance must be received before March 1st'. Some might read this phrase as relating only to the time frame for acceptance; others might say the offeror - by providing the time frame for acceptance - has (also) indicated that the offer is irrevocable during the stated period.

It is submitted each that case must be decided on its own facts, i.e., each individual offer should be interpreted on its own terms. Depending on the circumstances and the larger contractual context, the fact that an offer contains a statement relating to the time for acceptance may - or may not - be interpreted as (also) implying a promise not to revoke.[2]

1. Regarding the controversy see, e.g. Honnold, J., Uniform Law (1999) at pp. 162-163 [available at <http://www.cisg.law.pace.edu/cisg/biblio/honnold.html>]; Farnsworth, EA, op. cit. at pp. 3-11; Schlechtriem, Commentary (1998) at 120-122, and Murray, J., op. cit. (No. 102) at pp. 24-25. [page 67]
2. See Article 8, supra No. 81 et seq. Compare Schlechtriem, op. cit. at 121 (expressing the view that the fixing of a time for acceptance should give rise to a rebuttable presumption of irrevocability) and Murray, J., op. cit. at p. 25 (advising that offerors desiring to retain the right to revoke should expressly so state).

D. Modification: Action in Reliance

109. Subparagraph (2)(b) of Article 16 provides a further modification of the starting point set forth in paragraph (1). An offer may not be revoked if it was reasonable for the offeree to act in reliance on the offer, and the offeree has in fact. acted in reliance on it.

For example, the rule might be applied in a situation where B 'relies' on an (otherwise revocable) offer made by S, in that B (before accepting S's offer) offers to 're-sell' the same goods to C. If S revokes his offer to B after C effectively accepts the offer by B, but before B effectively accepts the offer by S, the key issue is whether it was reasonable for the offeree (B) to have so acted in reliance on the offer by S; for if the reliance was not reasonable, S will have rightly revoked his offer under the rule in Article 16(1), and B's (late) acceptance will have had no effect.

In American law, where courts often have had occasion to apply a very similar rule, reliance similar to the kind just described is likely to preclude the revocation of an otherwise revocable offer, provided the reliance was reasonably foreseeable by the offeror.[1] Although the CISG version of the rule deserves an 'autonomous' (Article 7) interpretation, it would seem that the foreseeablity of reliance (by the offeror) should at least be regarded a relevant factor pointing to the reasonableness of an offeree's act of reliance under Article 16(2)(b). Thus, it would hardly seem reasonable for a CISG offeree to conduct an 'extensive' - and expensive - 'investigation' concerning the advisability of acceptance, unless such an investigation was reasonably foreseeable by the offeror.[2] [page 68]

1. Unlike subparagraph (2)(b) of Article 16, which asks whether the offeree has reasonably relied, the key issue under 87(2) of the Restatement (2d) of Contracts, is whether the offeror should reasonably expect his offer to induce reliance.
2. Compare Secretariat's Commentary, A/CONF./97/5. Comment 8 to Article 14 of the 1978 Draft.

Pace Law School Institute of International Commercial Law - Last updated April 1, 2005
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