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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 29
Modification and Termination

A.  No Formal Requirements
B.  Relationship to Consideration Under Common Law
C.  Contract Requiring Written Modification or Termination

A. No Formal Requirements

142. As noted previously, a CISG contract of sale need not be concluded in or evidenced in writing, just as CISG contracts are not subject to any other requirement as to form.[1]

Following up on this theme, Article 29 eliminates 'formal' requirements as regards CISG contract modification and contract termination. The general rule is set forth in paragraph (1):

'A contract may be modified or terminated by the mere agreement of the parties.'

1. Regarding Article 11, see supra No. 92 et seq.

143. Article 29(1) thus serves to extend the Article 11 rule: unless the parties otherwise agree, a contract to modify or terminate a CISG agreement need not be in writing.'[1]

1. Regarding the modification in paragraph (2), see discussion infra No. 146.

B. Relationship to Consideration Under Common Law

144. Beyond this, Article 29(1) would seem to counter certain other domestic conceptions which might otherwise apply. Thus, under rules traditionally applicable in Common law jurisdictions, a 'one-sided' modification of a sales contract was not binding by virtue of 'the mere agreement of the parties.' If, for example, a buyer [page 82] promised to pay the seller more than the price originally agreed, but got nothing in return, that buyer's promise was not binding under the traditional Common law rule: the seller could not demand something for nothing, since some kind of 'consideration' was required to make the buyer's promise bind. Indeed, in England and certain other Common law jurisdictions, this is still the case.

Now, however, as regards international contracts subject to the CISG, 'lack of consideration' is not a defense available to the promisor who would allege that his CISG promise (to pay more) should not bind.

145. On the other hand, dispensing with the consideration requirement has not dispensed with the real problem which sometimes lurks in the one-sided modification kind of case. Article 29 states only that a CISG sales contract, once entered, may be modified by the 'mere agreement' between the parties, but the question of whether a promise to modify is valid and binding in the concrete case - or whether the modification has been extorted by a bad-faith exercise of economic duress - lies quite outside the Convention scope. Therefore, it is still necessary to distinguish between modifications arrived at by threats and extortion ('economic duress') on the one hand, and good faith (honest, acceptable business standards) on the other.[1] And it is submitted that this side of the Article 29 problem must be left to the applicable domestic law.[2]

1. See generally Lookofsky, J., Consequential Damages in Comparative Context (Copenhagen 1989) at pp. 34-39.
2. Accord: Schlechtriem, Commentary (1998) p. 212 with note 13 (citing Lookofsky, 'Loose Ends and Contorts in International Sales,' 39 Am. J. Comp. L 403 (1991) at p. 412 [available at <http://www.cisg.law.pace.edu/cisg/biblio/lookofsky6.html>]) and note 14 (citing the views expressed by Lookofsky in the previous (1993) edition of this Encyclopedia monograph). Re. questions of validity and CISG Article 4 see also supra No. 62 et seq.
Under American domestic (validity) law, a seller's outright refusal to deliver without additional compensation has been held to constitute a threat made in violation of the duty to deal in good faith: see Roth Steel Products v. Sharon Steel Corp., 705 F. 2d 134 (6th Cir. 1983) - a case which shows that the issues of duress, good faith and unconscionability all go hand in hand. English precedents include the Atlantic Baron case [1979] Q.B. 705, Atlas Express Ltd. v. Kafco Ltd. [1989] 3 WL.R 389, and Williams v. Roffey Bros, Ltd. [1990] 2 WL.R 1153, C.A. Re. the corresponding German law, see Schlechtriem, op. cit. p. 212 with note 14. In Danish contract doctrine economic duress is described as a very difficult problem requiring a concrete solution in each individual case: see Lynge Andersen and Nørgaard, Aftaleloven (2d. ed. Copenhagen 1993) at pp. 151-153.
Without direcly imposing an obligation on the parties to deal fairly, the CISG provides, in Article 7(1), that the Convention is to be interpreted so as to 'promote the observance of good faith in international trade': see supra Nos. 77 and 79. See generally Lookofsky, op. cit. (1991) pp. 412-413.

C. Contract Requiring Written Modification or Termination

146. Paragraph (2) of Article 29 permits the parties to derogate from the form-free default rule in paragraph (1):

'(2) A contract in writing which contains a provision requiring any modification or termination by agreement to be in writing may not be otherwise [page 83] modified or terminated by agreement. However, a party may be precluded by his conduct from asserting such a provision to the extent that the other party has relied on that conduct.'

The first sentence of Article 29(2), which conforms with the general freedom-of-contract rule in Article 6, clearly applies to clauses which seek to deny contractual effect to subsequent oral agreements and modifications.[1] The starting point is thus that such 'no oral modification clauses' are to be given effect, at least with the proviso that such clauses, if abusive or unreasonable, may be prohibited by domestic validity rules.[2]

A more difficult question is to determine what constitutes 'reliance-inducing' conduct under the 'estoppel' safety-valve established by the second sentence of Article 29(2), just as the proper construction (interpretation) of a given 'no oral modification' clause may give rise to a difficult question regarding the relationship between that sentence and the general rule in Article 6.[3] [page 84]

1. Accord: Schlechtriem, Commentary (1998) at 213. Compare so-called 'merger clauses' which are designed to deprive prior or contemporaneous oral agreements of contractual effect: re. such clauses and 'parol evidence' see supra No. 86 with note 6.
2. Schlechtriem at id.
3. See Honnold, Uniform Law (1999) at 230 ff. [available at <http://www.cisg.law.pace.edu/cisg/biblio/honnold.html>]. See also Schlechtriem, op. cit. at 215 (need to apply flexible approach means that courts will enjoy considerable discretion). See generally Hillman, R., 'Article 29(2) of the United Nations C.I.S.G.: A New Effort at Clarifying the Legal Effect of 'No Oral Modification' Clauses,' 21 Cornell International Law Journal 449 (1989). Regarding estoppel as a general CISG principle see supra No. 79 with notes 7 and 12 [available at <http://www.cisg.law.pace.edu/cisg/biblio/hillman2.html>].

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