Reproduced with permission from 8 Journal of Law and Commerce (1988) 11-51
John E. Murray, Jr. [*]
The contract formation Articles of the United Nations Convention on Contracts for the International Sale of Goods (CISG) provide a fascinating challenge for United States lawyers. For more than three decades, we have been assimilating the new design in the agreement process created by the Uniform Commercial Code as elaborated in the Second Restatement of Contracts. There is reason to believe that many of our brethren at the bar have less than a sophisticated understanding of the new design. Some may still believe that the UCC merely tinkered with monistic Willistonian contract law. While the "battle of the forms" and unconscionability created considerable interest, there is a continuing suspicion that notions of "unilateral" vs. "bilateral" contracts and other "chestnuts" are still recalled from those halcyon days in the first year contracts class without at least full recognition of the significant modifications affecting those fossils. The current understanding of the new design of the agreement process ranges from those who would still regard the First Restatement agreement process as "the law" to those who fully comprehend the nature and extent of the sometimes radical modifications. Against this backdrop, we must now begin to understand a new United States contracts formation law which will govern international contracts for the sale of goods.
II. Approaching the New International Sale of Goods Convention
We are struck by a new world where there is no consideration, no statute of frauds, and no parol evidence rule, among other differences. Perhaps the first memorable impression is the frugality of statement of the entire Convention. One example among many is the coverage of implied and express warranties and the disclaimer of warranties. The UCC requires four sections to deal with express warranties, the implied warranties of merchantability and fitness for a particular purpose and disclaimers of warranties. CISG disposes of these matters with aplomb in one Article. Within this Article, the premier illustration of frugality of language may be seen in one phrase that constitutes the entire CISG treatment of warranty disclaimer. At times, the sparse and candid language is commendable, as in a subsection of Article 29 dealing with no oral modification clauses. In other parts of CISG, however, the deliberate lack of elaboration can be disconcerting. This essay will concentrate on Part II of CISG, Articles 14 through 24, "Formation of the Contract." Related matters dealing with the parol evidence rule, objective vs. subjective theories of interpretation and contract modification will also be considered. It is important to begin with the CISG agreement process. The first Article begins, appropriately enough, with the definition of an "offer."
III. What Is An "Offer" Under CISG?
An American lawyer will be pleased to discover what may appear to be a familiar description of an offer in CISG: "A proposal for concluding a contract addressed to one or more specific persons constitutes an offer if it is sufficiently definite and indicates the intention of the offeror to be bound in case of acceptance. The Second Restatement of Contracts emphasizes the second portion of this definition: "An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it." Under CISG, the proposal must "indicate the intention of the offeror to be bound in case of acceptance." Such an intention must be "indicated" to the party to whom the proposal is addressed. How is that "indication" to be interpreted? Another Article provides the interpretation guide: "[S]tatements made by and other conduct [together, constituting 'indications' or manifestations] of a party are to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances. Thus, if the indications (manifestations) of the proposer justify the addressee in understanding that his acceptance will form a contract, the proposal, if otherwise sufficiently definite, constitutes an offer. The concept is indistinguishable from the Second Restatement definition.
B. Sufficiently Definite -- The Use or Misuse of Article 55
The CISG definition requires the proposal to be "sufficiently definite" to constitute an offer. At first glance, this appears to be well within the ambit of concepts familiar to the American lawyer. If a proposal is not sufficiently definite, it could not reasonably be understood as an offer. Moreover, the UCC requires sufficient definiteness to permit a court to fashion an appropriate remedy.[l2] CISG, however, defines "sufficiently definite" in a fashion that will be troublesome for an American lawyer: "A proposal is sufficiently definite if it indicates the goods and expressly or implicitly makes provision for determining the quantity and price."[l3]
While the phraseology may be angular, the requirement that the proposal must "indicate the goods" is not troublesome since it can only mean that the goods must be sufficiently described. Neither is the requirement that the proposal must expressly or implicitly allow for the determination of the quantity term. American contract law requires that the quantity be determined or determinable to permit an appropriate remedy and to satisfy the statute of frauds.[l7] If, however, the price is not expressly set forth, how may the price be implicitly determined? Consider a simple illustration.
Ames Corporation in Contracting State X sends a purchase order to Barnes Corporation in State Y which evidences an offer to buy 1000 units of M-33 Plastic. If Barnes accepts, is there an enforceable contract?
Under the UCC, the question scarcely survives its statement. If the parties intend to be bound and there is a reasonable basis to afford a remedy, the absence of a price term will not deter a court from discovering an enforceable contract. Under CISG, however, the question is not so easily answered. If the parties had dealt with each other in the past in such a fashion that their prior course of dealing would allow a price to be implied, or if trade usage would perform the same function, a contract could be found under CISG which expressly allows for trade usage, prior course of dealing and course of performance in determining the intention of the parties.[l9] Absent such "relevant circumstances", however, there would seem to be no basis for discovering an implicit price under CISG. The UCC would allow a court to insert "a reasonable price . . . if nothing is said as to price." Article 14(1) of CISG on its face, however, does not permit the insertion of a reasonable price. Moreover, earlier efforts by CISG delegates to resolve the question through the insertion of other language were unsuccessful. There is a difference of opinion between the two leading American authorities on CISG, Professors John Honnold and Alan Farnsworth, as to whether this problem was effectively solved. Professor Honnold suggests that Article 55 of the Convention solves the problem; Professor Farnsworth disagrees.
Article 55 is in Chapter III, Part III of CISG, dealing with the obligations of the buyer under a sales contract within the Convention:
Professor Honnold reads the foregoing as making clear that ". . . a contract may be 'validly concluded' even though 'it does not expressly or impliedly fix or make provision for determining the price.' More specifically, the added provision, that in such a case the parties are considered 'to have impliedly made reference' to the prices generally charged, precludes argument that failure to state the price produces a fatal gap in the contract that contravenes the provisions on definiteness in Article 14."
Notwithstanding this assertion, argument has not been precluded. Professor Honnold's colleague in UNCITRAL and elsewhere, Professor Farnsworth, views the unstated price problem in Article 14(1) as one of four problems within Part II of CISG that is "especially worthy of consideration." Farnsworth points out that the requirement in 14(1), that a proposal will not be sufficiently definite to constitute an offer unless it expressly or implicitly makes provision for determining the price, carries with it what he terms "the unfortunate implication" that such a proposal "is not sufficiently definite unless it does this." The consistent opposition of the United States to this language failed to convince the other delegates to delete it. Farnsworth discovers no solution in Article 55 since that Article becomes operative only after it has been determined that a contract "has been validly concluded." He joins others who believe that Article 55, in Part III of CISG dealing with the obligations of the parties to an existing contract, was designed for use only where a Contracting State made a declaration under Article 92(1) that it will not be bound by Part II of the Convention. If the non-CISG law of that State found a contract without a price to have been "validly concluded" but litigation ensued concerning the obligations of the parties under that contract to which Part III of CISG, ratified by the Contracting State, would apply, Article 55 of Part III would permit a court to insert the "price generally charged" in such a "validly concluded" contract. It is difficult to quarrel with this analysis of Article 55 since it finds considerable support in what may be called the legislative history of CISG.
The foregoing analysis suggests the solution does not lie in Article 55. A better approach may be found in Article 8 of the Convention, which requires an interpretation "according to the understanding that a reasonable person of the same kind as the other party would have had in the circumstances." The UCC rejects any notion that the omission of a price term will cause the agreement to be deemed unenforceable where the dominant intention of the parties was to enter into a binding agreement. If a reasonable person would regard the deal as binding, the interpretation of the parties' manifestations requires recognition of that agreement. The price term may be implicitly recognized through an expanded reading of trade usage, which CISG authorizes in determining the intent of the parties. This analysis will reject artificial and technical interpretations and "promote uniformity in its [CISG's] application and the observance of good faith in international trade." Unlike the UCC, CISG does not contain a clear directive that the purpose of courts is to discover the bargain of the parties in fact which imports a consequent rejection of technical barriers to the effectuation of that purpose. Yet, emphasis upon the reasonable understanding of the parties and their dominant intention within CISG could overcome any notion that the language of Article 14(1) concerning an explicit or implicit fixing of the price should be construed to permit technical barriers to that understanding and intention.
C. The Mysteries of Article 14(2)
From the perspective of an American lawyer, a literal application of this language is absurd. Certainly, American lawyers are well aware of proposals constituting offers though the offerees are not identified at the time the offer is made. On the other hand, the mere identification of the addressee of the proposal at the time it is made does not, in itself, constitute an offer. The question of whether an offer has been made can be very difficult in a given fact situation since it is a question of intention -- a question of fact. Certainly, the dominant guide in American case law is not whether the proposal was addressed to one or more specific persons. Rather, courts properly focus on whether the proposal contains a statement amounting to a commitment or promise as contrasted with a statement of present intention or a statement of opinion or prediction. Absent a commitment or promise, it is impossible to arrive at the conclusion that a party would be reasonable in assuming that his assent would conclude a contract, or, in the language of CISG, Article 14(1), there would be no indication that the offeror intended to be bound in case of acceptance. In suggesting the Article 14(2) test to determine whether a proposal is an offer by selecting only one subsidiary factor of very limited use in that determination, CISG creates the possibility of considerable confusion. What of a trade circular or catalogue addressed to one or more specific persons? It has been suggested that an offer should not be found in such cases under CISG because 14(1) still requires the document to indicate the proposer's intention to be bound. But this interpretation seems diametrically opposed to the language of 14(2)which, by its terms, requires any proposal to indicate clearly that the proposal is an offer except proposals addressed to one or more specific persons. The requirement in 14(1) that the proposal must indicate the intention of the offeror to be bound is hardly a test. It is a conclusion that can be supported by numerous guides or tests familiar to American lawyers. Those guides or tests, however, are conspicuously absent from CISG, which, again, mentions only the "specific person" in 14(2) and fails to identify it as, at best, a subsidiary guide among other much more important factors. Thus, the suggestion that the language of 14(1) overcomes the problem appears to be based on a construction that an American lawyer would bring Article 14(2) in conformity with fundamental notions of the common law of contracts. While such a preference is laudable, it hardly confronts the problems engendered by 14(2).
To ascertain compliance with CISG, should a typical American seller who distributes trade circulars or the like to specifically addressed parties in other countries be advised to include a conspicuous statement that the material is intended to be a mere solicitation rather than a statement offering to sell the described goods, assuming that to be the seller's intention? A client would be well advised to recognize the problem created by the language of 14(2). On the other hand, should a proposal that is not addressed to one or more specific persons "clearly indicate" that it is an offer, if that is the proposer's intention and CISG might apply? Again, a client would be well advised to recognize the problem created by the language of 14(2).
D. Time When Offers Become Effective -- Duration of Offers
CISG states that an offer becomes effective when it reaches the offeree. An offer, like other operative indications of intention, reaches the offeree when it is delivered to his place of business or mailing address. American lawyers may be troubled to discover the CISG possibility that one can be an offeree before he knows of the offer, i.e., if the offer is effective when it is delivered to the offeree's office or other mailing address, CISG promotes the notion that the offeree has a power of acceptance even before he reads the offer or otherwise comes to know of it. American contract law precludes an operative acceptance without knowledge of the offer. If an offer is made by A to B while A has no knowledge of B's identical offer to A, crossing offers do not constitute a contract. This problem may appear principally in classrooms discussing differences between CISG and the UCC or common law of contracts. CISG, however, manifests more pragmatic problems.
Assume an offer is dispatched on June I which provides that the offeree has twenty days in which to accept. The common law interpretation of that offer would permit twenty days from the time the offer is received on the sensible footing that the offeree cannot know of the offer and cannot, therefore, become an offeree, until he receives the offer. This sensible notion is rejected under CISG which would interpret the statement in the offer as commencing the twenty day period from the moment a telegram is handed to the telegraph company for dispatch or, in the case of a letter, from the date of the letter, or, where no date is shown on the letter, from the date on the envelope. The difference between the common law and CISG may be viewed simply as one of interpretation, i.e., there are two plausible interpretations and either is supportable. Yet, the CISG interpretation does not maintain internal consistency. Remember that CISG insists that an offer is "effective" when it reaches the offeree. If the offer is not effective until it reaches the offeree, why should the time stated in the offer begin to run upon dispatch or the time on the letter or envelope? This rule of interpretation changes under CISG with respect to instantaneous communication such as telephone, telex or the like, i.e., acceptance fixed by the offeror begins to run from the moment the offer reaches the offeree under the time for Article 20(1).
Even with respect to written, non-instantaneous communications, it has been suggested that the CISG rule commencing the twenty days from dispatch or the date of the letter or envelope would be overcome by a statement in the offer that the twenty days commences when the offer reaches the offeree since the offeror can "fix" the time for acceptance. CISG apparently recognizes the common law view that the offeror is master of the offer and does, therefore, permit the offeror to fix the time for acceptance. Yet, it does so with respect to the time the acceptance must reach the offeror since, as will be seen in some detail later in this article, the general rule under CISG is that the acceptance must be received to be effective, i.e., the common law "dispatch" or "mailbox" ("post box") rule is rejected by CISG. Thus, even if the offer were to state unequivocally that the twenty days for acceptance begins to run from the offeree's receipt of the offer, the acceptance would have to reach the offeror "within the time he has fixed."  The offeree, therefore, would have to make an acceptance decision and mail the acceptance in time to reach the offeror within twenty days from the date the offeree received an offer expressly stating that the offer begins to run from the date of receipt. Thus, even with respect to that offer, the offeree would have to deduct the required time for the acceptance to reach the offeror from the twenty days. If the letter offer did not expressly state that the twenty days begins to run from the offeree's receipt (thereby activating the rule of interpretation that the time begins before its receipt), the offeree must, first, deduct the time from the date of the letter or date on the envelope from the twenty days. From that result, he must then deduct the mailing time for acceptance. Those deductions may force an offeree into an acceptance decision within ten or fewer days from the time he receives the offer expressly stating the time for acceptance to be twenty days.
Professor Honnold acquiesces in the foregoing analysis with no discomfort since he regards the CISG Article commencing the running of the twenty days in the offer before its receipt by the offeree (absent an express statement to the contrary by the offeror) as "merely a guide to interpreting the offeror's statements." He then, however, suggests the following hypothetical: The letter offer states, "You will have five days to consider this offer." He further assumes that the mails between the parties normally take four or five days for delivery. He concludes, "It would be inconsistent with the expressed intention of the offer to start the five-day period on June 1 [the date on the letter or envelope]."
In light of his express assumption that the mailing time is four or five days for the offer to reach the offeree, Professor Honnold is presumably suggesting that it would be absurd to interpret the offer as commencing five days from the date of the offer since that period would have expired at or shortly after receipt of the offer. Thus, the guide to interpretation in Article 20(1) would be overcome. It is interesting that Professor Honnold does not simply interpret the language of his hypothetical offer, "You will have five days to consider this offer" as commencing five days from the time of the offeree's receipt, regardless of the time required for the offer to reach the offeree. If Article 20(1) is a mere guide to interpretation, it would seem that the language of the offer should be sufficient to overcome that guide. Professor Honnold, however, appears to suggest the contrary with respect to that language, and predicates the overriding of the interpretation guide on the period required for the mail to reach the offeree. It is even more interesting to consider the time the offeree has "to consider" the offer from the time of receipt. Again, the acceptance must reach the offeree within the time fixed in the offer to be effective. Thus, assuming the five days begins to run from the time of receipt, with the mail requiring four to five days to be received, the offeree would have to mail the acceptance immediately upon receipt of the offer to ascertain compliance with the required time of acceptance. Such an offeree could, of course, use a more rapid or even instantaneous medium of acceptance. If, however, Professor Honnold's analysis is designed to suggest a sensible interpretation of the time for acceptance under the circumstances of the offer, an even more sensible approach would permit the offeree to dispatch (mail) the acceptance within five days after receipt of the offer. There is, however, no readily apparent basis in CISG for this sensible result since it would suggest the application of the common law "post box" or dispatch rule which, again, has been rejected by CISG. The only possible interpretation under CISG that might permit this analysis is to interpret the offer as derogating from the rule that the acceptance must be received within the time fixed in the offer and to permit, instead, the offeree to manifest acceptance by dispatch within five days from receipt. Article 6 of CISG expressly permits the parties to exclude, derogate from or vary the effect of any provision with CISG. Moreover, the legislative history of CISG indicates that UNCITRAL refused to require any such exclusion, derogation or variance from CISG terms to be expressed by the parties though it also rejected the inclusion of a term permitting "implied" exclusion of CISG terms by the parties. Thus, if an offer could be interpreted to exclude the normal requirement that an acceptance reach the offeree under CISG, the dispatch rule could apply to the offeree's acceptance. In light of the express rejection of the common law dispatch rule by CISG delegates and the refusal to incorporate a term in Article 6 that clearly permits implied exclusion, however, derogation or variance from CISG terms, such an interpretation is more than questionable.
E. Revocable and Irrevocable Offers -- "Firm" Offers
American lawyers believe that offers are revocable unless they are made irrevocable through an option contract or alternate statutory or judicial devices which have the effect of an option contract in making an offer irrevocable. Upon first glance, CISG appears to provide a similar structure in stating a general rule that, subject to certain exceptions which appear similar to American devices, an offer may be revoked if it reaches the offeree before he dispatches an acceptance. The exceptions, however, may be quite different from those familiar to an American lawyer. The Uniform Commercial Code contains a section permitting a merchant to make a "firm" (irrevocable) offer to buy or sell goods if he does so in a signed writing which "gives assurance that it will be held open. . . ." There is, however, a limitation on the duration of such a firm offer. Whether the firm offer expresses a duration or a reasonable duration is supplied by a court, the maximum time for the firm offer is three months, i.e., at the end of three months, the offer becomes revocable even if the firm offer stated the duration for a longer period or a reasonable time would exceed three months. No such limitation is found in CISG. There is, however, a much more important difference between the UCC and CISG firm offer concepts.
American lawyers may not focus upon a distinction between a statement designed to make an offer firm or irrevocable and a statement that simply provides a period after which the offer will lapse. For an offer to be "firm" under the UCC, the terms of the offer must "give assurance that it will be held open. . . ." There is no definition or elaboration of this requirement in the UCC section. There is, however, no doubt that courts will insist upon sufficient evidence of such an "assurance." Moreover, the common law has never displayed any doubt on the question of measuring the duration of revocable offers. Absent a genuine option contract, there has never been any question that a common law offeror who merely states the duration of an offer in terms of when it will lapse does not surrender the power of revocation prior to the completion of that duration. This rubric of the common law is not shared by the civil law tradition. While Article 16 begins with the statement that offers may be revoked, the Article quickly moves from that common law influence into a civil law posture: "However, an offer cannot be revoked: (a) if it indicates, whether by stating a fixed time or otherwise, that it is irrevocable. . . ." It would be a gross mistake to construe this provision of Article 16 as if it were identical to the UCC firm offer of § 2-205. The mere statement of the duration of the offer will be sufficient to createan irrevocable offer under CISG because this subsection partakes of the civilian tradition. Even if an offer were stated in terms of lapse, e.g., "this offer will lapse thirty days after the date of this letter," it is conceivable that the language of Article 16(2)(a) would permit a court to interpret such offer as irrevocable for the period stated therein. CISG offers can be made irrevocable through the use of other language, i.e., any language that would create a UCC firm offer would be sufficient to create an irrevocable offer under CISG. If, therefore, an American offeror sought to make an offer intended to be revocable notwithstanding a lapse date, the only certain route to that result would be a clear statement to that effect in the offer, e.g., "this offer is revocable at any time prior to the offeree's dispatch of acceptance and remains revocable though, absent prior revocation, it will expire (lapse) at 12 noon, Eastern Standard Time (United States) on June 22,1989."
Before considering additional ways in which an offer may be made irrevocable under CISG, it is important to emphasize another provision. If an offeror sends an irrevocable offer, the irrevocable offer may nonetheless be revoked under CISG "if the withdrawal reaches the offeror before or at the same time as the offer." This sensible position is predicated upon the failure of such an offer to raise any expectations on the part of the offeree.
CISG also permits an offer to become irrevocable through the offeree's reasonable reliance. This provision would certainly include a situation familiar to American lawyers. Where a subcontractor's bid is used by a general contractor in making an offer to construct a building, the foreseeable reliance by the general contractor will make the sub's bid irrevocable. The CISG provision, however, is so broadly drafted ("an offer cannot be revoked . . . 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") that it may be said to encompass numerous situations well beyond any yet recognized under the common law of contracts in the United States. Thus, mere preparation to accept an offer, absent substantial expense, substantial commitments or foregoing alternatives, would not constitute justifiable reliance under the common law concept. Certain commentary on the CISG Article, however, suggests that "[e]xtensive investigation to determine whether he should accept an offer" may constitute such justifiable reliance as to make an otherwise revocable offer irrevocable. The civilian proclivity toward the irrevocability of offers in general may induce a much wider use of reliance to achieve irrevocability. Suggestions that this particular provision of CISG will prove to be "substantially the same" as the Restatement Second of Contracts provision may be premature.
Finally, an otherwise revocable offer will become irrevocable through the dispatch of an acceptance under CISG. This phenomenon occurs as a result of the general rejection of the "dispatch" or "mailbox" rule of the common law. It will be explored, infra, in the discussion of the time when acceptance becomes effective.
IV. What Is an"Acceptance" Under CISG?
A. The General Principle Under CISG
CISG requires an "indication" of "assent" to an offer if the offer is said to have been accepted. The "indication" may occur through "[a] statement made by or other conduct of the offeree." An American lawyer is well aware of the "assent" requirement and would find comfort in the allowance of a manifestation of assent through the offeree's words or conduct. He would also find what appears to be a familiar caveat in this definition of assent: "Silence or inactivity does not in itself amount to acceptance." As in other formation Articles of CISG, however, what first appears to be virtually identical may, upon closer scrutiny, become different.
B. The Time When Acceptance Becomes Effective -- Changes in the "Dispatch" or "Mailbox" Rule
American lawyers are wed to the "mailbox" or "dispatch" rule of acceptance, i.e., absent an express requirement in the offer that the acceptance is not effective until it is received, the acceptance is effective upon dispatch if it is properly sent through an impliedly authorized ("reasonable") medium of acceptance. The risk of transmission is on the offeror for two reasons: (1) the risk must be allocated to one of the parties and the choice is not clear, and (2) the risk is allocated to the offeror since he, as master of the offer, could have controlled the risk of transmission in his offer but chose not to do so. An old argument in favor of the dispatch rule suggests that the rule avoids incessant notification. Thus, under a rule requiring the acceptance to be received by the offeror, the offeree would not know whether his acceptance was received until he is notified by the offeror to that effect. Having sent such a notice, the offeror would have to be notified by the offeree that he received notice of receipt of acceptance by the offeror. The offeror would then have to notify the offeree that he received . . . and so on, ad nauseam. Notwithstanding these arguments in favor of the dispatch rule, CISG adheres to the civil law tradition in requiring an acceptance to "reach" the offeree within the time fixed in the offer or, if no time is stated in the offer, within a reasonable time.
The major problem created by this approach is the change in the risk of transmission or delay in the acceptance. The offeree must now be concerned that his acceptance reaches the offeror and that it arrives within the time required by the offer. Thus, the careful offeree will ascertain that fact by pursuing a duplicative manifestation of acceptance within the time required by the offer or using an initial medium of acceptance that will provide evidence of the offeror's receipt of the acceptance. It should not be forgotten that CISG does not require written evidence of the contract. An oral acceptance or oral duplication of a written acceptance, however, may be difficult to prove.
At first blush, the requirement that the acceptance reach the offeree may suggest another major problem. Assume an acceptance is mailed but has not reached the offeror who decides to revoke the offer, i.e., before the acceptance is received, but after it was dispatched. Earlier we referred to the general principle that offers are revocable under CISG. The same Article setting forth that general principle, however, solves what otherwise would be a major problem for the offeree, in this situation: ''[A]n offer may be revoked if the revocation reaches the offeree before he has dispatched an acceptance."While this provision solves the problem for the offeree, it creates a problem for the offeror. The dispatch of an acceptance is still not effective as an acceptance, but it does have the operative effect of making an otherwise revocable offer irrevocable. The structure becomes even more curious when another CISG provision is considered: "An acceptance may be withdrawn if the withdrawal reaches the offeror before or at the same time as the acceptance would have become effective."
This provision is viewed as a companion to Article 15(2) which permits even an irrevocable offer to be withdrawn by the offeror if the withdrawal reaches the offeree before or at the same time as the offer. While each of the three provisions, i.e., Articles 15(2), 16(1) and 22, individually suggest defensible and even desirable purposes, their combined effect can be harmful to the offeror. Thus, assume an offer is received by the offeree who sends his acceptance in time for it to reach the offeree within the time established in the offer. The Article 15(2) power of withdrawal is extinguished when the offer was received absent a simultaneous withdrawal. The offeror maintains the Article 16(1) power of revocation only until the offeree has dispatched his acceptance. At that point, the offeree has an irrevocable power of acceptance which he may withdraw under Article 22 until the acceptance reaches the offeree at which point it becomes operative as an acceptance. Assume the acceptance was dispatched on June 1, that it will not arrive until June 5, and that June 5 is within the time prescribed in the offer. From the moment the acceptance is dispatched until the moment it reaches the offeror, the offeree may unilaterally withdraw from the deal while the offeror, whose offer became irrevocable upon the dispatch of the acceptance, may not withdraw. As a practical matter, the offeree's withdrawal of his acceptance could be accomplished by telephone. Thus, the combined effect of these CISG provisions is to permit the offeree to speculate at the expense of the offeror. The Second Restatement of Contracts wars against this possibility even where the acceptance arrives in a timely fashion because such speculation is a manifestation of bad faith. While CISG expressly sets forth a standard of "good faith in international trade" as one of its purposes, its procrustean rules, perhaps unwittingly, promote the possibility of such speculation by the offeree in this situation. Curiously, Professor Honnold does not address the problem in his book, and Professor Farnsworth provides a brief treatment in which he characterizes the situation as "a minor problem." His characterization is disconcerting.
C. Acceptance by Conduct
Under the UCC and Second Restatement of Contracts, it is clear that the typical offer may be accepted in any reasonable manner. Absent a clear expression to the contrary in the offer, the offeree may accept by promising the required performance or by performance. Though CISG requires assent to be "indicated" to the offeror by "[a] statement . . . or other conduct of the offeree . . .," a subsection of this Article appears to permit the offeree to accept by performance "without notice to the offeror" if the offer expressly or impliedly permits such an acceptance. These directives suggest a general principle of communication of assent by the offeree, i.e., a requirement that acceptance be promissory either in language or conduct with the additional requirement that such communicated assent must "reach the offeror." The only exception appears to be an offer that expressly permits or, through trade usage or prior course of dealing, impliedly permits the offeree to "indicate assent by performing an act." In that situation, "the acceptance is effective at the moment the act is performed, provided that the act is performed within the period of time laid down in the preceding paragraph [within the time required by the offer]." If such an acceptance "if effective at the moment the act is performed" rather than "at the moment the indication of assent reaches the offeror," which is the general requirement for acceptance, it certainly appears to be a clear exception to that general requirement. Professor Honnold's analysis of this CISG article, however, suggests considerable doubt as to whether it constitutes a genuine exception.
Honnold creates a hypothetical offer stating, "Please rush shipment of the following goods: (description of the goods)." The seller ships and the next day dictates a letter to the buyer informing him the goods have been shipped. Before mailing the letter, the buyer attempts to withdraw the offer and seller informs buyer that the goods have been shipped. The seller's notice of shipment is mailed and received by the purchaser twelve days before the goods are delivered. Professor Honnold concludes that a contract was formed. He leaves for further analysis the question of whether the notice of shipment was necessary "to perfect the acceptance" which he characterizes as "a difficult question." His subsequent analysis is confusing. There, he suggests a different hypothetical where the buyer simply requests the seller to ship certain goods, i.e., there is no indication of the necessity of quick shipment in the offer by language such as "rush" or otherwise. The seller ships the requested goods the day after receiving the offer and does not notify the buyer of shipment. The buyer becomes aware of the shipment about two weeks later when the goods arrive and the carrier notifies the buyer of such arrival. Professor Honnold suggests that the Article 18(2) requirement that the indication of assent must reach the offeror within the time prescribed in the offer controls. This conclusion is anything but remarkable if the offer is construed to be the normal offer under CISG rather than an offer permitting acceptance by performance under 18(3). Honnold seems to adhere to this interpretation by insisting on the application of 18(2) as he cautions, "Acceptance by act is authorized by Article 18(3) only 'by virtue of the offer or as a result of practices which the parties have established between themselves or by usage.' " Later in the analysis, however, he suggests his interpretation of the Article 18(3) language where the offeree "may indicate assent by performing an act . . . without notice to the offeror."
His interpretation is troubling:
The analysis is troubling because it is unclear. Does Professor Honnold suggest that Article 18(3) which proclaims performance to be the acceptance when that Article applies is still controlled by 18(2) which generally requires that the communication of acceptance must reach the offeror within the time prescribed in the offer? If so, does the acceptance occur upon performance of the act or not until it is communicated to the offeror? To suggest that there is no acceptance until it is communicated to the offeror is diametrically opposed to the language in 18(3), i.e., "the acceptance is effective at the moment the act is performed." This cannot be Honnold's view. His earlier statement wondering whether "a timely communication [is] necessary to perfect the acceptance" suggests that he does not regard communication of acceptance as the acceptance since an acceptance under 18(3) has already occurred through performance (shipment). Unfortunately, he fails to characterize this necessary communication of acceptance. Under the UCC and the Second Restatement of Contracts, such a communication of acceptance is clearly a condition to the duty of the former offeror. Thus, once shipment (performance) has occurred, a contract would be formed. If the goods arrive within the time fixed in the offer or within a reasonable time in the absence of a fixed time, notice of acceptance would be superfluous. If, however, the goods would not arrive within that time, notice becomes a necessary condition to the duty of the buyer which duty arose as soon as the contract was formed, i.e., upon shipment by the seller. The parallel is clear in the UCC and the Second Restatement.[l02] Professor Honnold apparently reads such a condition into Article 18(3). It would have been particularly helpful if he had provided a clear statement of this analysis.
D. The Effect of a Late Acceptance
If an offeree attempts to accept after the offer has lapsed, the common law would view such an attempt as useless since the power of acceptance no longer exists. A different analysis awaits the American lawyer under CISG. Assume, for example, an acceptance reaches the offeror, as required under CISG, but, because the offeree was tardy in sending the acceptance, it arrives beyond the time fixed in the offer or, if no time was fixed, beyond a reasonable time. If the offeror wants to form the contract notwithstanding the late acceptance, CISG empowers him to do so by "orally [informing] the offeree or [dispatching] a notice to that effect." This provision leaves a number of questions.
It should be recalled that an acceptance may be withdrawn by an offeree if the withdrawal reaches the offeror before or at the same time an acceptance would have become effective (an acceptance normally becomes effective when it reaches the offeror if it is timely). In the late acceptance situation, the acceptance will not be effective because it did not reach the offeror within the time prescribed in the offer. Yet, because the offeror may treat such a late acceptance as effective, an offeree cannot assume he will not be bound to a contract because his acceptance was tardy. Thus, if the offeree who sends a late acceptance decides that he does not wish to be bound to a contract with the offeror, he must withdraw the acceptance. If his withdrawal is not received before he is orally notified of the offeror's treatment of the late acceptance as effective, however, a contract is formed. Moreover, if the offeror merely dispatches such a notice before receiving the offeree's notice of withdrawal, the withdrawal is inoperative. It is particularly interesting that CISG merely requires dispatch of the offeror's notice that he will treat the late acceptance as effective. Since offers, revocations of offers, acceptance and withdrawals of acceptances must reach the other party to be effective, the choice of dispatch as the operative moment when a notice that a late acceptance will be effective appears quite deliberate. Moreover, the language of that CISG provision does not suggest that the dispatched notice must be received at any time, i.e., it does not appear that dispatch is used in the same fashion in this provision as it is used in Article 16(1) where it operates to preclude a revocation by the offeror rather than to make an acceptance effective upon dispatch. Thus, in this isolated situation, the dispatch rule of the common law apparently lives under CISG.
If the acceptance arrives late even though the writing indicates that it was sent in timely fashion, i.e., the lateness was due to transmission delays beyond the control of the offeree, the acceptance is effective notwithstanding its late arrival unless the offeror, without delay, informs the offeree that the offeror considers the offer as having lapsed or dispatches a notice to that effect. Unlike the situation described above where the offeree is at fault in sending a tardy delay, CISG here deals with the situation where the offeree is diligent in sending an acceptance and, by virtue of the writing, the offeror knows or reasonably should know that the delay occurred through the fault of the intermediary rather than the offeree. The acceptance, therefore, is treated as effective to protect the offeree. The offeror, however, may have changed his position after the acceptance failed to reach him in a timely fashion. To protect the offeror, therefore, CISG permits him to orally inform the offeree that he considers his offer as having lapsed, or to dispatch a notice to that effect. Again, the language appears to permit the offeror to achieve the effect he desires merely by dispatching such a notice, i.e., the risk of transmission is on the offeree.
The "late acceptance" situation under CISG may be summarized rather easily as follows. Where the acceptance arrives late due to the tardiness of the offeree, no contract will result absent a notice from the offeror that a contract does result. Where, however, the late acceptance is the fault of the intermediary, a contract is formed upon the arrival of the late acceptance absent a notice from the offeror that he will treat the offer as having lapsed because of the late acceptance. Each of the rules in Article 21 appears to serve a desirable purpose. Thus, if the offeree is tardy in sending an acceptance, presumably he wants to be bound to the deal notwithstanding the late acceptance. That desire, however, will depend upon the offeror who must, in effect, assent to this late acceptance by informing or dispatching a notice to the offeree. The rule protects the offeror against a late acceptance but permits a contract to be formed if the offeror acquiesces. The power to form the contract is appropriately in the offeror since the offeree was tardy in sending the acceptance. The second rule in Article 21 initially protects the diligent offeree against delays caused by the intermediary by treating the late acceptance as effective. To avoid harm to the equally innocent offeror, however, the rule then allows the offeror to treat the late acceptance as inoperative by informing or dispatching a notice to the offeree to that effect. There is, therefore, an affirmative duty on the offeror to notify the offeree that the acceptance will be treated as inoperative if the offeror chooses to avoid being contractually bound at a time beyond that which he required in his offer. Unfortunately, there is another possibility, superficially redolent of a ramification described earlier where one party is apparently permitted to speculate at the expense of the other.
Assume a situation to which the second rule in Article 21 clearly appears to apply, i.e., the offeree has mailed an acceptance in ample time for it to reach the offeror within the time prescribed in the offer. Transmission delays beyond the awareness or control of the offeree, however, cause the acceptance to arrive quite late. The offeror had assumed that his offer was not accepted prior to receiving the delayed acceptance. Substantial changes in the market price for the goods now favor the offeror, i.e., the market price has dropped precipitously and the offeror would be delighted to sell the goods for the price in his original offer. The literal application of Article 21(2) would permit the offeror to treat the late acceptance as effective, regardless of the current desire of the offeree. Such an offeror appears to be given the power to speculate at the expense of the offeree. Yet, the situation would be rare in that it must assume no communication between the parties during the delay in transmission. Remembering the power of an offeree to withdraw an acceptance until it reaches the offeror, if the offeree were aware of the delay in transmission and a plummeting market price, such an offeree could withdraw the acceptance through an instantaneous medium such as the telephone. If the offeree were not aware of the delay in transmission, presumably he assumed he was bound to a contract that has become undesirable because of market changes. In the latter case, it does not seem anymore harsh to hold the offeree to the contract than it does to hold any party to a contract that becomes undesirable because of market changes. Thus, unlike the earlier "speculation" situation, this possibility is not necessarily one that permits conduct by the offeror bordering on bad faith. Professor Honnold, who said nothing about the earlier possibility of speculation which manifests no redeeming virtue, is concerned about this one.
Unfortunately, his discussion is difficult to follow. His example clearly requires the application of Article 21(2). The offer fixed June 30 as the time for the acceptance to reach the offeror as required under Article 18(2), and the offeree mailed the acceptance on June 15 in ample time; therefore, it should have reached the offeror by June 20, but was delayed in transmission until July 20. Yet, Honnold insists on discussing Article 21(1) with respect to this hypothetical. It provides: "But if the [offeror] may be given a free choice to approve or disapprove an 'acceptance' that has been delayed in transmission while conditions radically change, . . . [it provides] an opportunity to speculate at the expense of the other party." He then suggests:
Assuming that the Article 21(1) was intended rather than 21(2), since Article 21(1) refers to the situation where the late acceptance is caused by the fault of the offeree, why is there any unfairness to an offeree who is at fault in sending a late acceptance that is made operative by the offeror's notification? Such an offeree is not required to send any acceptance and should reasonably know that if he sends a late acceptance, it may be given operative effect. Moreover, even after sending the late acceptance, the offeree may still withdraw it at any time before it reaches the offeror.
Assuming that the number 21(1) is a misprint and Article 21(2) was intended, the diligent offeree would be bound to a contract if he chose not to withdraw his acceptance before it reached the offeror. If the market price of the goods he was attempting to buy plunged after his acceptance reached the offeror, the offeree would not be excused from performing. Professor Honnold suggests this example except that the acceptance did not reach the offeror. His example then suggests that, when the acceptance letter arrived a month later (after the market price has plunged) and the seller (offeror) "was glad to close a deal at the higher level reflected in his June offer," the seller wires the buyer that he will treat the June 15 letter as an acceptance, notwithstanding its late arrival. The question is, why did the seller bother sending any notice to the buyer (offeree)? Since the late acceptance was due to a delay in transmission rather than the fault of the offeree, the late acceptance "is effective" under Art. 21(2) unless the offeror chooses to treat it as rejection by notifying the offeree. Indeed, by treating the acceptance as effective under these circumstances, Article 21(2) is providing quasi "mailbox" rule protection to the offeree. It is not genuine mailbox rule protection because the acceptance is still not effective until it reaches the offeror, and the offeror may choose to negate the effectiveness of the late acceptance. Yet, by treating the late acceptance caused by a delay in transmission as an effective acceptance upon arrival subject to the power of the offeror to negate it, CISG is removing some of the risk of transmission from the offeree. As to the offeror's power to negate such a late acceptance, he must be permitted to do so if he is not to suffer because of the delay in transmission for which he, like the offeree, is not responsible. In sum, Articles 21(1) and (2) appear to be sound in principle and operation. The opportunity for "speculation" by the offeror is very limited but does not appear to be at the expense of the offeree who, at least under the Honnold hypothetical, appears to assume that he was bound to the contract and would have been surprised to learn of the delay in transmission. In any event, the level of speculation at the expense of the other party in this situation pales by comparison to the possibility of speculation by an offeree who takes his time to decide upon withdrawal of an acceptance as explored earlier.
E. Different or Additional Terms in the Acceptance -- The "Battle of the Forms" Under CISG
One of the sacred rules of the common law of contracts was the "matching acceptance" or "mirror image" rule which allowed for virtually no deviation in the terms of a response to an offer if that response was to operate as an acceptance. What has become the most controversial section of the Uniform Commercial Code is typically viewed as the section that emasculated the "matching acceptance" rule of the common law.
Section 2-207 permits a response containing different or additional terms to operate as an acceptance if the response is otherwise a definite and seasonable expression of acceptance. This iconoclastic concept has been misunderstood and applied in mechanical fashion -- a fashion diametrically opposed to the specific purposes of § 2-207 and the underlying purposes of Article 2 as expressed by the father of the UCC and principal draftsman of Article 2, Karl Llewellyn. Llewellyn was concerned that the contract recognized by a court would be the factual bargain of the parties. He knew that parties who exchange printed forms (typically a purchase order and acknowledgment) were only concerned with what he called "dickered" terms, i.e., the description of the goods, the price, perhaps the delivery terms and little else. They were neither concerned about nor aware of such lawyer-drafted, fine print clauses as those dealing with warranty disclaimers, the exclusion of consequential damages or arbitration as a substitute for the judicial process and judicial remedies as found in Article 2 of the UCC. Rather, the parties thought they had a "closed deal" and Llewellyn wanted to recognize that deal rather than some tortured amalgam of a deal that neither party would recognize, concocted from technical rules of monistic, Willistonian contract law. Llewellyn had nothing against a true "matching acceptance." But the acceptance he discovered and inserted into § 2-207 was not an acceptance at common law.
At common law, Llewellyn's definite and seasonable expression of acceptance containing different or additional terms was necessarily a counter offer which rejected the offer from the other party, typically the buyer. The reasonable merchant buyer did not know the response he received was a counter offer and when the goods arrived, he accepted them. Later, when something went awry such as the goods not performing according to merchantable standards causing direct and even consequential damages, the buyer felt compelled to bring an action for breach of that basic implied warranty of merchantability to recover his direct and consequential damages. The buyer would lose because the seller's printed form disclaimed the warranty of merchantability and excluded consequential damages. Since the reply to the offer contained terms that either expressly or impliedly deviated from the terms of the offer, the seller's form was a counter offer which was said to be accepted by the buyer when he accepted the goods.
The unassailable Willistonian logic resulted in the buyer accepting all of the seller's terms, i.e., warranty disclaimers, damage exclusions and the like though no reasonable buyer had any such intention. The manifest injustice of sticking either party with material, risk-shifting clauses neither read nor understood from the other's printed form through a mechanical application of common law contract rules was clear to Llewellyn. It would be no easy task to provide a UCC section that would deal effectively with the new concept.
We have now had enough case law and scholarly comment to conclude without the slightest doubt that the only remedy is a statutory amendment with no warranties that the substitute will work. The language of the current 2-207 has been properly criticized and the judicial evolution of the section upon which Llewellyn relied has been a miserable flop. Little wonder that the CISG delegates could not have been persuaded to pursue a United States legal perspective of acceptances containing different or additional terms. In fact, there is evidence that the American representatives were pleased to see the rejection of § 2-207 concepts in the Convention.
Notwithstanding the lack of a successful paradigm, a return to the pre-UCC version of the matching acceptance rule does not speak well for the CISG product. Whatever may be said to be wrong with UCC § 2-207, its purpose was to overcome the manifest injustice suggested above. That was and is a noble purpose. That purpose was either unseen, ignored or considered impossible to attain in one of the great compromise legal documents of the twentieth century, CISG. The nobility of purpose was, rather, said to be reflected in "the nature of a contract" and the "traditional theory that contractual obligations arise out of expressions of mutual agreement" thereby necessitating the requirement that "an acceptance must comply exactly with the offer." The absurdity of this notion with respect to unread printed forms was deliberately ignored by the delegates, for they were without a solution. The rationale is summed up very nicely by Professor Farnsworth: "[G]iven the controversy and uncertainty provoked by the Code provision, the Convention solution may be a sound, if conservative one."
The "Convention solution" is not a complete adoption of the pre-Code matching acceptance rule, though the differences between that antiquarian view and CISG are insignificant. The basic CISG provision certainly appears to be a complete adoption of the classical view: "A reply to an offer which purports to be an acceptance but contains additions, limitations or other modifications is a rejection of the offer and constitutes a counter-offer."
The language of this first and principal subsection in Article 19 is quite interesting. It is diametrically opposed to § 2-207(1) which would permit a reply to an offer purporting to be an acceptance to operate as an acceptance notwithstanding additions, limitation or other modifications. Fortunately, it uses the term "reply" rather than "acceptance," a fault of 2-207. The first subsection also avoids other troublesome language under § 2-207, i.e.,"different or additional" terms, and substitutes "additions, limitations or other modifications." Curiously, we will see "additional or different" creep into subsection (2) of Article 19. It is clear that Article 19(1) is designed to replicate the "matching acceptance" rule of the common law notwithstanding the repudiation of that concept under the Uniform Commercial Code.
Article 19(2) appears to mitigate the harshness of the matching acceptance rule of 19(1), but the mitigation is almost not worth the candle. If the reply to the offer contains different or additional terms that "do not materially alter the terms of the offer," the reply will constitute an acceptance unless the offeror promptly objects by orally informing the offeree or dispatching a notice to that effect. This provision is somewhat reminiscent of one of the earliest interpretations of § 2-207 of the UCC. In the celebrated Roto-Lith case, the court could not assimilate the radical changes effected by § 2-207. It suggested that immaterial changes contained in the response to the offer would not require the reply to be characterized as a counter offer, i.e., such a reply would constitute an acceptance which would include the immaterial changes. Material changes in the reply, however, mandated a counter offer characterization. Roto-Lith has been almost universally rejected as a reliable precedent since it is analytically unsound. The opinion unwittingly destroys § 2-207 which expressly allows for material alterations in an otherwise definite and seasonable expression of acceptance.
CISG Article 19(2) appears to arrive at the same conclusion as the ill-famed Roto-Lith case. Yet, it differs markedly from Roto-Lith in permitting the offeror to preclude the formation of a contract merely because the reply contains immaterial additions or deviations from the offer. The offeror is cloaked with this power under 19(2) even though the modifications of his offer are, by definition, insubstantial. If they are to be considered immaterial, the different terms in the reply may not relate to price, payment, quality or quantity of the goods, the place or time for delivery, the extent of one party's liability to the other or to the settlement of disputes. All of these terms are listed in subsection (3) of Article 19 as terms "considered to alter the terms of the offer materially."
It is difficult for Professor Farnsworth "to imagine variations that would not be material." Under § 2-207 of the Code, an offeror may preclude immaterial alterations of his offer by notice to the offeree. The offeror is not permitted to avoid the contract that was formed by the offeree's imperfect acceptance, however. By permitting the offeror to control the decision as to whether any contract is formed under CISG, there is the possibility of speculation at the expense of the offeree though Article 19(2) does require the offeror to act "without undue delay" if he decides to object to the immaterial variation of his offer. Assume, for example, that the offeror would like to revoke his offer but the offeree has already dispatched an acceptance which does not make the acceptance effective but does make the offer irrevocable. When the acceptance reaches the offeree, it is effective and a contract is said to be concluded at that point. If however, the offeror detects an immaterial difference in the terms of the purported acceptance, Article 19(2) permits him to defeat the entire contract. An offeror could, therefore, escape from a bargain because of an immaterial difference in the acceptance which would not bother someone in his position and, in fact, did not bother him. The "good faith" requirement in CISG will not operate as an effective deterrent of such conduct. If the offeror fails to object at all or fails to object in timely fashion, the reply is an acceptance and a contract is formed including the immaterial change in the acceptance. If, however, the offeror objects, the same reply is no longer an acceptance. It is magically transformed into a rejection. There would appear to be no reasonable basis for this structure. If a reply to an offer manifests an acceptance of all of the material terms of the offer but also contains a variant, immaterial term, why not permit the offeror to exclude that term from the contract by objecting to it rather than providing him with the power to preclude the formation of the entire contract? While this view may be seen as peculiarly American since it comports with the UCC, it is also a view that protects the offeror from any -- even immaterial -- variant terms and still requires the reply to be characterized as an acceptance which is effective when it reaches the offeror and concludes a contract under other CISG Articles. The current version is not only objectively absurd; it also creates contradictions within CISG.
It may have been oversanguine to expect CISG to include an effective provision dealing with different or additional terms in an otherwise definite expression of acceptance. We should not, however, assume that any of the problems that Llewellyn saw in the 1930's concerning such acceptances will somehow be avoided under CISG. Moreover, since current interpretations of the UCC favor buyers in the position of offerors sending purchase orders, it would not be unusual to discover a considerable proclivity for such buyers, pursuant to CISG Article 6, to avoid all of CISG or at least that portion dealing with the "battle of the forms".
V. CISG and the Parol Evidence Rule
Assume that the buyer and seller of equipment are about to sign a negotiated and detailed document evidencing their agreement when the buyer asks if the described equipment will meet certain specifications not mentioned in the writing that otherwise contains detailed specifications. After receiving the seller's assurance that the equipment will meet those unwritten specifications, the buyer and seller sign the document. Later, it is clear that the equipment fails to meet the specifications which were the subject of the parties' oral agreement prior to the execution of the writing. Under either the common law or Uniform Commercial Code parol evidence process, the evidence would be excluded. The alleged extrinsic agreement is one that parties, situated as were the parties to this contract, would naturally and normally include in the writing and the evidence would, therefore, be excluded under the Williston/First Restatement test. The evidence would also be excluded under the UCC test that would prevent the admission of such a prior agreement if it "would certainly" have been included in the writing by such parties. CISG rejects the parol evidence rule in the most frugal terms.
Article 8(3) may only appear to emphasize the relevant circumstances to be considered in determining the intention of the parties or the understanding a reasonable person would have under the circumstances. American lawyers will immediately recognize prior course of dealing, trade usage and course of performance in the garb of "practices which the parties have established between themselves, usages and any subsequent conduct of the parties." Just prior to this listing, however, a powerful phrase eliminates any concern over parol evidence: "[D]ue consideration is to be given to all relevant circumstances of the case including the negotiations . . . of the parties." Notwithstanding considerable criticism of the parol evidence rule from abroad, the rule continues to permeate the contract law of the United States. Professor Corbin would have shed no tears at its demise in this country, but it is contained, in liberalized fashion, in the Uniform Commercial Code and seems to thrive with respect to contracts other than those for the sale of goods to which the Code does not apply. Civil law countries have often managed without it or have been willing to apply it sparingly.
Parties to contracts subject to the common law or the UCC often insert a "merger" ("integration" or "zipper") clause in the writing evidencing their contract to provide an express manifestation of their intention that their writing constitutes the sole and exclusive (complete and final) statement of their agreement. Suppose the parties to a contract governed by CISG include such a clause. Does the insertion of a merger clause serve to incorporate the entire parol evidence process in any litigation over that contract? Professor Honnold suggests that such a clause may have that effect. Since there is continuing doubt concerning implied derogation of CISG terms under Article 6, the typical merger clause familiar to American lawyers may be insufficient for this purpose. At least some explicit reference to the parties' intention to derogate from Article 8(3) through Article 6 would provide a safer course. Moreover, since the parol evidence process is unfamiliar to jurists in countries that are now or will be subject to CISG, it may also be desirable to include an express reference to the UCC parol evidence process, i.e., UCC § 2-202, in a CISG merger clause. Since the UCC parol evidence rule expressly permits evidence of course of dealing, usage of trade and course of performance, it is not inconsistent with other parts of Article 8(3) of CISG discussed earlier in this section. Notwithstanding the criticisms of the parol evidence rule, it is clear that parties are often eager to emphasize their intention that the document they have signed should be the sole and exclusive manifestation of their agreement. A carefully drafted merger clause, therefore, becomes critically important under CISG if the parties do not intend to be bound by favorable or even accurate recollections of their negotiations prior to the execution of the final and complete writing evidencing their contract.
VI. Interpretations -- Objectives vs. Subjective Manifestations
We have just explored Article 8(3) of CISG which, except for the rejection of any parol evidence concept, contains familiar rules of interpretation, i.e., all relevant circumstances will be considered in determining the intention of the parties including trade usage, prior course of dealing and course of performance. Article 8(2) applies another familiar concept, i.e., statements or conduct of a party are to be interpreted according to the understanding a reasonable person would have had under the circumstances. But Article 8(2) applies only "[i]f the preceding paragraph is not applicable. . . ." That preceding paragraph, Article 8(1), may create confusion for a common lawyer: "For the purposes of this Convention statements made by and other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware of what that intent was."
If it is the actual intent of the party responsible for the statement or conduct that must be discerned, common lawyers long ago discarded any attempt to discover the subjective intent of any party to the contract. Though the unfortunate phrase "meeting of the minds" may appear even in current judicial opinions, there is no doubt that the phrase must be understood as requiring only an objective manifestation of assent, as any month old student of contract law in the United States knows. Article 8(1), however, does not require a return to some "will" theory of contract law. Rather, the intent of the party responsible for the statement or conduct is the controlling standard only "where the other party knew or could not have been unaware of what that intent was." American lawyers learn early on that the objective test fails only where there is no preponderance of objective evidence favoring one interpretation over another. The rare and famous example is Raffles v. Wichelhaus where the parties agreed to buy and sell cotton to arrive on the ship "Peerless". There were two ships named Peerless, apparently unknown to either party. From that case, the familiar incantation, now appearing in the Second Restatement, was first uttered: Where neither or both parties are aware of the latent ambiguity, there is no contract; where one party knows of a different meaning attached by the other and the other party does not know of a different meaning attached by the other, there is a contract according to the unknowing, innocent party. Article 8(1) would certainly appear applicable to a "Peerless" situation. It may also be applicable, however, to other situations which are relatively rare in United States contracts case law. If, for example, an offer contains a mistake of which the other party has reason to know, the offeree may not "snap up" the offer. If the offeror misspeaks and by that slip of the tongue makes an offer that the other party must have understood as mistaken because that party knew the true intention of the offeror, there is no power of acceptance for that which the offeree knew to be mistaken. These situations would appear to fall within the "subjective" standard of interpretation envisioned by Article 8(1).
While the standard of Article 8(1) is characterized as "subjective," Article 8(3) indicates that the "intent of a party" requires that due consideration be given to all relevant circumstances of the case including negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties. This subsection may superficially appear to apply only to "the understanding of a reasonable person" because it follows the "objective" standard of Article 8(2) which states the objective test, i.e., the understanding of a reasonable person. Article 8(2) expressly applies where 8(1) is not applicable. Article 8(3) expressly refers to the understanding of a reasonable person. What may be overlooked, however, is that 8(3) applies to both the understanding of a reasonable person and the intent of a party. Thus, even if the situation requires the application of 8(1) ("statements by and other conduct of a party are to be interpreted according to his intent"), the "intent" of that party will be considered in the context of all relevant circumstances. Thus, there is an "objective" overlay to the "subjective" standard of Article 8(1).
Finally, it is important to reiterate the difference between 8(1) and 8(2). The "intent of the party" will be the standard of interpretation of statements or conduct by that party only "where the other party knew or could not have been unaware what that intent was." Since the situations will be rare in which the quoted condition is met, the general standard of interpretation will be "the understanding that a reasonable person would have had in the same circumstances," i.e., the Article 8(2) standard. Article 8(3), again, elaborates the "reasonable person" standard of 8(2) and also overlays the "intent of the party" test in 8(1). Since 8(1) will be applied only in rare situations, however, 8(3) will be used primarily to elaborate the reasonable person standard of 8(2), a standard quite familiar to American lawyers.
VII. Contract Modifications Under CISG
One of the changes in the common law of contracts effected by the Uniform Commercial Code was a change in the pre-existing duty rule that allows good faith modifications to be enforceable without consideration. Article 29(1) of CISG permits the parties to modify or terminate their contract by a "mere agreement." There is nothing remarkable about such a pronouncement in CISG, however, since there is no requirement of consideration or other validation device in CISG. The apparent intention of CISG delegates in framing this provision was to adopt the Civil Law rather than the common law perspective. With respect to contracts for the sale of goods, however, the UCC had already removed the requirement of consideration which CISG sought to avoid. The Uniform Commercial Code section concerning contract modification proceeds to deal with oral modifications that do not satisfy the basic requirement of the statute of frauds, as well as oral modifications that violate a clause which the parties have inserted in the writing evidencing their original contract which precludes any modification that is not, itself, evidenced by a writing (a no oral modification clause). There has been considerable controversy concerning these and related provisions of the UCC. Since CISG has no statute of frauds requirement, it can deal with these problems in a much less complicated fashion. Article 29(2) seeks to make enforceable clauses requiring any modification or termination to be in writing. If, however, the parties have violated their own clause (their "private statute of frauds") through an oral modification, and one of the parties has relied on that modification, the other party may not assert the lack of a written modification to defeat the contract as modified. The language of Article 29(2) supporting this analysis is, however, flawed by the term, "conduct."
If the parties' original contract contained a provision precluding oral modifications but they orally agree to modify the contract notwithstanding that provision, a relying party in such a situation needs no "conduct" upon which to rely. Rather, he relies on the oral modification itself. Thus, to arrive at the analysis suggested above, it is necessary to regard the making of the oral modification by the other party as "conduct." While this has been done and clearly appears to be the purpose of the delegates, it remains an awkward term. Notwithstanding this flaw, the CISG contract modification concept and the removal of the no oral modification barrier through reliance on an oral modification is quite familiar to American lawyers.
This essay has concentrated on differences between United States contract law in the form of its common law and the Uniform Commercial Code on the one hand and CISG on the other. The lack of judicial interpretation or construction of CISG permits great leeway for anyone undertaking this task. The criticisms of the Convention are not criticisms of another legal system since CISG is now part of our legal system and, notwithstanding the deficiencies in the Convention addressed in this essay, the United States and the world have benefited considerably from its ratification in the United States and countries throughout the world. It is clearly preferable to peruse a uniform system of contract law for international transactions in the sale of goods than to continue with difficulties sometimes amounting to chaos which preceded the Convention and still afflict us where CISG does not apply. It is important to emphasize the enormous contributions of American scholars who were instrumental in bringing this benefit to the United States. In particular, the indefatigable efforts of Professors Honnold and Farnsworth are to be commended. John Honnold assumed the risk of writing a book analyzing CISG at a time when there was still doubt as to its ratification by the United States. Professor Honnold was committed to the promotion of the Convention and his book necessarily displays that commitment. Prior to its ratification in this country, those who supported it can be excused for some forbearance from a critical analysis. Now that we have it, however, it is appropriate to assume our normal stance of casting our critical eyes not only on this new legal product itself, but on competing analyses of it. Much more will be written of this Convention. At the moment, it is important that we begin to familiarize ourselves with it and, yes, even consider how it may be improved.
* University Distinguished Service Professor of Law, University of Pittsburgh, School of Law.
1. See Murray, A New Design for the Agreement Process, 53 Cornell L. Rev. 785 (1968).
2. In testimony before the New York Law Revision Commission concerning the then proposed Uniform Commercial Code, Karl Llewellyn emphasized the revolutionary character of the changes effected by the Code, particularly with respect to sales law in Article 2. Reacting to a suggestion that the Code "does not purport to change the substantive law of [New York] except in a few particulars," Llewellyn stated,
The changes are, in fact, deep, wide, vital. And they are utterly needed in order to produce intelligent and workable commercial law. 1 New York Law Revision Commission Report, Hearings on the Uniform Commercial Code 49 (1954) (emphasis in original).
3. U.C.C. § 2-207 (1978). For a recent analysis of this section and its interpretation, see Murray, The Chaos of the "Battle of the Forms", 39 Vand. L. Rev. 1307 (1986).
4. U.C.C. § 2-302 (1978). See generally Murray, Unconscionability: Unconscionability, 31 U. Pitt. L. Rev. 1 (1969).
5. For an analysis of the changes relating to unilateral versus bilateral contracts, see Murray, supra note 1.
6. U.C.C. §§ 2-313, 2-314, 2-315 and 2-316 (1978).
7. See generally U.N. Conference on Contracts for the International Sale of Goods, Final Act (April 10, 1980), U.N. Doc. A/Conf. 97/18, reprinted in S. Treaty Doc. No. 98-9, 98th Cong., 1st Sess. and 19 Int'l Legal Mat. 668 (1980) [hereinafter referred to as "CISG"]. Specifically, see CISG, art. 35.
8. Article 35(2) begins: "Except where the parties have agreed otherwise. . . ." This is the complete statement of warranty disclaimer in CISG. There follows the equivalent of the implied warranty of merchantability in (2)(a), fitness for a particular purpose in (2)(b), express warranties by sample or model in (2)(c), and the merchantability requirement of proper packaging in (2)(d). See CISG, supra note 7, art. 35(2).
9. Article 29(2) reads as follows:
This statement seems highly preferable to the modification mystery in § 2-209(2) through (5) of the U.C.C. Id., art. 29(2). For a recent exploration of that mystery, see Murray, The Modification Mystery: Section 2-209 of the Uniform Commercial Code, 32 Vill. L. Rev. 1 (1987).
10. See CISG, supra note 7, art. 14(1).
11. Id., art. 8(2). This subsection of Article 8 is sometimes characterized as the "objective" standard of interpretation as contrasted with Article 8(1) which suggests a subjective standard. As will be seen later, the subjective standard of 8(1) is rarely applicable. Id., art. 8(2).
12. U.C.C. § 2-204(3) (1978).
13. See CISG, supra note 7, art. 14(1).
14. Cf. U.C.C. § 9-110 (1978) stating that a sufficient description of collateral requires only that the description "reasonably identify" what is described.
15. Requirements or output contracts need not state the quantity term at the inception of the contract since the quantity term will be determined at the end of the contract period. See U.C.C. § 2-306 (1978) which favors such contracts and eschews any notion that they are fatally indefinite.
16. U.C.C. § 2-204(3) (1978).
17. See U.C.C. § 2-201 comment 1 (1978), indicating that, beyond identifying the goods and the parties, the quantity term is the critical term in the memorandum evidencing the contract for statute of frauds purposes.
18. See U.C.C. § § 2-204 (3), 2-305 (1978).
19. See CISG. supra note 7, art. 8(3). The language of this section differs from the U.C.C. characterizations: ". . . any practices which the parties have established between themselves, usages and any subsequent conduct of the parties." See also CISG, Article 9 which amplifies the significance of trade usage and prior course of dealing (termed "practices which they have established between themselves" under CISG). Article 9(2) emphasizes the implication of trade usage as part of the contract on formations. The U.C.C. insists upon the implication of trade usage and prior course of dealing in the definition of "agreement" in § 1-201(3). Course of dealing and usage of trade are defined in U.C.C. § 1-205(1), (2). For a leading case emphasizing the importance of such implied terms, see Columbia Nitrogen Corp. v. Royster, 451 F.2d 3 (4th Cir. 1971).
20. See CISG, supra note 7, art. 8(3).
21. U.C.C. § 2-305(1)(a) (1978).
22. Professor Honnold indicates that the issue arose in relation to the corresponding Article of the 1978 Draft Convention (Art. 51) which provided that the buyer must pay the price generally charged by the seller. Fearing that the seller's price might be abused, some delegates suggested language that would permit the price "generally charged." J. Honnold, Uniform Law for International Sales Under the 1980 United Nations Convention § 137 at 163 (1982) [hereinafter Honnold].
23. See CISG, supra note 7, art. 55 (emphasis added).
24. Honnold, supra note 22, at 163-64 (emphasis in original).
25. UNCITRAL stands for the United Nations Commission on International Trade Law, which first met in 1968.
26. Farnsworth, Formation of Contract, in International Sales: The United Nations Convention on Contracts for the International Sale of Goods § 3.04, at 3-8 (1984)[hereinafter cited as "Farnsworth"].
29. Article 92(1) permits a Contracting State to declare, at the time of signature, ratification, acceptance, approval or accession, that it will not be bound by Part II of the Convention, or that it will not be bound by Part III of the Convention. See CISG, supra note 7, art. 92(1).
30. See Note, The United Nations Convention on Contracts for the International Sale of Goods: Contract Formation and the Battle of the Forms, 21 Colum. J. Trans. L. 529, 537-38 (1983).
31. The United Nations Conference on Contracts for the International Sale of Goods -- Official Records, U.N. Doc. A/Conf. 97/19, at 44, art. 51 comment 2, Sales No. E.811V.3 (1981). This collection of documents characterized as "Official Records" includes previous drafts of CISG and commentary by various governments and organizations as well as commentary by the U.N. Secretary General on the penultimate draft.
32. See CISG, supra note 7, art. 8(2).
33. U.C.C. § 2-305 comment 1 (1978).
34. See CISG, supra note 7, art. 8(3). See also CISG Article 9(2) which elaborates the importance of trade usage and its application to questions of formation.
35. Id., art. 7(1).
36. For an analysis of the "factual bargain" philosophy of the U.C.C., see Murray, The Underlying Philosophy of Article 2 of the Uniform Commercial Code, 21 Washburn L.J. 1 (1981). There are many illustrations of the anti-technical nature of Article 2 of the Code. They include U.C.C. § 2-204(3) (contract does not fail for indefiniteness notwithstanding absence of one or more terms if parties intended to make a contract and there is a basis for giving an appropriate remedy); § 2-206 comment 1 ("[f]ormer technical rules as to acceptance . . . are rejected"); § 2-209(1) comment 1 ("[t]his section seeks to protect and make effective all necessary and desirable modifications of sales contracts without regard to the technicalities which at present hamper such adjustments").
37. Perhaps the best-known illustration is Carlill v. Carbolic Smoke Ball Co., 1 Q.B. 256 (1893) where a 100 Pound reward was promised to any person using the smoke ball in accordance with directions who contracted "the increasing epidemic influenza, colds or any disease caused by taking cold." Numerous advertisement cases can be found in the American Case law. Among these, one finds Lefkowitz v. Great Minneapolis Surplus Store, 251 Minn. 188, 86 N.W.2d 689 (1957) where advertisements constituted offers because they made the offeree clearly identifiable: "First Come, First Served."
38. See, e.g., Interstate Ind. v. Barclay Ind., 540 F.2d 868 (7th Cir. 1976) (quoting from Williston on Contracts, § 27, at 62 (3d ed. 1957): "Even where the parties are dealing exclusively with one another by private letters or telegrams, or by oral conversation, the same question may arise; and language that at first sight may seem an offer may be found merely preliminary in character."
39. See, e.g., Thos. J. Sheenan Co. v. Crane Co., 418 F.2d 642,644 (8th Cir. 1969) (present intention vs. promise or commitment); Anderson v. Backlund, 159 Minn. 423,199 N.W. 90 (1924) (predictions vs. promises).
40. This is the Restatement (Second) of Contracts § 24 (1981) conclusory test of an offer as discussed in Barnum v. Review Board of Indiana Employment Sec. Div., 478 N.E.2d 1243 (Ind. Ct. App. 1985) and Contempo Constr. Co. v. Mountain States Telephone & Telegraph Co., 736 P.2d 13 (Ariz. Ct. App. 1987).
41. See Honnold, supra note 22, at 162.
42. See CISG, supra note 7, art. 15(1).
43. Id., art. 24. This definition applies to other "indications of intention" besides acceptances.
44. One of the better known cases so holding is Glover v. Jewish War Veterans of United States, Post No. 58, 68 A,2d 233 (D.C. 1949). See also Restatement (Second) of Contracts § 23 (1981) setting forth the requirement that each party manifest assent with reference to the manifestation of the other. Comment c to this section precludes acceptance of unknown offers of reward.
45. See Restatement (Second) of Contracts § 23 comment d (1981).
46. The classic case is Caldwell v. Cline, 109 W. Va. 553, 156 S.E. 55 (1930). See also Falconer v. Mazess, 403 Pa. 165, 168 A.2d 558 (1961).
47. See CISG, supra note 7, art. 20(1).
48. Id., art. 15(1).
49. See Honnold, supra note 22, at 197.
50. See CISG, supra note 7, art. 18(2).
52. Honnold, supra note 22, at 197.
53. Id. at 198.
54. See CISG, supra note 7, art. 18(2).
55. CISG Art. 6 reads: "The parties may exclude the application of this Convention or, subject to Article 12, derogate from or vary the effect of any of its provisions." Id., art 6. Article 12 relates to Article 11 which states that a contract need not be concluded or evidenced by a writing and need not meet any prescribed form. Article 96, however, permits a Contracting State to make a declaration that any provision of Article 11, Article 29 (modifications need not be evidenced by a writing though no oral modification clauses will be respected) or Part II (Articles 14-24) that permits a contract of sale, offer, acceptance, modification or termination, to be effective without a writing does not apply where any party has a place of business in that Contracting State.
56. See Honnold, supra note 22, at 106.
57. See CISG, supra note 7, art. 16.
58. The U.C.C. definition of "merchant" is found in U.C.C. § 2-104 (1978).
59. U.C.C. § 2-205 (1978).
60. See CISG, supra note 7, art. 16(2)(a).
61. See, e.g., Friedman v. Sommer, 63 N.Y.2d 788, 471 N.E.2d 246 (1984); E. A. Coronis Assoc. v. M. Gordon Constr. Co., 90 N.J. Super. 69, 216 A.2d 246 (1966); Ivey's Plumbing & Elec. Co. v. Petrochem Maintenance, Inc., 463 F. Supp. 543 (N.D. Miss. 1978).
62. The classic case in Dickinson v. Dodds, 2 Ch. D. 463 (1876) where the offer was stated to be open until Friday, June 12, and was revoked on Thursday, June 11, the court holding that the promise to keep the offer open, unsupported by consideration, was a mere nudum pactum.
63. See Formation of Contracts: A Study of the Common Core of Legal Systems 780-783 (R.Schlesinger ed. 1968).
64. See CISG, supra note 7, art. 16(1).
65. Id., art. 16(2)(a).
66. See supra note 63, at 780.
67. Professor Honnold suggests that such an offer be revocable. Honnold, supra note 22, at 171. Professor Farnsworth notes that delegates from some civil law countries argued for the irrevocable offer result even where the time was fixed for lapse while delegates from the United States and other common law countries argued that such an offer should be revocable. He concludes, "The Convention, by limiting irrevocability to cases in which the fixing of the time 'indicates . . . that it is irrevocable,' seems to support the position we took in this regard. Nevertheless, under the Convention an offeror wishing to fix a time for lapse but not for irrevocability should make his intention plain." Farnsworth, supra note 26, § 3.04, at 3-11, 3-12.
68. This statement is consonant with the language of Art. 16(1). See CISG, supra note 7, art. 16(1).
69. Id., art. 15(2).
70. Id., art. 16(2)(b).
71. The classic case is the opinion by Justice Traynor in Drennan v. Star Paving Co., 51 Cal. 2d 409, 333 P.2d 757 (1958) which has been adopted by the overwhelming majority of courts. See, e.g., Arangon Constr. Co. v. Success Roofing, Inc., 46 Wash. App.314, 730 P.2d 720 (1986); Powers Constr. Co., Inc. v. Salem Carpets, Inc., 283 S.C. 302, 322 S.E.2d 30 (1984); Illinois Valley Asphalt, Inc. v. J.F. Edwards Constr. Co., 90 Ill. App. 3d 768, 413 N.E.2d 209 (1980); Montgomery Ind. Int'l Inc. v. Thomas Constr. Co., 620 F.2d 91 (5th Cir. 1980); Janke Constr. Co. v. Vulcan Mat. Co., 386 F.Supp. 687 (W.D. Wis. 1974).
72. See Restatement (Second) of Contracts § 87(2) comment e (1981).
73. Official Records, supra note 31, at 22 (emphasis supplied). While the Second Restatement of Contracts suggests that American contract law permits reliance to be used as a device to make offers irrevocable prior to acceptance, none of the language or illustrations would suggest that "investigation" by the offeree, even extensive investigation, would create that result.
74. See Farnsworth, supra note 26, § 3.04, at 3-12. Professor Honnold also reminds us of the requirement of Article 18(2) in connection with the reliance concept. Thus, notwithstanding the offeree's justifiable reliance, 18(2) still requires a manifestation of acceptance that must reach the offeror with the time fixed in the offer or, absent such a fixed time, within a reasonable time. Honnold, supra note 22, at 173.
75. See CISG, supra note 7, art. 16(1).
76. See infra notes 103-24 and accompanying text.
77. See CISG, supra note 7, art. 18(1).
80. Restatement (Second) of Contracts § 63(a) (1981). An acceptance under an option contract must be received to be effective according to § 63(b).
81. See CISG, supra note 7, art. 18(2). As to "oral offers," Article 18(2) requires such offers to be accepted immediately unless the circumstances indicate otherwise. This is a rule of construction in conformity with common law notions. See, e.g., Textron Inc. v. Froelich, 223 Pa. Super. 506, 302 A.2d 426 (1973).
82. See CISG, supra note 7, art. 16(1) (emphasis added).
83. Id., art. 22.
84. See supra note 69 and accompanying text. Professor Honnold suggests that Articles 22 and 15 are merely specific applications of the general principle that a party may withdraw or modify a communication by an overtaking communication. See Honnold, supra note 22, at 204.
85. In illustration 8 of § 41 of the Second Restatement, A sends B an offer by mail to sell at a fixed price corporate stock not listed on an exchange. B waits for two days after receiving the offer and then, after learning of a sharp rise in the price bid over-the-counter, sends a telegraphic acceptance. The illustration concludes that the acceptance may be too late even though it arrives before a prompt acceptance by mail would have arrived. Comment f to this section explains, "If the offeree makes use for speculative purposes of time allowed for communication, there may be a lack of good faith, and an acceptance may not be timely even though it arrives within the time contemplated by the offeror."
86. See CISG, supra note 7, art. 7.
87. See Farnsworth, supra note 26, § 3.03, at 3-13.
88. See U.C.C. § 2-206(1)(a) (1978); Restatement (Second) of Contracts § 32 (1981).
89. Starting to perform in response to the typical (indifferent) offer will not simply make the offer irrevocable under § 45 of the Second Restatement of Contracts. It will operate as a promise to complete performance. Ergo, under the antiquated usage, such a contract would be "bilateral." The new § 45 applies only to those rare offers that can be accepted only by performance. The beginning of performance with respect to those offers does not form a contract; rather, it has the effect of an option contract under § 45 of the Second Restatement so as to make the offer irrevocable for a reasonable time to permit the offeree to complete the performance forming, again under the antiquated usage which is no longer used in the Second Restatement, a "unilateral" contract.
90. See CISG, supra note 7, art. 18(1).
91. Id., art. 18(3).
92. Id., art. 18(2).
93. Id., art. 18(3).
96. Id., art. 18(2).
97. It should be recalled that a promissory acceptance, though not effective until it reaches the offeror under Article 18(2), operates to make the offer irrevocable once the acceptance is dispatched under Article 16(1).
98. Honnold, supra note 22, at 185. In a footnote, Professor Honnold suggests a curious construction of U.C.C. § 2-206(1)(b) which permits "an order or other offer to buy goods for prompt or current shipment [to be] construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods. . . ." He suggests that, "[t]his rule on how the offer 'shall be construed' provides less leeway for construction of the offer than Art. 18(3), but reaches the same result as the Convention in cases like [the hypothetical]." Section 2-206(1)(b), however, is a species of the general principle that precedes it in U.C.C. § 2-206(1)(a): "[A]n offer to make a contract shall be construed as inviting acceptance in any manner . . . reasonable in the circumstances" (emphasis supplied). See also Restatement (Second) of Contracts, § § 30(2), 32 (1981). Thus, the general rule of the U.C.C. with respect to contract formation permits the typical offer to be accepted either by promising or by performing, i.e., the acceptance would be effective upon performance by the offeree if that is the manner of acceptance chosen by the offeree. As Professor Honnold, himself, emphasizes, the general rule of CISG is "communication of assent." Honnold, supra note 22, at 181. Under the U.C.C., a promissory manifestation of assent would be required only if the offeror "unambiguously" required it (U.C.C. § 2-206(1)). See Murray, supra note 1.
99. Honnold, supra note 22, at 186.
100. Id. at 187 (emphasis in original).
101. Id. at 185.
102. See U.C.C. § 2-206(2) (1978); Restatement (Second) of Contracts § 54 (1981). See also Murray, supra note 1.
103. See CISG, supra note 7, art. 18(2).
104. Id., art. 21(1).
105. Id., art. 22.
106. Id., art. 18(2).
107. Id., art. 15(1).
108. Id., art. 16(1).
109. Id., art. 18(2).
110. Id., art. 22.
111. CISG Art. 21(1) requires the offeror either to orally inform the offeree that the offeror will treat the late acceptance as effective or to dispatch a notice to that effect, i.e., there is no suggestion that the dispatched notice must be received. Id., art. 21(1).
112. Id., art. 21(2).
113. That situation is dealt with at id., art. 21(1).
114. Id., art. 21(2).
115. See supra notes 83-87 and accompanying text.
116. CISG Article 22 permits such a withdrawal if it reaches the offeror before or at the same time as the acceptance would have become effective, and the acceptance would be effective when it reaches the offeror under Art. 18(2).
117. Honnold, supra note 22, at 201-02. This is not intended to suggest that Professor Honnold is necessarily unconcerned about the earlier example of possible speculation, see supra note 83 and accompanying text. He simply fails to mention it.
118. Id. at 200 (example 21B).
119. See Honnold's discussion of "Lateness Because of Transmission Delays." id. § 175, at 200. That section begins with, "It may now be useful to examine Article 21(1) when this provision is subject to stress." Yet, his previous § 174, at 200, deals with the Art. 21(1) problem of "tardy dispatch."
120. "Offeror" is substituted for "offeree" since the former was undoubtedly intended.
121. Honnold, supra note 22, at 202. In footnote 3 on page 202 of his book, Professor Honnold notes how strongly courts resist the possibility that one party may speculate at the expense of another. He refers to the discussions of Article 46 and 62, later in his book. Presumably, he is referring to § 285 at 302 with respect to Art. 46, and §§ 346 to 349 of his Article 62 discussion at 355-359.
122. Id. Article 7(1) requires the observance of good faith in international transactions.
123. There was a misprint earlier on page 202 as suggested in supra note 120.
124. See supra note 83 and accompanying text.
125. U.C.C. § 2-207(1) (1978).
126. See Murray, supra note 3.
127. All of these comments concerning § 2-207 are fully elaborated at Murray, supra note 1, and earlier articles cited therein.
128. See, e.g., various suggestions from Professor Honnold, supra note 22, in his analysis of CISG Article 19, such as: "[L]egal science has not yet found a satisfactory way to decide what the parties have 'agreed' when they have consummated a transaction on the basis of the routine exchange of inconsistent forms." Id. at 189. "The framers of the 1964 and 1980 Conventions were well advised not to follow this feature of the Uniform Commercial Code" (at 193 referring to U.C.C. § 2-207). See also note 8 of the Honnold book at 195 where he reports the rejection of § 2-207(1) and (2) by the Ontario Law Reform Commission. See also the quoted remark of Professor Farnsworth in the text at infra note 130.
129. Official Records, supra note 31, at 24.
130. Farnsworth, supra note 26, § 3.04, at 3-17.
131. See CISG, supra note 1, art. 19(1).
132. Section 2-207(1) is confusing because, inter alia, it speaks of a definite and seasonable expression of "acceptance" operating as an acceptance even though it contains different or additional terms unless the "acceptance" is made expressly conditional on assent to the different or additional terms at which point the "acceptance" is not an "acceptance" and only presumably a counter offer. U.C.C. § 2-207(1) (1978).
133. There is considerable difficulty in deciding whether a particular term in a response to an offer is either different or additional. Moreover, § 2-207(1) of the U.C.C. speaks of "different or additional" terms, but § 2-207(2) expressly mentions only "additional" terms. This problem and the other problems of § 2-207 are explored in Murray, supra note 1, and other articles therein.
134. For a suggestion that the term, "modifications" may not include "trivial" changes, see supra note 30, at 544-45.
135. See CISG, supra note 7, art. 19(2) (emphasis added).
136. Roto-Lith, Ltd. v. F. P. Bartlett & Co., 297 F.2d 497 (1st Cir. 1962).
137. See, e.g., C. Itoh & Co.(America) v. Jordan Int'l Co., 552 F.2d 1228, 1235, n.5 (7th Cir. 1977); Dorton v. Collins & Aikman Corp., 453 F.2d 1161, 1168, n.5 (6th Cir. 1972); Ebasco Serv. Inc. v. Pennsylvania Power & Light Co., 402 F. Supp. 421, 437-38 (E.D. Pa. 1975); Steiner v. Mobil Oil Corp., 20 Cal. 3d 90, 107, 569 P.2d 751, 763, 141 Cal. Rptr. 157, 169 (1977); Uniroyal, Inc. v. Chambers Gasket & Mfg. Co., 177 Ind. App. 508, 517-18, 380 N.E.2d 571, 578 (1978).
138. See U.C.C. § 2-207(2)(b) (1978) which indicates that such material alterations in a definite and seasonable expression of acceptance do not become part of a contract between merchants.
139. See CISG, supra note 7, art. 19(3). The interesting question is whether any term dealing with any matter listed in 19(3) is conclusively presumed to be a materially different or additional term. The scholarship on this point suggests an affirmative answer based on the deletion of earlier language ("unless the offeree by virtue of the offer or the particular circumstances of the case has reason to believe they [the different or additional terms] are acceptable to the offeror"); Official Records, supra note 31, at 24. See also supra note 30, at 549, n.6.
140. Farnsworth, supra note 26, § 3.04, at 3-16. Professor Honnold agrees. See Honnold, supra note 22, at 193: "However, only the Convention provides a definition of 'material.'"
141. U.C.C. § 2-207(2)(a) (1978) permits the offeror to limit acceptance to the terms of the offer as one method of precluding immaterial alterations. The somewhat duplicative § 2-207(2)(c) permits the offeror to notify the offeree of objection to such immaterial terms in an otherwise definite and seasonable expression of acceptance and to remove the immaterial terms in this fashion.
142. See CISG, supra note 7, art. 16(1).
143. Id., art. 18(2).
144. Id., art. 23.
145. The requirement that the offeror's objection occur "without undue delay" would not preclude this result since the offeror cannot object until he receives the acceptance containing the immaterial, different or additional terms.
146. See CISG, supra note 7, art. 7(1).
147. See Official Records, supra note 31, at 24.
148. The Netherlands suggested another device that would have arrived at the same result. With respect to the offeror's objection, it suggested the following amendment: "If the offeror does so object, the offeree can promptly retract the additional or different terms and the terms of the contract are those of the offer." Official Records, supra note 31, at 96. The rational for the amendment was stated as follows: "That situation [permitting the offeror to convert an acceptance into a rejection] could give rise to abuse and affect good faith in international trade. Non-material alterations or additions could certainly be considered important by the offeror, but the offeree should always be entitled to retract those changes or alterations promptly and revert to the terms of the original offer." Id. at 57, 286. The Netherlands amendment lacked support. Id. at 58, 286.
149. The U.C.C. test is found in Comment 3 to § 2-202 and is more liberal than the common law, Williston/First Restatement test. See the comparison between the tests in the well-known opinion by Justice Traynor, Masteron v. Sine, 65 Cal. Rptr. 545, 436 P.2d 561 (1968). For an analysis of the incorporation of the U.C.C. test, among others, in the Second Restatement of Contracts, See Murray, The Parol Evidence Process and Standardized Agreements Under the Restatement, Second, Contracts, 123 U. Pa. L. Rev. 1342 (1975).
150. See CISG, supra note 7, art. 8(3) (emphasis added). Professor Honnold emphasizes that portion of the quoted phrase, " all relevant circumstances." Honnold, supra note 22, at 142. The more specific phrase, "including the negotiations", however, clearly addresses the parol evidence issue.
151. Professor Honnold notes that the English Law Revision Commission has recommended abolition of the parol evidence rule, Law Commission, Working Paper No. 70, Law of Contract, the Parol Evidence Rule (1976) in Honnold, supra note 22, at 143.
152. The view of Professor Corbin on the parol evidence process are found throughout the article by Murray, supra note 149. Professor Honnold suggests "a growing body of opinion that the 'parol evidence rule' has been an embarrassment for the administration of modern transactions." Honnold, supra note 22, at 143.
153. There is no parol evidence rule in German law.
154. In France, the parol evidence rule does not apply to commercial contracts.
155. Honnold, supra note 22, at 142.
156. See supra note 55 and accompanying text.
157. See U.C.C. § 2-202(a) (1978) referring to course of dealimg or usage of trade in § 1-205 and course of performance in § 2-208.
158. See, e.g., Barnes v. Treece, 15 Wash. App. 437, 549 P.2d 1152 (1976) applying the reasonable person test to determine whether a statement was made in jest. See also the well-known statement of Judge Learned Hand in New York Trust Co. v. Island Oil & Transport Corp., 34 F.2d 655, 656 (2d Cir. 1929): "The standard is what a normally constituted person would have understood [words] to mean when used in their actual setting."
159. See CISG, supra note 7, art. 8(1).
160. 2 H. & C. 906 (1864).
161. See Restatement (Second) of Contracts § 20 (1981).
162. See Tyra v. Cheney, 129 Minn. 428, 430, 152 N.W. 835 (1915); Geremia v. Boyarsky, 107 Conn. 387, 140 A. 749 (1928). See also Restatement (Second) of Contracts § 153(b) (1981).
163. The First and Second Restatement of Contracts contain the following hypothetical: "A says to B, 'I offer to sell you my horse for $100.' B, knowing that A intends to offer to sell his cow for that price, not his horse, and that the word 'horse' is a slip of the tongue, replies, 'I accept.'" Restatement (First) of Contracts § 71 illust. 2 (1932); Restatement (Second) of Contracts § 20 illust. 5 (1981). Neither Restatement finds a contract for the sale of the horse. The first Restatement also finds no contract for the sale of the cow, but the Second Restatement concludes that there is a contract for the sale of the cow.
164. Honnold, supra note 22, at 137-38.
165. Article 8(3) begins: "In determining the intent of a party or the understanding a reasonable person would have had. . . ." See CISG, supra note 7, art. 8(3).
166. U.C.C. § 2-209(1) (1978).
167. Article 29(1) says: "A contract may be modified or terminated by the mere agreement of the parties." See CISG, supra note 7, art. 29(1).
168. See Official Records, supra note 31, at 28. The civil law had permitted a modification if there was sufficient cause regardless of the lack of consideration.
169. U.C.C. § 2-209(3) (1978).
170. U.C.C. § 2-209(2) (1978).
171. Subsections (4) and (5) of U.C.C. § 2-209 deal with the concept of waiver and withdrawal of waiver with respect to modifications that do not satisfy the requirements of subsection (2) or (3), i.e., oral modifications. For a recent analysis of these problems under § 2-209, see Murray, The Modification Mystery: Section 2-209 of the Uniform Commercial Code, 32 Vill. L. Rev. 1 (1987).
172. Article 11 says: " A contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses." Article 12, however, emphasizes the power of a Contracting State whose legislation requires contracts of sale to be evidenced by writings to utilize Article 96 which permits that State, at any time, to make a declaration that any provision of CISG that permits contrast, modifications, terminations or any other event to be operative without a writing does not apply where any party has his place of business in that Contracting State. See CISG, supra note 7, art. 11.
173. Article 29(2) states: "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." Id., art. 29(2).
174. See Honnold, supra note 22, at 231.
175. See Official Records, supra note 31, at 28 which contains "Example 27A" where the reliance is upon an oral modification which the example apparently regards as "conduct" of the other party.
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