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Published by Manz, Vienna: 1986. Reproduced with their permission.

excerpt from

Uniform Sales Law - The UN-Convention on Contracts for the International Sale of Goods

Univ. Prof. Dr. Peter Schlechtriem [*]

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B. The Offer [see also Formation of the Contract: Basic Principles and Open Questions]

Under Article 14(1) sentence 1 (which corresponds to ULF Article 4(1)) an offer is a proposal that is "sufficiently definite" and indicates the "intention of the offeror to be bound in case of acceptance". Article 14(2) is more precise than ULF in that it generally considers proposals to indefinite groups of people to be mere invitations to make offers, unless the offeror has made it clear that the contrary is intended, i.e., that the proposal is truly a public offer.[159]

In contrast to ULF Article 4(2), sufficient certainty is not assured by means of supplemental reference to the preliminary negotiations, established practices between the parties, usages, and the applicable legal rules for sales contracts.[160] Rather, the Convention establishes concrete requirements. According to Article 14(1) sentence 2, the offer must indicate the goods to be sold, determine or make provision for determining the quantity, and fix the price or provide a means for its determination. Also, in German law it is essential for a sales contract that the goods be specified. The goods might be considered "determinable" where, as in German law, one of the parties or a third person is granted the authority to determine them.[161]

Both in the UNCITRAL deliberations and the Vienna Conference, the further requirement that the price be determined or determinable was hotly debated. Proposals to eliminate the requirement of a fixed or determinable price failed as a result of the opposition by the Soviet Union, a number of developing countries, France and other states.[162]

The retention of the definite price requirement for a valid offer and, in many [page 50] cases, for contract formation is regrettable.[162a] In special circumstances, such as urgency or trust in the seller's sincerity, when the parties have waived price negotiations, the definite price requirement can endanger the validity of a contract and provide a pretext for escaping a disadvantageous agreement.[163] The Article also poses an unsatisfactory contradiction to Article 55, which presupposes the possibility of forming a contract without a fixed or determinable price.[163a] It can only be explained by the desire of the Scandinavian countries to introduce the Uniform Law for International Sales without Part III, and to have a provision in Part II in case the price has not been determined.[164] On the other hand, the position of those who wished to require a definite price is also understandable. Large organizations can be so limited by the comprehensive planning that the price they have agreed upon is an indispensable factor for the planning of the entire organization. Above all, the developing countries are also understandably concerned about using the shorthand of the seller's standard price or even allowing the seller discretion to set the price within the bounds of equity, as in §§ 316 and 315(1) of the German Civil Code. The more flexible system can be practicable or at least tolerable in countries or economic systems with comparatively homogeneous and well-known market structures. But in world trade, price transparency is a given at most for raw materials, i.e., for the products of the developing countries, but not for the industrial goods imported by these countries.[165] Finally, the French position can perhaps be explained on the basis of the French experience with Article 1591 of the French Civil Code, which, since the beginning of the 1970's, has experienced a renaissance as an instrument of control for contracts that exploit the weaker party, such as contracts between a gas-station owner and his supplier.[166]

The practicality of Article 14(1) sentence 2 probably cannot be determined until there is experience with its application. Unfortunately, there are likely to be divergent results. In particular, it is possible that domestic courts will make only limited use of the tacit price agreement or an implied reference to circumstances which make a determination of price possible. They may even employ Article 14(1) sentence 2 as an additional instrument to control validity in pursuing certain legal-political purposes. The wording of the law, however, permits - indeed encourages - a broader application. Where the "price generally charged" exists at [page 51] the time the contract is concluded and can be determined by the other party, an order that does not name a price must frequently be understood as an implied reference to these sales prices (list prices, catalogue prices, etc.). A price can also be determined expressly or implicitly by reference to a particular market at delivery or at some other time.[167] Reference to price lists or catalogues which reserve the right to change prices can also be understood as a reference to the price valid at the time of delivery. In any case, the parties may generally exclude the application of Article 14(1) sentence 2 [168] and agree to allow one side to set the price - as long as there are no domestic prohibitions applicable under Article 4(a).[169]

Articles 9 and 8(3) indicate that due consideration must be given to trade usages, and above all to the intent of the parties, the negotiations, established practices between the parties, and usages, as well as to the parties' later conduct, whenever a tacit agreement on price, an agreement on price determinability, or even the implicit exclusion of Article 14(1) sentence 2 is in question. Finally, a statement which is intended as an offer but lacks a definite price will be treated as an invitation to make an offer, while the addressee's reply may contain sufficient indication of the price or of its determination to be an offer; the addressee's conduct, such as the acceptance of delivered goods, can then be considered as an indication of assent in the sense of Article 18(1) sentence 1. On the whole, the Germans will, in practice, be able to live with Article 14(1) sentence 2, although it is advisable that offers and acceptances indicate as definitely as possible a price or a mechanism for fixing the price.[page 52]

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FOOTNOTES

* The author of this book participated at the Conference as a member of the delegation from the Federal Republic of Germany. The views expressed here are personal to the author and do not necessarily represent the position of the F.R.G. or its delegation.

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159. For examples, see Huber at 437-438; Dölle (Schlechtriem) ULF Article 4 §§ 24-25.

160. Although the Convention contains no provision corresponding to ULF Article 4(2), a contract can be supplemented by usages if they are directly applicable under Article 9 or made applicable by virtue of the parties' intent on the basis of Article 8(3). They can also be applicable by virtue of the supplementary and optional provisions of the Convention on the contents of sales contracts. See Secretariat's Commentary at 56 § 9.

161. See Huber at 437. Offers for requirement and output contracts whereby the quantity to be delivered is based on the future demand of the buyer or the quantity which the seller can produce, would, therefore, also be covered. In my opinion, the mere fact that Article 65(1) presupposes that, in a sale subject to the buyer's specifications, the buyer has the right to determine the form, size, or other characteristics of the goods, does not justify the contrary conclusion that, when a party has the right to determine the quantity, the offer lacks a definite term and no contract can be concluded by its acceptance.

162. With regard to the motions and the discussion, see A/Conf.97/C.1/SR.8 at 10 et seq. (= O.R. 270). As to the firmness of the Soviet position, see id. § 87; A/Conf. 97/C.1/L.37 (= O.R. 92) (an even more restrictive Soviet proposal which also was not passed). Even the proposals by a working group, which attempted to find a compromise between the irreconcilable differences (A/Conf. 97/C.1/L.103) (= O.R. 92), did not progress any further. See A/Conf. 97/C.1/SR.11 at 6 et seq. (= O.R. 290) (discussion).

162a. Farnsworth, Formation at 3-9. For additional critical views, see id. at note 6.

163. But cf. Dölle (von Caemmerer) (regarding ULIS Article 57) (includes a comprehensive analysis of comparative law). As to the controversy in German law and a critical comparison to the 1978 Draft Convention, see Huber at 438-439.

163a. See also infra note 319.

164. See infra at VI.C.1.

165. See Date-Bah at 51.

166. See Judgment of April 27, 1971 Cass. com., J.C.P. 16975; Judgment of June 21, 1976, Cass. com. D. 1976 I.R. 264. In the deliberations on Article 55, the French position was more flexible. See A/Conf. 97/C.1/L.205 (= O.R. 121) (French compromise proposal); see also Tallon, Buyer's Obligations at 7-11.

167. See Secretariat's Commentary at 57 § 14 et seq.

168. E.g., AGBG § 11 Nr. 1.

169. Contrary to the necessity of written form in the reservation states, see Article 12 sentence 2, Article 14(1) sentence 2 has not been excluded from the autonomy of the parties. See Stoffel in Lausanner Kolloquium at 63, 64. However, if domestic law, prohibits a single party from determining the price - e.g., under consumer-protection laws - Article 4(a) would control. See Tallon, Buyer's Obligationss at 7-12.

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