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Article 17. Rejection of Irrevocable Offer Followed by Acceptance

TEXT OF ARTICLE 17

An offer, even if it is irrevocable, is terminated when a rejection reaches the offeror.


OUTLINE OF ISSUES

Reproduced with permission of UNCITRAL

17A Termination of offer by rejection

17A1 Rejection of offer

17A11 Express rejection

17A12 "Acceptance" that modifies offer (see art. 19)


DESCRIPTORS

Offers ; Acceptance of offer ; Receipt rule


CASE ANNOTATIONS: UNCITRAL DIGEST CASES PLUS ADDED CASES

UNCITRAL cites one case in its Digest of Art. 17 case law:
 

* Germany 28 February 1996 Landgericht [District Court] Oldenburg (Egg case) [translation available]
 

The following additional references to Art. 17 in case law are provided:
 

Canada 28 October 2005 Superior Court of Justice, Ontario (Chateau des Charmes Ltd v. Sabaté USA Inc. et al.)


UNCITRAL CASE DIGEST

The UNCITRAL Digest of case law on the United
Nations Convention on the International Sale of Goods

A/CN.9/SER.C/DIGEST/CISG/17 [8 June 2004]. Reproduced with the permission of UNCITRAL.

ARTICLE 17

      An offer, even if it is irrevocable, is terminated when a rejection reaches the offeror.

DIGEST OF ARTICLE 17 CASE LAW

1. Article 17 states that an offer terminates when a rejection reaches the offeror. This is true whether or not the offer is irrevocable. Article 24 defines when a revocation "reaches" the offeror. Although article 17 has been cited,[1] there are no reported cases interpreting it.


FOOTNOTE

[Citations to cisgw3 case presentations have been substituted [in brackets] for the case citations provided in the UNCITRAL Digest. This substitution has been made to facilitate online access to CLOUT abstracts, original texts of court and arbitral decisions, and full text English translations of these texts (available in most but not all cases). For citations UNCITRAL had used, go to <http://www.uncitral.org/english/clout/digest_cisg_e.htm>.]

1. [GERMANY Landgericht [District Court] Oldenburg 28 February 1996, available online at <http://cisgw3.law.pace.edu/cases/960228g1.html>] (citing arts. 14, 15, 16, 17, 18 and 19).


ANNOTATED COMPARATIVES
-  UNIDROIT Principles
-  PECL comparative

Discussion of the Provisions of
CISG Article 17 and UNIDROIT Principles Article 2.5

Stephen E. Smith, Esq. [*]
November 2004

  1. Introduction
  2. Scope of Application
  3. Irrevocability
  4. Termination
  5. Notice
  6. Rejection
    (a) Explicit
    (b) Implicit
    (c) Implied terms
    (d) Conduct
  7. Illustrations
    (a) Irrevocability v. rejection
    (b) Counter-offer as rejection
    (c) Is silence an acceptance or a rejection?
  8. Conclusion

1. Introduction

This article will address the powerful effects of CISG Article 17, perhaps the shortest Article of the CISG, and put its utility into perspective. Note though that utility is informed by other CISG Articles and UNIDROIT Principles, as described and referenced herein.

CISG Article 17 provides: "[a]n offer, even if irrevocable, is terminated when a rejection reaches the offeror". Accordingly, it is seemingly misplaced in its setting within Articles that benefit the offeror in the formation of the contract. Those Articles, CISG Articles 15 through 18, provide grounds upon which the offeror, after having dispatched his offer, may be freed from the binding effects of his offer and therefore reallocate the resources committed. Before the offer has reached the offeree, the offeror may withdraw the offer (CISG Article 15(2)). CISG Articles 16 and 18 contemplate actions which can be taken after the offer has reached the offeree: the offeror may revoke the offer unless it is irrevocable (CISG Article 16).[1] The offeror is also freed from his offer upon the expiration of the time for its acceptance (CISG Article 18(2)).

CISG Article 17, however, foresees as a cause of termination of the offer, an initiative emanating from the offeree, i.e., the rejection of the offer, an obvious offeree benefit. Further, even though irrevocable, the offeree may still reject the offer, an option not allowed the offeror regarding an irrevocable offer (CISG Article 16). Herein lies much of CISG Article 17's power.

UNIDROIT Article 2.5, in virtually the same words as CISG Article 17, explicates the same issue. There is, though, one minor difference in the wording. CISG Article 17 contains the clarification: that the offer terminates when the rejection reaches the offeror, even if the offer is irrevocable. It may be observed that the clarification contained in CISG Article 17, i.e., "even if irrevocable", was inserted because this rule is not accepted in all legal systems.[2]

2. Scope of Application

Both CISG Articles 17 and UNIDROIT Principles Article 2.5 deal only with the issue of the termination of the offer by the offeree. Other causes for termination of the offer, such as death, incapacity or insolvency of the offeror, are by intent not covered under the CISG.[3]

3. Irrevocability

The comment to UNIDROIT Principles Article 2.5 specifies that it applies to both revocable and irrevocable offers.[4] Accordingly, it is no longer necessary to distinguish between revocable and irrevocable offers. An offer can be irrevocable not only by its own nature or the description, but also because of the reliance of the offeree on its irrevocability.[5]

4. Termination

While CISG lacks specific definition and explanation of what is the effect of a termination, UNIDROIT Principles Article 7.3.5 provides that "termination of the contract releases both parties from their obligation to demand and receive future performance." Termination occurring by rejection of the offer by the offeree then extinguishes future obligations of the offeror.

5. Notice

Both CISG Articles 17 and UNIDROIT Principles Article 2.5 make it clear that the rejection must reach the offeror; mere dispatch of the rejection is not sufficient.[6]

In the case of contradicting declarations by the offeree (acceptance sent after rejection or vice versa), the declaration which first reaches the offeror is effective. Where the contradicting declarations reach the offeror at the same time, the offeror may only rely on the declaration which has been sent last, as this corresponds to the real intent of the offeree.[7] There are sufficient and consistent definitions and explanations as to when a certain communication "reaches" the addressee.[8] Here in the clause at issue, we should apply the same rules as universally applied.[9] Most important of these, of course, is the language of CISG Article 17 itself.

6. Rejection

     (a) Explicit

What kind of information in what form constitutes a valid rejection has long been an unsettled matter. CISG Article 19 provides that:

"A reply to an offer which purports to be an acceptance but contains material additions, limitations or other modifications is a rejection of the offer and constitutes a counter-offer."

On the other hand,

"... [a] reply to an offer which purports to be an acceptance but contains additional or different terms which do not materially alter the terms of the offer constitutes an acceptance, unless the offeror, without undue delay, objects orally to the discrepancy or dispatches a notice to that effect ..."

Since it is a commonly accepted rule that acceptance with modification is considered a counter-offer,[10] both the CISG and the UNIDROIT Principles are careful in their approaches to the subject. The CISG names the items that can be taken as immaterial modifications,[11] while the UNIDROIT Principles describe what are modifications that do not change the nature of the acceptance.[12] Accordingly, a certain degree of vagueness remains. The comment to UNIDROIT Principles Article 2.5, allows that "[a]n offer may be rejected either expressly or impliedly." This enlarges the scope of the means of acceptance and is consistent with the modes of acceptance described in UNIDROIT Principles Article 2.6.

     (b) Implicit

Moreover, both commentaries to the texts specify that the offeree's rejection need not be express, but may be implicit, including through conduct.[13] Of course, the determination of whether a certain statement or conduct amounts to a rejection is a question of interpretation (CISG Article 8; See also the discussion of CISG Article 19 above).

     (c) Implied Terms

Perhaps, the easiest of the non-explicit rejections is this "material / immaterial" variant. CISG Article 19, by providing that an acceptance in terms which materially alter the offer "is a rejection of the offer" and "constitutes a counter-offer", takes care of most of the situations. By the clear wording of CISG Article 19, an acceptance that must be considered as a counter-offer terminates the initial offer. By contrast, an acceptance which does not materially alter the terms of the offer only amounts to a rejection if the offeror thereto objects (CISG Article 19(2)). There is then generally no room for considering that the initial offer may survive a negotiating process conducted on the basis of such initial offer without the offeree losing the benefit thereof.[14]

     (d) Conduct

Perhaps more difficult is this nonverbal approach, whether directed to the offeror or another. This creation of a tri-party paradigm leads to market inefficiency and unfairness not usually seen in either the CISG or the UNIDROIT Principles.

Further, neither the CISG nor the UNIDROIT Principles and their respective commentaries address the issue of whether the offeree's conduct implying rejection of the offer may be directed toward a third person rather than toward the offeror, and yet free the latter. The answer depends on whether the offeree has a legitimate interest in relying upon the irrevocable offer, and being bound by it for its entire duration.

7. Illustrations

     (a) Irrevocability v. rejection

One inconsistency arising from CISG Article 17 is that because of the irrevocability of the offer, the offeree may claim that even if it has issued a rejection which has reached the offeror, the offeree should still have the right to keep the offeror obligated to perform on the original offer. This may seem incongruous since the provision clearly rules out such claims, but query: do situations like the following one justify clarification?

Illustration: B receives an offer from A, which includes the following sentence: "A cannot withdraw or revoke this offer in any situation within one month and B can accept this offer at any time during the period." B rejects the offer in the next week but decides to accept it soon afterward. Does A not need to keep the offer open since B's rejection has trumped his right to accept the offer? In this case the offer was terminated by B's rejection. A need not keep open, withdraw, or revoke his offer.

     (b) Counter-offer as rejection

Where the offeree replies to the offer by raising some material alterations, even if the parties do not call the communication a rejection, it will be regarded as a rejection because such a communication constitutes a counter-offer. (See discussion of Notice, § 5 above)

Illustration: In response to A's offer, B asks for lower price. A does not accept the new price. Even if there is still time before the expiration of A's offer, A does not need to carry out the original offer even if now B agrees to the original price offered by A, as B's counter-offer has terminated A's obligation.

     (c) Is silence an acceptance or a rejection?

Both the UNIDROIT Principles and the CISG make distinctions between the situations where the offeree sends out a counter-offer and where the offeree's communication is regarded as acceptance. However, it is not always easy to distinguish a counter-offer from an acceptance, even if both the documents try to define what are material modifications. As if this is not troublesome enough, what if, no response is made?

Illustration: In response to A's offer, B agrees with all the material conditions that A offers, but asked A to put a sticker on each box of the commodity with B's contact information on it. A makes no response to this request within a reasonable time. Accordingly, A is bound to carry out the offer with the obligation to put these stickers on each box as A has failed to establish that this additional request was material. Without timely communication from A after B's response, B's response has been taken as an acceptance of the original offer with this nonmaterial addition.

8. Conclusion

As can be seen from the above discussion, the most nettlesome issue addressed by a comparison of CISG Article 17 and UNIDROIT Principles Article 2.5, with the inclusion of those ancillary articles of both necessary for such a comparison, is the termination of an irrevocable offer by the offeree. Hopefully, this short article has shed some light on this issue and its resolution. The counterpart provisions adopt a similar approach and are also worded in almost identical terms.


FOOTNOTES

* Stephen E. Smith, Esq. is a Senior Lecturer at Northwestern University School of Law and the faculty advisor for their Willem C. Vis International Commercial Arbitration Moot team. Mr. Smith wishes to thank David Tahan and Peng Zhao for their research assistance and Jennifer A. Woyan for her patient revisions and useful suggestions as to its format.

1. See Shahdeen Malik's insightful work regarding CISG Article 16, "Offer: Revocable or Irrevocable. Will Article 16 of the Convention on Contracts for the International Sale Ensure Uniformity?", 25 Indian J. Int'l L. (1985) 26-49; <http://cisgw3.law.pace.edu/cisg/biblio/malik.html>.

2. Cf Honnold, J.O., Uniform Law for International Sales under the 1980 United Nations Convention (Deventer Kluwer), 1999 (3rd ed.) p. 154, no. 3 . See also Text of Secretariat Commentary on article 15 of the 1978 Draft [draft counterpart of CISG Article 17], Comment 2, <http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-17.html>. See the Legislative history of CISG Article 17: Match-up with 1978 Draft to assess relevance of Secretariat Commentary <http://cisgw3.law.pace.edu/cisg/text/matchup/matchup-d-17.html>. "CISG Article 17 and 1978 Draft Article 15 are identical. The Secretariat Commentary on 1978 Draft CISG Article 15 should therefore be relevant to the interpretation of CISG Article 17." Ibid.

3. Report of the Working Group on the international sale of the movable objects on work of its 9th session (Geneva, September 19-30, 1977, Doc. A/CN.9/142 N. 283). [trans.]

4. Official Comment on UNIDROIT Principles Article 2.5, Comment 1, <http://cisgw3.law.pace.edu/cisg/principles/uni17.html#official>.

5. "However, an offer cannot be revoked: (a) if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or (b) if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer." CISG Article 16.2

6. Cf. Enderlein F. and Maskow D., International Sales Law, New York-London-Rome, 1992, Article 18, no. 15, p. 91.

7. According to Heuzé, in: The International Sales of Merchandise, Paris, 2000, p. 162: "From Articles 15 and 22, it appears to be able to be deduced without temerity that the Vienna Convention intended to set up a general rule whereby the author of an expression of will can validly rescind the offer, since it puts its correspondent on notice to know his change of intention, or be placed in his initial position." [trans.]

8. CISG-AC Opinion No 1, Electronic Communications under CISG, 15 August 2003. Rapporteur: Professor Christina Ramberg, Gothenburg, Sweden. The opinion is available online at <http://cisgw3.law.pace.edu/cisg/CISG-AC-op1.html>. Regarding the impact of electronic communications in the context of CISG Article 17, the Opinion states:

OPINION
The term "reaches" corresponds to the point in time when an electronic message has entered the offeror's server. An offer is terminated when a rejection enters the offeror's server. A prerequisite is that the offeror has consented expressly or impliedly to receiving electronic communications of that type, in that format, and to that address.

COMMENT
17.1. An offer is terminated when rejection reaches the offeror. In electronic environments the exact time of "reaches the offeror" can be determined. The offeree can no longer create a contract by dispatching an indication of assent. If the offeree changes his mind after having dispatched a rejection of the offer and wishes to conclude a contract, the indication of assent must enter the offeror's server before the rejection enters the offeror's server.

9. A rejection "reaches" the addressee when it is made orally to him or delivered by any other means to him personally, to his place of business or mailing address or, if he does not have a place of business or mailing address, to his habitual residence. CISG Article 24. According to the UNIDROIT Principles, an oral rejection reaches the addressee when it is made personally to the personal qualified as the addressee, while other communications reach the addressee when they are delivered personally to the addressee or his working place. In the latter situation, not only the addressee does not need to be personally handed the rejection, but also it will become effective once it is in the addressee's mailbox, fax, computer, etc. UNIDROIT Principles Article 1.9.4. Both Article 1.9 of the UNIDROIT Principles and Article 24 of the Convention define the point of time at which a communication reaches the addressee. The counterpart provisions adopt the same "receipt" principle, make the same distinction between oral and other communications, and provide similar definitions of the relevant concepts. See, Felemegas J., "Comparison between provisions of the CISG (Article 24) and the counterpart provisions of the UNIDROIT Principles (Article 1.9)", <http://cisgw3.law.pace.edu/cisg/principles/uni24.html#ed>.

10. "Acceptance with modifications normally to be considered a counter-offer. In commercial dealings it often happens that the offeree, while signifying to the offeror its intention to accept the offer ("acknowledgement of order"), nevertheless includes in its declaration terms additional to or different from those of the offer. Para. (1) of this article provides that such a purported acceptance is as a rule to be considered a rejection of the offer and that it amounts to a counter-offer by the offeree, which the offeror may or may not accept either expressly or impliedly, e.g. by an act of performance." See Official Comment to UNIDROIT Principles Article 2.11. <http://www.unilex.info/instrument.cfm?pid=2&do=Comment&pos=1>.

11. "Additional or different terms relating, among other things, to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party's liability to the other or the settlement of disputes are considered to alter the terms of the offer materially." CISG Article 19(3).

12. "What amounts to a "material" modification cannot be determined in the abstract but will depend on the circumstances of each case. Additional or different terms relating to the price or mode of payment, place and time of performance of a non-monetary obligation, the extent of one party's liability to the other or the settlement of disputes, will normally, but need not necessarily, constitute a material modification of the offer. An important factor to be taken into account in this respect is whether the additional or different terms are commonly used in the trade sector concerned and therefore do not come as a surprise to the offeror." See Official Comment to UNIDROIT Principles Article 2.11. <http://www.unilex.info/instrument.cfm?pid=2&do=Comment&pos=1>.

13. Text of Secretariat Commentary on CISG Article 15 of the 1978 Draft [draft counterpart of CISG Article 17], Comment 2, <http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-17.html>; Official Comment on UNIDROIT Principles Article 2.5, Comment 1, <http://cisgw3.law.pace.edu/cisg/principles/uni17.html#official>.

14. This rigidity is criticized by Heuzé, op. cit., p. 163, "this solution is undoubtedly not very convenient, insofar as it discourages negotiation, since it exposes the recipient of the offer to accept the offer, without a modification of the conditions." [trans.]


PECL COMPARATIVE

Remarks on the manner in which the Principles of European Contract
Law may be used to interpret or supplement Article 17 of the CISG

Cecila Carrara and Joachim Kuckenburg [*]
February 2003


1. Introduction
2. Scope of Application
3. Conflicting Declarations
4. Implicit Rejection
a) Rejection by implied terms
b) Rejection by conduct
5. Obligation to Negotiate in Good Faith?

1. Introduction

Art. 17 CISG forms part of the set of rules (Arts. 15 to 18 CISG) which provides for grounds upon which the offeror, after having dispatched his offer, may be freed from the binding effects of his offer and therefore reallocate the resources committed. Before the offer has reached the offeree, the offeror may withdraw the offer (Art. 15(2) CISG). Arts. 16 to 18 CISG contemplate actions which can be taken after the offer has reached the offeree: the offeror may revoke the offer unless it is irrevocable (Art. 16). The offeror is also freed from his offer upon the expiry of the time for its acceptance (Art. 18(2), 2nd and 3rd sentences CISG). Art. 17 CISG further foresees, as a cause of termination of the offer, an initiative emanating from the offeree, i.e., the rejection of the offer.

Art. 2:203 PECL, in almost identical terms as Art. 17 CISG, regulates the same issue. There are two minor differences in the wording, i.e., on the one side Art. 17 CISG contains the clarification that the general rule, whereby the offer terminates when the rejection reaches the offeror, applies also if the offer is irrevocable; on the other side Art. 17 CISG uses the word "terminate" as opposed to the term "lapse" in Art. 2:203 PECL. This second difference is of no significance, since no regulatory difference may be inferred from the use of the words "terminate" or "lapse". With respect to the first difference, it can be observed that the clarification contained in Art. 17 CISG, i.e., "even if irrevocable", was inserted because this rule was not applicable in all legal systems.[1] However, the Comments and Notes on Art. 2:203 PECL state that the same is true for the latter although this has not found its way into the text of the PECL.

2. Scope of Application

Both Arts. 17 CISG and 2:203 PECL only deal with the issue of termination of the offer through rejection of the same by the offeree. Other causes for termination of the offer, such as death, incapacity or insolvency of the offeror, are by intent not covered under the CISG.[2] The PECL do not address the issue either. Accordingly, given the absence of a specific rule for these cases, they need to be resolved on the basis of the applicable national law.[3]

3. Conflicting Declarations

Both Arts. 17 CISG and 2:203 PECL make it clear that the rejection must reach the offeror within the meaning of Article 24 CISG: mere dispatch of the rejection is not sufficient. In case of contradicting declarations by the offeree (acceptance sent after rejection or vice versa), the declaration which first reaches the offeror is effective,[4] Where the contradicting declarations reach the offeror at the same time, the latter may only rely on the declaration which has been sent the latest as this corresponds to the real intent of the offeree.[5]

4. Implicit Rejection

Both commentaries to the texts specify that the offeree's rejection does not need to be express, but may be implicit, including by conduct. Of course, the determination of whether a certain statement or conduct amounts to a rejection is a question of interpretation (Art. 8 CISG).

     a) Rejection by implied terms

     Art. 19 CISG, by providing that an acceptance in terms which materially alter the offer "is a rejection of the offer" and "constitutes a counter-offer", takes care of most of the situations. By the clear wording of Art. 19 CISG, an acceptance which must be considered as a counter-offer terminates the initial offer.

By contrast, an acceptance which does not materially alter the terms of the offer, only amounts to a rejection if the offeror thereto objects (Art. 19(2) CISG).

Thus, there is in general no room for considering that the initial offer may survive a negotiating process conducted on the basis of such initial offer without the offeree loosing the benefit thereof.[6] For example, if A offers to sell x quantity for (a) price to B and B answers to be ready to buy 2x quantity for 2(a) - 10% discount, what happens if A does not react to the answer? According to Artt. 19 (1), (2) 1st sentence, (3) and 17 CISG, B has implicitly rejected A’s offer and may not rely on it any longer.

If, however, B’s statement should be interpreted to the effect that B accepts the initial offer, but would indeed prefer to make the deal on the basis of his proposed terms, it is suggested that a first contract - on the terms of the initial offer - is concluded, but that its effectiveness depends upon whether A accepts B’s counterproposal, within the time of acceptance. If A does accept B’s counterproposal within such time, only the second contract is concluded and the first contract never becomes effective.

     b) Rejection by conduct

     The CISG, the PECL and the respective commentaries do not address the issue of whether the offeree's conduct implying rejection of the offer may be directed towards a third person rather than towards the offeror, and yet free the latter. For example, this may arise in a bid situation where the issuer of the bid invites a plurality of irrevocable offers (Art. 14(2) CISG). Offeror A may learn that the issuer of the bid (i.e., the offeree) has accepted the offer of a competitive bidder, offeror B. Does this imply the rejection of A's offer?

The answer depends on whether the issuer of the bid has a legitimate interest to rely on the irrevocable offer of several bidders, having them all bound for the entire duration of the offer.

If the issuer of the bid has accepted B’s offer, generally A should be considered freed from his offer. It would in fact not be comprehensible why A, once aware of the fact that he has been ruled out, should still commit his resources to the benefit of the issuer of the bid. This same conclusion should apply even in cases where the issuer of the bid has reserved a right of withdrawal from the first contract (or has reserved a trial period), unless it is clear from the terms of the bid that the purpose of soliciting irrevocable offers was precisely that of granting the issuer of the bid a fall-back solution.

If, however, the issuer of the bid has selected B’s offer only for entering into further negotiations, A should not be considered freed from his offer. Indeed, the very purpose of a bid is to keep available the resources of all bidders within the time frame initially fixed in the bid until one offer only is finally accepted.

5. Obligation to Negotiate in Good Faith?

The example proposed above under 4 a) shows that the CISG system tends to lead to "take it or leave it" situations, whenever there is a reply to an offer which purports to be an acceptance but contains modifications: indeed, if the modifications are substantial, the purported acceptance is a new offer which must, in turn, be accepted to form a contract; but even if the modifications are not substantial, the offeror may withdraw from the negotiations by simply objecting to the reply of the offeree (Art. 19(2) 1st sentence CISG). It appears that this rule may provide a pretext for the offeror to interrupt the negotiations at any time, even in cases where the proposed modifications to the initial offer are of no material relevance. May the offeror be held liable towards the offeree, who may have relied on the conclusion of the contract?

Whilst the CISG does not contain any specific rule concerning the parties’ liability for breach of an obligation to negotiate in good faith, Art. 2:301 PECL provides that a party negotiating or breaking off negotiations contrary to good faith is liable for the losses caused to the other party.[7]

The CISG does not regulate the issue of pre-contractual liability [8] (including the sub-categories of unjustified interruption of the negotiations, misrepresentation, entering into negotiations without any real intention of coming to the conclusion of the contract, etc.).[9] Indeed, the CISG deals with the negotiations only in order to determine whether a contract has been concluded or not. May pre-contractual liability nevertheless find its way in the system of the CISG by virtue of Art. 7 (2) CISG, considering that Art. 2:301 PECL recognizes such liability as a general principle?

It is submitted that Art. 7(2) CISG is not applicable to this situation because pre-contractual liability is a matter which is not governed by the CISG and therefore the absence of a rule on the issue does not constitute a gap. However, even if one were to consider that a general duty to negotiate in good-faith could be read into the system of the CISG, the latter does not provide for a specific remedy in case of breach of such a duty: clearly, Art. 74 CISG is not applicable because its plain wording limits it to damages for breach of contract. In addition, the Comments to Art. 2:301 PECL, para. G, expressly state that the party in good faith cannot claim to be put in a situation in which it would have been if the contract had been correctly performed (positive interest), but the damages which it may claim are limited to the costs and expenses incurred (negative interest).[10] This limited protection does not fit in with Art. 74 CISG, which allows for recovery of full damages, as it is always the case for damages out of breach of contract.

However, an additional question may arise, namely whether the absence of any specific provision on pre-contractual liability must be interpreted to the effect to exclude any recourse to national applicable laws . The answer, once more, is provided by the fact that pre-contractual liability simply falls outside the scope of the CISG: Art. 2:301 PECL shows that pre-contractual liability is a widely recognized principle and the party in good faith should be able to have recourse to extra-conventional remedies under national law.


FOOTNOTES

* Avv. Cecilia Carrara is a research fellow at the CERADI - Luiss Guido Carli University in Rome AND AN Italian attorney, of counsel to the law firm MACCHI CELLERE GANGEMI; Joachim Kuckenburg, FCIArb, is a German attorney in the Paris law firm De Busschère Kuckenburg.

1. Secretariat Commentary to Art. 15 of the 1978 Draft Convention [Art. 15 of the 1978 Draft Convention and Art. 17 of the CISG are identical], no. 1, available online at <http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-17.html>. However, it is worth noting that, already in 1964 during the preparatory works for the 1964 Hague Convention on the Uniform Law for the Formation of Contracts (ULF), the UNIDROIT Commission expressly rejected the proposal to include such a proviso considering that it was "so evident that it would seem superfluous" (Honnold, Uniform Law for International Sales, 3rd ed., The Hague, 1999, p. 169, fn. 2). The same rule is contained in Art. 15 of the Code Européen des Contrats which states, under para. 2: "L'offre, même si irrévocable, cesse d'avoir des effets à partir du moment où parvient à l'auteur une déclaration de refus de la part du destinataire, fût -elle jointe à une nouvelle offre" (Code Européen des Contrat, coordinated by Gandolfi, Milano, 2001).

2. Rapport du Groupe de travail sur la vente internationale des objets mobiliers corporels sur les travaux de sa 9ième session (Genève, 19-30 septembre 1977, Doc. A/CN.9/142 n. 283).

3. Cf. P. Schlechtriem, in: Schlechtriem, Commentary on the UN Convention on the International Sales of Goods (CISG), 2nd edition (in translation by G. Thomas), Oxford 1998, p. 125, Art. 17, note 6: "[...] domestic law continues to govern the effects of such events on an existing offer." Schlechtriem goes on to state: "At most where an offer has already become binding owing to the dispatch of an acceptance, could it be argued, in accordance with the prevailing view in may legal systems, that the offer has become "so depersonalised" that at least the offeror's death or lack of capacity cannot prevent the conclusion of a contract. However, Article 7(2) does not permit recourse to general legal principles derived from a comparative study of the law, but only to the principles upon which the Convention is based. On the other hand, not only does the Convention not contain any principles concerning that problem, but it basically assumes that questions of legal capacity continue to be governed by domestic law. The position must be the same as regards the fate of an offer which has become irrevocable in such cases."

4. Cf. Enderlein/Maskow, International Sales Law, New York-London-Rome, 1992, Art. 18, no. 15, p. 91, available online at <http://cisgw3.law.pace.edu/cisg/biblio/enderlien-art18.html, "Consequently, if the offeree accepts the offer, for instance by telex, before his letter containing a rejection has reached the offeror, a contract is made."

5. According to Heuzé, in: La vente internationale des marchandises, Paris, 2000, p. 162 : "des articles 15 et 22 il paraît pouvoir être déduit sans témérité que la convention de Vienne a entendu ériger en principe général la règle suivant laquelle l’auteur d’une expression de volonté peut valablement revenir sur celle-ci, dès lors qu’il met son correspondant en mesure de connaître son changement d’intention avant, ou en même temps que sa position initiale."

6. This rigidity is criticized by Heuzé, op. cit., p. 163, "cette solution n’est sans doute pas très opportune, dans la mesure où elle décourage la négociation, puisqu’elle expose le destinataire de l’offre à ne plus pouvoir accepter celle-ci, s’il a au préalable vainement tenté d’obtenir une modification de ses conditions."

7. See also Art. 2.15 UNIDROIT Principles.

8. Stoll, in Schlechtriem, Commentary on the UN Convention on the International Sale of Goods, Oxford, 1998, Art. 74, n° 10; Bonell, Vertragsverhandlungen und culpa in contrahendo nach dem Wiener Kaufrechtsübereinkommen, RIW 1990, p. 693 et seq..

8. The elaboration and definition of the different sub-categories of pre-contractual liability vary in each national legal system, e.g. for Anglo-American legal systems see Farnsworth, Pre-contractual Liability and Preliminary Agreements: Fair dealing and Failed Negotiations, Col. L. Rev. 1987, p. 218 et seq.; Kessler & Fine, Culpa in contrahendo, Bargaining in good faith and Freedom of contract: A comparative study, Harv. L. Rev. 1964, p. 401 et seq.; for Italy, Patti, Responsabilita' contrattuale, Il Codice civile commentato, Giuffré 1993; Bianca, Diritto civile 3, Il Contratto, Giuffré 1994, p. 159 et seq..; for Germany, new § 311 (2) BGB codifying the institute of culpa in contrahendo, cf. Koller, in Koller/Roth/Zimmermann, Schuldrechtsmodernisierungsgesetz 2002, München, 2002, p. 63-64; Faust, in Huber/Faust, Schuldrechtsmodernisierung, Einführung in das neue Recht, München, 2002, pp. 69-72; Huber, in Huber/Faust, op. cit., pp. 387-390.

10. This reflects the general position in the various legal systems recognizing pre-contractual liability.

11. According to Schlechtriem, op. cit., Introduction to Arts. 14-24, no. 6, fn. 36, the possibility to go back to national remedies should be possible "only in cases where the parties have not been moving towards a contract through corresponding offer and acceptance.", since Arts. 16 and 17 CISG regulate the issue to the exclusion of all other national rules.


Pace Law School Institute of International Commercial Law - Last updated August 31, 2006
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