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2008 UNCITRAL Digest of case law on the United Nations Convention on the International Sale of Goods

Digest of Article 14 case law [reproduced with permission of UNCITRAL] [*]

[Text of article
Overview
Addressees of proposal
Indication of intent to be bound by acceptance
Definiteness of proposal
Indication of the goods
Fixing or determining the quantity
Fixing or determining the price
Relevance of price formula in article 55]

Article 14

(1) 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. A proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price.
(2) A proposal other than one addressed to one or more specific persons is to be considered merely as an invitation to make offers, unless the contrary is clearly indicated by the person making the proposal.

OVERVIEW

1. Article 14 sets out the conditions on which a proposal to conclude a contract constitutes an offer that, if accepted by the addressee, will lead to the conclusion of a contract under the Convention. This article has been applied to determine whether a statement or other conduct rejecting an offer constitutes a counter-offer (see article 19(1)).[1] The principles set out in this article -- i.e., the person making the proposal must intend to be bound, and the proposal must be sufficiently definite -- have been applied, together with those in other articles of Part II, notwithstanding that Part II was not applicable by virtue of a declaration under article 92.[2] For discussion of whether Part II of the Convention provides the exclusive way to conclude a contract governed by the Convention, see the Digest for Part II.

2. The identity of the person making a proposal or of the person to which the proposal is made may be uncertain. Decisions have applied article 14 and the rules of interpretation in article 8 to this issue.[3]

[See also the overview comments UNCITRAL has prepared to introduce all of the Formation provisions of the CISG (articles 14 through 24). They discuss the following subjects: Permitted Reservations by Contracting States, Exclusivity of Part II, Validity of Contract, Formal Requirements, Incorporating Standard Terms, and Commercial Letters of Confirmation.]

Addressees of proposal

3. The first sentence of paragraph (1) focuses on proposals that are addressed to one or more specific persons. Under the applicable law of agency, the maker of an offer addressed to an agent may be bound by the acceptance of the principal.[4] One decision states that article 14(1) rather than the law of agency governs the issue of identifying whether a manufacturer or its distributor is party to the contract.[5]

4. Paragraph (2) provides for proposals other than ones addressed to one or more specific persons. There are no reported decisions applying paragraph (2)

Indication of intent to be bound by acceptance

5. The first sentence of paragraph (1) provides that, to constitute an offer, a proposal to conclude a contract must indicate the intention of the proponent to be bound if the addressee accepts the proposal. The intent may be shown by interpretation of a statement or act in accordance with paragraphs (1) or (2) of article 8.[6] By virtue of paragraph (3) of article 8, this intent may be established by all the relevant circumstances, including statements or other conduct during negotiations and the conduct of the parties after the alleged conclusion of the contract.[7] A buyer was found to have indicated its intent to be bound when it sent the seller an "order" that stated "we order" and that called for "immediate delivery".[8] A communication in the English language sent by a French seller to a German buyer was interpreted by the court as expressing the seller's intent to be bound.[9] Where both parties had signed an order designating a computer programme and its price, the buyer was unable to establish that the order merely indicated an intention to describe details of a contract to be concluded at a later time rather than an intention to conclude the contract by means of the order.[10] Another buyer's order specifying two sets of cutlery and the time for delivery was likewise interpreted as indicating an intent to be bound in case of acceptance, notwithstanding buyer's argument that it had merely proposed future purchases.[11]

Definiteness of proposal

6. To be deemed an offer, a proposal to conclude a contract not only must indicate an intent to be bound by an acceptance but also must be sufficiently definite.[12] The second sentence of paragraph (1) provides that a proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price. Practices established between the parties may supply the details of quality, quantity and price left unspecified in a proposal to conclude a contract.[13] Decisions have applied the rules of interpretation in article 8 to determine whether a communication or act is sufficiently definite. One court has concluded that, if the intent to be bound by an acceptance is established, a proposal is sufficiently definite notwithstanding the failure to specify the price.[14]

7. Article 14 does not require that the proposal include all the terms of the proposed contract.[15] If, for example, the parties have not agreed on the place of delivery [16] or the mode of transportation [17] the Convention may fill the gap.

Indication of the goods

8. To be sufficiently definite under the second sentence of paragraph (1) a proposal must indicate the goods. There is no express requirement that the proposal indicate the quality of the goods. One court found that a proposal to buy "chinchilla pelts of middle or better quality" was sufficiently definite because a reasonable person in the same circumstances as the recipient of the proposal could perceive the description to be sufficiently definite.[18] Another court assumed that an offer to purchase monoammoniumphosphate with the specification "P 205 52% +/- 1%, min 51%" was a sufficiently definite indication of the quality of the goods ordered.[19] If, however, the parties are unable to agree on the quality of the goods ordered there is no contract.[20]

Fixing or determining the quantity

9. To be sufficiently definite under the second sentence of paragraph (1) a proposal must expressly or implicitly fix or make provision for determining the quantity. The following quantity designations have been found sufficiently definite: a reference to "700 to 800 tons" of natural gas when usage in the natural gas trade treated the designation as adequate;[21] "a greater number of Chinchilla furs" because the buyer accepted the furs tendered without objection;[22] "three truck loads of eggs" because the other party reasonably understood or ought to have understood that the trucks should be filled to their full capacity;[23] "20 truck loads of tinned tomato concentrate" because the parties understood the meaning of these terms and their understanding was consistent with the understanding in the trade;[24] "10,000 tons +/-5%."[25] A court has found that a buyer's proposal that expressly designated no specific quantity was sufficiently definite because, under an alleged customary usage, the proposal would be construed as an offer to purchase the buyer's needs from the offeree.[26] Another court found that the seller's delivery of 2,700 pairs of shoes in response to the buyer's order of 3,400 pairs was a counter-offer accepted by the buyer when it took delivery; the contract was therefore concluded for only 2,700 pairs.[27]

10. A distribution agreement specifying terms on which the parties would do business and obliging the buyer to order a specified amount was found not sufficiently definite because it did not state a specific quantity.[28]

Fixing or determining the price

11. To be sufficiently definite under the second sentence of paragraph (1) a proposal must expressly or implicitly fix or make provision for determining not only the quantity but also the price. Proposals with the following price designations have been found sufficiently definite: pelts of varying quality to be sold "at a price between 35 and 65 German Marks for furs of medium and superior quality" because the price could be calculated by multiplying the quantity of each type by the relevant price;[29] no specific agreement on price where a course of dealing between the parties established the price;[30] a proposal that prices were to be adjusted to reflect market prices;[31] agreement on a provisional price to be followed by establishment of a definitive price after the buyer resold the goods to its customer, because such an arrangement was regularly observed in the trade.[32]

12. The following proposals were found to be insufficiently definite: a proposal that provided for several alternative configurations of goods but did not indicate a proposed price for some elements of the alternative proposals;[33] an agreement that the parties would agree on the price of additional goods ten days before the new year.[34]

13. One court has concluded that, if the intent to be bound by an acceptance is established, a proposal is sufficiently definite notwithstanding the failure to specify the price.[35]

Relevance of price formula in Article 55

14. Article 14 states that a proposal to conclude a contract is sufficiently definite if it "fixes or makes provision for determining" the price. Article 55 provides a price formula that applies "[w]here a contract has been validly concluded but does not expressly or implicitly fix or make provision for determining the price." The price supplied by article 55 is "the price generally charged at the time of the conclusion of the contract for such goods sold under comparable circumstances in the trade concerned."

15. Most decisions have declined to apply article 55.[36] Several have concluded that article 55 was not applicable because the parties had expressly or implicitly fixed or made provision for determining the price, thereby satisfying the definiteness requirement set out in article 14(1).[37] One tribunal found that where the parties had agreed to fix the price at a later time but had not done so, the proposal was not sufficiently definite under article 14(1) and that article 55 was not applicable because of the parties agreement to fix the price at a later time.[38] In another case where the proposal to conclude a contract failed to fix the price, the court declined to apply article 55 to fix the price because there was no market price for the airplane engines concerning which the parties were negotiating.[39] Another court also found that, to the extent the price formula of article 55 might be applicable, the parties had derogated from that formula by their agreement.[40]

16. When enforcing an agreement notwithstanding the fact that the parties had not fixed the price in their original negotiations, one court has invoked article 55. In that case, the court stated that the price set out in a corrected invoice issued by the seller at the request of the buyer and to which the buyer did not object was to be interpreted as the price charged under comparable circumstances in the trade concerned, as provided in the article 55 formula.[41]


NOTES

* This presentation of the UNCITRAL Digest is a slightly modified version of the original UNCITRAL text at <http://www.UNCITRAL.org/pdf/english/clout/CISG_second_edition.pdf>. The following modifications were made by the Institute of International Commercial Law of the Pace University School of Law:

   -    To enhance access to contents by computer search engines, we present in html rather than pdf;
 
   -    To facilitate direct focus on aspects of the Digests of most immediate interest, we inserted linked tables of contents at the outset of most presentations;
 
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   -    To enable researchers to themselves keep the case citations provided in the Digests constantly current, we have created a series of tandem documents, UNCITRAL Digest Cases + Added Cases. The new cases and other cases that are cited in these updates are coded in accordance with UNCITRAL's Thesaurus.

In addition, this presentation introduces each section of the UNCITRAL Digest with a Google search button. This is to help you access doctrine (relevant material from the over 1,200 commentaries, monographs and books on the CISG and related subjects that we present on this database) as well as the texts of the cases that UNCITRAL cites in its Digests and that we present in our updates to UNCITRAL's Digests.

1. [GERMANY Oberlandesgericht Frankfurt 4 March 1994 (Special screws case)] (a buyer's purported acceptance that included both screws for which the seller had stated the price and additional screws for which the seller had not stated the price was a counter-proposal that was not sufficiently definite because the price of the latter screws were not fixed or determinable). See also [AUSTRIA Oberster Gerichtshof 20 March 1997 (Mono ammonium phosphate case)] (stating that a counter-offer must satisfy the conditions of article 14).

2. [GERMANY Oberlandesgericht München 8 March 1995 (Copper and nickel electrolyte cathode case)] (applying the general principles of Part II rather than the national law applicable by virtue of private international law to transaction between Finnish seller and German buyer).

3. [GERMANY Oberlandesgericht Frankfurt 30 August 2000 (Yarn case)]; [GERMANY Oberlandesgericht Stuttgart 28 February 2000 (Floor tiles case)]; [NETHERLANDS Hoge Raad 7 November 1997 (Vodka case)]; [SWITZERLAND Obergericht des Kantons Thurgau 19 December 1995 (Cloth case)]; [SWITZERLAND Handelsgericht des Kantons St. Gallen 5 December 1995 (Computer hardware devices case)]; [GERMANY Landgericht Hamburg 26 September 1990 (Textiles case)]. See paragraph 15 of the Digest for Part II.

4. [AUSTRIA Oberster Gerichtshof 18 June 1997 (Shoes case)] (if offeror knew that addressee was acting as agent, then offeror should expect proposal to be transmitted to the principal; if offeror did not know or was unaware that addressee was an agent, the offeror was not bound by principal's acceptance; case remanded to determine whether the addressee was agent and whether offeror knew of this).

5. [SWITZERLAND Obergericht des Kantons Thurgau 19 December 1995 (Cloth case)] (interpreting the statements and acts of the parties in accordance with art. 8, manufacturer rather than its dealer was party to contract; manufacturer had, however, assigned its claim for breach to dealer).

6. [SWITZERLAND Bezirksgericht St. Gallen 3 July 1997 (Fabrics case)] (see full text of the decision).

7. [SWITZERLAND Bezirksgericht St. Gallen 3 July 1997 (Fabrics case)] (stressing the parties conduct subsequent to conclusion of the contract).

8. [SWITZERLAND Handelsgericht des Kantons St. Gallen 5 December 1995 (Computer hardware devices case)] (see full text of the decision).

9. [GERMANY Oberlandesgericht Hamburg 4 July 1997 (Tomato concentrate case)] ("We can only propose you"; "First truck could be delivered").

10. [GERMANY Landgericht München 8 February 1995 (Standard software case)].

11. [SWITZERLAND Handelsgericht des Kantons Aargau 26 September 1997 (Cutlery case)].

12. [UNITED STATES Federal District Court, Northern District of Illinois, 7 December 1999 (Magellan International v. Salzgitter Handel)] (conditions satisfied).

13. [HUNGARY Fovárosi Biróság 24 March 1992] (citing art. 9(1), court concludes that prior sales transactions between the parties supplied details unstated in telephone order).

14. [SWITZERLAND Handelsgericht des Kantons St. Gallen 5 December 1995 (Computer hardware devices case)] (fax ordering software devices sufficiently definite notwithstanding failure to mention price).

15. See also [GERMANY Landgericht München 8 February 1995 (Standard software case)] (contract for purchase of software enforceable even if parties intended further agreement with respect to use of software).

16. [GERMANY Amtsgericht Duisburg 13 April 2000 (Pizza cartons case)] (art. 31(a) applies when buyer unable to establish parties agreed on different place).

17. [SWITZERLAND Bezirksgericht der Sanne 20 February 1997 (Spirits case)] (seller deemed authorized to arrange transportation under art. 32(2) when buyer was unable to establish that parties agreed on transport by truck).

18. [AUSTRIA Oberster Gerichtshof 10 November 1994 (Chinchilla furs case)].

19. [AUSTRIA Oberster Gerichtshof 20 March 1997 (Mono ammonium phosphate case)] (remanding to lower court, however, to determine whether an apparently contradictory response was sufficiently definite).

20. [GERMANY Oberlandesgericht Frankfurt a.M. 31 March 1995 (Test tubes case)] (no agreement on quality of test tubes).

21. [AUSTRIA Oberster Gerichtshof 6 February 1996 (Propane case)] (see full text of the decision).

22. [AUSTRIA Oberster Gerichtshof 10 November 1994 (Chinchilla furs case)] (citing art. 8(2), (3)) (see full text of the decision).

23. [GERMANY Landgericht Oldenburg 28 February 1996 (Egg case)] (citing art. 8(2)).

24. [GERMANY Oberlandesgericht Hamburg 4 July 1997 (Tomato concentrate case)].

25. [AUSTRIA Oberster Gerichtshof 20 March 1997 (Mono ammonium phosphate case)] (remanding to lower court to determine whether other elements of acceptance were sufficiently definite).

26. [UNITED STATES Federal District Court, Southern District Court of New York, 10 May 2002 (Geneva Pharmaceuticals Tech Corp. v. Barr Labs., Inc.)].

27. [GERMANY Oberlandesgericht Frankfurt a.M. 23 May 1995 (Shoes case)].

28. [UNITED STATES Federal District Court, Southern District of New York, 21 July 1997 (Helen Kaminski v. Marketing Australian Products)] (see full text of the decision).

29. [AUSTRIA Oberster Gerichtshof 10 November 1994 (Chinchilla furs case)].

30. [HUNGARY Fovrosi Birosag 24 March 1992] (citing art. 9(1)).

31. [FRANCE Cour de cassation 4 January 1995 (Electronic components case)], affirming, [FRANCE Cour d'appel, Paris 22 April 1992] ("à revoir en function de la baisse du marché ").

32. [ICC International Court of Arbitration, Award 8324 of 1995 (Magnesium case)].

33. [HUNGARY Legfelsobb Birosag 25 September 1992 (Airplane engines case)] (see full text of the decision).

34. [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Award 309/1993 of 3 March 1995 (Rejection of article 55 case)]; [RUSSIA Federation Chamber of Commerce and Industry, Award 304/1993 of 3 March 1995 (Implicit agreement on price case)] (citing art. 8).

35. [SWITZERLAND Handelsgericht des Kantons St. Gallen 5 December 1995 (Computer hardware devices case)] (fax ordering software devices sufficiently definite notwithstanding failure to mention price).

36. See also [GERMANY Oberlandesgericht Frankfurt a.M. 15 March 1996 (Benetton I fashion textiles case)], (citing articles 14 and 55 when expressing doubt parties had undertaken obligations), affirmed [GERMANY Bundesgerichtshof 23 July 1997 (Benetton II fashion textiles case)] (no citation to articles 14 or 55); [GERMANY Landgericht Alsfeld 12 May 1995 (Flagstone tiles case)] (court indicates that buyer did not allege circumstances from which a lower price could be established in accordance with article 55) (see full text of the decision).

37. [GERMANY Landgericht, Darmstadt 9 May 2000 (Video recorders case)] (parties agreement as to price enforceable even if price different from that of the market); [AUSTRIA Oberster Gerichtshof 10 November 1994 (Chinchilla furs case)] (transaction between a German seller and an Austrian buyer; parties had fixed the price in a contract concluded by offer and acceptance; the court therefore reversed an intermediate courts application of article 55).

38. [RUSSIA Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry, Award 309/1993 of 3 March 1995 (Rejection of article 55 case)] (transaction between a Ukrainian seller and an Austrian buyer; court found that buyer may have separate claim for seller's failure to propose a price during the designated time).

39. [HUNGARY Legfelsóbb Biróság 25 September 1992 (Airplane engines case)] (transaction between a U.S. seller and a Hungarian buyer).

40. [FRANCE Cour d'appel, Grenoble 26 April 1995 (Candy case)] (buyer had accepted invoices with higher than market prices).

41. [SWITZERLAND Bezirksgericht St. Gallen 3 July 1997 (Fabrics case)] (transaction between a Dutch seller and Swiss buyer; buyer's subsequent conduct interpreted as establishing buyer's intent to conclude a contract).


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