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Reproduced with permission from 23 International Lawyer (1989) 443-483

excerpt from

Reconciliation of Legal Traditions in the U.N. Convention on Contracts for the International Sale of Goods

Alejandro M. Garro [*]


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Open-Price Terms

Socialist countries objected to the conclusion of contracts with open-price terms, because the parties are expected to conform their contracts to a predetermined macroeconomic governmental plan.[86] This view makes sense in a planned economy, in which contracts with open-price terms are a nullity from the perspective of the superintending state planning agency. Also in some civil law systems contracts of sale with open-price terms are viewed with hostility, particularly when the unilateral fixing of the price works to the disadvantage of the weaker party.[87] It was also argued at the Vienna Conference that contracts with open-price terms do not serve the interests of the developing countries as a result of the unfavorable terms of trade for raw materials, in contrast with the ever-increasing price of manufactured goods.[88] In contrast, the policy prevailing in the United States on this matter encourages the conclusion of sales contracts for long-term supplies, leaving the price and quantity of goods open to be adjusted in light of sellers' output and buyers' requirements.[89]

In order for a proposal to enter into a contract of sale to be deemed "sufficiently definite," article 14(1) of the Convention (under the formation section) requires the offeror to fix the price, expressly or implicitly. The United States delegation was unsuccessful in attempting to change this language in favor of "open-price" offers.[90] An uneasy compromise was finally reached, not by amending article 14(1) but by inserting a new provision in article 55 (under the section dealing with the obligations of the buyer).[91] This provision seems to say the opposite of what is stated in article 14(1), for it implies that a contract may be "validly concluded" even though it "does not expressly or implicitly fix or make provision for determining the price."[92]

American legal scholars who participated in the diplomatic negotiations disagree about the interpretation of article 55. On the one hand, Professor Honnold believes that a contract with an unstated price may be validly concluded.[93] On the other hand, Professor Farnsworth thinks that article 55 is an empty set since it applies, according to its opening clause, only in cases "where a contract has been validly concluded," and if there is no reference to the price there can be no offer, hence no valid contract could have been concluded.[94] I am in favor of Honnold's opinion for two reasons. The first one is that in a codified set of rules such as the Convention, every effort should be made to construe seemingly incompatible provisions in order to make sense out of them. The other reason is that it is conceivable and even plausible to reconcile their meaning. Whereas article 14(1) requires that the price be at least "implicitly" fixed, article 55 indicates that a contract with an open-price is actually a contract with an "implicit" price fixed by operation of law, i.e., the price "generally charged at the time of the conclusion of the contract."[95] In a period of rapid price fluctuation, however, it is to be expected that if a controversy under the Convention arises in the courts of a country that is not receptive to open-price contracts, the wording of article 14(1) and a narrow construction of article 55 may lead to the nullity of the contract.[96]

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FOOTNOTES

* Alejandro M. Garro, Lecturer in Law, Columbia University. This paper was submitted to the 81st Annual Meeting of the American Association of Law Libraries, June 26-29, 1988.

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86. Rosett, supra note 25, at 289.

87. See Rosett, supra note 25, at 289 n. 80; Uniform Sales Law, supra note 13, at 51 n. 166, referring to judgments of the French Court of Cassation in which open-price contracts have been invalidated. Under French law a contract of sale where the indication as to the price is not definite is null and void. See French Civil Code arts. 1129, 1583, 1591. See generally B. Starck, Droit Civil, Obligations 1399 (1973), referring to the case law of the French Court of Cassation on this matter; Corbisier, La détermination du prix dans les contrats commerciaux portant vente de marchandises, Réflexions comparatives, 4 Revue Internationale de Droit Compare 767, 826-29 (1988) (discussing the issue of price certainty from a comparative perspective and under the Convention).

88. See Date-Bah, The Convention on the International Sale of Goods from the Perspective of the Developing Countries, in La Vendita Internazionale, supra note 79, at 28:

"If a contract can be formed without an agreement on price, this would create the danger of buyers being landed, after vague negotiations, with sales contracts whose contract prices would be imposed by the courts: many such courts would be in the developed countries and could impose unreasonably high prices for manufactured goods. Such contract prices would tend to be the sellers' prices and, as is well-known, while the prices of the raw materials exported by the developing countries are generally fixed in the commodity markets of the developed world, the prices of manufactured goods are usually determined by the manufacturers themselves."

89. Although open-price contracts were subject to attack at common law, U.C.C. 2-305, 2-306 explicitly authorizes contracts with open-price terms as well as output and requirement contracts. U.C.C. 2-305 provides: "The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time of delivery if nothing is said as to price . . . ." See Rosett, supra note 25, at 288 n. 79; Farnsworth, supra note 85, 3.04, at 3-8; see also U.C.C. 2-204(3): "Even though one or more of the terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy."

90. See Farnsworth, supra note 85, 3.04, at 3-8. Article 14(1) of the Convention, supra note 3, had already been approved when art. 55 was discussed, and the former provision could only be modified by a qualified majority, which could not be raised. See Ghestin, Les obligations du vendeur, supra note 42, at 6.

91. Convention, supra note 3, art. 55, provides:

"Where a contract has been validly concluded but does not expressly or implicitly fix or make provision for determining the price, the parties are considered, in the absence of any indication to the contrary, to have impliedly made reference to the price generally charged at the time of the conclusion of the contract for such goods sold under comparable circumstances in the trade concerned."

92. The adoption of art. 55 eventually responded to the desire of the Scandinavian countries to accept Part I of the Convention without Part II, and to have a provision in Part II in case the price has not been determined. 1 U.N. Official Records, supra note 24, at 45. See Uniform Sales Law, supra note 13, at 51; Eörsi, Article 55, in Commentary, supra note 13, at 407; see also Rosett, supra note 25, at 289 ("The language of this article [55] appears directly keyed to article 14(1) and seems to undercut the earlier provision").

93. J. Honnold, Uniform Law, supra note 13, at 163-64 (arguing that failure to state a fixed price does not contravene the requirement of definiteness in art. 14).

94. Farnsworth, supra note 85, 3.04, at 3-9; see also Rowe, U.N. Convention on International Sales Law, Int'l Fin. L. Rev. July 1983, at 20, 21; Rosett, supra note 25, at 289 n.81, Eörsi, Article 14, in Commentary, supra note 13, at 144 ("As there is no offer without an indication of the price, a contract without such an indication seems to be a manifest contradiction."). See also Date-Bah The Perspective of the Developing Countries, supra note 88, at 28. Professor Date-Bah recalls that several delegations sought unsuccessfully to delete the second sentence of art. 14 (1), so that an offer could be held sufficiently definite even if it did not expressly or impliedly fix the price or make provision for determining the price. Date-Bah concludes that the implication to be drawn by the interpreter from the motion's defeat is that there can be no valid "open-price" contract under the text of art. 14(1), as it now stands.

95. Some commentators attempt to reconcile arts. 14 (1) and 55 of the Convention, supra note 3, on the ground that the former provision is concerned with offers and the latter 55 with contracts. According to this view, once a contract is concluded, the offer becomes irrelevant and the conclusion of the contract in itself proves that the offer was sufficiently definite, irrespective of whether a provision was made for determining the price. The conclusion of these authors is that art. 55 has precedence over art. 14(1). Eörsi, Article 55, in Commentary, supra note 13, at 407 ("An approach which concentrates on the offer is no longer appropriate after the contract has been concluded."); Uniform Sales Law, supra note 13, at 51, 80. Contra Ghestin, Les obligations du vendeur, supra note 42, at 6 ("A priori, la question de validité étant préalable à celle de l'exécution, l'article 14 devrait prévaloir sur l'article 55, qui suppose d'ailleurs expressément que la vent ait été 'valablement conclue'. Mais la Convention de Vienne refuse expressément de régler les questions de validité.).

96. See Farnsworth, supra note 85, 3.04, at 3-9; see also Tallon, The Buyer's Obligations under the Convention on Contracts for the International Sale of Goods, in International Sales, supra note 13, 7-03, at 7-9; Niggemann, Les obligations de l'acheteur sous la Convention des Nations Unies sur les contrats de vente internationale de marchandises, 1 Revue de Droit des Affaires Internationales 27, 33 (1988) [hereinafter Niggemann, Les obligations de l'acheteur].

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Pace Law School Institute of International Commercial Law - Last updated August 16, 1999
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