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Reproduced with permission from 6 Temple International and Comparative Law Journal (1992) 193-215

excerpt from

Contract Formation under the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Commercial Code: Pitfalls for the Unwary

Burt A. Leete [*]

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Communication, Revocation, and Withdrawal of the Offer

A. Communication

There is little difference between the legal systems in the rules concerning communication of the offer. The CISG contains a specific provision making the communication of the offer effective when it "reaches" the offeree.[76] Under the CISG, an offer "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."[77] Although the U.C.C. does not have a similar provision, this language seems to be consistent with the common law approach to the communication of the offer.[78] Thus, under both common law and the CISG, the offer can only be accepted after it has been communicated to the offeree.[79]

B. Revocation

The CISG is significantly different from the U.C.C. and common law on the issue of revocation. An examination of revocability of an offer under the CISG, the U.C.C, and the common law reveals a lack of consistency among the three systems. Ultimately, there may not be a great difference between the CISG and the common law approaches. However, there may be confusion due to the different treatment revocability receives in common law and civil law countries.

Under the common law, an offer is presumed to be revocable at any time, subject to some exceptions, until it is accepted by the offeree.[80] This is true even if the offeror states that an offer must be accepted within a specific time period, or expressly states that the offer is not revocable.[81] The lawyer operating in a common law country would assume that the statement of a time period for acceptance results in the offer being terminated at the expiration of that time. Furthermore, in order for a promise to hold an offer open for a period of time to be enforceable, consideration from the offeree is generally required.[82] The U.C.C. approach to revocation also generally presumes an offer to be revocable until it is accepted by the offeree.[83] However, the U.C.C. creates an exception for "firm offers" made by merchants.[84] Section 2-205 provides for the enforcement of promises, made by merchants, to keep offers open for a period of time, without consideration, provided that such a promise is made in writing and meets certain other restrictions.[85]

The civil law approach to revocability is considerably different. An offer that states a time limit for an acceptance is generally treated as an irrevocable offer by the civil law.[86] Likewise, unless otherwise indicated, an offer with no time limit for acceptance is treated as irrevocable for a reasonable time.[87] Thus, if the offeror states that his or her offer must be accepted within "twenty days," the civil law lawyer would consider the offer to be irrevocable for that period.

The common law lawyer, however, would treat the same offer as revocable at any time before acceptance.[88] In fact, the common law lawyer would generally treat the offer as revocable even if there were a promise to keep it open for a period of time, unless consideration was given by the offeree.[89] In this respect the U.C.C., with regard to contracts for the sale of goods, makes a distinction between an "open offer," which can be revoked before acceptance, and a "firm offer," which cannot be revoked during a stated or reasonable period of time.[90] No such distinction is made in civil law countries.[91]

The CISG adopts the common law approach to revocation with two exceptions.[92] The first exception results from a compromise with the civil law countries; Article 16(2)(a) provides that an offer is irrevocable where the offeror states that an acceptance must be made within a fixed time period.[93] Therefore, the offer stating that acceptance must be made "within twenty days" would be irrevocable for that period. There has been considerable discussion concerning the confusion that will result in this area. Some commentators contend that the language of Article 16(2)(a) still allows for revocation in cases arising between two common law countries even where an offer states a fixed time for acceptance.[94] However, the comments issued with the draft of Article 16(2)(a) state clearly that "this provision does not require a promise on the part of the offeror not to revoke his offer nor does it require any promise, act or forbearance on the part of the offeree for the offer to become irrevocable."[95]

This provision of the CISG might have been written more clearly to avoid such confusion. However, the underlying problem with this language may stem from the drafters' attempt to reach a compromise among the opposing legal traditions. When the contract is drawn by a draftsman who is familiar with the CISG and its history, prudence would indicate that an intent to make an offer irrevocable will be stated clearly. The problems that are likely to arise will occur where the contractual process is carried on by parties from differing legal traditions who are not aware of the history of the CISG. However, if one reads the language of Article 16(2)(a), coupled with the comments to earlier drafts, it is hard to accept the argument that an offer which states a time for acceptance, without more, is still amenable to revocation within that period, even in a court steeped in the common law tradition.

The second exception to the common law approach adopted by the CISG is that 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."[96] While this provision seems to have aspects of an estoppel approach under the common law, it really goes somewhat farther. The comments to this section state that the provision would be applicable in the circumstance where an offeree merely needs time to investigate whether the offer should or should not be accepted.[97] Under the common law, an offer would not be irrevocable merely because the offeree needs time to investigate the feasibility of acceptance.[98] But the comments to Article 14 of the CISG draft (adopted as Article 16 of the CISG) indicate that the offer should not be revocable in this situation even where the offer does not specify irrevocability.[99] This is consistent with the approach of many civil law countries that an offer is presumed to be irrevocable for a reasonable time for the offered to consider it.[100] The differences between the common law and civil law approaches highlight the potential for misunderstanding between contracting parties with different legal traditions.

C. Withdrawal of the Offer

A "withdrawal" of an offer under the CISG differs from the concept of "revocation." Under the common law, the word revocation also includes the concept of withdrawal.[101] However, the CISG takes an approach similar to the civil law and makes a distinction between the terms.[102] Article 15(2) provides that "[a]n offer, even if it is irrevocable, may be withdrawn if the withdrawal reaches the offeree before or at the same time as the offer."[103] The provision is of little consequence unless the offer is otherwise irrevocable and the offeror changes his or her mind after the offer is dispatched but before it "reaches" the offeree. The CISG provision makes clear that even an irrevocable offer may be withdrawn before it becomes effective by reaching the offeree.[104] All that is required to do so is that the communication withdrawing the offer reach the offeree before or at the same time as the offer.[105] A similar result would be reached under the common law.[106]

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FOOTNOTES

* Professor, College of Business and Management, University of Maryland at College Park; B.S., Juniata College; M.B.A., University of Maryland; J.D., American University.

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76. Id. art. 15(1).

77. Id. art. 24.

78. Mayor of Jersey City v. Town of Harrison, 62 A. 765, 766 (N.J. 1905) (illustrating common law approach that communication of offer does not occur unless knowledge of offer acquired with express or implied intention of proposing party).

79. Id. the comments to the draft of CISG Article 22 (adopted as CISG Article 24) state: "an offeree who learns of an offer from a third person prior to the moment it reaches him may not accept the offer until it has reached him." CISG Draft, supra note 50, art. 22, cmt. 2.

80. Restatement (Second), supra note 66, 42, cmt. a.

81. Id.

82. Id.

83. U.C.C. 2-205.

84. Id.

85. Id. Firm offers under 2-205 must be signed by the offeror, irrevocable for a reasonable period of time not to exceed three months, and if the term of assurance is on a form supplied by the offeree, it must be separately signed by the offeror. Id.

86. Garro, supra note 5, at 456.

87. Id. at 455.

88. Id. at 456.

89. Restatement (Second), supra note 66, 42 cmt. a.

90. U.C.C. 2-205.

91. Garro, supra note 5, at 456. In most civil law countries, every open offer is considered a firm offer because "it expressly states that it is irrevocable or implicitly indicates so by stating a fixed period for acceptance." Id.

92. CISG, Article 16 states:

"(1) Until a contract is concluded an offer may be revoked if the revocation reaches the offeree before he has dispatched an acceptance.

"(2) 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, supra note 11, art. 16.

93. Id. art. 16(2)(a).

94. See Garro, supra note 5, at 457 (citing history of drafting of Article 16 which also contains comments regarding the disparate treatment it could receive in common law or civil law courts); see also Report of the United Nations Commission on International Trade Law on the Work of its Eleventh Session, [1978] UNCITRAL Y.B. 41, U.N. Doc. A/CN 9/SER.A/1978 (stating that "the mere fact of stating a time for acceptance would not automatically lead to the result that the offer was irrevocable, if, under the circumstances of the case, such a result was not intended" and "where a merchant from one common law country made an offer to a merchant from another common law country, the fixing of a time for acceptance without more would not indicate that the offer was irrevocable"); see also Gyula Eörsi, Problems of Unifying Law on the Formation of Contracts for the International Sale of Goods, 27 Am. J. Comp. L. 311, 321 (1979) (suggesting that businessmen of common law countries could interpret offer stating fixed time for acceptance as revocable, and that meaning they give to their own contract must be respected, but that this would be inconsistent with "the need to promote uniformity" as recommended in Article 6 [sic]).

95. CISG Draft, supra note 50, art. 14, cmt. 6.

96. CISG, supra note 11, art. 16(2)(b).

97. CISG Draft, supra note 50, art. 14, cmt. 8. Comment 8 to Article 14 of the CISG draft (adopted as CISG Article 16(2)(b)) states in part that the section "would be of particular importance where the offeree would have to engage in extensive investigation to determine whether he should accept the offer. Even if the offer does not indicate that it is irrevocable, it should be irrevocable for the period of time necessary for the offeree to make his determination." Id.

98. Garro, supra note 5, at 455 (citing Restatement (Second) 42).

99. CISG Draft, supra note 50, art. 14, cmt. 8.

100. See Garro, supra note 5, at 455 (citing Bürgerliches Gesetzbuch [BGB] art. 147 (F.R.G.); Code des obligations [C.o.] art. 5 (Switz.) (stating that offer irrevocable during time offeror may reasonably expect to receive answer); Código Civil para el Distrito Federal [C.C.D.F.] art. 1806 (Mex.); Venezuelan Civil Code art. 1137.

101. See Corbin, supra note 70, 38 at 61 (using terms "revocation" and "withdrawal" interchangeably).

102. CISG, supra note 11, art. 15(2).

103. Id.

104. Id.

105. Winship, supra note 57, at 7.

106. Id.

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