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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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The Acceptance

Manner and Time of Effectiveness of Acceptance

There are some significant differences between the approaches taken to acceptance by the CISG, the U.C.C., and the common law. The CISG states that "[a] statement made by or other conduct of the offeree indicating assent to an offer is an acceptance. Silence or inactivity does not in itself amount to acceptance."[107] This flexible approach to the method of acceptance is similar to that taken by the U.C.C.[108] However, important differences exist in the approach taken by the CISG, the U.C.C., and the common law with regard to when an acceptance is considered effective where the acceptance is either mailed or made by performance.

The CISG rejects the common law rule that when mailing is the authorized method of acceptance and the offeror has not stated otherwise, an acceptance is considered effective when mailed.[109] The CISG states instead that an acceptance is not effective until it reaches the offeror.[110] While the effect of the common law rule is to place the risk of a lost acceptance on the offeror, the effect of the CISG approach is to adopt the approach taken by many civil law countries and place the risk on the offeree.[111] Thus, the CISG is consistent in adopting a receipt theory as opposed to a dispatch theory for all the communications concerned with contract formation.[112] In analyzing the CISG position on acceptance, it is important to recall that the CISG takes a broader approach to the irrevocability of offers than does either the U.C.C. or the common law. It also provides that an offer that is not irrevocable, "may be revoked if the revocation reaches the offeree before he has dispatched an acceptance."[113] Because of the approach taken by the CISG on revocability of the offer, the adoption of the receipt theory does not make the practical difference that it might otherwise.

However, the adoption of the receipt theory is not totally irrelevant. For example, assume that an offeree has dispatched a letter accepting an offer and changes his mind before the acceptance reaches the offeror. If the offeree dispatches a rejection that reaches the offeror prior to the arrival of the offer, a contract does not result under the CISG.[114] This would be true under the CISG even for irrevocable offers.[115] In contrast, a common law rejection does not terminate an irrevocable offer.[116]

The CISG also treats acceptance by performance in a manner somewhat different from what the common law lawyer might expect. Both the CISG and the U.C.C. provide that an offer may be accepted by performance.[117] The CISG provides that acceptance by performance may be made without notice to the offeror and that the acceptance is effective when the act is performed.[118] Article 18(3) states:

"[I]f, by virtue of the offer or as a result of practices which the parties have established between themselves or of usage, the offeree may indicate assent by performing an act, such as one relating to the dispatch of the goods or payment of the price, without notice to the offeror, the acceptance is effective at the moment the act is performed, provided that the act is performed within the period of time laid down in the preceding paragraph."[119]

Note that this constitutes an exception to the receipt theory of acceptance otherwise adopted by the CISG. Clearly, where performance is authorized as a mode of acceptance either by the offer, by prior practices, or by trade usage, the offer is accepted once performance is begun as in the case of "dispatch of the goods."[120] Hence, while an offeree bears the risk of loss of a communicated acceptance, this is not the case where the mode of acceptance is by performance, such as shipment of the goods. One commentator states that the paragraph is not as significant as it may seem at first because sellers in practice will typically notify the buyer that goods have been sent; in any event, if an acceptance is by communication, the speed of telex and other electronic means is so fast, that "any loss of time is negligible."[121] But, as noted below, there is no requirement of notice under the CISG and one cannot presume that notice will be given in all cases.

Perhaps more significant is the difference in the requirement of notice of performance under the U.C.C. and the CISG. The U.C.C. requires notice to the offeror, within a reasonable time, that performance has begun or the offeror may treat the offer as having lapsed.[122] The CISG does not require notification to the offeror that the offeree has begun performance.[123] The United States attempted to amend this provision to make it consistent with the U.C.C. but later withdrew the amendment.[124]

The practical impact of this provision can be seen in the situation where a buyer makes an offer to purchase goods. The seller may go to considerable expense in assembling the ordered goods, packing them for shipping and so on. If we assume that the seller is ready to ship the goods, but has not yet notified the buyer of acceptance, the buyer may still revoke his offer under the U.C.C. but not under the CISG.[125] An American seller who is not familiar with the CISG will most likely have given the notice required by the U.C.C. so the result will be the same.[126] On the other hand, an American buyer who believes the notice requirement of the U.C.C. gives him more flexibility in the bargaining process, should attempt to make the law of the U.C.C. applicable when making the offer to purchase goods, thus requiring notice by the seller within a reasonable time.

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* 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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107. CISG, supra note 11, art. 18(1).

108. U.C.C. 2-206(1). Section 2-206(1) states: "(1) unless otherwise unambiguously indicated by the language or circumstances (a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances[.]" Id.

109. Restatement (Second), supra note 66, 63(a), cmt. a.

110. CISG, supra note 11, art. 18(2). Article 18(2) states:

"An acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror. An acceptance is not effective if the indication of assent does not reach the offeror within the time he has fixed or, if no time is fixed, within a reasonable time, due account being taken of the circumstances of the transaction, including the rapidity of the means of communication employed by the offeror. An oral offer must be accepted immediately unless the circumstances indicate otherwise."

111. Eörsi, supra note 94, at 317.

112. Id. at 317-19 (discussing receipt theory versus dispatch theory).

113. CISG, supra note 11, art. 16(1).

114. Id.

115. Id. art. 17. Article 17 states that "[a]n offer, even if it is irrevocable, is terminated when a rejection reaches the offeror." Id.

116. Restatement (Second), supra note 66, 37.

117. CISG, supra note 11, art. 18(3); U.C.C. 2-206(1)(a), (2).

118. Id. art. 18(3).

119. Id.

120. CISG Draft, supra note 50, art. 16, cmt. 12 (giving examples of acts that might constitute acceptance). The comment states: "[I]n most cases it [acceptance] would be by the shipment of the goods or the payment of the price but it could be by any other act, such as the commencement of production, packing the goods, opening of a letter of credit or . . . the procurement of the goods for the offeror." Id.

121. Eörsi, supra note 94, at 318.

122. U.C.C. 2-206(2).

123. CISG, supra note 11, art. 18(3) (stating in part "if . . . the offeree may indicate assent by performing an act, such as one relating to the dispatch of goods or payment of the price, without notice to the offeror, the acceptance is effective at the moment the act is performed").

124. Analysis of Comments and Proposals by Governments and International Organizations on the Draft Convention On Contracts for the International Sale of Goods, and On Draft Provisions Concerning Implementation, Reservations and Other Final Clauses, Prepared by the Secretary-General, U.N. Doc. No. A/CONF.97/9/1980, reprinted in CISG Conference, supra note 1, at 71, 75 (art. 16, cmt. 2); First Committee Report, supra note 51, art. 16.

125. Winship, supra note 57, at 11.

126. U.C.C. 2-206(2).

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

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