Go to Database Directory || Go to CISG Table of Contents


PRINCIPLES OF EUROPEAN CONTRACT LAW

Meaning of terms: "material"


PECL Article 1:301(5)
(complete and revised version 1998)

In these Principles, except where the context otherwise requires:

()

a matter is 'material' if it is one which a reasonable person; in the same situation as one party ought to have known would influence the other party in its decision whether to contract on the proposed terms or to contract at all


Comment and notes on PECL 1:301(5)

Like the commentary to the UNIDROIT Principles and the U.S. Restatements, the comments to the PECL help explain the meaning of the text. The PECL notes identify civil and common law antecedents and related domestic provisions. With the permission of the Commission on European Contract Law, the comments and notes to this PECL provision are presented below. The source of this material is Ole Lando & Hugh Beale eds., Principles of European Contract Law: Parts I and II, Kluwer Law International (2000) 124, 125-126.


COMMENT

Under the Principles it is sometimes necessary to decide whether a matter is material. Thus under Article 2:208: Modified Acceptance, a reply which gives a definite assent to an offer will not amount to an acceptance if it contains additional or different terms which materially alter the offer; and under Article 2:210: Professional's written Confirmation, additional or different terms contained in a confirmation of the contract will not become part of it if they would alter it materially.

The test is whether the party proposing the additional or different terms should expect them to have any influence on the other's decision. If a reasonable person in his position would not expect this the matters are not material.

Under the Principles, 'material' is different to 'fundamental', which is the standard used to determine whether a non-performance justifies termination (see Article 9:301 and associated Articles) and is also referred to in determining whether a mistake as to facts or law is sufficiently serious to justify avoidance (see Article 4:103). A matter which is fundamental is more important than one which is only material.

It should be noted that the French version of the Principles uses the word "substantielle" in place of the English "material". This is because "materiel" has a different meaning to the English "material"; conversely, the English word "substantial" carries overtones of seriousness or significant importance which the word "material," at least as defined in Article 1:301(f), does not have. [page 124]

NOTES: PECL 1:301(5) [Meaning of "material"] [Match-ups with Continental and Common Law domestic rules, doctrine and jurisprudence]

The meaning of 'material' adopted in the Principles, and the distinction between 'material' and 'fundamental', is derived from the COMMON LAW. Thus in the law of misrepresentation, and of non-disclosure in relation to insurance contracts, a matter is material if it would affect the judgment of a reasonable person in deciding whether, or on what terms to enter a contract (Treitel, Contract 312; Chitty 6-022; Marine Insurance Act 1906, s. 20(2), which is said to represent the general law, Lockyer & Woolf Ltd v. W. Australian Insurance Co. Ltd [1936] 1 K.B. 408; Pan Atlantic Insurance Co. Ltd v. Pine Top Insurance Co. Ltd [1995] 1 A.C. 501). In contrast, a term is fundamental if it 'goes to the root of the contract' (see the judgment of Lord Upjohn in Suisse Atlantique Société d'Armement Maritime SA v. Rotterdamsche Kolen Centrale NV [1967] 1 A.C. 361, 422).

CISG appears to adopt a similar distinction. Under art. 19, a purported acceptance which states terms which do not materially alter the terms of the offer constitutes an acceptance; whereas under art. 49 the buyer may declare the contract avoided only if the seller's failure to perform is fundamental. Although art. 19(3) gives examples of what will be material, neither 'material' nor 'fundamental' is defined in CISG. Bianca & Bonell (-Farnsworth) 2.8 gives examples of 'material' discrepancies, some of which seem quite minor; the importance of the distinction is noted at 3.1 but no criterion is suggested. Honnold 169 states merely that 'material' covers 'most aspects of contract', which does not suggest that a matter must be fundamental in order to be material. [page 125]

Other systems adopt a criterion similar to this definition of 'material' in the contexts in which the Principles use it. For example, GREEK CC art. 196 states that, by way of exception to the requirement of agreement, if the parties consider that they have concluded a contract even though they are disagreed on a particular point, they will be bound if it appears that the agreement would have been concluded without any consensus on that point. Both doctrine and case law refer to such a matter as 'immaterial'.

In contrast, some systems tend to use 'material' in the sense of 'substantial' (e.g. SCOTTISH law) or do not distinguish the two concepts (e.g. DANISH statutes and writers). [page 126]

Go to full texts of Parts I & II of Principles of European Contract Law


© Pace Law School Institute of International Commercial Law - Last updated December 13, 2000
Go to PECL Bibliography || Go to PECL Schedule of Abbreviations
Comments/Contributions