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GUIDE TO CISG ARTICLE 14

Secretariat Commentary (closest counterpart to an Official Commentary)


Guide to the use of this commentary

The Secretariat Commentary is on the 1978 Draft of the CISG, not the Official Text, which re-numbered most of the articles of the 1978 Draft. The Secretariat Commentary on article 12 of the 1978 Draft is quoted below with the article references contained in this commentary conformed to the numerical sequence of the Official Text, e.g., article 12 [draft counterpart of CISG article 14].

To the extent it is relevant to the Official Text, the Secretariat Commentary on the 1978 Draft is perhaps the most authoritative source one can cite. It is the closest counterpart to an Official Commentary on the CISG. A match-up of this article of the 1978 Draft with the version adopted for the Official Text is necessary to document the relevancy of the Secretariat Commentary on this article. See the match-up for this article for a validation of citations to this Secretariat Commentary. This match-up indicates that article 12 of the 1978 Draft and CISG article 14 are identical.


Text of the Secretariat Commentary on article 12 of the 1978 Draft
[draft counterpart of CISG article 14]   [Offer]

PRIOR UNIFORM LAW

ULF, article 4.

COMMENTARY

1. Article 12 [draft counterpart of CISG article 14] states the conditions that are necessary in order for a proposal to conclude a contract to constitute an offer.

Proposal sent to one or more specific persons

2. In order for a person to accept an offer, that offer must have been addressed to him. In the usual case, the requirement causes no difficulties since the offer to buy or sell goods will have been addressed to one specific person or, if the goods are to be bought or sold by two or more persons acting together, to those specific persons. The specifications of the addressee will usually be by name, but it could be made in some other way such as "the owner or owners of ... ".

3. It is also possible that an offer to buy or sell will be made simultaneously to a large number of specific persons. An advertisement or catalogue of goods available for sale sent in the mail directly to the addressees would be sent to "specific persons," whereas the same advertisement or catalogue distributed to the public at large would not. If an advertisement or catalogue sent to "specific persons" indicated the intention to be bound to a contract in case of acceptance and if it was "sufficiently definite", it would constitute an offer under article 12(1) [draft counterpart of CISG article 14(1)].

[Lansing & Hauserman state:"[Article 14(1)] of the Convention indicates that an offer must be '...addressed to one or more specific persons.' ... While this wording does not appear in the UCC [see UCC 2-206, 2-205], it would be an error to necessarily presume that a greater degree of specificity or some higher standard is required by the Convention. Indeed, the Convention merely reflects the common law decisions defining offer. ... However, an exception to [Article 14(1)'s] requirement is set out in [Article 14(2)]. ... That article allows a proposal generally addressed to be considered an offer if "the proposer so intends. Again the importance of the intention of the offeror is reflected in the Convention." Paul Lansing & Nancy R. Hauserman, "A Comparison of the Uniform Commercial Code to UNCITRAL'S Convention on Contracts for the International Sale of Goods", 6 N.C.J. Int' 1 L. & Com. Reg. 69 (1980).

[Honnold elaborates: "Even if a proposal is addressed to 'one or more specific persons' it is not an offer unless ... it 'indicates the intention of the offeror to be bound in case of acceptance.' ... To take a common case: Supplier mails a catalogue to 500 prospective buyers; each envelope is addressed to a specific person. Is this a proposal 'addressed to one or more specific persons' and therefore governed by paragraph (1)? The answer should be No ... the phrase 'addressed to one or more specific persons' should refer to communications that are restricted to the addressees; a seller who, mails out a catalogue normally intends as wide a distribution as possible and would be glad for the addressee to pass the catalogue on to others. Thus, such a mailing to named addressees should be governed by paragraph (2): the intent 'to be bound in case of acceptance' must be 'clearly indicated'." John O. Honnold, "Uniform Law for International Sales under the 1980 United Nations Convention [Honnold Text], 2d ed., Kluwer Law International (1991) pp. 195-196.

Proposal sent to other than one or more specific persons, paragraph (2)

4. Some legal systems restrict the concept of an offer to communications addressed to one or more specific persons while other legal systems also admit of the possibility of a "public offer". Public offers are of two types, those in which the display of goods in a store window, vending machine or the like are said to be a continuing offer to any person to buy that article or one identical to it, and advertisements directed to the public at large. In those legal systems which admit of the possibility of a public offer, the determination as to whether an offer in the legal sense has been made depends upon an evaluation of the total circumstances of the case, but does not necessarily require a specific indication of intention to make an offer. The fact that the goods are on display for sale or the wording of the advertisement may be enough for a court to determine that there was a legal offer.

5. This Convention, in article 12(2) [draft counterpart of CISG article 14(2)], takes a middle position in respect of public offers. It states that a proposal other than one addressed to one or more specific persons is normally to be treated merely as an invitation for the recipients to make offers. However, it constitutes an offer if it meets the other criteria for being an offer and the intention that it be an offer is clearly indicated. Such an indication need not be an explicit statement such as "this advertisement constitutes an offer" but it must clearly indicate an intention to make an offer, for example, by a statement that, "these goods will be sold to the first person who presents cash or an appropriate banker's acceptance".

[Honnold elaborates: "Article 14 incorporates the generally accepted premise that a party may make an offer to as large a group as it wishes. ... However, a communication addressed to a large group, if construed as an offer, can involve practical difficulties and hazards. For example, sellers often give wide distribution to catalogues describing a line of goods and indicating prices. Some months may be required for the preparation, printing, and distribution of the catalogue. During this period some of the goods may become unavailable because of heavy demand, shortage of materials, or other production difficulties, and cost increases may call for readjustment of prices. If supply or production difficulties are widespread, or if the general price level rises sharply, the seller may face a flood of orders. If these orders should be 'acceptances' of an 'offer,' the result could be ruin for the seller and a windfall for the buyers. In these settings a 'reasonable person' (Art. 8(2)) would not think that the catalogue 'indicates an intention to be bound' (Art. 14(1)) and courts have been reluctant to construe communications to create such hazards. ... These practical considerations are reflected in Article 14(2): If a proposal is not 'addressed to one or more specific persons,' it is not an offer 'unless the contrary is clearly indicated by the persons making the proposal'." ... Honnold Text, 2d ed., p. 195.]

Intention to be bound, paragraph (1)

6. In order for the proposal for concluding a contract to constitute an offer it must indicate "the intention of the offeror to be bound in case of acceptance." Since there are no particular words which must be used to indicate such an intention, it may sometimes require a careful examination of the "offer" in order to determine whether such an intention existed. This is particularly true if one party claims that a contract was concluded during negotiations which were carried on over an extended period of time, and no single communication was labelled by the parties as an "offer" or as an "acceptance". Whether there is the requisite intention to be bound in case of acceptance will be established in accordance with the rules of interpretation contained in article 7 [draft counterpart of CISG article 8].

7. The requirement that the offeror has manifested his intention to be bound refers to his intention to be bound to the eventual contract if there is an acceptance. It is not necessary that he intends to be bound by the offer, i.e. that he intends the offer to be irrevocable. As the revocability of offers, see article 14 [draft counterpart of CISG article 16].

[Enderlein & Maskow state: "A proposal is aimed at concluding a contract only when it expresses the intention of the offeror to be bound. The offer is one of the two statements of will which lead to the conclusion of a contract. Hence the relationship under a contract is a relationship of intention. The intention to be bound is not excluded because of the fact that the contract is to be concluded under a condition. A proposal for the conclusion of a contract does not automatically contain the intention to be bound; it may also be aimed at taking up negotiations on a sale. This could be the case in particular if the proposal at first only contains the category and quantity of the goods. ... If there is the intention to be bound, lacking provisions could be complemented by jus dispositivum ([Kazuaki] Sono [in Sarcevic & Volken ed., "The Vienna Sales Convention: History and Perspective, Oceana (1986)], p. 120). Some formulations in the offer might cause doubt as to the intention to be bound. In some instances the intention to be bound can be seen from the clarity with which the goods are specified ([Gyula] Eörsi [Bianca-Bonell Commentary, Milan: Giuffrè (1987)] p. 140). As far as the intention to be bound is the result of an error, questions of validity are touched upon which do not come under the CISG. Non-binding offers do not contain an intention to be bound. [The phrase 'intention of the offeror to be bound in case of acceptance'] expressly stipulate[s] that the intention to be bound must refer to the contract to be concluded. If the offer is not accepted, there will be no binding. The intention to be bound does not refer to the offer itself. (As to the binding nature of the offer compared Article 15 fo1.)" Fritz Enderlein & Dietrich Maskow, "International Sales Law", [Enderlein & Maskow Commentary], Oceana (1992) p. 84.]

[Honnold states: "When one party is in doubt over whether the other party intends to be bound or merely to open negotiations the question can usually be resolved quickly by phone or wire. ... Moreover, doubts suggested by the bare text of the parties' statements will often be dissipated when (as Art. 8 requires) those statements are interpreted in their full context, including 'the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties.' In short, the parties' understanding is a question of fact that is individual to each transaction; the general guides in Article 14 for interpreting the parties' intent ... play subordinate and supporting roles." Honnold Text, 2d ed., pp. 194-195.]

An offer must be sufficiently definite, paragraph (1)

8. Paragraph (1) states that a proposal for concluding a contract must be "sufficiently definite" in order to constitute an offer. It goes on to state that an offer is sufficiently definite if it: indicates the goods, and expressly or implicitly fixes or makes provision for determining the quantity, and expressly or implicitly fixes or makes provision for determining the price.

[Enderlein & Maskow state "The determination of the price necessarily includes the currency, whereas agreement on the terms of payment is not necessary (c. Articles 54 and 57 fol.)" (Enderlein & Maskow Commentary, p. 85)

9. The remaining terms of the contract resulting from the acceptance of an offer which only indicates the goods and fixes or makes provision for determining the quantity and the price would be supplied by usage or by the provisions in Part III on the law of sales. If, for example, the offer contained no term as to how or when the price was to be paid, article 53(1) [draft counterpart of CISG article 57(1)] provides that the buyer must pay it at the seller's place of business and article 54(1) [draft counterpart of CISG article 58(1)] provides that he must pay it when the seller places either the goods or documentation controlling their disposition at the buyer's disposal. Similarly, if no delivery terms is specified, article 29 [draft counterpart of CISG article 31] provides how and where the goods are to be delivered and article 31 [draft counterpart of CISG article 33] provides when they are to be delivered.

10. Nevertheless, the fact that a proposal contains only the three terms necessary for the offer to be sufficiently definite may indicate, in a given case, that there was no intention on the part of the offeror to be bound in case of acceptance. For example, it would be necessary to interpret the proposal in the light of article 7 [draft counterpart of CISG article 8] to determine whether there was an intention to be bound in case of acceptance where a seller offered to sell equipment to be manufactured with the only specifications being the type and quantity of the goods and a price of Swiss francs 10 million. It would normally be the case that a seller would not contract for such a large sale without specification of delivery dates, quality standards, etc. Therefore, the lack of any indication in respect to these matters suggests that there might have been as yet no intention to be bound to a contract in case of acceptance. However, even in the case of such a large and complicated sale, the applicable law of sales can supply all of the missing terms if the intention to contract is found to have existed.

Quantity of the goods, paragraph (1)

11. Although, according to article 12 [draft counterpart of CISG article 14], the proposal for concluding a contract will be sufficiently definite to constitute an offer if it expressly or implicitly fixes or makes provision for the quantity of goods, the means by which the quantity is to be determined is left to the entire discretion of the parties. It is even possible that the formula used by the parties may permit the parties to determine the exact quantity to be delivered under the contract only during the course of performance.

12. For example, an offer to sell to the buyer "all I have available" or an offer to buy from the seller "all my requirements" during a certain period would be sufficient to determine the quantity of goods to be delivered. Such a formula should be understood to mean the actual amount available to the seller or the actual amount required by the buyer in good faith.

13. It appears that most, if not all, legal systems recognize the legal effect of a contract by which one party agrees to purchase, for example, all of the ore produced from a mine or to supply, for example, all of the supplies of petroleum products which will be needed for resale by the owner of a service station. In some countries such contracts are considered to be contracts of sale. In other countries such contracts are denominated as concession agreements or otherwise, with the provisions in respect of the supply of the goods considered to be ancillary provisions. Article 12 [draft counterpart of CISG article 14] makes it clear that such a contract is enforceable even if it is denominated by the legal system as a contract of sale rather than as a concession agreement.

[Honnold states: "Under Article 14(1) a proposal is sufficiently definite if (inter alia) it 'expressly or implicitly fixes or makes provision for determining the quantity ...'. Long-term contracts. often call for the supply of a buyer's requirements or for the delivery of a seller's output; Article 14(1) should not be construed to nullify these important transactions on the ground that the quantity will not be fixed until the buyer's requirements or the seller's output become known." Honnold Text, 2d ed., p. 197.]

[Enderlein & Maskow state: "The quantity does not have to be determined from the outset. Reference to all the requirements or total output of the goods should be acceptable. ... Any quantity may also be offered; the determination can be done through acceptance (Eörsi [Lausanne Colloquium, p. 46]). The quantity may also be determined by naming the requirements for a certain purpose or the amount of money available for it. Eörsi [Bianca-Bonell Commentary], p. 141. ... Quantity and price [see further commentary on Price below] can be fixed later on the basis of objective factors (requirements, output and/or offer of the competition, stock market or market prices). It may, however, also be left to one of the parties (list price) or a third person to fix quantity and price (Schlechtriem [*]; Eörsi [**]). Enderlein & Maskow Commentary, p. 85.]

*Schlechtriem, "Das UNCITRAL-Kaufrecht im Vergleich zum österreichischen Recht", Doralt ed. (Vienna 1985), p. 187; Schlechtriem, "Einheitliches UN-Kaufrecht. Das Übereinkommen der Vereinten Nationen über intemationale Warenkaufverträge-Darstellung und Texte, Beitrage zum ausländischen und intemationalen Privatrecht", Bd. 46 (Tübingen 1981), p. 37. **Eörsi, "Wiener Übereinkommen von 1980 iiber den intemationalen Warenkauf", Lausanne Colloquium, vom 19. und 20. November 1984 (Zurich 1985), p. 47.

[Schlechtriem states: "[T]he mere fact that Article 65(1) presupposes that, in a sale subject to the buyer's specifications, the buyer has the right to determine the form, size or other characteristics of the goods, does not justify the contrary conclusion that, when a party has the right to determine the quantity, the offer lacks a definite term and no contract can be concluded by its acceptance." Peter Schlechtriem, "Uniform Sales Law: The UN-Convention on Contracts for the International Sale of Goods [Schlechtriem Text]," Vienna: Manz (1986), p. 50, n. 161.]

[Honnold states: "Under the Convention, as under domestic law, problems can arise if the quantity can be controlled freely by one party -- by artificially increasing output when costs (or prices) drop, or by artificially increasing 'requirements' when costs (or prices) rise. ...Tools to cope with these problems are provided by the flexible principles of Article 8 governing contract interpretation ... and by the direction in Article 7(1) to interpret the Convention to promote 'the observance of good faith in international trade'." Honnold Text, 2d ed., p. 197.]

Price, paragraph (1)

14. Article 12 [draft counterpart of CISG article 14] provides the same rule in respect of the price that it does in respect of quantity. Thus, for the proposal to constitute an offer it must expressly or implicitly fix or make provision for the price. It is not necessary that the price could be calculated at the time of the conclusion of the contract. For example, the offer, and the resulting contract, might call for the price to be that prevailing in a given market on the date of delivery, which date might be months or even years in the future. In such a case the offer would expressly make provision for determining the price.

15. Where the buyer sends an order for goods listed in the seller's catalogue or where he orders spare parts, he may decide to make no specification of the price at the time of placing the order. This may occur because he does not have a price list of the seller or he may not know whether the price list he has is current. Nevertheless, it may be implicit in his action of sending the order that he is offering to pay the price currently being charged by the seller for such goods. If such is the case, the buyer has implicitly made provision for the determination of the price and his order for the goods would constitute an offer.

16. Similarly, where the buyer orders goods from a catalogue for future delivery it may be implicit in his order and from other relevant circumstances that the buyer is offering to pay the price currently being charged by the seller at the time of the delivery.

17. In order to determine whether a proposal implicitly fixes or makes provision for determining the price it is necessary to interpret the proposal in the light of article 7 [draft counterpart of CISG article 8], and in particular paragraph (3) of that article. (OFFICIAL RECORDS, pp. 20-21).

[The Secretariat Commentary states that for a proposal to expressly or implicitly fix or make provision for the price, "It is not necessary that the price could be calculated at the time of the conclusion of the contract." Similarly, Schlechtriem states: "A price can also be determined expressly or implicitly by reference to a particular market at delivery or at some other time. ... Reference to price lists or catalogues which reserve the right to change prices can also be understood as a reference to the price valid at the time of delivery." Schlechtriem Text, p. 52.]

[Nicholas points out: "In some systems of law the price must be either determined or objectively determinable at the time of the formation of the contract. The USSR and France among the developed countries were especially insistent on this. The French Cour de cassation has in a series of decisions in recent years been particularly strict. ... Some developing countries also were hostile to the freedom which a laxer rule would give to suppliers of manufactured goods from developed countries." Barry Nicholas, "The Vienna Convention on International Sales Law", 105 Law Quarterly Rev. 212-213 (1989).]

[Tallon cites two series of French cases whose operative facts are as follows: "The first concerns the so-called 'beer clauses' contained in agreements under which a brewery grants a loan to a public house, which promises to deal exclusively with the brewery at the price usually charged for similar goods at the same place. ... In 1978 the Cour de cassation held this widely used clause to be void under Civil Code article 1129, which requires that an amount, if uncertain, shall be determinable. ... The second series of cases involved another common clause, this time found in general conditions for car sales. The order form mention a tentative price, the actual price being that of the price list in effect at the time of delivery. The Cour de cassation has denied remedies in specific performance or in damages if the buyer refuses to take delivery of the car ordered because of an increase in price, holding that the price had not been agreed upon when the order was signed; the sale could only be concluded if and when the buyer accepted the actual price, which he was free to refuse to do. ..." Denis Tallon, in Galston & Smit, "International Sales: The United Nations Convention on Contracts for the International Sale of Goods, Matthew Bender (1984), pp.7-11/12).]

[Nicholas states: "[Article 14(1)] seems to be more.flexible than the French cases mentioned above. A reference to a catalogue which lists prices or to a particular market at the time either of the contract or of delivery must surely be sufficient. If the catalogue reserves the right to change prices or if the contract refers, as in the French brewery cases referred to above, to the price charged in the area at the time of delivery, it can be argued that this constitutes 'provision for determining the price' ..." Barry Nicholas, 105 L. Quarterly Rev. 214 (1989).]

[Two French commentators, Ghestin and Niggeman, disagree. Ghestin states: "Article 14 ... defines an offer as 'a proposal that is sufficiently definite', and adds 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'. This means that it is the viewpoint held by France and the Eastern block countries that prevails over that of the Common Law countries. The text seems to dictate that the price can be or is determined, without further intervention of the will of the contracting parties" (emphasis added). Jacques Ghestin, "The Obligations of the Seller according to the Vienna Sale Convention of the 11th April 1980, on Contracts for the International Sale of Goods", Int'l Bus. L.J. No.1 (1988), p. 6. Niggeman is to the same effect. He states: "The proposal worked out and supported by the working group, of which France was a party, seems to have adopted the idea that a contract is validly concluded if one can refer to objective criteria or those which are reasonably beyond the influence of the seller. French jurisdiction has its origin in specific cases in which the idea of protecting one party against arbitrary decisions of the other has been determining. ... [T]he wording of Article 14 [does not] impose the conclusion that unilateral fixing of a price should suffice to render the contract valid or to determine the price" (emphasis added). Friedrich Niggeman, "Buyer's Obligations under the United Nations Convention on Contracts for the International Sale of Goods", Int'l Bus. L.J. No.1 (1988), pp. 32-33.]

[The Article 14(1) issue is, Does the phrase "expressly or implicitly fixes or makes provision for determining the price" permit a formula such as the price charged to others at the time of delivery? -- the view held by Nicholas and others; or Does it prohibit such a "unilateral" determination notwithstanding an agreement of the parties to this effect?-- the view of the French commentators cited.]


Pace Law School Institute of International Commercial Law - Last updated August 29, 2006
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