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Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods

Professor Jacob S. Ziegel, University of Toronto
July 1981

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Article 16

(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.

COMMENT

1. Three aspects of Art. 16 call for consideration:

(a) Notice to offeree where offer made to the public. Art. 16(1) seems to require that the revocation must actually reach the offeree even where the offer is made to the public. This seems inconsistent with art. 14(2) which, as has been noted, does recognize the validity of offers made to non-specific persons if this was the intention of the person making the proposal. Presumably the meaning of "reaches" must be relaxed accordingly and, in the case of an offer made to the public, or a part thereof, an offer will be effectively revoked if reasonable steps are taken to bring it to the attention of the offerees. [Gaston, para. 34].

(b) Binding character of offer stated to be irrevocable. The Anglo-Canadian common law is exceptional in not recognizing the binding character of an offer stated to be irrevocable unless it is supported by consideration. The reversal of the rule was recommended before the war by an English Law Reform Committee and has been recommended again in a recent Working Paper by the English Law Commission [Firm offers: Working Paper No. 60 (1975)] if the firm offer is made in the course of a business. UCC 2-205 also recognizes the binding character of a firm offer by a merchant for a maximum period of three months and provided it is made in a signed writing. A similar, though not identical, recommendation appears in the OLRC Sales Report, pp. 91-95.

In view of these precedents, there is nothing startling about art. 16(2)(a) and it can be accepted as reflecting modern thinking in the common law as well as the non-common law legal community.

(c) Reasonable reliance by offeree. Art. 16(2)(b) has no clear counterpart in the Canadian common law though there is evidence that some courts may be moving in the same direction by penalizing an offeror who acts in bad faith. Art. 16(2)(b) is also supported by section 89B(2) of the Tent. Rest. 2d on Contracts (American Law Institute, Tent. Drafts Nos. 1-7, 1973), which reads:

"89B. (2) An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice."

Since it is often in the interests of the offeror that the offeree should have a reasonable opportunity to determine whether or not to accept the offer, the implication of a firm offer as provided in Art. 16(2)(b) seems to be a fair interpretation of the offeror's intention. Whether the implication should be drawn in a particular case will of course depend on all the circumstances, including the relevant trade practices and usages.

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Pace Law School Institute of International Commercial Law - Last updated April 1, 1999
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