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Reproduced with permission of 17 Journal of Law and Commerce (1998) 187-217

The Several Texts of the CISG in a Decentralized System: Observations on Translations, Reservations and other Challenges to the Uniformity Principle in Article 7(1)

Harry M. Flechtner [*]

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At any rate, the approach suggested by the quoted passages would yield unpalatable results. For example, does the uniformity principle of the Convention really demand adherence, as a matter of stare decisis, to a decision like the one rendered by the Hungarian Supreme Court in the Malev litigation?[79] In that case, a U.S. manufacturer of jet engines (Pratt & Whitney) made a written proposal to the Hungarian national airline (Malev Airlines) to supply jet engines for new aircraft that Malev was purchasing. The proposal covered engines for two aircraft and a spare engine, with options to purchase engines for an additional aircraft plus an additional spare. The exact engine model selected would depend on whether Malev purchased aircraft manufactured by Airbus or by Boeing. The written proposal stated prices per engine for each of the various engine models covered. Later, the proposal was amended to cover an additional engine option for Boeing aircraft, but a price for this additional engine option was not stated. The Malev general manager signed and telexed a letter stating that, pursuant to the written proposal, Malev had chosen Pratt & Whitney engines for the aircraft it was purchasing. Malev opted to purchase Boeing aircraft, after which it engaged in various planning exchanges with Pratt & Whitney concerning engine maintenance and establishing a spare parts pool in Hungary. Approximately three months after signing the acceptance letter, however, Malev announced that it would not purchase the Pratt & Whitney engines.

Pratt & Whitney commenced an action in Hungary, and obtained a declaration from the Metropolitan Court of Budapest that a valid contract existed under the CISG.[80] On appeal, however, the Hungarian Supreme Court reversed and found that no valid contract had been formed. The court relied primarily on the language of Article 14(1) of the CISG stating that, to constitute an offer, a proposal must be "sufficiently definite," and that a proposal is sufficiently definite if it, inter alia, "expressly or implicitly fixes or makes provision for determining the quantity and the price."[81] The court cited the fact that a price was not stated for the additional Boeing engine option that Pratt and Whitney had added to the contract, and the fact that the price stated for Airbus engines (the alternative that Malev did not choose!) failed to cover the engine housing and certain required additional equipment. It then concluded that Pratt & Whitney's proposal lacked a sufficient price term and thus could not constitute an offer under the CISG. The court's analysis was not effected by CISG Article 55, which provides that, where a validly concluded contract fails to set a price, the parties are presumed to have intended "the price generally charged at the time of the conclusion of the contract for such goods sold under comparable circumstances in the trade concerned."[82] The court concluded that Article 55 could not supply the missing prices because "jet engine systems have no market prices." The court not only denied Pray & Whitney any recovery, but it ordered the U.S. company to reimburse Malev for the costs of the litigation.

Given the apparently contradictory provisions of Articles 14 and 55 concerning the validity of open price contracts, the question of whether such contracts are enforceable under the Convention has been hotly debated.[83] The Malev decision has charitably been described as setting a " 'high water mark' in regard to the requirement of definite price terms in contract proposals."[84] Less charitably, the decision is subject to several criticisms. First, it rewards Malev's bad faith in repudiating an agreement that, when made, the buyer almost certainly assumed was binding. Imagine if the tables were turned, and it was Pratt & Whitney who refused to sell the engines after Malev had committed to purchase Boeing aircraft. Second, the decision ignores the international character of the Convention by straining for an interpretation favorable to the party of the same nationality as the court. Is it now required, in the name of a rigid construction of the uniformity principle of Article 7(1), that the important controversy over open price contracts under the CISG be deemed definitively settled by a decision that seems to flout the principles of internationality and good faith, which share equal place with the uniformity principle in Article 7? Is this required merely because the Malev decision happened to appear among the early decisions on the Convention?

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FOOTNOTES

* Professor, University of Pittsburgh School of Law, A.B. 1973, Harvard College; A.M. 1975, Harvard University; J.D. 1981, Harvard University School of Law.

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79. Judgment of September 25, 1992, Legfes {CO}-{04}-{9C}bb Biróság (Hungary), translated in 13 J.L. & Com. 31 (1993); See also Paul Amato, U.N. Convention on Contracts for the International Sale of Goods - The Open Price Term and Uniform Application: An Early Interpretation by the Hungarian Courts, 13 J.L. & Com. 1 (1993).

80. Judgment of January 10, 1992, Megyel biróságok és Budapest, translated in 13 J.L. & Com. 49 (1993).

81. CISG, supra note 1, art. 14(1).

82. Id. art. 55.

83. An account of this controversy is given in Amato, supra note 79, at 5-11.

84. Id. art 27.

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Pace Law School Institute of International Commercial Law - Last updated May 26, 1999
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