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Published in J. Herbots editor / R. Blanpain general editor, International Encyclopaedia of Laws - Contracts, Suppl. 29 (December 2000) 1-192. Reproduced with permission of the publisher Kluwer Law International, The Hague.

[For more current case annotated texts by this author, see Bernstein & Lookofsky, Understanding the CISG in Europe, 2d ed. (2003) and Lookofsky, Understanding the CISG in the USA, 2d ed. (2004).]

excerpt from

The 1980 United Nations Convention on Contracts
for the International Sale of Goods

Joseph Lookofsky

Article 14
The Offer: Minimum Requirements

A. Definiteness & Intention to be Bound. Offer Addressed to Specific Persons
B. Problem of Price-Gap
C. Invitation to Make Offers Distinguished

100. The offer is the starting point - and often also the focal point - in the contract formation process. In order to qualify as a CISG offer (capable of being accepted), a proposal must meet certain minimum requirements. Paragraph 1 of Article 14 provides as follows:

'(1) A proposal for concluding a contract addressed to one or more specific persons constitutes an offer if it is sufficiently definite and indicates the intention of the offeror to be bound in case of acceptance. 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.'

A. Definiteness & Intention to be Bound. Offer Addressed to Specific Persons

101. Article 14(1) indicates that the key elements of a CISG offer are definiteness and the offeror's intention to be bound, and the latter is best regarded as the primary criterion.[l] [page 62]

The CISG offeror is properly regarded as the 'master' of his offer, in that the offer is to be interpreted according to the offeror's intent, at least in cases where the offeree knew or could not have been unaware what that intent was.[2] Absent clear evidence of this, however, weight will be placed on the understanding that a 'reasonable person' in the position of the offeree would have had.[3]

According to the second sentence of Article 14(1), a proposal is sufficiently definite if it (a) 'indicates the goods' and (b) 'expressly or implicitly fixes or makes provision for determining' the quantity and price. For example, a purchase order which identifies standard software and the compensation to be paid will satisfy these minimum requirements,[4] just as an order for chinchilla pelts of 'middle or better quality' at price 'between 35 and 65 German marks' has been held sufficiently definite under Article 14.[5]

Conversely, a proposal which fails to satisfy the requirement of definiteness cannot qualify as a CISG offer, nor can it qualify as a counter-offer under Article 19(1).[6] But if a given CISG offer seems incomplete at first blush, custom and usage may serve to fill it out. In a Hungarian case, a seemingly nebulous oral offer by a German seller was held sufficiently definite under Article 14(1), in that the quality, quantity and price of the goods were impliedly fixed by the parties' prior course of dealing in accordance with Article 9(2): the seller repeatedly had delivered goods ordered by the buyer, who had regularly and without objection paid the price after delivery.[7]

As regards the requirement that the proposal must 'indicate the goods', it may be noted that the Convention provides a mechanism whereby the seller can fill the gap left by a buyer who fails to make specifications as otherwise required by the contract.[8]

If a particular proposal addressed to one or more specific persons is sufficiently definite, it will qualify as an offer; proposals not so addressed must be evaluated in accordance with Article 14, paragraph 2.[9]

1. Some commentators see both definiteness and specificity as subsets of the requirement of intention to be bound: see, e.g. Honnold, J., Uniform Law Sales (1999) at p. 147 [available at <http://www.cisg.law.pace.edu/cisg/biblio/honnold.html>].
2. Regarding Article 8(1), see supra No. 81 et seq.
3. Article 8(2). See, e.g., the decision of Oberster Gerichtshof (Austria), 20 March 1997, No. 2 Ob 58197m, ZfRV 1997, 204-207, also reported [at <http://cisgw3.law.pace.edu/cases/970320a3.html> and] in UNILEX.
4. See the decision of LG München, 8 February 1995, No. 8 HKO 24667/93, CLOUT Case 131, also reported [at <http://cisgw3.law.pace.edu/cases/950208g4.html> and] in UNILEX.
5. See the decision of the Austrian Supreme Court (Oberster Gerichtshof) of 10 November 1994, CLOUT Case 106, also reported [at <http://cisgw3.law.pace.edu/cases/941110a3.html> and] in UNILEX.
6. See infra No. 118 et seq. and the decision of OLG Frankfurt am Main (Germany), 4 March 1994, No. 10 U 80/93, reported [at <http://cisgw3.law.pace.edu/cases/940304g1.html> and] in UNILEX, where a Swedish buyer's order was held to constitute a rejection of the German seller's offer under (German domestic law and) CISG Article 19(1), whereas it was not sufficiently definite to constitute a counter-offer under Article 14 (also corresponding to German law). Although the court seems to have avoided express consideration of the Swedish Article 92 declaration, the declaration would not have affected the outcome in a case like this: see infra No. 328.
7. See, e.g. the decision of the Court of Budapest of 24 March 1992, reported [at <http://cisgw3.law.pace.edu/cases/920324h1.html> and] in UNILEX; see also Vida in IPRax 1993 at 263. Regarding Article 9(2) see supra No. 89 et seq.
8. Regarding Article 65 see infra No. 264.
9. See infra No. 103.
[page 63]

B. Problem of Price-Gap

102. The most controversial Article 14(1) question relates to the requirement of definiteness. To be sure, a proposal is sufficiently definite if it ... fixes or makes provision for determining ... the price, but is it possible to make an e contrario deduction, such that a proposal which leaves the price term 'open' is not sufficiently definite and therefore not a (valid) CISG offer? If the e contrario deduction is permissible, and if one party has its place of business in a State where open price terms are invalid under domestic law,[1] then a court could declare a contract with an open price term invalid under the applicable (domestic) law.[2]

The problem has not been clarified - and may even have been exacerbated - by CISG Article 55 which provides a gap-filling reference to the price 'generally charged' in cases '[w]here a contract has been validly concluded but does not expressly or implicitly fix or make provision for determining the price'.[3] Although the wording and the legislative history of Article 55 seem inconclusive, it at least seems clear that Article 55 does not negate the notion that open price terms might sometimes be invalid,[4] just as we should reject the converse contention that a price gap is necessarily fatal to an offer under Article 14.[5]

A sound starting point for courts and arbitrators would be to try and discern the intention of the parties in the concrete case,[6] so as to determine whether or not they themselves actually wanted their open-price-term agreement to bind. Not only is the intention of the parties the overriding principle of Article 14,[7] but Article 6 lets the parties derogate from nearly any CISG provision, including - it would seem Article 14.[8] To determine the parties' intention, we refer to the flexible principles set forth in Article 8;[9] if, on this basis, it appears that the parties (expressly or impliedly) 'intended' to be bound by their agreement, including the open price term, then that intention should prevail. A domestic rule, such as Article 1591 of the French Civil Code, should not be allowed to override the clearly contrary intention of the parties to an international sale.[10]

1. This is, for example, the case under French domestic law.
2. See the discussion in Farnsworth, E.A., 'Formation of Contract,' in International Sales (Galston and Smit ed., New York 1984) at pp. 3-8 [available at <http://www.cisg.law.pace.edu/cisg/biblio/farnsworth1.html>] (seeing this as the unfortunate implication). See also Murray, L, 'An Essay on the Formation of Contracts and Related Matters Under the United Nations Convention on Contracts for the International Sale of Goods,' Vol. 8 Journal of Law and Commerce 11 (1988), 13-17 [available at <http://www.cisg.law.pace.edu/cisg/biblio/murray.html>]. Compare Witz, C., Les premières applications jurisprudentielles du droit uniforme de la vente internationale (Paris 1995) at 61 f.
3. Emphasis added. See infra No. 240.
4. Compare Honnold's position in the first (1981) edition of Uniform Law at 164 (Article 55 'precludes argument' that price gap can be fatal under Article 14); compare the 3rd edition (1999) at 150-157 [available at <http://www.cisg.law.pace.edu/cisg/biblio/honnold.html>] re. the possibility of a fatal gap by virtue of domestic law.
5. Clearly, CISG Article 14 does not say or imply that a proposal is invalid (for indefiniteness) if it fails to fix the price.
Some observers see Article 55 as a rule tailored to the special needs of the Scandinavian States (who are 'not bound' by Article 14 or any other rule in CISG Part ll): see, e.g., Bergem & Rognlien, Kjopsloven (Oslo 1991) pp. 591 ff. But the legislative history of Article 55 hardly warrants the conclusion that the validity of an open price term contract depends on whether the parties reside in States which have ratified Part II, in that all States which ratify CISG Part III must be bound by the same Article 55, whatever it means: see Lookofsky, Understanding the CISG in Scandinavia (1996) 3-3. See also infra No. 240. Regarding the 'Scandinavian' Article 92 declarations, see infra No. 328. [page 64]
6. Accord: Hager, G. in Schlechtriem, P., Commentary (1998) p. 462.
7. Supra No. 100 et seq.
8. Accord: Hager, G. op. cit.
9. Supra No. 81 et seq.
10. Accord Witz, Premières Applications pp. 68-70. See also Magnus in Staudinger, Kommentar, Art. 14, Rd. Nr. 34 and authors cited there. See also Article 2.2 of the UNIDROIT Principles indicating that the position taken here is an internationally acceptable interpretation of the Article 14 rule; re. CISG Article 7(1) see supra No. 76.
Allowing the parties to a CISG contract to contract out of contrary domestic validity rules accords with generally accepted PIL principles, e.g., Article 3(1) and 3(3) of the 1980 Rome Convention on the Law Applicable to Contractual Matters.

C. Invitation to Make Offers Distinguished

103. The CISG distinguishes between an offer, which binds the offeror, and an invitation that others make offers, which does not. Paragraph (2) of Article 14 provides:

'(2) A proposal other than one addressed to one or more specific persons is to be considered merely as an invitation to make offers, unless the contrary is clearly indicated by the person making the proposal.'

Paragraph (2) of Article 14 reaffirms the starting point in. Paragraph 1: a proposal not addressed to one or more specific persons is to be interpreted - presumptively as an invitation to make offers.[1] However, a proposal clearly evidencing an intention to be bound should be treated as a true offer (which is subject to the various rules which apply to offers and their acceptance in CISG Part II). [page 65]

1. The converse - that a proposal addressed to one or more specific persons is considered to be an offer - does not necessarily follow from paragraph (2). For a contrary view, 'paraphrasing' paragraph (2), see Murray, J., op. cit. No. 102 at p. 18.

Pace Law School Institute of International Commercial Law - Last updated April 1, 2005
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