Jump to Content Jump to Main Navigation
Signed in as:
Oxford Law Citator
Sign up for alerts

Part III Formation of The Contract, 10 Offer and Acceptance

From: Global Sales and Contract Law

Ingeborg Schwenzer, Pascal Hachem, Christopher Kee

Content type:
Book content
Product:
International Commercial Law [ICML]
Published in print:
26 January 2012
ISBN:
9780199572984

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved. Subscriber: null; date: 06 June 2023

Subject(s):
Formation of contract — Performance of contract — Interpretation of contract — Burden of proof and damages

(p. 130) 10  Offer and Acceptance

  1. A.  General 10.01

  2. B.  Offer 10.04

    1. I.  Definiteness of Offer 10.04

      1. 1.  Minimum Content 10.05

      2. 2.  Determination 10.08

        1. (a)  General 10.08

        2. (b)  Subsequent Determination 10.11

        3. (c)  Indefinite Purchase Price 10.14

    2. II.  Intention to be Bound 10.19

      1. 1.  General 10.19

      2. 2.  Offers Distinguished from Invitations to Treat 10.22

    3. III.  Binding Effect of Offers 10.26

      1. 1.  General 10.26

      2. 2.  Irrevocability 10.29

        1. (a)  General Rule 10.29

        2. (b)  Exceptions 10.33

      3. 3.  Revocability 10.34

        1. (a)  General Rule 10.34

        2. (b)  Exceptions 10.37

          • (i)  Common Law 10.38

          • (ii)  French-Influenced Legal Systems 10.41

          • (iii)  Modern Approach 10.42

      4. 4.  Consequences of Revocation of an Irrevocable Offer 10.44

    4. IV.  Termination of Offers 10.47

      1. 1.  Withdrawal and Revocation 10.47

      2. 2.  Lapse of Time 10.48

      3. 3.  Express or Implied Condition 10.50

      4. 4.  Rejection 10.51

      5. 5.  Death and Incapacity 10.52

  3. C.  Acceptance 10.55

    1. I.  Declaration of Acceptance 10.55

    2. II.  Time for Acceptance 10.60

    3. III.  Effect and Effectiveness of Acceptance 10.62

    4. IV.  Alterations between Offer and Acceptance 10.67

  4. D.  Modern Forms of Contract Conclusion10.74

  5. E.  Language Problems 10.78

  6. F.  Burden and Standard of Proof 10.83

A.  General

10.01  Almost all legal systems act on the assumption that a contract is based upon two distinct declarations, namely offer and acceptance.1 However, this archaic mechanism often does not mirror the present day realities of contract negotiations and conclusions, especially at the international level.

10.02  More than 30 years ago, in a 1979 UK Court of Appeal decision, Lord Denning proposed that the requirements of offer and acceptance were not absolute ones.2 The House of Lords, (p. 131) however, disagreed with this view, preferring to retain the importance of offer and acceptance, and instead suggested that there might be rare exceptions where contracts were formed without clearly identifiable offers and acceptances.3 In modern trade the exception is becoming the rule, and the willingness of the common law courts to recognize other methods of contract formation is increasing.4 At a statutory level most noteworthy is USA § 2-204(1)–(2) UCC which explicitly provides that a contract for sale of goods may be made in any manner sufficient to show agreement and that such an agreement may be found even though the moment of its making is undetermined.

10.03  At the international level the mechanism of offer and acceptance was also adopted by ULF (IS),5 CISG,6 and the OHADA Treaty.7 Only the recent uniform projects have abandoned this notion to some extent and acknowledge that, in addition to contract formation by offer and acceptance, the existence of a contract may also be inferred from conduct by the parties that is sufficient to show agreement.8

B.  Offer

I.  Definiteness of Offer

10.04  All legal systems require an offer to be sufficiently definite which means that upon acceptance of the offer a contract must immediately be created with obligations that are legally enforceable.9 The offer must therefore contain the essentialia negotii of the envisaged contract to be concluded. As a general rule, all legal systems take the position that a declaration only constitutes an offer, if the mere ‘yes’ of the offeree is sufficient to create consent.10

(p. 132) 1.  Minimum Content

10.05  The essentialia negotii in a sales contract should be principally understood as the goods, their quantity and the price.11 Indication of specific features of the goods, while often found in a sales contract, is not a necessary element.12 For example, steel is usually bought on the basis of weight and quality whereas it is up to the buyer to specify measurements at a later stage.

10.06  Additionally, further contractual details may be part of the essentialia negotii in a particular case such as confidentiality agreements, non-competition clauses, or dispute resolution clauses. If the negotiations between the parties indicate that reaching agreement on such additional terms is essential, an offer without such details is not sufficiently definite.

10.07  Finally, it is also generally necessary that the parties to the envisaged contract be certain or ascertainable.13

2.  Determination

(a)  General

10.08  No problems arise with regard to the definiteness of the offer, where the offeror already, itself, makes express provision for the essentialia negotii. Likewise, the offer is sufficiently definite where the interpretation of the declaration leads to an implicit fixation of the essentialia negotii.

10.09  However, offers may not always determine the essentialia negotii but instead make provision for their determination. With regard to the goods, the declaration may make reference to ‘three truckloads’, ‘all I have available’, or ‘entire harvest’. With regard to the purchase price, it is sufficient for offers—as is often the case—to refer to the market price of the respective goods,14 to a list price,15 to the price at a commodity market, to a daily quotation or price,16 to the price of a competitor,17 or to the size or weight of the goods. In all these cases the essentialia negotii are not determined but nevertheless determinable. Regularly, legal systems hold offers to be (p. 133) sufficiently definite, where the essentialia negotii are merely determinable.18 However, the question of what is required for determinability to be present is not uniformly answered, particularly when it comes to the purchase price.19

10.10  In determing whether the parties have reached a consensus on the essentialia negotii it needs to be taken into account whether the parties have already taken steps to perform the contract.20

(b)  Subsequent Determination

10.11  An offer may be sufficiently definite if it provides for the subsequent determination of the essentialia negotii by a third party.21 Jurisdictions differ on whether the third party has to make the determination in a reasonable manner.22 There is also divergence on the consequences of a failure or refusal of the third party to act. In some instances where the third party fails or refuses to make the (in some cases reasonable) determination the court may step in and make the determination instead.23 However, in other jurisdictions, particularly those common law jurisdictions following the English model with respect to price determination, the contract is avoided.24

10.12  Whether the parties may also provide in their contract that one of them subsequently has the right to determine one of the obligations, especially if the seller can determine the purchase price, is answered differently by legal systems. Whereas some legal systems are very liberal on this point,25 others do not allow for such subsequent determination,26 at least under certain circumstances.

10.13  Where the contract does not even provide for such mechanism to determine the essentialia negotii, some select legal systems provide that the obligee of the indeterminate obligation has the right to make a subsequent determination.27

(p. 134) (c)  Indefinite Purchase Price

10.14  Special problems arise if an offer or agreement neither makes provision for the purchase price nor for the mechanism by which it is to be determined. In many legal systems the above-mentioned rules also apply to the determination of the purchase price. Regularly the civil law provisions on this issue presume that the market price is to be paid.28 Most common law jurisdictions also have provisions in their sale of goods legislation which state that the buyer must pay a reasonable price where a price is not fixed.29 A special case are prices which have been fixed by governmental regulation.30

10.15  A very rigid position was taken by France where Article 1591 CC expressly provides that the price must be determined by the parties (‘le prix de la vente doit être determinée et designée par les parties’). According to the principle of pretium certum the contract is only valid if the price can be determined without having recourse to the will of one or both of the parties.31 In the 1990s, however, the French Supreme Court abandoned the pretium certum requirement for (p. 135) framework contracts allowing the subsequent unilateral fixing of the price by the seller.32 It still applies, however, to one-time contracts,33 where at least a minimum must be determinable.34

10.16  The effects of the principle of pertium certum are still clearly visible in the OHADA AUDCG. According to Article 235, a contract of sale is only valid if the parties have either specified the price in the contract itself or if they have made reference to the market price as at the time of the conclusion of the contract.

10.17  With respect to the CISG the different approaches taken by legal systems had led to a fierce dispute at the Vienna Conference, first as to whether a contract should nevertheless come into existence where a price had not been fixed and, secondly, as to which mechanisms were to be applied to fill the gap.35 This dispute led to the incorporation of Article 5536 into the Convention. Since then the relationship between Article 14 CISG and Article 55 CISG is heavily debated.37 The solutions offered range from the view that there was no conflict at all;38 that the reference to ‘validity’ in Article 55 was to the applicable domestic law;39 that Article 55 CISG superseded Article 14 CISG as lex specialis;40 to Article 55 CISG being subsidiary to Article 14 CISG.41

10.18  The preferable opinion builds on the last mentioned approach and as a first step distinguishes the situations in which Articles 14 and 55 CISG apply. Where Article 14 CISG and the entire Part II of the Convention are excluded via the reservation in Article 92 CISG, Article 55 CISG is of relevance if the applicable domestic law allows for open-price contracts.42 Otherwise, Article 14(1) CISG allows for an implicit fixation of the purchase price. In this context Article 55 CISG can be used as a guideline to interpret the offer as to which price has been implicitly fixed.43 Naturally, in practice, offers not fixing the price will often have to be interpreted as derogating from Article 14 CISG by virtue of Article 6 CISG leading to the application of Article 55 CISG.44 As the CISG also allows for other mechanisms of contract formation than (p. 136) offer and acceptance,45 the validity requirement in Article 55 CISG is met by the intentions of the parties to be bound and the price can be fixed by virtue of this provision.46 As a result, contracts under the CISG will seldomly fail due to the lack of a fixed contract price. The conflict between Article 14 CISG and Article 55 CISG thus is more of a theoretical than practical nature.47

II.  Intention to be Bound

1.  General

10.19  An objective intention to be bound is an important feature of the declaration of offer in all legal systems. As a general proposition it can be said to mark the border between non-binding preliminary negotiations and initial commitment.48 However, an actual subjective intention to be bound is not required in many cases.49 Whether there is an intention to be bound has to be decided from the viewpoint of the person receiving the declaration.50 Furthermore in commercial situations there may even be a presumption in favour of the intention to be bound.51 If no intention to be bound can be discerned the declaration has to be considered a mere invitation to make offers (invitatio ad offerendum).

10.20  Where the party making the declaration does not wish to be bound, it is advisable that this be clearly communicated to the purported offeree. Clauses such as ‘without obligation’, ‘sans engagement’, ‘sujette à confirmation’, or ‘non obligo’ may be interpreted as excluding an intention to be bound.52 Another commonly found expression is ‘subject to contract’.53

10.21  In a given case the interpretation of the statement may also exclude the irrevocability of the offer where it would otherwise be binding by default.54

(p. 137) 2.  Offers Distinguished from Invitations to Treat

10.22  There is no intention to be bound where a proposal is made to enter into negotiations (invitation to treat, invitatio ad offerendum). The distinction between an offer and such invitations is especially pertinent as regards proposals directed to more than one person or even to the public at large.

10.23  The majority of legal systems tend to interpret proposals to an indefinite group of persons as mere invitations to treat. This applies for example to price lists; circulars; advertisements in newspapers, radio, television, or the Internet; calls for tender, as well as shop displays.55

10.24  While this may amount to a presumption it is not a rule, and the character of the declaration must always be interpreted. In some legal systems shop displays with indication of a price are treated as an offer.56 On the other hand the display of goods on websites may generally be an invitation to make offers.57 However, websites which also display how many goods remain in stock may be found to express the necessary intention to be bound.58 Furthermore, some legal systems considerably broaden the concept of offer to combat unfair competition. The most notable example is France where any advertisement is treated as an offer to contract with the first person59 to accept it or as long as goods are in stock.60 French law has exerted some influence on this point also in other legal systems,61 as well as on the Draft Common Frame of Reference.62

10.25  At the international level, uniform law and projects mirror the divergences among domestic legal systems. While the PICC are silent on this question63 Article 14(2) CISG expressly states that proposals addressed to more than one or specific persons are generally to be considered as an invitation to make offers. By contrast Article 2:201(3) PECL follows the French approach by stating that ‘[a] proposal to supply goods at stated prices made by a professional supplier in (p. 138) a public advertisement, in a catalogue, or by a display of goods, is presumed to be an offer to sell at that price until the stock of goods is exhausted’.

III.  Binding Effect of Offers

1.  General

10.26  Legal systems differ considerably with regard to the questions of whether and when the offeror can be bound to its proposal to enter into a contract. Various legal systems with a Germanic background,64 in Eastern Europe and Central Asia,65 in East Asia,66 as well as the Nordic states provide that the offeror is bound as soon as the offer reaches the offeree; all other legal systems do not attribute such a binding effect to the offer. Under common law the reason for ‘free revocability’ can be found in the doctrine of consideration;67 in essence there needs to be a collateral agreement supported by consideration that the offer will not be revoked.

10.27  However, these seemingly irreconcilable starting points are mitigated in practice by numerous exceptions to the general rules. Further harmonization naturally occurs in practice as a result of the conduct of the parties.

10.28  Uniform law and projects reflect these differences in approaches. Although they all start from the general rule of revocability of the offer, they pay tribute to concepts of irrevocability by drastically limiting the free revocability.

2.  Irrevocability

(a)  General Rule

10.29  Under some legal systems the offer has binding effect on the offeror as soon as it has become effective. Until this point in time the designated offeree is not in need of legal protection, and consequently, the offeror may withdraw68 its offer.69 The effectiveness of the withdrawal is determined by the same rules as those which apply to the offer, namely a withdrawal becomes effective when it reaches the offeree.70 Uniform law and projects also distinguish between a withdrawal of the offer and general questions of revocability.71 Thus, for the concept of withdrawal the crucial question is when the offer becomes effective.

10.30  The generally used criterion is that the offer must have ‘reached’ the offeree. Offers inter presentes undisputedly reach the offeree immediately. With regard to offers inter absentes several legal systems apply an objective test and rely on the point in time at which the offer enters the sphere of the offeree in a way that the offeror can reasonably expect that the offer is taken (p. 139) notice of.72 Here, it is sufficient for the offer to be put in the offeree’s mailbox or to arrive at the offeree’s fax machine.73 Other legal systems apply a subjective test (or allow the reach presumption to be rebutted) and allow withdrawal until the offeree has actually taken notice of the offer.74

10.31  Modern means of communication have practically eliminated the time window between dispatch and receipt of a declaration. Thus, it is virtually impossible for a declaration withdrawing the offer to enter the email server of the offeree before or at the same time as the offer, if that had already been sent by email. It is not even possible to call the offeree by phone in the meantime. It follows that, in practice, the offeror will never be able to escape the binding effect of its offer in legal systems which do not allow taking distance from it at a later point. Statutory provisions are rendered meaningless in that regard. Those legal systems that allow withdrawal until the offeree has acquired knowledge of the offer are better suited to solve this problem. However, questions of proof might deprive this solution of its benefit.75

10.32  Further problems arise in connection with proposals made to the public. Two questions have to be answered: first, when does the offer become effective and, secondly, is a withdrawal possible? With respect to the first question the answer depends on whether the group of people is at least in some way defined, for example by addresses for sending advertising materials, or whether the group is entirely undefined. In the first case the requirement of ‘reach’ must be met. In the second case the publication of the offer suffices. Where the offeror wishes to withdraw the offer to the public, again the two situations must be distinguished and be treated accordingly, as the requirements for a withdrawal should be the same as for the coming into effect of the offer.76 It follows that a declaration to the public at large which is held to be an actual offer cannot be withdrawn, where the applicable law requires the withdrawal to reach the offeree, here meaning the public, before the offer. However, this will hardly ever amount to a practical problem, as those legal systems that hold offers to be irrevocable are very reluctant to treat proposals to the public as offers. On the other hand, those legal systems more inclined to classify proposals to the public as offers also regularly allow revocation.

(b)  Exceptions

10.33  Even in those legal systems in which an offer is irrevocable, freedom of contract allows the offeror to exclude the binding effect.77 This is usually done by using certain (p. 140) terms such as ‘subject to revocation’. Clauses such as ‘without obligation’ usually negate the intention to be bound78 but may exceptionally signify a right to revoke the offer, if the circumstances so indicate.79

3.  Revocability

(a)  General Rule

10.34  The majority of legal systems allow for the ‘free revocation’ of the offer until the time the contract is concluded. It follows that while for legal systems which only allow withdrawal the question of ‘reach’ is decisive, for legal systems allowing ‘free revocation’ it is the time when the contract comes into existence that is relevant. Common law has developed the so called mailbox rule,80 namely the contract is concluded when the acceptance is dispatched, which considerably shortens the period within which the offeror may actually revoke. Thus, the difference between the above-mentioned approach of irrevocability and the combination of revocability and mailbox rule boils down to the period of time the offeree needs to reflect on whether to accept the offer. Greater differences are, however, to be found where a contract comes into existence only by the acceptance reaching the offeror, or even where the offerror need be aware of the acceptance.81

10.35  Revocation of the offer, where this is permitted, becomes effective upon receipt by the offeree.82 In common law jurisdictions, as a general rule, actual receipt is required although there may be circumstances where the receipt of the notice of revocation at the last known place of business or residence will suffice.83 It is not necessary that communication revoking the offer come from the offeror, rather the offeree may know it from any reliable source.84 It is probably sufficient if evidence can establish that the offeree was aware, through whatever means, that the offeror no longer intended to pursue a contract with the offeree.85 Typically the mere sale of the goods which were the subject of the offer to another is not sufficient to amount to a revocation—unless the offeree becomes aware of such sale prior to accepting the offer.86

10.36  A revised offer sent by the offeror and received by the offeree before acceptance of the original offer may amount to a revocation of the original offer.

(b)  Exceptions

10.37  In the different legal systems allowing for revocability numerous exceptions have been developed. Although not a true exception, it should be mentioned here that occasionally the offeror who revokes its offer may be liable for damages to the offeree if the latter has already taken steps to perform the contract.87

(p. 141) (i)  Common Law

10.38  Most common law countries still firmly rest on the principle that offers are freely revocable. Subject to the exceptions discussed below revocability generally remains unrestricted even where the offeror has declared a readiness to keep the offer open for a given period, or where the offer fixes a certain period of time for acceptance.88

10.39  Considerable restrictions on the concept of free revocability can, however, be found in the USA. Under the USA UCC a ‘firm offer’ cannot be revoked. Section 2-205 UCC provides that an offer by a merchant to buy or sell goods ‘in a signed writing which by its terms gives assurance that it will be held open is not revocable, either during the time stated or if no time is stated for a reasonable time’.89

10.40  Other exceptions found more generally across common law jursidictions include offers under seal, and ‘option contracts’.90 Similarly, the ability to revoke unilateral offers once the offeree has begun performance appears to be disputed.91 In the USA, following the doctrine of detrimental reliance, an offer may become irrevocable if the offeree has relied to its detriment on the offer and such reliance would have been reasonably expected by the offeror.92 In Australia, unlike other common law jurisdictions, the same result would be achieved by promissory estoppel.93

(ii)  French-Influenced Legal Systems

10.41  The French Supreme Court—although constantly reasserting the general rule that an offer may be revoked before it has been accepted—has almost extinguished that principle. An offer may not be revoked where it states a certain time for acceptance94 or, if no such period has been stated, for a reasonable period of time.95 Numerous legal systems with French background share the first of these restrictions,96 while only some of them also share the second one.97

(p. 142) (iii)  Modern Approach

10.42  The modern approach is characterized by a happy fusion of the different approaches towards revocability. It is represented by Articles 15 and 16 CISG and has been followed not only by other uniform law98 and projects99 but also by recent codifications around the world.100

10.43  The modern approach starts from the principle of revocability of offers. It recognizes the possibility to withdraw the offer before it becomes effective upon reaching the offeree (Article 15 CISG). The offer may, however, only be revoked up to the time the offeree dispatches its acceptance (Article 16(1) CISG). It is important to note that dispatch of the acceptance does not ordinarily result in the conclusion of the contract under the CISG.101 Furthermore, free revocability is also restricted by the concept of firm offer,102 irrevocability during a fixed time for acceptance (Article 16(2)(a) CISG), and finally by the concept of detrimental reliance (Article 16(2)(b) CISG).

4.  Consequences of Revocation of an Irrevocable Offer

10.44  Two, and arguably three, approaches can be seen to the consequences of the revocation of an irrevocable offer. The first approach is that the revocation does not have any effect on the offer; consequently the offer can still be accepted by the offeree and a contract is formed.103 Depending upon the respective legal system, specific performance or damages for non-performance can be claimed by the offeree.

10.45  The second approach is most clearly seen in French law. Under French law it has long been held that the wrongful revocation of an offer does not lack legal effect but only gives rise to the offeror’s delictual or quasi-delictual liability.104 In a recent decision, the French Supreme Court, relying on Article 1134 CC, reaffirmed that an offer that fixed a time for acceptance could not be revoked.105 However, as this provision contains a basic rule for contractual obligations, it has been argued that this may also be interpreted as a marked change by the French Supreme Court.106

10.46  The arguably third approach can be found in many Ibero-American107 as well as East-Asian countries,108 where the basis for such liability seems to be unclear, be it delictual, quasi-delictual, or contractual. Furthermore, the extent to which damages may be granted differs, be it reliance or expectation interest.109 A special solution can be found in Chile110 and Ecuador,111 where although the offeree may only claim damages but not specific performance, the offeror may escape liability by offering specific performance instead.

(p. 143) IV.  Termination of Offers

1.  Withdrawal and Revocation

10.47  It is unanimously held among all legal systems that as far as withdrawal/revocation of an offer is possible, the offer is terminated upon the declaration of withdrawal/revocation reaching the offeree.112

2.  Lapse of Time

10.48  An offer may terminate after the lapse of a certain period of time. Of primary importance is whether the offeror has fixed a time for acceptance.113 If so, the offer terminates if it is not accepted during that period.114

10.49  If the offeror did not fix a certain time for acceptance, there is agreement that the offer is open for acceptance for a reasonable time.115 What constitutes a reasonable period will depend on the circumstances of each situation—particular regard may be had to the nature, complexity, and value of the goods116 and the trade practice and industry custom. Only a very few countries (p. 144) establish fixed periods of time for acceptance.117 Furthermore, civil law legal systems explicitly provide that an offer inter presentes has to be accepted immediately.118

3.  Express or Implied Condition

10.50  The occurrence of an event which was the subject of an express or implied condition may also terminate the offer. Although the offer may not be usually described as a conditional offer, there may however be a condition implied into the offer. For example in auctions, it may be considered an implied condition that an offer will terminate when a higher bid is received.119 Furthermore, in cases where a proposal to the public is deemed to be a binding offer,120 a condition may be implied that the offer is restricted to the available stock and terminates if the stock is sold out.121

4.  Rejection

10.51  There is furthermore agreement that an offer is terminated when a rejection reaches the offeror.122 The rejection may be explicit but may also be implicit. In particular, an acceptance with modifications constitutes a counter-offer and implies a rejection of the original offer.123 However a counter-offer must be distinguished from a mere request for modification124 or further information, (p. 145) which is not a rejection. Whether it is a counter-offer or a mere request for modification or further information is to be determined by an objective assessment of the offeree’s intention.125 For example where the offeree specifically indicates in its response that it is not rejecting the original offer although proposing different terms this will not amount to a rejection.126

5.  Death and Incapacity

10.52  As concerns termination of the offer by death or incapacity of the offeror the starting points of civil law and common law jurisdictions seem to be different. In many, but not all,127 civil law systems the death of the offeror or its loss of legal capacity in general does not terminate the offer.128 In contrast under traditional common law the death of the offeror was equated with the revocation of the offer thus leading to its termination.129 Between these poles middle grounds have been developed. Many legal systems nowadays rely on knowledge of the death of the offeror on the side of the offeree as a key factor in deciding upon the termination of the offer.130 In other legal systems death does not terminate the offer at least where there has been a fixed time for acceptance. This is for example the case in Italy131 but also under French law where the Supreme Court held that an offer to a definite person setting a fixed time may be regarded as a unilaterally binding act that survives the offeror’s death.132

10.53  Finally, the legal systems agree that in all these cases it must be decided by interpretation whether the respective offer is intended to survive or to be terminated by the death of the offeror.133 The decisive criterion in this regard is commonly held to be whether the transaction depends on the person of the offeror.134

(p. 146) 10.54  Uniform law and projects do not address the issue of termination of the offer by death or incapacity. With respect to the CISG it is preferable to exclude this question from the Convention.135 One reason for its exclusion from the CISG is the fact that Article 11 ULF has no successor in the CISG.136 A second reason is that questions of legal capacity fall outside the scope of the CISG and there is no reason to distinguish offers that have become irrevocable.137

C.  Acceptance

I.  Declaration of Acceptance

10.55  Under the traditional mechanism of contract formation the acceptance forms the counterpart to the offer. Typically the acceptance is defined as a statement by the offeree indicating assent to an offer.138

10.56  In the first place, the offer may stipulate the mode or means of its own acceptance. Where this occurs, acceptance will only be effective if done in the manner described.139 However, the stipulation itself may require interpretation to determine whether a different but equally efficiacous mode or means would suffice; for example where the offer stipulated acceptance should be posted to the offeror’s office, but instead the offeree hand-delivers the acceptance.140

10.57  In general the acceptance is effectuated by express declaration.141 However, an offer can also be accepted by conduct.142 In practice typical conduct indicating assent involves acts relating to (p. 147) the dispatch of the goods or the payment of the purchase price.143 It is, however, not always necessary that the acceptance reaches the other party.144

10.58  All jurisdictions agree that silence or inactivity does not in itself amount to acceptance.145 This holds true even if the offeror has indicated that it would regard silence on the side of the offeree as a declaration of acceptance.146 However, as the formula ‘in itself’ shows, silence in conjunction with other circumstances may lead to assent on the side of the offeree.147 This is particularly the case, where the parties have dealt with each other in the past and have developed (p. 148) according practices.148 Furthermore, legal systems may acknowledge silence as indicating assent as a usage among merchants or at least in specific areas of industry.149

10.59  In recent times the sending of unsolicited goods has received special attention by legal systems. The approach, which appears to be currently prevailing, is to disallow silence as well as use or disposal of the goods as acts of acceptance. The common aim of all legal systems is to deny a claim for payment or damages against the recipient of the unsolicited goods. On the European level the EC Distance Selling Directive obliges the EU Member States to provide adequate measures to protect consumers in this regard.150 The devices to reach this goal, however, differ considerably. Under some legal systems the sending of unsolicited goods for all purposes is deemed an unconditional gift to the recipient who may use or dispose of the goods in any manner it sees fit without any obligation.151 A variation is to allow a ‘recovery period’ during which the offeror can recover the goods, but after which the recipient can keep the goods.152 Other systems deny classifying the sending of unsolicited goods as an offer for a contract of sale.153 Similarly, legal systems may deny an acceptance in these cases.154 Finally, a legal system may simply stipulate that no claim arises against the recipient of unsolicited goods.155

II.  Time for Acceptance

10.60  As outlined above, time for acceptance depends on the question whether the offeror has set a time limit.156 In civil law countries with a Germanic background, statutes contain meticulously elaborated provisions on the computation of the beginning and ending of time periods.157 From there such provisions have found their way also into uniform laws and projects. While CISG, PICC and PECL contented themselves with general rules,158 the DCFR contains a more elaborate provision on the computation of time.159 If no time limit has been set by the offeror, acceptance must be effected within a reasonable time.160

10.61  A late acceptance will not generally be effective to conclude the contract. However it may be considered a new offer which may then be accepted by the original offeror.161 In many jurisdictions, the offeror may, however, instead treat a late acceptance as still being effective, if it so (p. 149) informs the offeree.162 Furthermore, many legal systems provide that if a communication containing a late acceptance shows that it has been sent in such a way so that normally it would have reached the offeror in due time, the late acceptance is effective unless the original offeror informs the offeree that it considers the offer as having lapsed.163

III.  Effect and Effectiveness of Acceptance

10.62  Under all legal systems the effect of the acceptance is to bring about the conclusion of the contract. Likewise they all distinguish between contract formation inter presentes and inter absentes. In case of instantaneous communication such as the parties dealing face to face, by telephone, or in chat rooms, it is agreed as a starting point that the offeror must have correctly and completely understood the acceptance to bring the contract into existence.164 The underlying rationale is that in these situations parties are able to immediately verify whether or not they have been understood or not. Where necessary for reasons of legal certainty an exception may be made in order to protect the offeree in its reasonable perception that the offeror has understood the acceptance.165 Legal systems, however, differ on the question when the acceptance becomes effective when the parties are dealing inter absentes.

10.63  Generally speaking, two groups of countries can be distinguished. In the first group an acceptance becomes effective as soon as it reaches the offeror.166 In the second group the acceptance (p. 150) becomes effective as against the offeror167 when it is dispatched by the offeree (so-called postal or mailbox rule168).169

10.64  The distinction roughly corresponds to the approaches taken by these legal systems to the revocability of the offer.170 Countries that in the first place bind the offeror to its offer once it has become effective typically require that the acceptance has reached the offeror,171 whereas in those countries where free revocability is accepted the dispatch rule prevails.172 Thus, the postal or mailbox rule functions as a balancing mechanism to the general revocability of the offer in order to protect the offeree by narrowing the time window during which the offeror may revoke. This view is reinforced by the fact that the mailbox rule itself is restricted and does not apply to instantaneous communication which also covers telex messages.173 Despite this general rule there is debate in some common law jurisdictions (settled in others174) as to whether an offeree may revoke the acceptance after its dispatch but before it reaches the offeror.175 It is (p. 151) clear, however, that a remarkable difference remains between the two starting points. As under the mailbox rule the contract is concluded upon dispatch the original offeror thus bears the risk of the acceptance being delayed or getting lost.176

10.65  A variation to the first group under which the acceptance must reach the offeror is those countries where acceptance only becomes effective upon the offeror’s knowledge of the acceptance.177 However, this broad rule that easily may lead to legal uncertainty often is attenuated by the presumption of knowledge as soon as the acceptance reaches the offeror.178 Still, where these legal systems accept free revocability they offer the least protection to the offeree.

10.66  In modern times the questions of revocability and effectiveness of acceptance have been distinguished. Uniform law and projects on the one hand accept revocation of the offer until dispatch of the acceptance but assume the conclusion of the contract only upon the acceptance reaching the offeree.179 This approach is now also to be found in some domestic legal systems.180

IV.  Alterations between Offer and Acceptance

10.67  All legal systems use the so-called mirror-image rule as a starting point: that is, the contract is only concluded if the acceptance matches the offer. A declaration purporting to be an acceptance but which contains additions, limitations, or other modifications of the offer is deemed to be a rejection of the offer and at the same time constitutes a counter-offer that in turn may be accepted by the original offeror or not.181 Strictly applied this rule causes severe practical (p. 152) problems as it does not mirror the factual conduct of parties in trade. As soon as parties have reached agreement on the essentialia negotii they are less concerned if consent on other contract terms has been reached or not.

10.68  Legal systems have therefore reacted to the undesired results of the mirror-image-rule by restricting it in different ways.

10.69  The first approach has been to distinguish between material and immaterial alterations of the offer by the acceptance. Where (a) the acceptance contains only immaterial alterations and (b) the initial offeror has not expressly limited acceptance to the terms of the offer or the offeror does not object, then the contract is concluded on the terms of the acceptance. This solution can be clearly seen in USA § 2-207(2) UCC.182 From there it found its way into uniform law and projects183 as well as recent domestic codifications.184 The Nordic Contracts Acts in their respective Articles 6(2) make a similar attempt. In essence, a declaration, although changing the offer, is still considered an acceptance where the offeree believes the reply to correspond to the offer and the offeror is aware of that intent.

10.70  What constitutes a material discrepancy can sometimes appear to be a matter of whimsy.185 Under the CISG, Article 19(3) seeks to give guidance in this regard by providing a non-exhaustive186 catalogue of alterations which are presumed to be material.187 This provision has, however, not been adopted by the uniform projects. The Official Comment to USA § 2-207 UCC also contains a non-exhaustive list of examples of both clauses which would typically materially alter the contract, as well as clauses which would not typically alter the contract.188 Whether alterations to an offer are material will, in any case, need to be decided by taking into account all circumstances of the individual case.

10.71  A similar concept to the one described above is the so-called professional’s written confirmation. This envisages the situation where one party after the (purported) conclusion of the contract sends a written confirmation which contains additional or different terms. It has long been held in Germany that the additional or different terms become part of the contract unless (p. 153) they materially alter the offer189 or the recipient objects to the discrepancy without undue delay. In recent times this has been adopted by the uniform projects.190

10.72  The second approach to the mirror-image rule analyses in which areas the offer and acceptance correspond to each other and in which they do not. If there is an agreement at least as to the essentialia negotii, and where the terms on which there is difference are not so essential to the parties that the parties would not have concluded the contract without agreement on them, then the contract is concluded on the terms agreed to and supplemented by provisions of law.

10.73  This approach has particularly been advocated in Germany with regard to the problem of battle of forms.191 It was also the solution proposed in the 2003 draft revisions to USA, § 2-207.192

D.  Modern Forms of Contract Conclusion

10.74  In modern trade, business partners often negotiate over a period of time, at the end of which lawyers draft a document representing the outcome of those negotiations. Both parties sign the document simultaneously. Finding the precise offer and acceptance in these scenarios can be difficult if not impossible. The crucial question arising in this context is at what point do the parties show sufficient intention to be bound to assume a legally binding contract?

10.75  Expressions used in this context typically talk about ‘letter of intent’, ‘agreements in principle’, ‘memorandum of understanding’, or ‘heads of agreement’. These expressions do not, however, answer the underlying question. In trade practice and legal systems these terms are rather interchangeable and used with totally different meanings.193 There are even legal systems which distinguish under one term—such as letter of intent—several sub-categories.194

10.76  Beyond any questions of terminology it is the interpretation of the content of the respective document and the conduct of the parties which will be the decisive factors. Interpretation may lead to the result that a party merely wanted to initiate contract negotiations. The sender may simply be identifying issues in the anticipated contract it considers important, or listing the points that have to be negotiated. Parties may set out the factual circumstances under which the negotiations will take place as well as to legal obligations during the negotiation phase such as production of documents, confidentiality or non-competition clauses. The document may describe anticipated legal obligations to be established under the envisaged contract.

10.77  If after interpretation it is determined that a document does not amount to a binding offer on the side of the sender, then it necessarily follows that where the addressee ‘agrees’ to the document this does not constitute an acceptance but rather shows the willingness to also enter into (p. 154) serious contract negotiations. In practice these documents will often contain an express clause disclaiming an intention to be bound.195 At the heart of the issue is whether liability can be incurred if negotiations break down or are terminated before a contract is concluded.196

E.  Language Problems

10.78  In international business transactions language problems may arise, although it is nowadays agreed by all legal systems that freedom of contract encompasses the freedom of the parties to choose the language for their contract. However, there are some domestic legal systems that oblige the parties that a contract executed within the national territory must be drafted in the language of that legal system. Whereas Mexico establishes this rule only as a consumer protection mechanism in connection with adhesion contracts,197 Poland provides for a much more extensive rule as all contracts involving at least one Polish party and which have to be performed—even if only partly—in Poland have to be drafted in the Polish language.198 In Mexican law the language requirement is a question of validity. Poland provides that contracts not satisfying the language requirement cannot be proven in court. In substance both cases establish specific form requirements.199

10.79  In the first place it may be questionable whether a declaration in a certain language may reach a party which is not of the same mother tongue. It seems agreed that the declaration reaches the addressee if it speaks this language or if the parties have been negotiating in this language. There is disagreement, however, whether the use of one of the so-called world languages—especially English—suffices in any event.200 Regularly the result will depend on the circumstances of the special case such as the respective mother tongue of the parties, their places of business, prior dealings, and whether the communication takes place during the contract formation phase or later during the phase of performance. It may also follow from the widely recognized principle of good faith and fair dealing in international trade that a party receiving a declaration with seemingly legal importance but in a language it is not familiar with has a duty to contact the other party to clarify its content.201

10.80  Further problems may arise when interpreting declarations and contracts. In this context a party may misstate a term by using a foreign language or misunderstand a communication in a foreign language. These issues will be dealt with in the chapters on interpretation202 and mistake.203(p. 155) Moreover, parties may choose to draft their contract in two or even more different languages. In case of discrepancies of the different language versions the question arises which version prevails. It is first of all up to the parties to decide this question. Failing such a term again the interpretation of the circumstances of the case is decisive. In particular, regard is to be had to other communications of the parties.

10.81  Special provisions on the language of contracts have been enacted as regards the information duties in electronic commerce. A professional making an offer electronically has to inform the offeree about the languages offered for the conclusion of the contract.204

10.82  Finally, it has to be noted that in legal proceedings in domestic courts only the official language of the respective state will be acknowledged and therefore all documents have to be accompanied by translations.205 In arbitration, however, the parties are free to determine the language of the proceedings in their arbitration agreement.206 Whether documents have to be translated into this language usually is at the discretion of the tribunal.207

F.  Burden and Standard of Proof

10.83  Given the divergence between jurisdictions outlined below, it is important to clarify how the expressions burden of proof and standard of proof are used in this text. Whereas the burden of proof refers to he who bears the risk of failing to provide sufficient evidence, the standard of proof is the measure of evidence required. It is sometimes unfortunately said that the burden of proof switches from party to party during the course of litigation. This characterization, although understandable, is not particularly helpful and thus best avoided.208 The party who bears the burden of proof carries the risk that the evidence it presents is not sufficient to support (p. 156) its claim—if the evidence is insufficient the party will fail even where the other party has not defended itself.

10.84  There is significant divergence amongst legal systems regarding both the burden and the standard of proof. With respect to the burden of proof there is difference as to whether those rules are matters of procedural law or substantive law. However despite the fact that this is really a major difference, outcomes remain largely coherent and understandable. With regard to the CISG the clearly prevailing view assumes that the burden of proof is a matter governed by the Convention and not to be left with domestic law.209

10.85  With respect to standard of proof there are also considerable differences in approach. These differences are rather fundamental. As a broad generalization common law jurisdictions apply a balance of probabilities or preponderance of evidence approach, whereas civil law jurisdictions favour the intime conviction notion. A detailed discussion is beyond the scope of this work.210

10.86  It is a well-known principle accepted throughout the world that the one who wants to rely on a fact beneficial to it has to prove it.211 This is put most succinctly in Article 1315 of the French Civil Code which states that the one who wants an obligation to be performed has to prove it and respectively the one who claims exoneration has to prove payment or some other fact that exempts it from its obligation.

It follows from the principle mentioned above that the party who is relying on the existence of a contract has to prove it. In particular, as the contract comes into existence with the acceptance of the offer, the effectiveness of the acceptance must be proven. At this point the differences between the dispatch rule and the receipt rule gain relevance. Whereas the dispatch of a declaration regularly may be proven easily,212 difficulties arise when receipt has to be proven.

Footnotes:

1  Common Law (UK) Gibson v Manchester City Council [1979] 1 WLR 297 (HL); Eastern Europe/Central Asia Lapiashvili, p 68; Shari’a Basha, p 33, Zahraa, 13 ALQ (1998), 265; Afg Arts 506, 597 CC; Are Art 130 CC, FHC, challenge no 501, session dated 24 May 1998, JY 18, TO 20, p 540; Aus Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197, The Laws of Australia/Davis, para 7.1.370; Aut § 861 CC which applies to contracts of sale by virtue of § 1054(1) CC; Bhr Art 31 CC; Bol Kaune Arteaga, vol 1, pp 64–5; Che Art 1 CO, Schwenzer, paras 28.01 et seq; Cri Brenes Cordoba/Ramíerz/Trejos, p 57; Deu §§ 145 CC et seq; Dza Art 59 CC; Egy Art 89 CC, Mansour, p 50; Est § 9 CO; Hkg Calimpex International v ENZ [1994] 1 HKC 191; Hun Harmathy, p 99; Irl Clark, p 4; Irn Art 183 CC; Irq Art 73 CC, Mansour, p 50; Isr s 1 (General Part) CL; Jor Art 90 CC, Mansour, p 50; Kaz Osakwe, Notre Dame L Rev (1998), 1498; Kwt Arts 31–3 CC, Abdel Reda/Al Nakas, pp 40–1; Lbn Arts 165, 178 CO, Basha p 33; Lby Art 89 CC; Mar Art 19 CO; Mex Vásquez del Mercado, p 157; Nld Art 6.217; Qat Art 64 CC; Rus Osakwe, 73 Notre Dame L Rev (1998), 1427; Sco McBryde, para 6-02; Slv Miranda, De la Compraventa pp 28–9; Syr Art 92 CC; Tun Art 23 CO; Tur Art 1 CO, Rumpf, § 27, paras 18 et seq; Yem Art 147 CC.

2  Gibson v Manchester City Council [1978] 1 WLR 523 (CA).

3  Gibson v Manchester City Council [1979] 1 WLR 297 (HL).

4  See eg Aus MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125 (HC); The Laws of Australia/Davis, paras 7.1.20, 7.1.390; Eng G Perry Trentham v Archital Luxfer [1993] 1 LLR 25 (CA); Sco McBryde, para 6-05.

5  Arts 3 et seq ULF (IS) .

6  Art 14 CISG.

7  OHADA Art 241 AUDCG.

8  Art 2.1.1 PICC; Art 2:101(1) PECL; Art II.-4:101 DCFR.

9  See for CISG, Schlechtriem/Schwenzer/Schroeter, Art 14, para 2; Bianca/Bonell/Eörsi, Art 14, para 2.2.2; Common Law Benajamin’s Sale of Goods, para 1-030 (slightly different), OHADA Art 241 AUDCG; Arabic/Middle East Zahraa, 13 ALQ (1998), 269; Arg Art 1148 CC; Arm Art 451 CC; Aus The Laws of Australia/Davis para 7.1.460; Aut § 869 CC, OGH, 15 July 1981, 1Ob630/81, OGH 9 June 2009, 4Ob84/09w, Koziol et al/Bollenberger, § 861, para 3, Rummel/Rummel, § 869, para 5; Aze Art 408 CC; Blr Art 405 CC; Bol Art 826 Com C, Camargo Marín, p 408; Bra Art 429 CC, Gomes, p 73; Che Schwenzer, para 28.03; Chl Supreme Court, RDJ, vol 36, s 1, p 362 cited in Díez Duarte, p 123, n 351: noting that if the parties failed to agree on a price, there is no contract of sale, and thus the available remedy is the invalidity (rescission) of the contract and not the avoidance for ordinary breach as established in Arts 1489, 1873 CC; Chn Art 14 PRC CL; Col Art 845 Com C, Supreme Court, 16 October 1980, Supreme Court, 8 March 1995 cited in Oviedo Alban, p 37, n 6; Deu Erman/Armbrüster, § 145, para 2, MünchKommBGB/Gruber, Art 14, para 13; Ecu Cevallos Vásquez, p 234; Esp Llobet I Aguado, p 21; Est § 16 CO; Gtm Art 1522 CC; Hrv Art 253 CO; Ind Mulla, Contracts, vol 1, p 54; Irl Clark, p 8; Ita Arts 1374, 1346 CC; Jpn Draft Proposal—new CC, Book III, para 3.1.1.12(2); Kaz Art 395 CC; Kgz Art 396 CC; Ltu Art 6.167 CC; Mda Art 681CC; Mex Vásquez del Mercado, p 157, Collegiate Tribunals, Novena Época, Registry 177,335, SJF XXII, September 2005, p 1436; Mng Art 195 CC; Nld Busch et al/Hartlief, p 105; Nzl Burrows/Finn/Todd, p 38; Per Sierralta Ríos, p 55; Phl Art 1319 CC; Pol Art 60 CC, Supreme Court Poland, 12 February 2004, V CK 291/04, Monitor Prawniczy 1/2005 p 10, LEX no 137335; Prt Supreme Tribunal of Justice, 4 October 2001, Supreme Tribunal of Justice, 12 March 2002; Rus Art 435 CC; Sco McBryde, para 6-14 (sufficently defined to indicate intention); Slv Miranda, Obligaciones, p 31; Tjk Art 467 CC; Tur Ansay/Wallace/Ansay, p 153; Twn Wang Zejian, Obligations, p 156; Ukr Art 641 CC; USA