INTRODUCTION

Art. 17 CISG forms part of the set of rules (Arts. 15 to 18 CISG) that provide the grounds upon which the offeror, after having dispatched his offer, may be freed from the binding effects of his offer and therefore reallocate the resources committed. Before the offer has reached the offeree, the offeror may withdraw the offer (Art. 15(2) CISG). Arts. 16 to 18 CISG contemplate actions that can be taken after the offer has reached the offeree: the offeror may revoke the offer unless it is irrevocable (Art. 16). The offeror is also freed from his offer upon the expiration of the time for its acceptance (Art. 18(2), 2nd and 3rd sentences CISG). Art. 17 CISG further foresees, as a cause of termination of the offer, an initiative emanating from the offeree (i.e., the rejection of the offer).

Art. 2:203 PECL, in almost identical terms as Art. 17 CISG, regulates the same issue. There are two minor differences in the wording:(1) Art. 17 CISG contains the clarification that the general rule, whereby the offer terminates when the rejection reaches the offeror, applies also if the offer is irrevocable, and (2) Art. 17 CISG uses the word “terminate” as opposed to the term “lapse” in Art. 2:203 PECL. This second difference is of no significance, because no regulatory difference may be inferred from the use of the words “terminate” or “lapse.”

GENERAL SCHEME OF ARTICLE 1:105 PECL AND ARTICLE 9 CISG

The structure and contents of Article 1:105 PECL and Article 9 CISG are similar. The first paragraph of each article deals with the binding effect of usages and practices that are agreed upon by the parties. The second paragraph of Article 9 CISG and Article 1:105 PECL deals with the binding effect of usages not agreed upon by the parties, but that are nevertheless binding due to their general applicability or because the parties implicitly have agreed upon a usage.

Practices and usages will, when applicable to the contract, set aside rules of law of the CISG and provisions of the PECL that would otherwise apply. However, under the PECL, practices and usages are only applicable if they do not violate mandatory rules of the law applicable to the contract; under the CISG, usages can be overridden in accordance with its Article 4(a) validity provision.

PRACTICES AND USAGES

Neither Article 9 CISG nor Article 1:105 PECL, defines the terms “usage” and “practice.” Therefore, what ultimately constitutes a usage or a practice in CISG and PECL is to be decided by national courts or by arbitral tribunals.

The Secretariat Commentary on Article 8 of the 1978 Draft of the CISG does not include a definition of the terms “usage” and “practice.” However, the Commentary to Article 1:105 PECL defines the term “practice” as previous conduct in a particular transaction or a particular kind of transaction between the parties that may be regarded as a common understanding.

INTRODUCTION

The principle of party autonomy entrenched in CISG Article 6 represents an important guarantee for the effective functioning of international trade and accommodates the fulfillment of the principle of freedom of contract, which is a basic tenet of international commercial relations. The inclusion of this principle in the provisions of the CISG reflects the strong conviction of the international community that specific warranties must be created for the establishment of a freely operating, market-oriented international economy within which the contracting parties have the freedom to act in conformity with their business interests. Similar provisions were also incorporated in other international uniform laws adopted before the CISG.

The UNIDROIT Principles, which were promulgated almost fifteen years after the adoption of the CISG, contain two articles that correspond in substance with CISG Art. 6. UNIDROIT Principles Arts 1.1 and 1.5, though similar in essence to CISG Art. 6, better illustrate the concept of party autonomy and can be used for the interpretation and application of CISG Art. 6. This concept was regulated in two other important conventions on international commercial relations – one adopted the same year as the CISG and the other a few years later. The solid interest that the international community has shown in the importance of party autonomy once again underlines its significance. Although today it seems unthinkable to have a uniform act that regulates international commercial relations without explicitly emphasizing party autonomy, there was strong opposition to the inclusion of this concept during the draft process of the Convention.

An understanding of the contours and function of American federalism is vital to comprehension of the workings of the law in the United States. The division and sharing of power between the fifty American states and their federal government in both public law and private law spheres is more fundamental and intricate than is the case with any other modern federal nation-state.

When considering American federalism, it must be constantly kept in mind that the American nation-state is the result of the voluntary association of thirteen independent former colonies, each with a degree of individual sovereignty and its own complete system of public and private law. The American states are not provinces or regions of a larger comprehensive whole; rather, the national government that binds them together is the product of a voluntary fusion of the sovereign states that had been there before.

This historical development stands in contrast with that of other modern democracies, even those with some federal characteristics. In most of these jurisdictions, political consolidation had preceded or accompanied the development of a national legal order. Even in European federal democracies such as Germany, private law as well as much of public law is and remains national despite the increased federalization of the German state following World War II.

INTRODUCTION

Whereas Arts. 14 to 17 CISG deal with the offer, Arts. 18 to 23 CISG deal with the acceptance. Art. 18(1) CISG defines the acceptance in general. This provision is in large part supplemented by Art. 19 CISG, which deals with the substantive contents of an acceptance. By contrast, Art. 18(2) and (3) CISG is concerned with the communication of the acceptance and the conditions under which the offeree may be dispensed of such communication. It is thereby supplemented by Art. 20 CISG for the computation of applicable time periods and by Art. 21 CISG with respect to late acceptances. Whereas Art. 23 CISG may be regarded as the conclusion of Part II of the CISG, defining the moment when a contract is concluded, Art. 24 CISG defines for both offer and acceptance when a certain statement reaches the addressee within the meaning of the CISG.

ARTICLE 18(1) CISG – MEANING OF ACCEPTANCE

Article 18(1) CISG substantially corresponds to Art. 2:204 PECL, defining in rather broad terms the meaning of acceptance, which may be express or implied by conduct. Both provisions do, however, clearly deny that silence or inactivity per se may constitute an acceptance. Art. 2:204 PECL thereby reconfirms the principle that in commercial dealings silence in itself does not have legal relevance.

ARTICLE 18(2) CISG – EFFECTIVENESS OF ACCEPTANCE

Reasonable Time

According to Art. 18(2) CISG, an acceptance must reach the offeror within the time open for its acceptance.

INTRODUCTION

Both the CISG (Art. 14(1)) and the PECL (Art. 2:101) recognize the traditional offer-acceptance model of contracting. The PECL also has a provision (Art. 2:211) on contracts not concluded through the traditional offer and acceptance mode.

Offer-acceptance, the only model explicitly addressed in the CISG, is the principal model in most legal systems of the world. However, it seems to be universally agreed that rules on the traditional model of offer-acceptance can be applied by way of analogy to other models, insofar as this is reasonable and with appropriate adaptations. The Comments on Art. 2:211 PECL may, in this respect, be relevant to the proper interpretation of the CISG.

ANIMUS CONTRAHENDI

The offeror expresses with his proposal the intention to give an option to the offeree: with the acceptance, the offeree can conclude the contract according to the terms of the offer. This intention has its Latin name: animus contrahendi. Both the CISG and the PECL demand animus contrahendi in an offer: the offer should show the offeror's “intention to be bound” in the case of acceptance (CISG Art. 14(1)), and an offer must be “intended to result in a contract if the other party accepts it” (PECL Art. 2:201(1)(a)).

THE “SUFFICIENT DEFINITION” OF AN OFFER

An offer is not only the manifestation of the offeror's intention to conclude the contract: as a project of a possible future contractual relationship, the offer must contain all of the elements necessary for the successful conclusion of a valid contract.

a. Article 46 of the Convention gives the buyer the right to specific performance unless the buyer resorts to a remedy that is inconsistent with it. As is evident throughout the provisions of the CISG, the rights of the buyer and the seller are balanced in the Convention, and the seller is also entitled to demand specific performance as stated in CISG Article 62. Resorting to the remedy of specific performance does not deprive the buyer of his right to claim damages, as stated in CISG Article 45(2). Another aspect of this balance between the rights of the buyer and the seller is that according to CISG Article 48(1) the seller may, even after the date for delivery, remedy at his own expense any failure to perform his obligations, if he can do so without unreasonable inconvenience or uncertainty of reimbursement by the seller of expenses advanced by the buyer. If the seller makes use of this right, the buyer need not make use of his right to require performance under CISG Article 46. In fact, if the seller requests an opportunity to remedy in accordance with CISG Article 48(1) and the buyer does not comply with the request within a reasonable time, the seller may remedy within the time indicated in his request and the buyer may not resort to any remedy that is inconsistent with performance by the seller during that time (see CISG Art. 48(2)).

INTRODUCTION

Article 18 of the Convention provides that “[a]n acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror. An acceptance is not effective if the indication of assent does not reach the offeror within the time he has fixed […].”

It is an important element of certainty for parties who contemplate entering into a contract that there is a clear point of time at which the period fixed by the offeror for acceptance of the offer commences. In the case where the offeror fixes a precise date by which the offeree must accept the offer (e.g., “no later than August 31”), there are no special problems regarding the period allowed for acceptance of the offer by the offeree. However, in the case where the offeror merely indicates a period of time for acceptance (e.g., “ten days”), problems may arise as to when exactly that period begins, due to possible ambiguity and uncertainty whether the period starts from the time the communication was prepared by the offeror, the time it was sent, or the time it was received by the other party.

CALCULATING THE PERIOD FOR ACCEPTANCE FIXED BY THE OFFEROR

In Part II of the Convention, entitled “Formation of the Contract,” Article 20 deals with the interpretation of the offeror's time limits for acceptance of an offer to conclude a contract. CISG Article 20 provides a mechanism for calculating when that period begins to run in cases where the commencement of the period of time during which an offer can be accepted by the offeree has not been expressly fixed by the offeror.

GENERAL: CURRENT PRICE DAMAGES UNDER THE CISG AND PECL

Both the CISG and the PECL distinguish between two mutually exclusive types of situations following breach (“non-performance” in the context of the PECL) of contract and avoidance (“termination” in the context of the PECL) by either party.

1.1 In one type of situation, the aggrieved party engages in an alternative transaction that substitutes for the performance expected from the original, now avoided (terminated) contract; this is a so-called cover transaction. Such transactions fall under CISG Art. 75 and PECL Art. 9:506. In the other type of situation, the aggrieved party does not resort to a substitute transaction. In such cases, market-price-based damages may become available to the aggrieved party under so-called current price clauses, CISG Art. 76 and PECL Art. 9:507. Note that under perfect market conditions, the two types of situations converge. This chapter begins by exploring the general logic of current price damages shared by the CISG and PECL and subsequently identifies and analyzes the differences in approach between the two instruments.

1.2 Monetarily speaking, current price damages are a compensation for a devaluation or increase of price in terms of a theoretical substitute transaction. They represent the difference between the contractual price of goods (or, in the case of the PECL, also services, etc.) and their price at a certain later time, whether higher or lower (how this later time is determined is discussed below).

The size and organization of the bar, the lawyer's conception of his or her role, and the general style of legal education in a society reflect the historic position of the lawyer and the society's traditional conception of law. This chapter begins with a discussion of American legal education because its style and approach are closely related both to the importance of decisional law in common law legal systems and to the problem of maintaining legal unity in the American federal system.

Before considering educational arrangements, some remarks are in order respecting American legal philosophy. Speaking generally, the schools that have flourished in the United States parallel those found in Great Britain and on the continent of Europe. Liberalism, utilitarianism, natural-law theories, sociological jurisprudence, conceptualism, functionalism, interest analysis, legal realism, economic analysis, and logical positivism are among the conceptual and intellectual systems that have influenced American legal thinking.

Historically, a rough parallelism exists between philosophical movements in American and European legal thinking. In the late nineteenth and early twentieth centuries, when a conceptual and formal jurisprudence (Begriffsjurisprudenz) based on the premise that the law was logically complete (die logische Geschlossenheit des Rechts) was widespread in Europe, the same assumption of a complete body of pre-existent law supported a mechanical jurisprudence in the United States.

In time, sociological jurisprudence and legal realism challenged this premise in the United States just as did such theories as Interessenjurisprudenz in Germany and Geny's libre recherche scientifique in France.

DAMAGES IN INTERNATIONAL SALES LAW: CISG, PECL, AND UPICC

Contract law, whether national or international, is – almost universally and entirely – at the disposition of the parties when they are modeling their individual contractual situation; very few of its provisions are usually considered mandatory. Mandatory rules are confined to questions of validity because of a party's immorality, illegality, or incapacity, as well as the rudimentary protection of the balance of the duties owed between the parties. Even in situations where the contract partners actively negotiate the terms of their contract, and especially in the manifold situations in which they do not discuss the conditions, the commercial parties of cross-border transactions often do not consider the substantive law applicable to their contract. This holds true not only for the contract drafting stage but also for the fulfillment stage of performing the duties owed under the contract. Somewhat prematurely, the parties (and their legal counsel) might even believe that their elaborate contract deals with all the issues of fulfillment and no reference to the underlying law must be made. Whatever the scenario, this view dramatically changes when the relationship deteriorates and one or both of the parties deliberate about damages. In practice virtually all less extensively negotiated, elaborated, and documented contracts – and thus the vast majority of them – do not provide any rules of either accounting or awarding damages. The pursuit of compensation almost invariably leads the parties to turn to the applicable law.

a. Article 8 of the CISG is entitled “Interpretation of Statement or Other Conduct of a Party.” Surprisingly, the CISG makes no explicit statement concerning the interpretation of a contract that is the joint product of the parties' negotiations resulting in the adoption of common language. As Professor Honnold has noted, the provisions of Article 8 have “special significance for agreements that have not resulted from detailed negotiations.” Uncomplicated sales of goods, in which no formalized contractual documents are produced, are quite common, but more complex transactions that interweave sales with support services are also very important. The UNIDROIT Principles' focus is broader than simple sales and provides explicit guidance for the interpretation of contracts and not merely for the interpretation of individual communications. It thus fills a wide gap in the CISG text.

b. Article 4.1 of the Principles talks in terms of the interpretation of “contracts”. It starts with a subjective notion. If the parties have a common intention, the common intention will prevail. This, on the face of it, is the same rule that has been adopted by the American Restatement, but the common law objectifies intention by erecting barriers to evidence of what the parties really intended as opposed to what they said or wrote. The Principles, however, disclaim any limitation on evidence of the parties' intentions.

c. If the common intention of the parties cannot be determined, the Principles would apply an objective test to determine the meaning of the contract.

INTRODUCTION TO THE CONCEPT OF “EXEMPTION” IN ARTICLE 79 CISG

Different legal concepts exist in all legal systems dealing with the problem of changed circumstances and excusing a party from performance of its obligations when a contract has become unexpectedly onerous or impossible to perform. Some systems only accept a narrow range of excuses; others are more generous (e.g., the concepts of imprévision or hardship, force majeure, or Wegfall der Geschäftsgrundlage).

The rules dealing with situations of changed or supervening contractual circumstances are based on the two basic concepts of hardship and force majeure – they constitute exceptions to the cardinal canon of pacta sunt servanda and ameliorate its strictness.

Hardship refers to the performance of the disadvantaged party having become much more burdensome, but not impossible, whereas force majeure refers to the performance of one party's obligations that has become impossible, even on a temporary basis.

IS HARDSHIP COVERED UNDER ARTICLE 79 CISG?

The CISG deals with the issue of changed circumstances on an international level by avoiding any reference to existing domestic concepts.

The most difficult question concerning the application of Article 79 CISG is whether situations of hardship (i.e. where the performance by one of the parties has become much more onerous and difficult – but not impossible – usually in financial terms) are covered in the embedded exemption.

INTRODUCTION

The concept of fundamental breach under Article 25 CISG plays a crucial role within the remedial system of the CISG because it determines the availability of the avoidance remedy in respect of any breach other than late performance (Articles 49(1)(a), 64(1)(a), 72(1), and 73(1) CISG) and of the substitute delivery remedy (Article 46(2) CISG). Fundamental breach is also important for the transfer of risk (Article 70 CISG). Its UNIDROIT Principles counterpart, fundamental non-performance, is defined in Article 7.3.1(2) of the UNIDROIT Principles. Unlike Article 25 CISG, its scope is limited to the termination of a contract. Before addressing the issue of whether or not Article 7.3.1(2) of the UNIDROIT Principles may be used to interpret or supplement Article 25 CISG, it is necessary to first take a closer look at the elements constituting fundamental breach, because recourse to the UNIDROIT Principles is only admissible where the language of the CISG provision gives rise to doubts as to the precise meaning of its content.

ELEMENTS CONSTITUTING FUNDAMENTAL BREACH

Article 25 provides that a breach is fundamental if

a. In the words of Art. 37 CISG, the seller may cure a “lack of conformity … before the date for delivery.” Once the date of delivery has passed, the limitations of Art. 48 CISG apply. For documents, Art. 34 CISG applies as lex specialis. Unlike the CISG, the UNIDROIT Principles (UP) stipulate one general right to cure in Art. 7.1.4 regardless of object or time. Any interpretation of Art. 37 CISG in light of Art. 7.1.4 UP must take into consideration that the norm is only one part of the curing constructions provided by the CISG.

b. The legal history of Art. 37 CISG stretches from the nearly equivalent Art. 37 ULIS to the first codified right to cure in Sec. 2–508 UCC. In particular the civil law tradition is less familiar with the seller's right to “tender a second time” as the seller gave the goods autonomously outside his disposal power. However, the stated aim of CISG and UNIDROIT Principles is to find concepts that transcend legal traditions. As part of an “International Restatement of Contract Law” Art. 7.1.4 UP encourages the worldwide acceptance of a general right to cure.

c. Comparing the legal context of Art. 37, the provisions in Art. 52(1) and Art. 72 CISG are relevant for the system of early performance. Whereas under Art. 52(1) CISG the buyer may deliberately refuse to take any early delivery, Art. 6.1.5 UP restricts this right if he “has no legitimate interest in so doing.”

American law academics should speak and write about the role and influence of the American legal system in the modern legal world with some diffidence. In a sense, this is an issue that is better addressed from the outside. Foreign jurists, who experience the American legal system from the outside, are likely to be in a much better position to gauge the effect and influence of American legal institutions on the world legal order than is an American academic or practitioner.

On the other hand, as the end of what some have called “the American Century” has come and gone, the issue of America's relationship with the other great and small lands, jurisdictions, economic and political systems, and cultures of the modern world has come very much to the fore. Questions that were often muted during the long years of the Cold War are now fueling public debate in the stark new world following the fall of the Berlin Wall, September 11, 2001, and the American invasion of Iraq. This is a time to talk and write frankly in the hope that honest dialogue will increase understanding and enable us to work better together to make the world a better place for all our grandchildren.

This chapter focuses on three main themes. The initial part discusses the various structural and political conditions and circumstances that define and affect the relationship of American law and the American legal system with the global legal order.

INTRODUCTION

CISG Article 6 lays down the general rule that the Convention applies to international contracts of sale of goods, subject to a contrary agreement by the parties. Its counterparts in PECL Articles 1:102 and 1:103 likewise address the principle of freedom of contract and its limitations, but differ from CISG Article 6 in several respects. These differences primarily follow from the different legal nature of the two sets of rules – whereas the CISG in its Contracting States forms part of the substantive law that the courts have to apply (lex fori), the applicability of the PECL in general requires an agreement of the parties to submit their contract to the Principles (PECL 1:101). However, these differences also reflect the different approaches adopted by the drafters of the CISG and the PECL to the limitations to the freedom of contract, in particular those limitations arising from so-called mandatory rules of law. As a consequence, the use of PECL Articles 1:102 and 1:103 as an aid to interpret CISG Article 6 is subject to several important caveats discussed below.

FREEDOM OF CONTRACT UNDER THE CISG AND THE PECL

The principle of freedom of contract, one of the basic principles underlying the international law of contracts in general, has been recognized by both the drafters of the CISG and of the PECL. The wording of CISG Article 6 and PECL Article 1:102(2) is in fact quite similar, and the prominent position of both provisions among the first articles in the Convention and the PECL illustrates the important role of the parties' autonomy.