International Commercial Law – the CISG Prof. Giorgio F. COLOMBO

General Provisions Lesson n. 6

Acceptance ≠ Offer Art. 19 CISG (1) A reply to an offer which purports to be an acceptance but contains additions, limitations or other modifications is a rejection of the offer and constitutes a counter-offer

Acceptance ≠ Offer Art. 19 CISG (2) However, a reply to an offer which purports to be an acceptance but contains additional or different terms which do not materially alter the terms of the offer constitutes an acceptance, unless the offeror, with undue delay, objects orally to the discrepancy or dispateches a note to that effect. If he does not so object, the terms of the contract are the terms of the offer with the modifications contained in the acceptance

Acceptance ≠ Offer Art. 19 CISG (3) Additional terms relating, among other things, to the price, payment, quality and quantity of goods, place and time of delivery, extent of one party’s liability to the other or the settlement of disputes are considered to alter the terms of the offer materially

Acceptance ≠ Offer Art. 19 (1) is easy. Many similar examples in national laws Art. 19 (2) is a bit more tricky When a change is material or immaterial?

Example A German Buyer offers to purchase from an Italian Seller ten lots of «wrapped bacon» The Italian Seller replies he would be happy to sell the German Buyer ten lots of «unwrapped bacon» The Seller delivers 4 lots, but then the Buyer refuses to accept anymore The Seller then has to sell the remaning lots for a lower price, and brings legal action against the Buyer

Example A German Buyer buys clothes from a French Seller. In the proposal by the Seller, French courts have jurisdiction However, in the confirmation documents sent by the Buyer, it is written that German courts have jurisdiction The Seller does not object and they start trading

Example After a few shipments, Buyer refuses to pay the price, claiming some defects Seller then starts legal action in France, but Buyer contests the jurisdiction, by claiming that Seller had read his conditions and did not object

«Battle of the Forms» Most professional traders use standard terms and conditions to carry out their business There could be the situation in which both parties send their standard terms and conditions to the other and want them to apply How is the situation solved?

«Battle of Forms» «Last shot» rule «Knock out» rule Last general terms and conditions proposed would apply This would be the solution suggested by an inflexible reading of Art. 19 «Knock out» rule Both general terms and conditions apply In case of discrepancies, neither applies The matter is regulated by the CISG and the applicable law

«Battle of Forms» Is that really important? Yes, but... No, but... Specific contracts should always be negotiated It is necessary to demonstrate agreement No, but... Business operators are often very ignorant about the law Carelessness could easily lead into troubles

Fundamental Breach Art. 25 CISG A breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstance would have not foreseen such a result

Fundamental Breach The definition of «Fundamental Breach» is very important in the CISG, because it is used in various provisions (Artt. 46, 49, 51, 64, 70, 72, 73) When there is a «Fundamental Breach» a lot of consequences are triggered, the most important of which is the possibility to declare the contract avoided When a breach is fundamental?

Fundamental Breach Requirements A breach A detriment If something is not a breach, it cannot be fundamental A detriment The «detriment» such as to deprive the party of what he is entitled to expect under the contract The foreseeability A breach of contract is not fundamental when the defaulting party did not foresee the detrimental consequences and when a reasonable person, of the same kind and in the same circumstances, would not have foreseen these consequences.

Examples A Swedish Buyer purchases from a German seller some calibrators for industrial purpose. The price is EUR 5,000,000 Under the contract, the Buyer must open a Letter of credit in favor of the Seller for the amount of EUR 5,000,000 The Buyer fails to open the L/C. However, it offers the Seller a different bank guarantee The Seller refuses to accept the different guaranterr

Examples A Japanese Buyer purchases from an Italian Seller 5,000 fashion clothes The clothes are intended to be sold in the season «Spring-Summer 2016», the sales for which start in January In late February, the Seller is still unable to deliver the clothes The Buyer declares the contract avoided

Examples A German Buyer purchases from a Chinese Seller 22 containers of sport clothes However, at the quality insepction, it is found out that the clothes shrink about 10% when washed The Buyer declares the contract avoided

Examples A German Buyer buys four different quantities of cobalt sulphate from a Dutch Seller In the contract, the parties agreed that the cobalt must be of “British origin” However, part of the cobalt is from South Africa The Buyer declares the contract avoided