INTERNATIONAL BUSINESS CONTRACTS CISG: Part 2 CONTRACTS

When does a contract exist? Offer + Acceptance = Contract

MIRROR IMAGE CONTRACT Formation of a CISG contract: Intent to be bound 4/5/2019 Intent to be bound OFFER Definite terms Communication to one or more specific persons CONTRACT Communication from party to whom offer was intended OFFER To be an offer the expression must be Addressed to one or more specific persons Sufficiently definite Indicate the intention of the offeror to be bound in the case of acceptance ACCEPTANCE Same terms Intent to be bound to same obligation as offeror Source: Erick L. Rchards. Law for Global Business HELIA / Satu Pitkänen

Specifically addressed Addressed to the offeror Definite terms Specifically addressed Intent to be bound 1 3 2 ACCEPTANCE Addressed to the offeror Same terms On time ACCEPTANCE Modified Late REFUSAL COUNTER OFFER NEW OFFER CONTRACT OFFER LAPSES

ACCEPTANCE WITH MODIFICATIONS Modified acceptance is generally considered as a rejection of the offer => it constitutes a counter offer Unless the modifications are nonmaterial => they become part of the contract unless the offeror promptly notifies

LATE ACCEPTANCE Delayed acceptance constitutes a new offer unless 1. The offeror approves the acceptance and informs about his approval Or 2. The delay is due to abnormal transmission and the offeror does not notify

IMPLIED ACCEPTANCE If the past dealings between the offeror and the offeree so indicate, then an act performed by the offeree shall be construed as an acceptance

CASE Cortez, in a letter, offered to sell sugar to Wyatt at a fixed price. However, soon the market price of sugar began to rise. Cortez wanted to cancel his offer. Can he do it?

OFFER Offer is effective when it reaches the offeree But It can be revoked until the offeree dispatches his acceptance unless The offer is stated as irrevocable or the offeree relies on its irrevocability

Timeliness and CISG Contract Formation OFFER effective ACCEPTANCE DISPATCHED OFFER DISPATCHED OFFER RECEIVED Offeror may revoke unless it made an irrevocable offer Offeror may revoke Irrevocable offer becomes binding Offer becomes binding Modified from: Richards, E. 1994. Law for global Business. Irwin, USA

CASE Cortez, in a letter offered to sell sugar to Wyatt at a fixed price. After Wyatt mailed an acceptance the market price for sugar began to fall. Wyatt immediately contracted to buy the sugar at a lower price from another supplier and telegraphed a rejection to Cortez. Was the revocation acceptable?

Timeliness and CISG Contract Formation ACCEPTANCE 4/5/2019 Timeliness and CISG Contract Formation ACCEPTANCE Contract is concluded OFFER RECEIVED ACCEPTANCE RECEIVED ACCEPTANCE DISPATCHED Offeror may revoke unless the offer was irrevocable Offeree may reject, offeror may not revoke Acceptance becomes binding Offer becomes binding Irrevocable offer becomes binding Modified from: Richards, E. 1994. Law for global Business. Irwin, USA HELIA / Satu Pitkänen

ACCEPTANCE The offeree must respond within reasonable time, and oral offers must be responded immediately The acceptance becomes effective and the contract is formed when the acceptance reaches the offeror The offer cannot be revoked after the acceptance has been dispatched

FORMATION OF CONTRACTS UNDER COMMON LAW

British Common Law Mailbox Rule => Offer: Acceptance: Can be revoked any time before the offeree dispatches an acceptance According to the doctrine of consideration offer as a unilateral act can’t be binding Acceptance: Becomes binding when dispatched

Modified from: Richards, E. 1994. Law for global Business. Irwin, USA Timeliness and Contract Formation according to British Common Law Contract is concluded OFFER DISPATCHED OFFER RECEIVED ACCEPTANCE MAILED Offeror may revoke Offer and acceptance become binding Modified from: Richards, E. 1994. Law for global Business. Irwin, USA

Modified from: Richards, E. 1994. Law for global Business. Irwin, USA CASE Todd contracted to build the Cariocias a cabin for $ 20,000. Before completing his work, Todd informed the Cariocias that he would not complete the job unless they paid him an additional $ 5,000. The Cariocias agreed to pay the extra $ 5,000. Under 1) British Common law rules 2) CISG would Todd be entitled to this additional compensation although the Cariocias refuse to pay? Modified from: Richards, E. 1994. Law for global Business. Irwin, USA

Modified from: Richards, E. 1994. Law for global Business. Irwin, USA SOLUTION 1) Todd paid no consideration for the promise of additional ($5,000) compensation => The Cariocias must pay only $ 20,000 2) The CISG holds that contracts may be modified by mere agreement of the parties => As long as the modification meets the formal requirements of the contract the Cariocias must pay $ 25,000 Modified from: Richards, E. 1994. Law for global Business. Irwin, USA

United States Uniform Commercial Code, UCC An offer An acceptance Becomes binding when the acceptance is dispatched Unless The offeror is a merchant and he has in a signed writing promised that the offer is irrevocable An acceptance Becomes binding when dispatched unless the offer states that “acceptance effective only when received”

DETAILS OF CONTRACT

NON-DISCLOSURE AGREEMENT An NDA is a contract through which the parties agree not to disclose information covered by the agreement Creates a confidential relationship between the parties to protect any type of confidential and proprietary information or trade secrets Can be concluded to protect any type of information that is not generally known should be signed at an early stage of negotiations Contents definition of confidential information exclusions from confidential information obligations of receiving party time periods, and miscellaneous provisions. An NDA can be mutual or one-way

NON-WAIVER CLAUSE A non-waiver clause aims to preserve a party's rights and remedies if that party fails, whether intentionally or by oversight, to take action in respect of a breach of contract Generally such clauses will provide that: a failure or delay in enforcing an obligation, or exercising a right or remedy, does not amount to a waiver of that obligation, right or remedy a waiver of a breach of a term does not amount to a waiver of a breach of any other term in the agreement a waiver of a particular obligation in one circumstance will not prevent a party from subsequently requiring compliance with the obligation on other occasions