INTERNATIONAL BUSINESS CONTRACTS CISG: Part 2 Satu Pitkänen 2015

When does a contract exist? 4/5/2019 When does a contract exist? Offer + Acceptance = Contract HELIA / Satu Pitkänen

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

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

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

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

CASE Buyer: ”Ship me 100 widgets on 16 March at the latest” -> Seller ships on 14 March -> Buyer phones and cancels on 15 March Is there a contract?

IMPLIED ACCEPTANCE If the offer, usage, or past dealings between the offeror and the offeree so indicate, then an act performed by the offeree shall be construed as an acceptance Silence or inactivity does not amount to 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?

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

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

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

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”