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Tuesday, May 24th 2022

The ACP Legal Association

  • OHADAC and ACP Legal

    The partisans of this project, called OHADAC (Organisation for the Harmonisation of Business Law in the Caribbean), decided to meet within the framework of the association ACP Legal, to help interested Caribbean States to implement the project.

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  • OHADAC in brief

    This brochure has been published by the ACP Legal Association.

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OHADAC PRINCIPLES ON INTERNATIONAL COMMERCIAL CONTRACTS

Article 2.1.1

Formation of contract

The contract is concluded by the acceptance of the offer.

In the countries belonging to the OHADAC, in both civil law and common law, it is commonly accepted that no one can be obliged without their consent and that the consent is formed by the offer and the acceptance of said offer. This is the habitual model to form and conclude contracts. The offer and acceptance model exists in the Caribbean countries governed by civil law and frequently it is expressed in their civil codes (Articles 1.009 and 1.010 of the Costa Rican Civil Code; Article 311 of the Cuban Civil Code; Article 1.521 of the Guatemalan Civil Code; Article 6:217 of the Dutch and Suriname Civil Code; Article 1.553.1º of the Honduran Civil Code; Articles 1.804-1.811 of the Mexican Civil Code; Article 1.113 of the Panamanian Civil Code; Article 1.214 of the Puerto Rican Civil Code) or in their commercial codes (Articles 845 to 863 of the Colombian Commercial Code; Article 54 of the Cuban Commercial Code; Article 718 of the Honduran Commercial Code; Article 83 of the Nicaraguan Commercial Code; Articles 201 of the Panamanian Commercial Code and 1.113 Civil Code, Article 272.1 of the Santa Lucian Commercial Code, Article 110 of the Venezuelan Commercial Code). Consent is also necessary in the countries belonging to the common law legal tradition. Although the central idea of the contract not the obligation itself, but the exchange of promises through consideration, consent is expressed through reciprocal promises [Section 2 (1) English Sale of Goods Act; Section 3 (1) Sale of Goods Act of Antigua and Barbuda; Section 6 (3) Sale of Goods Act of Bahamas; Section 6 (3) Sale of Goods Act of Montserrat; Section 3 (1) Sale of Goods Act of Belize; Sections 2 and 6 (3) Sale of Goods Act of Jamaica; Section 3 (1) Sale of Goods Act of Trinidad and Tobago).

The bilateral model of offer and acceptance has been formulated in the CISG (in force in Colombia, Cuba, Honduras, Dominican Republic, Saint Vincent and the Grenadines and Guyana). Articles 14 to 24 regulate the requirements that the offer and the acceptance must satisfy in order to conclude the contract, although they do not expressly mention the consent mechanism through the offer and the acceptance. The conclusion of contracts through offer and acceptance is regulated in Article 2.2.2 UP and also in Article 30.2º CESL.

However, the PECL and the DCFR (Article II-4:201) seem to have deviated from the bilateral model and it is stated in Article 2:101 that the formation of the contract requires only that the parties declare their intention to be legally bound and have reached a sufficient agreement. But, the bilateral scheme has not been abandoned, although Article 2:211 PECL specifies that the rules relating to offer and acceptance will be applied with the appropriate adaptations even though the process of contract formation cannot be analysed into offer and acceptance.

Example 1: If a US businessman offers a Jamaican businessman a car for $ 18,000 and the Jamaican businessman agrees, a valid contract is concluded and the offer and the acceptance can be identified without problems. In other more complicated contracts, with long negotiations, it is necessary to consult the exchange of documents between the parties to see if they have come to an agreement.

Some countries do not mention offer and acceptance, either in the civil code or in the commercial code. This is the case of France and the Dominican Republic (Articles 1.101 and 1.108 Civil Code) or Haiti (Articles 897 and 903 Civil Code), which consider the contract as an agreement that requires consent, capacity, determined object and legal cause. However, the Draft project of reform of the French law of obligations of 2013 reserves Chapter 2 to the conclusion of the contract, using the offer and acceptance model (Articles 13-34).

To demonstrate the existence of contractual consent or an agreement of intentions requires the application of rules on the interpretation of the contract included in section 1 of Chapter 4 of these Principles, which are applicable, mutatis mutandis, to unilateral declarations of intention. To this end, the comments to the rules of said Chapter, particularly those that refer to the diversity of comparative systems and to problems raised by subjective and objective tendencies of interpretation. In practice, as analysed in commentaries on Chapter 5, although civil law and common law systems have opposing principles, they coincide in the objective interpretation of declarations in line with reasonable criteria, in the light of a context taken in a broad sense.

Example 2: If during a meal in a restaurant, a Dominican businessman A offers a Haitian businessman B a machine for a good price and the businessman B gives $ 1000 as a deposit, the contract will have been concluded, although A's intention was to play a joke on B, since B does not know that A has no intention to be obliged because the proposition and any reasonable person could have believed that A has formulated a real contractual offer.

Commentary

Article 2.1.2

Definition of offer

A proposal for concluding a contract constitutes an offer if it is sufficiently precise and indicates the intention of the offeror to be bound in case of acceptance.

1. The precise nature of the offer

The regulation of the declarations of intention in the codes of the OHADAC territories is varied. Some civil codes, like those of Colombia, Honduras, Nicaragua, Panama or Venezuela, are very detailed. On the other hand, some texts do not even explicitly refer to the offer or the acceptance (Dominican Republic, France or Haiti). In other codes, the references are very brief (Article 444 Costa Rican Commercial Code, that refer to the conclusion of sale contracts; Article 54 Cuban Commercial Code and Article 85 of the Puerto Rican Commercial Code, both about the conclusion of the contracts made by correspondence). The regulation is less detailed in the French Civil Code, as it was mentioned earlier, which is different in the Draft project of reform of the French Law of Obligations of 2013, as stated in Articles 11-34. The influence of the DCFR, the CISG, the UP and the PECL in each country is evident. Those regulatory instruments thoroughly regulate offer and acceptance contracts, following the German model, like the BGB or the Italian Civil Code, which can be found in Chapter 4 of the DCFR on formation of contracts, and particularly in Section 2 (Articles II-4:201-4:211) referring to offer and acceptance, in a manner almost parallel to that of the PECL, that also can be found in Section 2, Chapter 2 about the offer and the acceptance (Articles 2:201-2:211), as well as in CISG (Articles 14 to 24).

In the OHADAC legal systems it is agreed that the offer is a proposal that one party makes to another party in order to conclude a contract, either through declarations or conclusive acts. This proposal, like acceptance, must be notified to the other party in order to form the agreement that constitutes the contract (Article 845 of the Colombian Commercial Code). The principle of freedom of form is recognised, so that the notice can be made in any form, except for some types of contracts that require certain formalities (deposit contracts, OPAs, property loans, etc.). The offer may be sent through instant communication means such by fax, telephone or e-mail. Notifications by post or telegraph are less frequently used. The sending of the declaration of intention through electronic methods is accepted as a manifestation of the principle of freedom of form and by virtue of the principle of functional equivalence between the written private documents and those written electronically, that are able to store, conserve and reproduce the information [Articles 1.108.1 and 1.316.1 French Civil Code; Article 6:227a.1 Dutch Civil Code; Article 1.834 bis Mexican Civil Code, Articles 197 y 198 Panamanian Commercial Code, Sections 7 (a) and 7 (b) Uniform Electronic Transactions Act (UETA), that apply in 47 States of the United States, as well as the District of Colombia, Puerto Rico and the Virgin Islands. The revised Section 2 UCC has substituted the term “written” for “document”, in order to include electronic forms and traditional written forms on paper]. Also Article 11 of the UNCITRAL Model Law on Electronic Commerce says that, unless otherwise agreed, the contractual offer and acceptance can be expressed through a data message, even though state laws can make exceptions when certain formalities for the validity of the contract are required. That can also be found in Article II-3:105 DCFR.

Example 1: In a trade fair, the Mexican businessman A gives his business card to the businessman B from the city of Gustavia (St. Barthélemy). B, who wishes to establish a commercial relationship, sends a contractual offer to A through e-mail, with all of the terms and conditions of the contract. Even though there is not a previous agreement about the use of the electronic methods, this is a valid form of communication between the parties.

However, there is an apparent divergence as to what should be the minimum content of the proposal to constitute an offer. In economic terms, it seems excessive to require that the offer mention all aspects of the contract since, aside from drafting costs, there is always the possibility of missing out something. Therefore, common law systems do not require a minimum content in the offer or the existence of essential elements in the contract, but simply the common intention of the parties, the consideration and adequate description of the object of the contract and the amount are necessary for the conclusion of the contract. Section 2-201 (1) UCC only considers essential the amount of goods covered by the contract and Section 2-204 (3) UCC requires a remedy for the damage that the failure of one party causes to the other (as in Section 33 (2) of the Restatement (Second) of Contracts). Generally, American law does not see any problem with leaving certain aspects open providing reasonable basis for giving an appropriate remedy. So, the determination of the quantity and price can be omitted, leaving it up to a third person or even one of the parties (Section 2-204 (3) UCC); or let the courts construing terms not agreed, referring to the commercial uses, the regularly established practices between the parties, the terms implied and any remedy appropriate to the circumstances, in short, referring to the criterion of reasonableness (Section 2-204 (3) UCC).

The contract will be deemed not to have concluded only when such integration turns out to be impossible. This is because the parties trust the judges not to override the intention of the parties. However, there are always exceptions, because there are cases where the contract is considered incomplete because they have not yet decided the start date of the contract [Harvey v Pratt (1965), 1 WLR 1025] and there are cases when it is estimated that parties have not concluded the contract because they have not fixed the price and that is a sign that the parties will continue the negotiations [Russell Bros (Paddington) Ltd v John Elliott Management Ltd (1992), 11 Const LJ 337]. Also in English law, Section 8 (2) of the Sale of Goods Act of 1979 considers that a binding agreement of sale exists from the moment in which the parties have agreed to buy and sell, and they can leave the rest of the questions to be determined through reasonable standards or by the law itself. If the parties have not fixed a price, it is considered that they have agreed on a reasonable price. Other Caribbean systems have followed the same approach.

The same criterion is followed by the UP (Section 2.1.2), the PECL (Article 2:201), the DCFR (Article II-4:201) and the CESL (Article 31.1). Although they require that the proposal that constitutes an offer has sufficiently defined the terms, or is sufficiently precise, they do not list the terms that the offer should contain, which makes it possible to the use various techniques of contract integration based on commercial uses and business practices and on the reasonable nature of the technique in question. Even they allow the unilateral setting of prices or other contractual components by only one contracting party or a third person, so that if the party that determines the price or other contractual elements should exceed its powers, the contract would not become void, but should be corrected for a reasonable price by the courts, and if the third person authorised to determine the price does not fulfil its obligation, it is understood that the contracting parties have empowered the judge to do so.

These criteria are in contrast with the rigidity of some civil law systems, which require that the contract is complete and contains all the essentials terms (Article 1.108 French and Dominican Civil Code) or conditions of the contract (Article 1.522 Guatemalan Civil Code). Article 14 of the Draft project of reform of the French Law on obligations of 2013 requires that the offer has the essential elements of the contract, like Article 845 of the Colombian Commercial Code, so that subsequent agreements between the parties are not necessary to conclude the contract. Thus, the offer only needs the acceptance of the offeree in order for the contract to be binding.

However, the apparent rigidity of the civil law systems in some countries disappears, because it is presumed that the contract can exist despite the absence of agreement on any of the essentials. In this regard, it is recognised that the determination of some elements is deferred to a later time, provided that the basis for subsequent determination has been fixed in the proposed contract. Even the price, although it is an essential element, can also be determined retrospectively, by reference to a certain thing, or by a third person (Article 1.592 of the French and Dominican Civil Code) or by reference to the stock exchange or market.

Example 2: The Jamaican company A offers company B the sale of 50 head of cattle to the farm that B has in Port of Spain (Trinidad and Tobago) or the number of head of cattle that B needs for this season, for the current price in the cattle fair in Kingston at the time of delivery, or at the usual price between the parties or at a reasonable price. Although some elements of the offer are not certain, nothing prevents determination a posteriori.

It is not an impediment to the conclusion of the contract the fact that parties leave some open questions under Dutch and Suriname Law, whose Article 6:227 Civil Code only requires that obligations assumed by the parties are ascertainable; or Mexican Commercial Code, which provides rules for integrating terms not specified by the parties, as the kind and quality of goods to be delivered or deadlines for compliance (Article 83 and 87), as established by Article 421 Costa Rican Commercial Code, Article 101 Nicaraguan Commercial Code, Articles 219, 223.3 and 227 Panamanian Commercial Code and Article 138 of the Venezuelan Commercial Code.

Even a normative text such as the CISG, which seems to respond to the rigorous model of civil law systems, listing in detail the elements required in the offer, is close to the common law model and allows, to a certain extent, the subsequent determination of contract terms. Article 14 CISG provides that, for the offer to be sufficiently definite, it must indicate goods and expressly or implicitly fix and make provision for determining the quantity and price. The lack of any of these terms implies the lack of offer and leads to a mere invitation to offer. However, this requirement is relaxed to admit the existence of an offer if it provides a means for determining the price. The time and place of delivery of goods shall be determined in accordance with Article 31 et seq., and the time and place of payment according to Articles 57 and 58. Even the essentials, such as the quantity, may be implicitly determined and result from pre-existing agreements or from individual usages or from practices between the parties, if they have previously made repeated orders for the same amount. In short, it is a question of interpretation of the intention of the parties.

Example 3: Car construction company A, registered in Free Town (Bahamas), has had contractual relationships with the U.S. auto parts manufacturer B for several years. Having decided to expand their business, A decided to open a branch in Nassau; so it sends an offer to B for B to deliver the same parts to the Nassau branch. The offer does not specify either the number of pieces or the price, but B accepts the offer. It can be understood that the contract has been concluded, because the terms that do not appear in the offer can be integrated in accordance to the practices established between the parties in their prior contractual relationships.

In this manner, facilitating the integration of elements of the offer which have not been set out through judicial intervention, some approximation between the two models occurs; hence these Principles opt for a flexible approach to the concept of offer. However, as a question of interpretation, certain oscillations, that are related to the different trends in the general field of contract interpretation, discussed in Section 1 of Chapter 4 of the Principles, cannot be excluded. Therefore, in cases in which the offer leaves certain terms open, the party that does not want to leave any doubt of the binding nature of the offer, must ensure that this intention is sufficiently clear.

2. The intention to be bound as a subjective requirement of the offer

In order to consider the proposal as an offer, it must demonstrate the serious intention of the offeror to be bound in case of acceptance (Article 14.1 CISG, Article 2.1.2 UP, Article 2:102 PECL, Article II-4:201 DCFR). However, no regulatory text indicates which words the offeror must use, admitting any formula. The offer should be serious and defined. If done with reservations or without confirmation, it shall not constitute a real offer. Therefore, the inclusion of a clause such as “except confirmation”, “safe passage” or “without obligation” implies the offeror's intention not to be bound and provoke the obligation of the recipient in case of acceptance. Such clauses are known under the terms “sans engagement”, “senza impegno”, “without obligation”, “subject to agreement” or “freibleibend”.

A statement made for purely informative purposes or with the intention to encourage the party to make an offer are not offers, because they do not involve the will to be bound by the contract. Instead, proposals containing provisions such as “unless lack of stock” or “except price change” are real offers. This limitation to cover the demand for the product or service as far as possible according to the capacity of the service provider or the available stock of goods has been provided for in Article 849 of the Colombian Commercial Code as a way to end the offer for a just cause. It is also envisaged in Article II-4:201 DCFR, indicating that, although the statement is contained in a catalogue or in a public advertisement shall be deemed as an offer. In any case, if the proponent does not wish to be bound by a proposal of this kind, in order not to leave any doubt as to its true intention, some of the unbinding clauses to which reference has been made before should be added to the proposal.

Ascertaining the offeror's intention to contract is a matter of interpretation that will be resolved in accordance with general rules on interpretation in Section 1 of Chapter 4 of these Principles, which may lead to diverse solutions depending on the different legal traditions. Thus, in English law an offer must not be interpreted subjectively by reference to what is currently happening in the mind of the offeror, but objectively, by reference to the interpretation that a reasonable person in the same position as the recipient of the offer would make [Centrovincial Estates plc v Merchant Investors Assurance Co Ltd (1983), Com LR 158]. To conclude a contract for exchange of promises between two parties, where the promise of each one is the consideration for the promise of the other, the intention of both parties must be coincident according to what has been communicated and understood, even if this does not represent the current state of mind of the communicating party [Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal (The Hannah Blumenthal) (1983), 1 All ER 34]. However, if the understanding of the one party is unreasonable, because it cannot be unaware of the real intention of the other party, this party may pull out of the contract (Hartog v Colin & Shields (1939), KB 27 AELR 566).

Civil law codes are more prone to a subjective interpretation, so that the basic rule is that no one shall be bound by a contract that it had no intention to conclude (Article 1.156 French and Dominican Civil Code, Article 681 Guatemalan Commercial Code, Article 713 Honduran Commercial Code). However, there are exceptions to this general rule that make these systems closer to the objective interpretation, based on the perception of the statements by the other party, because it must be remembered that in these Codes the principle of good faith governs contract negotiations and leads to the protection of the recipient's trust. This explains that some form of liability for damages may be required in the event of acts of negligence by the offeror.

The regulations contained in Article 2.1.2 of these Principles should therefore be related to the rules of interpretation of the statements of the parties, especially Article 4.1.2. In this regard, it must be assumed an interpretive criterion in the sense that the intention of the parties must be assessed in the light of the meaning that a reasonable person of the same kind as the parties had given their statements in similar circumstances; signs identified in that rule can be used, allowing coverage of the different interpretative cultures in the Caribbean legal field.

CLAUSES RELATING TO THE BINDING NATURE OF THE OFFER

In any case, it is the rules on interpretation of contracts that will determine whether or not the proposal is an offer. To avoid any doubt about the binding nature of the proposal, depending on whether or not it contains all the essential elements of the contract, it would be useful that the proponent, that does not want to be bound by the proposal, indicates clearly that it will not be bound by the offer, even if the other party accepts all the terms by the. This effect would be achieved with a clause like:

“This proposal is not a contractual offer; therefore the proposer will not be bound by it even if it were accepted in full by the party to whom it is addressed.”

Conversely, if the proposer wants to be bound by the contract, it is useful to prevent possible uncertainties about whether or not their proposal is an offer through precise wording, including all endpoints which should be included in the contract to be valid or anticipating the way of specifying those elements that have not been finally closed, and with specific reference to its intention to be bound by the declaration.

Commentary

Article 2.1.3

Offer and invitatio ad offerendum

1. The offer may be directed to one or more specific persons.

2. A proposal directed to the public shall not constitute an offer, unless so provided by the offeror or indicated by the circumstances.

3. Circumstances mentioned in the previous paragraph exist, particularly, in case of exhibition of goods and products at a particular price in physical or virtual spaces. In these cases, the offer is presumed effective until the stock of goods or the possibilities to supply the service are exhausted.

1. Proposals made to certain persons and to the general public

The distinction between offers and invitations to make offers is important. The offer binds the offeror, forcing him to make a contract if the recipient accepts, in the terms offered in the proposal. In contrast, the invitation ad offerendum does not bind the offeror, who may decide not to conclude the contract.

Generally, the proposal addressed to one or more specific persons constitutes an offer if the other requirements are met. The offeree may be determined on condition that the person is individualised, for example by giving their personal data, although it is enough that the offeree is identifiable. However, in some cases, recipients of the proposal are clearly identified by their first and last names or their company name and the fact that the proposal constitutes and offer raises certain doubts. This happens when catalogues, brochures, flyers, or lists of goods with their prices are sent either by mail or other advertising media, such as mailing to a significant number of people. These proposals will be considered as simple invitations to offer if, according to trade usage, these mailings have an advertising purpose to make a product known and incite the recipient to make proposals to contract. Consequently, the proposer is only obliged if it shows its intention to be bound.

Article 14.2 CISG states that proposals not addressed to one or more specific persons are invitations to make a contract, which has been interpreted as if these proposals are advertisements and not as contractual offers: this is a way to protect the proposers, because it prevents the obligation of the proposer to be forced to satisfy a flood of orders, although this objective could also be achieved through the inclusion of safeguard clauses in the proposal to protect the offeror, such as “while stocks last”. Cases of restricted mailing list are considered binding offers, according to Article 92.2 Nicaraguan Commercial Code, which introduces the caution that at the time of the order there is no alteration in the price and there may be goods in the warehouses of the offeror. Also the PECL and the DCFR admit that these marketing communications are contractual offers [Article 2:201 (3) PECL and Article II-4:201 (3) DCFR]. At any event, these rules provide only a presumption because the advertisement may indicate a different intention or to be inferred from the circumstances. Despite certain differences, the UP, which do not even mention the offerees, reach the same conclusion, and sending the proposal to an indeterminate public does not mean that there is no offer. Interpretations will therefore be on a case-by-case basis, as the second sub-paragraph of Article 2.1.3 of these Principles suggests.

Example: To make its varieties of green and roasted coffee known, a Nicaraguan businessman sends many Costa Rican businessmen identified with their name and address their product catalogues indicating their price and highlighting their qualities. The proposal also includes the clause “while stocks last”. Although in some legal systems linked by the CISG proposal has advertising purposes, the inclusion of the clause permits interpretation of that clause as a contractual offer.

Proposals made to the general public and not to one or various determined persons are more controversial. Some countries try to protect the proposer against a flood of orders and consider that offers made to the general public are not binding, but they have a commercial function: these proposals do not show a serious and sufficient intention to be bound by a contract. This is the common law approach, unless the proposer indicates otherwise [Pharmaceutical Society of Great Britain v Boots Cash Chemist (Southern) Limited (1955), 1 QB 401, 1 All ER 482; Fisher v Bell (1960), 1 QB 345, 3 All ER 731 (CA); Partridge v Crittenden (1968), 1 WLR 1204]. However, certain common law rulings have deemed that these proposals made public are offers [Carlill v Carbolic Smoke Ball Co (1893), 1 QB 256 (CA); Billings v Arnott (1945), 80 ILTR 50 (HC); Lefkowitz v Great Minneapolis Surplus Store (1957), 251 Minn. 188, 86 NW 2d 689]. Article 847 of the Colombian Commercial Code and Article 92.1 Nicaraguan Commercial Code also follow this approach. Article 14.2 CISG also enables the offeror to provide otherwise, in which case the proposal is an offer provided that all other requirements of precision of the essential terms are met.

In other jurisdictions, however, proposals made to the public with price indication through advertisements in the media are considered as offers, if they contain the price or the essentials (Article 720 Honduran Commercial Code, Article 206 Panamanian Commercial Code, Article II-4:201 DCFR, Article 2:201 PECL, Article 14 Draft project reform of the French law on obligations of 2013). French case law shows hesitations on this point. In the Netherlands, there is no rule of law on this point, although it is generally accepted that public proposals to sell goods or provide services at a certain price are offers as far as the capacity of the service provider or while stocks last.

In the end, both opposing positions are close, because the circumstances and intent of the offeror are what determine one solution or the other. The fact that the proposal is contained in a commercial website aimed at the general public does not change these rules, as under the common law they are to be considered as invitations to offer, unless otherwise indicated on the website itself, and in the continental systems they are considered as offers if they contain other essential elements of the contract. These circumstances must be taken into account by offerors if they do not want to be bound by the terms of their proposal when acceptance is made.

Given the diverse range of approaches about whether or not proposals made to the public are binding offers, it is best that proposers take precautions to avoid being unintentionally bound if the law governing the contract attributes the character of binding offers to these proposals. If proposers do not intend to be bound by the contract, they should state clearly that the proposal is not a contractual offer. If they wish to be bound, it is recommended that they protect themselves against a flood of orders by including a condition or safeguard clause such as “while stocks last”.

2. Display of merchandise in display cases, counters and other places inside establishments showing the price

In some legal systems, exhibition of goods in shop windows or showcases indicating the price is considered or presumed to be binding offers (Article 848 of the Colombian Commercial Code, Article 206.2 Panamanian Commercial Code, Article 2:201 PECL, Article II-4:201 DCFR). Thus, if a wrong price is assigned to the product in the showcase, the cashier is obliged to sell the merchandise at the fixed price. Given the binding nature of these displays, the offeror is protected in Article 849 of the Colombian Commercial Code, establishing that if the goods had run out at the time of acceptance, the offer shall be deemed terminated for just cause.

Common law follows the opposite approach. The presentation of goods in shops and markets is not considered more than an invitation to make an offer [Fisher v Bell (1961), 1 QB 394-399; (1960) 3 All ER 731-733; Pharmaceutical Society of GB v Boots Cash Chemist (Southern) Ltd (1952), 2 All ER 456]. However, there were cases in which the display of goods in a self-service store has been considered as an offer [Lasky v Economy Grocery Stores (1946), 319 Mass 224, 65 NE 2d 305; Chapelton v Barry UDC (1940), 1 All ER 356]. Also Article 14.2 CISG considers these proposals as invitations to offer, since it is not a proposal addressed to one or more specific persons. The display is a way of indicating that the product is available and its price, so that the purchase of the product by the recipient is actually a purchase offer, and not a sales offer. Under this approach, the cashier would have no obligation to sell the product exposed to any customer whatsoever or, consequently, be obliged to sell an erroneously labelled product.

The OHADAC Principles have opted for a flexible rule in the third paragraph of Article 2.1.3, based on the denial of an offer in these cases, but at the same time accepts a contextual interpretation. Again, given the various considerations in deciding whether or not these offers are binding, it is recommended that the offeror expressly states that the commercial communication is not binding on the offeror and its subsequent acceptance is essential in order to avoid undesirable results.

Commentary

Article 2.1.4

Effectiveness of the offer

1. An offer becomes effective when it reaches the offeree.

2. Any offer may be withdrawn if the notice of withdrawal reaches the offeree before or at the same time as the offer.

It is generally accepted that the offer becomes effective when it reaches the addressee, orally or in writing or in person at their place of establishment or usual residence. Otherwise, the offeree cannot know the offeror's intention to be bound by a contract. This receipt theory, which assumes that the offeree knows of the offer by receiving it, has been expressly set forth in Article 15.1 CISG and in Article 2.1.3 UP. The rule contained in the first sub-paragraph of Article 2.1.4 follows the general criteria set out in Article 1.3 of these Principles.

However, until there is an acceptance, the offeror is not bound by the contract. An offeror can therefore change its mind about its willingness to conclude the contract for the period of time between the issuance of the statement of intention and its receipt by the offeree. The second paragraph of Article 2.1.4 includes the right to issue another different statement of intention, to rescind or terminate the first proposal made in the offer, which is known as “withdrawal of the offer”. Its effectiveness is widely accepted as a part of the broad discretionary power of the offeror with respect to its proposal.

By definition, the offer cannot be withdrawn if it has been made in the presence of the offeree or by using means of instant communication such as the telephone. This is because the withdrawal of the offer cannot reach the offeree before or at the same time as the offer itself. The withdrawal of the offer is possible provided that the offeror passes this communication to the offeree at the same time or before the offer. If it does it, then it would be a revocation (section 1.010.1 of the Costa Rican Civil Code, Article 1.808 of the Mexican Civil Code, Article 2.450 of the Nicaraguan Civil Code, Article 15.2 CISG, Article 2.1.3 UP, Article 1:303 PECL, Article 15 Draft of reform of the French law of Obligations 2013). In any case, it is recommended to state this possibility in the offer.

The withdrawal of the offer has no impact on its revocable or irrevocable character, since the irrevocability of the offer implies that the offer is complete once it reaches the offeree, whereas withdrawal indicates that the offer has not yet acquired its binding effect because it has not yet reached the recipient. However, although withdrawal and revocation are differentiated in common law systems, these two periods are indistinguishable and the only possibility envisaged is for the offeror to invalidate its original declaration of will.

Commentary

Article 2.1.5

Revocation of the offer

1. The offer may be revoked if the revocation reaches the offeree before the acceptance has been dispatched.

2. However, an offer cannot be revoked if it establishes a period of irrevocability or the offeree could reasonably have believed that the offer was irrevocable and has started to perform acts of execution.

3. When the offer establishes a period of acceptance, this is presumed to be a period of irrevocability, unless otherwise indicated by circumstances.

The revocation is the cancellation of the offer in the time between receiving the offer and the conclusion of the contract. It is possible when the offer is already effective because it has reached the recipient. The process of formation of the contract is already open, so now the recipient assumes its role. If the recipient accepts, the contract shall be terminated; if it rejects, the offer lapses.

In common law countries, these two moments are indistinguishable, but merely provides for the possibility of the offeror to revoke its original declaration of intent at any time before accepting the offer. In these systems, the revocation is integral to the offer, as the irrevocability of the offer would imply an obligation for the offeror without any consideration for the acceptor (Sections 42, 43 and 47 Restatement (Second) of Contracts). Some Caribbean civil law systems follow the same rule (Article 6:219 Dutch and Suriname Civil Code; Article 87 Nicaraguan Commercial Code; Article 1.137.4º of the Venezuelan Civil Code). However, in these systems the power of revocation is subject to requirements concerning the notification to the acceptor that limit its effectiveness. If, at the time the acceptor sends its acceptance it has not received a notice of revocation of the offer, the offer will be ineffective, and acceptance prevails [In Re Imperial Land Company of Marseilles, ex parte Harris (1872), KR 7 Ch. App. 587; Byrne & Co v Leon van Tienhoven (1880), 5 CPD 344; Re London & Northern Bank (1900), 1 Ch. 200]. The principle of freedom of form which governs the issue of the offer also applies to its revocation, which may be carried out with any wording possible (sections 1.2 and 1.9 UP). Common law case law supports even accepts revocation by selling to a third party. What does not seem sufficient however, is the fact that the acceptor be informed of the revocation by a third party unauthorised by the offeror, although in common law, it is sufficient for the revocation to be disclosed by a reliable source.

The main problem of revocation is fixing the deadline beyond which the offeror can no longer exercise this right. According to common law and Dutch law, that time is set in the moment in which the acceptance is sent by the acceptor (Article 6:219.2 Dutch and Suriname Civil Code; Article 16.1 CISG; Article 2:202 PECL; Article 32.1 CESL). Instead, the Article 1.137.4º of the Venezuelan Civil Code extends the time period in which the revocation may be exercised until the acceptance has come to the knowledge of the offeror.

Other systems establish a principle of irrevocability, at least for a given period, either by stating a fixed time for the acceptance of the offer, either for a reasonable time. This is based on the principle that when a person makes a statement of intention, a binding relation is created (Article 443 Costa Rican Commercial Code; Article 317.1 Cuban Civil Code; Article 1.521 Guatemalan Civil Code; Article 718 Honduran Commercial Code; Article 1.804 Mexican Civil Code; Article 846 of the Colombian Commercial Code; Article 89 Nicaragua Commercial Code; Article 2.453 Nicaraguan; Article 204 Panamanian Commercial Code; Article 1.137.5º of the Venezuelan Civil Code). Some legal systems, such as Dutch and Suriname law, take the same stance when the offer includes a period for acceptance or provides that it is irrevocable [Section 2-205 UCC; Article 16 CISG; Article 2.1.4 (2) (a) UP; Article 2:202 PECL; Article II-4:202 (b) DCFR; Article 32.3 CESL; Article 16 Draft project reform of the French law on obligations of 2013]. In some legal systems, even the autonomy of the offer is accepted in the event of the death of the offeror, except in cases where it would be contrary to the circumstances, the offeror's intention or of the nature of the contract (Article 846 of the Colombian Commercial Code; Article 1.014 Costa Rican Civil Code; Article 6:222 Dutch and Suriname Civil Code; Article 718 Honduran Commercial Code; Article 1.809 Mexican Civil Code; Article 2.454 Nicaraguan Civil Code; Article 213 Panamanian Commercial Code). Conversely, Article 18.2 of the Draft project of reform of the French Law on obligations of 2013 provides for the expiry of the offer after the offeror's death, like Article 1.528 Guatemalan Civil Code, if the offeror dies before receiving acceptance or if the offeree dies before accepting.

This idea of setting a deadline for acceptance is widespread in civil law systems, especially in German codes, under which the regulation of the acceptance period of the offer has a double effect: it prevents acceptance from being made after that date and, secondly, it means the existence of a promise not to revoke the offer during the validity of the term, which is equivalent to considering these offers as irrevocable. Conversely, the common law and part of continental doctrine consider that the provision of time for acceptance only indicates that, after that period of time, the acceptance of the offer is not admitted, without this constituting a cause of irrevocability. Under French courts, the revocation of the offer in these cases prevents the conclusion of the contract, but it entails liability for damages by the offeror.

Example 1: Company A based in Belize offers a U.S. company B the sale of a certain amount of mahogany under certain conditions and at a certain price. However, the offer includes a clause under which these conditions shall be valid until a specific date. Depending on the legal system applicable to the contract, such a clause may lead to consider the offer as irrevocable or, on the contrary, it is understood that after that time the offer will no longer be accepted.

Domestic laws of OHADAC countries also support the principle of trust as a reason to make an offer irrevocable. The offer shall be irrevocable if the offeree can reasonably believe that it was an irrevocable offer and acted according to such offer, hiring or doing contractual offers with third parties. If the offeror, through its behaviour or statements, induces the offeree to rely on the irrevocability of the offer, this trust should be protected, as a revocation of the offer lacking in good faith or which North American jurisprudence known as promissory estoppel. In this sense, even English courts, unlikely to recognise good faith or the doctrine of estoppel to enforce obligations not agreed, allow the irrevocability of the offer in cases where, in a unilateral contract, the acceptor has already begun to perform the contract obligations [Daulia Ltd v Tour Millbank Nominees Ltd (1978), Ch 231].

The rule contained in Article 2.1.5 of these Principles is the most recognised in line with most systems and is formulated with sufficient flexibility, so it can achieve balanced and accepted solutions for all legal cultures represented in the Caribbean. Finally, the interpretation criteria play an important role in determining whether, in fact, the conduct or statements of the offeror can induce a reasonable person in the same position as the recipient to believe that the offer was irrevocable. In this sense, it is perfectly possible that in a contract between two parties established in common law states, commercial practice and legal usages easily can be used to interpret that the parties have thought that the offer made with an acceptance period was revocable, while interpretation may result in reverse if both parties are located in civil law systems. In mixed cases, the general principle of private international law should not be forgotten: a party can always wield the law of his habitual residence to establish that he has not given its consent if it is deemed unreasonable, under the circumstances, applying contrasting criteria according to the law applicable to the contract, including these Principles [e.g. Article 10.2 of Regulation (EU) no. 593/2008 of the European Parliament and the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I)].

The irrevocable nature of the offer implies that if the recipient agrees, a contract will exist and liability could be required not only by fault in contrahendo. In the same line is the Cuban legal system, which provides that the revocation will have no effect in such cases (Article 318.2 Cuban Civil Code). International instruments provide the irrevocability of the offer in cases where the recipient has reason to believe that the offer was irrevocable and acted accordingly [Article 16.2 (b) CISG; Article 2.1.4:2 (b) UP; Article 2:202 (3) PECL; Article II-4:202 (3) DCFR; Article 32.3 CESL]. In contrast, other legal texts, that support the revocable character of the offer, provide that if notice of the revocation reaches the offeree after it has carried out acts of execution of the contract, the offeree should be compensated for damages (Article 208 Panamanian Commercial Code; Article 113 of the Venezuelan Commercial Code and Article 1.139.3 of the Venezuelan Civil Code).

Example 2: An Aruban company A proposes to a Venezuelan company B to build a residential complex in Oranjestad at a certain price. B requests one month to create the models and assess the profitability of the project. A accepts and B begins with the projected tasks. During the period of one month, A is obliged to maintain the offer. If A were to revoke the offer during this period, the legal consequence will depend on the applicable law (there will either be no consequences or A will be obliged to compensate for damages).

Given the diversity of solutions concerning the determination of the revocable or irrevocable nature of the offer, it is recommended, in any case, to state in the offer itself whether or not it is revocable, although common law does not recognise the possibility for the offeror to produce an irrevocable offer by unilateral intention, because of the consideration requirement. Therefore, the offeror may revoke the offer until the conclusion of the contract (Section 42 Restatement (Second) of Contracts). The only way that the offeror may make the offer irrevocable is by providing the offeree with consideration while the offer still stands, or by making a promise under seal, although the UCC has evolved towards more flexible positions. The irrevocability means that if the offeror decides to revoke it, despite having indicated that it was irrevocable, this statement will be ineffective. Therefore, the contract is concluded if the recipient accepts the offer.

Commentary

Article 2.1.6

Definition of acceptance

1. Acceptance is a firm adhesion to the offer.

2. Acceptance derives from a statement made by or other conduct from the offeree. This conduct may consist in the beginning of performance of the contract by the offeree.

3. Silence or inactivity does not in itself amount to acceptance.

1. Express and implied acceptance

As a general rule, acceptance is the assent of the offeree to be bound by the projected contract in the terms established (Articles 18.1.1º and 3º CISG; Article 2.1.6 UP, Articles 2:102 and 2:204 PECL; Article II-4:204 DCFR). Assent may be expressed in any manner in accordance with the principle of freedom of form (Article 3.1.2 of these Principles). Acceptance is usually expressed through an oral or written declaration of intention, sent to the offeror, indicating the intention to accept the offer. Unlike the rule sometimes followed under common law, which often requires that the acceptance is communicated by the same method that was used in the offer, most systems are governed by the principle of freedom as to the form, in accordance with provisions of Article 3.1.2 of these Principles. It is therefore not necessary to use a particular means, even the same that was used by the offeror (sections 2.1.13 UP and 2:205 PECL). Nevertheless, there is some consensus in considering that if the means used by the offeror is very fast, as telex, e- mail or telephone, it is not reasonable to respond with another much slower means such as a postal mail, but instead a similar method to that used by the offeror may be used. Rules on contract interpretation may serve to attenuate the principle of freedom of form in relation with acceptance. Moreover, it is not necessary to use a specific word for the offeree to state its willingness to the offeror, unless, exceptionally, something different is established in the offer, as the signed return of the document forwarded by the offeror might be.

The acceptance can also be made through the behaviour of the offeree, through conclusive acts, as the beginning of the execution of the contract in circumstances that allow the offeror to reasonably understand that the acceptance occurs based on the proposed terms (Article 275.3 of the Saint Lucian Civil Code). Under Section 30 (1) of the Restatement (Second) of Contracts, the offer may require that the acceptance is made by an affirmative answer of words, one action or abstention to the execution of a specific act.

2. Silence as acceptance

As a general rule, it is accepted that silence does not amount to acceptance. If the offeree does not say anything after receiving an offer, it is not bound by the contract, because there must be prior communication between the parties, so that they may each know the other party's intentions [Article 444 of the Costa Rican Commercial Code; Article 1.253 of the Guatemalan Civil Code; Article 713.2 of the Honduran Commercial Code; Article 18 CISG; Article 2:204 (2) PECL; Article II-4:204 (2) DCFR, Article 34.2 CESL]. The same rule applies in France (judgments of the Cour de Cassation of May 23, 1979 and December 3, 1985), and in common law, where, despite the requirement of consideration, it also raises the treatment of silence as acceptance, although accompanied with certain nuances [Felthouse v Bindley (1862) 11 CB NS 869, 142 ER 1037].

However, the rule may vary depending on circumstances and social and economic context. The principles of good faith, legal certainty and trust play a more or less important role depending on the legal system involved. In this regard, Article 21 of the Draft project of reform of the French law on obligations 2013 highlights gives prominence attributes value to the silence when this is specified in the law, or by custom or trade relations between the parties or by the particular circumstances. Similarly, Articles 18.1 CISG, 2.1.6 UP, 2:204 PECL and II-4:204 DCFR establish that silence alone does not constitute acceptance, and it is understood, conversely, that we must take into account the circumstances of the case, as these can lead to attribute a value of negative or positive declaration of intention, to silence. Given that these circumstances are not specified, the decision must be taken by judges and arbitrators. The need to take into account the circumstances of the case is also seen in common law, where the context may indicate that silence has a clear enough meaning for the other party, and may therefore be exceptionally considered as acceptance. This is the case, for example, where the offeror has been invited to offer by the offeree and the offeree has established that silence constitutes acceptance [Alexander Hamilton Institute v Jones (1924), 234 Ill. App]. However, under common law, it seems that it is not enough for the silence of a party to create trust and reliance in the other party for the other party to think that the contract has been accepted. The first party must also have begun to perform its contractual obligations [Smith-Scharff v PN Hirsch Inc (1988), 754 SW 2d 92]. So it has been included in Section 2-201(3) UCC and in sections 87(2), 90 and 139 of the Restatement (Second) of Contracts. This trend towards “behaviourism”, which beginning to take root in some countries results in the attribution of the same or even greater value to the conduct of the parties as their declarations (Article 86 Nicaraguan Commercial Code, which does not even require notice to the offeror if the offeror demands the immediate performance of the contract without prior acceptance of the offer, which is not required, in accordance with general trade practices; Article 205 of the Panamanian Commercial Code; Article 246 of the Puerto Rican Commercial Code). Acceptance by conduct or conclusive facts require that these are unequivocal, obvious and clear, such as payment of the price in the offer, dispatch of the goods, acceptance of payment, packaging of the goods, taking out of insurance for the transport of goods, renting of transportation, opening of a documentary credit, rental of facilities for the storage of goods, obtaining of relevant licenses, order to the bank for the transfer of funds, etc. Article 18.3 CISG is a clear example of the value of the performance of contract obligations as acceptance, without necessarily having notified the offeror. An exception to the general rule laid down in Article 18.2 CISG, which does require notice to the offeror. Section 2-201 UCC and Section 54.2 (a) Restatement (Second) of Contracts require that the seller informs the purchaser of the performance of the contract, quickly delivering the goods or by a notice that precedes the receipt of the goods. Therefore, the start of performance of the contract by the offeror is a form of acceptance that binds the offeror, provided it has received notice of the start of performance of the contract. Otherwise, the offeror is relieved of its contractual obligations.

Among the circumstances that can lead to positive effects attributed to silence are the prior negotiations between the parties. In this case, if one of the parties makes a final offer to another party, this party is obliged to answer, failing which it will be deemed to have accepted the offer. This approach is found in Article 1.253 of the Guatemalan Civil Code or Article 211 of the Panamanian Commercial Code. This is also apparent from American case law [Filanto SpA. v Chilewich International Corp P (1992), SDNY (DC) 91 Civ. 3253 (CLB), 789 F. Supp. SDNY 1229-1242; Smith-Scharff Paper Company v PN Hirsch & Co Stores Inc (1988), Mis. CA 754 SW Rep. 2d Series 928].

Example 1: In this case, it was usual among the parties that Smith-Sharff stockpiled a number of paper bags printed with the of P.N. Hirsch logo, in order to supply them when the orders were made. When Hirsch terminated its business, Smith-Scharf was in possession of the usual number of bags, and he demanded that Hirsch purchase them. The court imposed the obligation.

Prior negotiations between the parties must therefore be taken into account [Cole-McIntyre-Norfleet Co v Holloway (1919), 141 Tenn. 679; 214 SW 87]. In these last cases, it is understood that forcing the offeror to have to answer implies a greater burden. The fact that the acceptor itself indicates that it is considered that the offer is accepted if otherwise not stated within a certain period of time must be considered. These principles are contained in the Restatement (Second) of Contracts, which provides in section 69 acceptance by silence under some exceptional circumstances: when the offeror has given reasons to the offeree to understand that assent may result from silence or inactivity and the offeree believes that by remaining silent or inactive it is accepting the offer; or when, as a result of prior negotiations between the parties, it is reasonable that the offeree should notify the offeror if it does not want to accept. French case law also provides examples of how the interpretation of the facts may lead the courts to estimate that the contract is formed, despite the silence of a party.

Example 2: This happened in the case Hughes v Technocontact, where the company Technocontact made an offer to sell electrical equipment to the English company Société Hughes Electronic. Upon receiving the offer, Hughes Electronic requested some changes in the design of the pieces. The French company sent the material with the requested changes and the English company refused to pay, arguing that it had not replied to the acceptance of the modifications made by Technocontact. Instead, the French Court held that the silence implied acceptance in this context (judgment of the Cour de Cassation of 27 January 1998).

It is debatable whether the offeror's renunciation of the acceptance, that is when the offer provides that silence amounts to consent, can bind the offeror. In English law, the offeror must be informed of the other party's intention to accept the offer, even if the silence of the offeree is considered as acceptance. However, some English authors admit that, although the offeree is not bound to the contract, the offeror is obliged. Thus the recipient of the offer will be protected, not having to expend effort or expense to reject the offer and, although it does not remain bound, it may renounce the protection in order to demand that the other party performs the contract.

The same considerations emerge from American law [Section 69 of the Restatement (Second) of Contracts], based on the principle of trust in the content of the offer. However, the offeree may not take advantage of the circumstances to enforce the contract against the offeror, because there have been significant changes in the prices of products. Under French law, however, there is no objection for the offeree to take advantage of the situation, provided the principle of good faith, to which French courts attach a lot of importance, is observed. But for silence to amount to acceptance, it is generally required that it is accompanied by acts of performance.

Trade usages and practices are also taken into consideration under common law [Minories Finance Ltd v Afribank Nigeria Ltd (1995) 1 Lloyd's Rep. 134] and in other legal systems in order to assign a value of implied acceptance to silence. The case law of the Court of Justice of the European Union ruled in the same sense (ECJ judgment of 20 February 1997, Mainschiffarhts-Genossenschaft c. Les Gravières Rhénanes SARL).

It is sometimes established that silence is regarded as a declaration of intention under certain circumstances. It is the case of Article 19.2 CISG for cases in which there is no substantive change to an offer; for example, if the offeror does not protest about such changes this means that the offeror accepts the amendments, which become part of the contract. Similarly, Article 21.2 CISG provides that silence regarding an acceptance regularly sent but outside the acceptance period implies that acceptance becomes effective, if the offeror does not immediately notify the acceptor that the offer has expired. There are also legal systems that consider silence as acceptance, when the resulting contract benefits only the offeree; under French case law, the judge, in his sovereign assessment of the facts and the intention of the parties, may decide that silence constitutes acceptance, when the offer has been made in the sole interest of the party to whom it is addressed (judgment of the Cour de Cassation of 29 March 1988).

Commentary

Article 2.1.7

Time of acceptance

1. The offer must be accepted within the time the offeror has fixed, and if no time is fixed, within a reasonable time considering the circumstances.

2. The offer expires at the end of the fixed or reasonable period of acceptance. A late acceptance is not effective, unless the offeror renounces the expiry date by notifying the offeror without delay that it accepts the offer

1. Deadline for accepting

Acceptance must be done in timely fashion, i.e. in time. The nature of acceptance in time is clear in cases where contract is made between present parties or through means of instant communication such as the telephone; then the acceptance will occur immediately. This follows from the usual practice in contracts (Article 1011 Civil Code Costa Rican; Article 850 of the Colombian Commercial Code; Article 6:222.1º Dutch and Suriname Civil Code; Article 1.805 Mexican Civil Code; Article 83 Nicaraguan Commercial Code; Article 2.451 Nicaraguan Civil Code; Article 202 Panamanian Commercial Code; Article 110 of the Venezuelan Commercial Code).

However, it is possible that the offeror allows the offeree to take some time to reflect and express his declaration of intention, especially if the offeree should contact their suppliers and submit the proposal to representative bodies of the company of which it forms part (Article 1011 Costa Rican Civil Code; Article 853 of the Colombian Commercial Code; Article 2.451 Nicaraguan Civil Code). This postponement of the time of the declaration of acceptance may result from the usual practice between the parties.

When contract takes place between people who are not in the same place and they use means that do not allow for instant communication, several problems arise in connection with the acceptance period: up to what point the acceptance can be made, how is the term determined, and if the emission of the declaration of acceptance is relevant or if the declaration should reach the offeror.

All legal systems agree that the deadline for acceptance is set by the offeror. Setting a deadline for acceptance can be done in many different ways, which raises the problem of setting the start and end time. The provisions of Article 1.4 of these Principles must be considered in this respect.

In the absence of indications in the offer, some countries set specific rules. For example, Article 851 of the Colombian Commercial Code, which sets it in 6 days from the date of the proposal, if the offeree resides in the same place. If the offeree lives in another location, the term is increased in proportion to the distance. Article 1.012 Costa Rican Civil Code and Article 2.452 Nicaragua Civil Code establish 3 days if the other party is in the same district, 10 days if it is in a different district and 60 days if it is abroad. Article 1.806 Mexican Civil Code states 3 days in addition to the time required for return mail. Article 111 of the Venezuelan Commercial Code has fixed a time limit of only 24 hours if the parties live in the same place.

However, the most widespread solution is the one established in common law systems. Examples are Article 6:221.1 of the Dutch and Suriname Civil Code and Article 1.523 of the Guatemalan Civil Code, which have opted for an open solution based on a reasonable time limit. This allows some flexibility, with adaptations on a case-by-case basis. This is also the solution specified in the first sub-section of Article 2.1.7 of these Principles, which seems best adapted to the variety and complexity of cross border transactions. Such reasonable time usually includes the time the offer takes to reach the offeree and the time needed by the offeree to reflect and answer [Article 112 of the Venezuelan Commercial Code; Article 1.137.2 of the Venezuelan Civil Code; Section 41 (1) Restatement (Second) of Contracts; Article 18.2 CISG; Article 2.1.7 UP; Article 2:206 PECL; Article II-4:206 DCFR; Article CESL 36.3].

Again, given the diversity of options and in order to achieve greater legal certainty for both parties, it is best for the offeror to clearly specify the acceptance deadline in the offer, setting a specific day, provided that this is reasonable according to the circumstances.

2. Late Acceptance

It may happen that the offeree's answer does not reach the offeror within the time fixed by the offeror or within a reasonable time either because it was sent after that period, or because there were problems during its transmission that caused the delay. Where acceptance is submitted late, it is not effective as acceptance because the offer has lapsed (Article 111 of the Venezuelan Commercial Code). The contract can therefore not be concluded (Article 204.2 Panamanian Commercial Code, which requires the offeror to notify the offeree). The offeree is responsible for the expiry of the offer, since he has not sent it in time. Many legal systems consider that this is a counter-offer capable of being accepted by the first offeror (Section 70 Restatement (Second) of Contracts). From this point of view, the contract is formed when the original offeror, who is now the offeree, accepts. This acceptance of the counter-offer could occur by silence or inactivity of the first offeror, and is usually rejected unless recognised by usages or practices (United States).

Since the expiry of the offer is a rule established in the interests of the offeror, the conclusion of the contract may favoured if the offeror acknowledges the effectiveness of the late acceptance, either on its own initiative or at the offeree's request. This is the meaning of the last sentence in Article 2.1.7 of these Principles (Article 6:223 Dutch and Suriname Civil Code; Article 112 of the Venezuelan Commercial Code; Article 1.137.3 of the Venezuelan Civil Code; Article 21 CISG; Article 37.1 CESL). The admission of the effectiveness of the late acceptance can be very beneficial to the offeror. On one hand, it can be beneficial if the offeror defers notice to the other party so as to gain time to speculate on the market and obtain better opportunities from other competitors. On the other hand, if market opportunities are not good, accepting a late acceptance continues to be beneficial, although it could harm the offeree who believed that the offer had lapsed and that the contract had not been concluded. The solution to this problem must strike a balance between the two interests at stake: it can promote the conclusion of the contract, provided that the offeror rapidly informs the offeree of its acceptance within the given time limit. If the offeree's response is not considered as a counteroffer, but as the admission of the effectiveness of a late acceptance, the time of conclusion of the contract is set retroactively at the time of acceptance of the original offer.

It is also possible that acceptance is dispatched on time, but has not reached the offeror due to circumstances beyond the offeree's control. These circumstances include delays in the chosen means of communication, or the fact that the offeror has provided a wrong address which has caused a delayed acceptance. This situation is different from the previous one, because under normal circumstances the acceptance would have been made within the time limit and would have enabled the conclusion of the contract. That is why the law aims to protect the offeree who is not responsible for the delay, by considering that the contract has been concluded unless the offeror promptly manifest its disagreement (Article 6:223 Dutch and Suriname Civil Code; Article 21.2 CISG; Article 37.2 CESL]. The rule, however, is a source of legal uncertainty and an exception to the receipt theory that is difficult to define in practice. Consequently, same rule applies even when the late acceptance is due to reasons beyond the acceptor's control. If the delay was attributable to the offeror, the offeror may incur in non-contractual liability for damage caused to the recipient, but the contract cannot be considered concluded unless the offeror has given notice of its confirmation of the late acceptance.

Example: A Suriname businessman sends a contractual offer to a U.S. businessman setting a period of five days for acceptance. The American businessman answers after eight days. The admissibility of the late acceptance depends on the willingness of the offeror, but also varies depending on whether it is considered to be a counteroffer (which must be accepted by the original offeror) or a case of late acceptance. In any case, it is recommended that the offeror promptly notify whether it accepts or not, to prevent that its failure to oppose the late acceptance encourages the offeree to conduct acts of performance, which will then have to be compensated.

Commentary

Article 2.1.8

Acceptance with modifications

Acceptance by the offeree which establishes or implies additional or different terms that alter or condition the terms of the offer is a rejection of the initial offer and, in turn constitutes a new offer.

The acceptance must be consistent with the offer, since the meeting of the minds between the offer and acceptance should be on the same elements. This requirement of consistency is interpreted differently in the different legal systems. Some systems are based on a rigid approach to the meeting of minds through the classic rules of offer and acceptance and do not support the acceptance of the offer containing modifications, expanding or restricting its terms. Any modification of the offer shall be considered as a rejection of the offer and constitutes a counteroffer, which will, in turn, be accepted by the first offeror in order to conclude the contract, reversing the positions of the parties. This requirement of strict compliance with the acceptance of the terms in which the offer is made is known as the “mirror image rule”. To consider the modified acceptance of the offer as a counteroffer moves the burden of the formation of the contract to the last offeror, which is known as the last-shot rule. The contract is considered as concluded if it is deemed that this was the intention of the parties, which means taking into consideration the rules of interpretation of the contract. The terms of the last counteroffer will be added to the contents of the contract (Article 855 of the Colombian Commercial Code; Article 444 Costa Rican Commercial Code; Article 1.010.2 Costa Rican Civil Code; Explanatory Memorandum to the Guatemalan Civil Code; Article 6:225 Dutch and Suriname Civil Code; Article 1.810 Mexican Civil Code; Article 87.2 and Article 90 Nicaraguan Commercial Code; Article 2.450 Nicaraguan Civil Code; Article 209 Panamanian Commercial Code; Article 1.137.7 of the Venezuelan Civil Code; Section 50 Restatement (Second) of Contracts; Zambia Steel & Building Supplies Ltd v James Clark & Eaton Ltd (1986), 2 Lloyd's Rep. 225; Butler Machine Tool Co Ltd v Ex-Cell-O-Corporation (England) Ltd (1979), 1 WLR 401; article 19.2 Draft project of reform of the French law on obligations of 2013, Article 19.1 CISG). However, other provisions often lead to the consideration that the contract has been concluded, although the offer does not fully match the acceptance. This can be seen, for example, in the second subsection of Article 6:225 Dutch and Suriname Civil Code, in which the contract can be considered as formed if the acceptance only differs from the offer on minor issues, unless the offeror immediately objects to the differences.

At the other extreme, there are the systems that have a more flexible approach to the meeting of minds, for which a minimum agreement on key elements of the contract and a slight match between the offer and acceptance are sufficient. These systems aim to facilitate the conclusion of the contract, and to go beyond the rigidity of the mirror image rule. They admit that the acceptance constitutes a counteroffer only if it substantially alters the terms of the offer. The model of this trend is the U.S. law, which inspired the UP and Article 19.2 CISG, but this trend is also observed in Dutch law, as has been highlighted, and in the case of countries like France, which tend to a more open concept in accordance with the requirements of international trade. The offer is set rather as an invitation to the other party to cooperate in shaping the content of the contract [Section 2-206 (1) UCC]. The party that does not want to be bound has the responsibility to express its disagreement with such acceptance or it will otherwise be bound by the contract, even against their will. The only way not to be bound by the contract is if the party promptly opposes, without delay or within a reasonable time, or warn, in the offer itself, that only an acceptance that matches the terms specified in the offer will be admitted [Article 19.2 CISG; Article 2.1.11 UP; Article 2:208 PECL; Article II-4:208 (2) DCFR; Article 38.4 º CESL; section 2-207 UCC; Roto-Lith Ltd v F.P. Bartlett & Co (1962), 297 F 2d 497, 1st Cir]). If the offeror has taken pains to guarantee its contractual intention in this manner, the contract will not be concluded. If the other party has begun to perform acts of performance, believing that the contract was formed, there is no contract and this party will receive compensatory remedies. However, if the offeror does not object, or objects too late, the contract will be considered as formed under the terms of the offer plus the additions incorporated by amending the declaration of acceptance. In any case, if the parties do not reach a satisfactory agreement on the basic terms of the contract, the contract will not be considered to be concluded. Section 2-207 of the UCC supports this view, stating that there is definite and timely acceptance even when there are additional or different terms compared with the original offer.

However, although this starting point is generally accepted, there is a significant difference between the American UCC, on one side, and the new legislative trends and the CISG, on the other side. Section 2-207 (2) and (3) UCC allows the conclusion of the contract, although the changes to the terms of the offer are substantial. In contrast, under the CISG and the new legislative trends, the conclusion of the contract is only possible if the acceptance does not involve a substantial change in the terms of the contract. Therefore, when the acceptance substantially alters the offer or when the offer is conditional on acceptance by the recipient of all the terms, there will not be acceptance but a counteroffer and the contract is concluded when the intention of the counter party (the initial offeror) to be bound by the contract, is manifest, for example, by implementing acts of performance.

Some texts list the changes that are deemed significant for this purpose (Article 19.3 CISG; Article 38.2 CESL): variations which affect the price, quality and quantity of the goods, place and date of delivery, the extent of liability of a party in respect of the other or the settlement of disputes. This very detailed list seems to leave no room for insubstantial modifications that could allow the conclusion of the contract. Although acceptance changes some aspect of these elements, it does not always conclude that there has been a substantial change in the terms of the offer. The decision on whether the contract has been completed requires an interpretation of the terms of the offer and acceptance in each case. It is usually indicated that an alteration is substantial when it is unexpected and burdensome to the party whose express knowledge has not been incorporated; if a period shorter than reasonable is included; and, finally, if it is unusual or contrary to a balance of benefits typical of this kind of contract or sector of activity concerned and able to go unnoticed by the other contracting party.

Example 1: A businessman from the Virgin Islands offers to enter into a contract with an Antiguan and Barbadian businessman under certain terms. The party from Antigua and Barbados accepts, but introduces an arbitration clause in its answer. The consideration of whether this amendment is substantial or not depends on the customs in the trade sector concerned. In any case, under a flexible approach, in order not to be bound, objections to the introduction of the clause should be stated without delay.

Example 2: The same party accepts the proposal but asks for more time to perform the service. Cases of extension of time are usually not be considered substantial changes to the offer, even if they are not accepted by the other party [Global Tankers Inc v Amercoat Europa NV (1975) 1 Lloyd's Rep 666, 671].

The OHADAC Principles do not follow such a flexible approach, because it creates a risk of legal uncertainty by obliging the parties to predetermine which aspects are essential to the parties before they have definitively expressed their intention. According to the most widespread approach of this flexible approach, an acceptance with non-material modifications could would not be sufficient to conclude the contract if the original offeror declares its disagreement without undue delay. Actually, this rule also forces the offeree to wait for the offeror's confirmation during a reasonable period of time before starting the contract performance, so that the costs, in terms of negotiations, are the same as those resulting from the waiting for a definitive acceptance of the counter-offer. Consequently, it seems more reasonable and predictable to follow the rule requiring that acceptance be fully consistent with the offer and establishing that modifications by the offeree, regardless of their substantial nature, are considered as a counter-offer that must be accepted by the original offeror.

Commentary

Article 2.1.9

Standard terms

1. The standard terms of a contract are clauses that are not individually negotiated by the parties and which have been drawn up in advance for a number of contracts of a certain class.

2. In order to oppose the standard terms of the contract to the adhering party, it is necessary for the adherent party to be given notice on them before the conclusion of the contract. This condition shall not be considered satisfied by the mere reference to the conditions in the contract, although the adherent party has signed the contract when

  1. they are so surprising or unusual that the adherent could not reasonably take them into consideration in regard to the circumstances and purpose of the contract; or
  2. they are too onerous, taking into account the nature, language and the way they have been established.

This article regulates the efficiency of the standard terms in standardised contracts. Its first section defines standard terms as terms that have not been negotiated individually by the contracting parties, written by one of the parties in order to be incorporated into several contracts. For the purposes of implementation of the second paragraph, it is only of interest that the clauses have not been individually negotiated, but are part of a previously established form to which the other party simply adheres. The fact that this form has been used in other contracts or not is irrelevant for this purpose.

The inclusion of standard terms in the contract negotiation simplifies the negotiation process and the costs involved. It allows the trader to calculate risks in advance, to know its obligations and to draft in a standardised way all clauses of its contracts, adapting them to the needs of the business.

Although the protection regime for the adherence is characteristic of consumer contracts, the standard terms are also usual in commercial contracts, and legal systems tend to protect the other party regardless of their professional trade. It should also be taken into account that some interpretive rules generally protect the adhering party of the contract. In particular, it shall apply the rule in Article 4.1.3 of these Principles (whose comments should be understood reproduced), which establishes the principle “contra proferentem” in order to interpret, among others, ambiguous standard terms of the contract in the sense most favourable to the other party [Article 1.162 French and Dominican Civil Code; Article 672.1 Guatemala Commercial Code; Article 730 Honduran Commercial Code; judgment of the Supreme Court of Jamaica in Ammar & Azar Ltd v Brinks Jamaica Ltd (1984), Nº A051 de 1981 (Carilaw JM 1984 SC 35)]. This rule can even lead to consider standard terms as not included when they are so abstruse that they may be incomprehensible to an average adhering party.

Moreover, the prevalence of the individually negotiated terms over the standard terms (Article 672.3 Guatemalan Commercial Code; Article 728 Honduran Commercial Code; Article 2.1.21 UP) must also be considered, in accordance with paragraph second article 4.1.5 of these Principles, whose comments should be reproduced here.

Regardless of interpretative rules established, the second sub-section of Article 2.1.9 of these Principles establishes specific conditions for the effectiveness of the standard terms, which reflect the most current trends in the law of both domestic and international trade and have somewhat subjective and objective scope.

From the subjective point of view, on the ground of obvious reasons of legal certainty and respect for the autonomy of the parties in commercial trade, all legal systems firstly admit that signature incorporated in the document containing standard terms obliges the party signing the contract, according to the pacta sunt servanda principle. Therefore, failure to read the standard terms does not avoid the effect of a signature [Article 726 Honduran Commercial Code; Article 6:232 Dutch and Suriname Civil Code; Sections 211 (1) and (2) Restatement (Second) of Contracts; Parker v South Eastern Railway (1877) 2 CPD 416; L'Estrange v Graucob (1934), 2 KB; Levinson v Patent Steam Carpet Clearing Co Ltd (1978), QB 69; Interfoto Picture Limited v Stiletto Visual Programme Ltd (1989), QB 433].

However, the fact that the standard terms have been drafted unilaterally leads to many legal systems to establish protective measures for the adhering party, that determine its inclusion in the contract, despite its acceptance [Article 6:233 Dutch and Suriname Civil Code; section 2-302 UCC, Section 211 (3) Restatement (Second) of Contracts]. In American contract law, a set of exceptions to the rule of incorporation of the standard terms to the contract are envisaged: if the clauses are illegible or very small print; if they have not been known to the counterparty and have been placed in unusual places, like the back of the document; if they are indicated by reference or the case deals with contracts in which standard terms are not expected. Another common requirement is that relating to the obligation to make the standard terms available for the other party, so they can be met before the conclusion of the contract [Article 672 Guatemalan Commercial Code; Article 6:234 Dutch and Suriname Civil Code; Chapelton v Barry UDC (1940), 1 All ER 356; judgment of the Supreme Court of Bermuda, Robinson v Somers Isles Shipping Ltd (2008), Nº 275, 2007 (Carilaw BM 2008 SC 9); Article 20.1 Draft project reform of the French law on obligations of 2013].

As an objective condition, the effectiveness of the standard term is also subjected to a test of reasonableness. In English and American law, the test of reasonableness (fair and reasonable) serves as a criterion for determining whether a clause may be incorporated into the contract or whether, on the contrary, it is deemed unfair and ineffective. Reasonableness is assessed according to a set of circumstances that the parties knew or reasonably had to know when they concluded the contract (Article 11.1 Unfair Contract Terms Act 1977). Hence the degree of communication of a clause is very important to determine whether it is improper or unreasonable. Civil law systems sometimes impose a control of the content of the clauses to prevent excessively onerous terms from being imposed on the other party or to prevent abuse of good faith (Article 6:233 Dutch and Suriname Civil Code).

The rule laid down in the Principles obeys this trend by introducing a flexible formulation that can be adapted to the specific characteristics of the contract. To avoid the ineffectiveness of the contractual consent given by the adhering party, the party who draws up the conditions should avoid the mere reference in the contract to the existence of standard terms in another document, unless the signature is affixed after the indication that the conditions are in another document and unless the adhering party specifically signs the form that contains the standard terms, that the references to these standard terms are clearly visible, and that the standard terms themselves have been drafted in a clear and understandable manner for an average adhering party.

Commentary

Article 2.1.10

Battle of forms

1. When both parties use forms with standard terms and they fail to reach an agreement on the terms to use, the contract is concluded on the basis of the agreed terms and the provisions of the standard terms that are substantially common to both parties.

2. However, the contract is not concluded if either party has informed or informs the other party, without undue delay, that it does not intend to be bound by the contract

Another case where may be inconsistencies between the offer and acceptance occurs in cases of battles of forms, that is, when the parties mutually exchange forms with conditions unilaterally drafted by each and different from those written by the other contracting party. This raises the question whether, in the event of different forms, the contract is concluded, and if so, what is its content.

Some legal systems consider the classic rules of offer and acceptance as applicable, so that if the acceptance incorporates standard terms that differ from those proposed by the offeror, there will be a counter-offer, which will enable conclusion of the contract if is accepted by the other party, by declaration, which is the less frequent option ( Article 444 Costa Rican Commercial Code), by silence [BRS v Arthur v Crutchley Ltd (1967), 2 All ER 785], or by an act of performance [Article 855 of the Colombian Commercial Code; Article 444 Costa Rican Commercial Code; Article 855 Cuban Commercial Code; Article 1.810 Mexican Civil Code; Articles 87.2 and 90 Nicaraguan Commercial Code; Article 209 Panamanian Commercial Code; Article 114 of the Venezuelan Commercial Code; British Road Services Ltd v . Arthur V Crutchley Ltd (1968) 1 All ER 811; Article 19 CISG]. However, there is another approach in English law, which considers the contract as not concluded, compensates acts of performance, such as through restitution [British Steel Corporation v Cleveland Bridge & Engineering Co Ltd (1984) 1 All ER 504]. This approach is also followed in the Article 6:225 Dutch and Suriname Civil Code.

In accordance with the above-mentioned approach, the content of the contract is determined by the form sent last, hence the name “last-shot rule”. Only if the offeror indicates its opposition to the new conditions it will be understood that the contract has not been concluded. This approach favours legal certainty and seeks to encourage the reading of forms, because it considers that the clauses of forms that are not read are still important. However, it is criticised because, for example, in sale contracts, buyers find themselves in a difficult position due to the fact that the contract is not concluded if the seller does not deliver the goods (since the seller is usually the last to send its form) and if the buyer accepts the delivery, then it means he has accepted the seller's terms. Nevertheless, this solution facilitates legal certainty, to the extent that parties can predict which content of the contract will prevail. This will always be the last form submitted (last-shot rule). However, case law has opted for the distinction between substantial and insubstantial changes [Butler Machine Tool Co Ltd v Ex -Cell O Corp (1979) 1 WLR 401 (CA)].

Other legal systems, however, prefer to give priority to contractual balance and seek a more neutral solution that favours neither party because of something as random as being the last party to make the proposal. In these more flexible legal systems, the battle of forms does not prevent the conclusion of the contract, provided that there is an agreement on the essentials. What happens is that substantially coincident clauses form part of the contract, while contradictory clauses in the respective forms are void (knock out rule). In this sense we find the U.S. law (Section 2-207 UCC), Article 2.1.22 UP, Article II-4:209 DCFR, Article 39.1 CESL, and Article 20.2 Draft project reform of the French law on obligations 2013. According to this flexible approach, unlike cases of amending acceptance of the offer, in the case of the battle of forms, substantial changes do not prevent the conclusion of the contract, but they are just deleted from the content of the contract. The party that does not wish to conclude the contract must indicate this expressly, by objecting without undue delay or by submitting a conditional offer or acceptance.

A variant of these flexible systems is Dutch law, which applies the first shot rule, so that changes made by the acceptor will have no effect, unless its acceptance expressly provides rejecting the application of the conditions contained in the offer [Article 6:225.3 of the Dutch and Suriname Civil Code]. The wording is different, but with the same result, in Section 2-207 (1) UCC, which also considers the acceptance as definitive and seasonable, even if though it states terms additional to or different from those offered, unless acceptance is expressly made conditional on assent to the additional or different terms. In both cases, conditional acceptance involves converting the acceptance to a counter-offer and therefore a return to the last-shot rule. Therefore, to impose a condition, the acceptance of the offer must include a clause that states that “acceptance is conditional upon assent from X to additional or different terms introduced by Y”.

The rule contained in these Principles qualifies the general rule in Article 2.1.8. It is based on the need to preserve the contract as much as possible, in accordance with substantially common terms and conditions (knock-out rule). If the discrepancy affects the essential aspects of the contract, it may be concluded that the concurrence between offer and acceptance is not sufficient to support a contract as concluded. In any case, we must take into account the rules of interpretation and, above all, the integration of contract rules contained in Section 2 of Chapter 4 of these Principles. Judges and arbitrators will determine to what extent the discrepancy between the terms of the forms is materially important.

The contract will not be concluded either when one of the parties has manifested or makes clear its intention not to be bound unless the provisions of its standard terms form are fully accepted, provided that this clause is not set out standard terms. That is why it is so important that the acceptance clause of standard terms is sufficiently visible in the articles of the contract, in such a way that the other party has the opportunity to know of the standard terms and that the intention not to be bound is clear if the terms considered to be substantial are not accepted by the other party. It is advisable to include a clause of express acceptance of the standard terms surrounded with maximum guarantee of efficacy and able to prevent unwanted results, regardless of the regulatory text governing the contract.

CLAUSES ON BATTLES OF FORMS:

There are several possibilities to this end. The first option is to specify that the contract is considered as concluded and that contradictory clauses introduced by the other party will not be considered. This is done to reach an agreement on the common clauses. Where there is no agreement, it is presumed that nothing has been agreed to, so that contradictory clauses void each other.

Option A: Forms Compatibility

“The acceptance of the standard terms of a party does not prevent the conclusion of the contract if they are irreconcilable with the standard terms of the other party. The irreconcilable clauses will be deemed as not included”.

The second option, if a party wants to impose their own conditions, will require including a cancellation clause of those introduced by the other party that are inconsistent with their own. This clause should be included in a well- featured place and be able to call the attention of the other party. The problem is that the other party can be equally careful and include such a clause in turn; in this case, the will to accept or reject the contract must be explicitly notified because, depending on the legal system to which the contract is subject, this could be considered as a counteroffer (last-shot rule) or will give priority to the first offer eliminating incompatible terms (knock out rule). A second drawback is that such clauses are considered invalid in the light of some legal systems. Thus, French case law does not support the voluntary hierarchy of conditions by one of the contracting parties, i.e. clauses that impose one's own conditions, cancelling those of the counterparty (e.g. judgment of the Cour of Cassation of 10 December 1991).

Option B: Exclusion of forms

“The acceptance of the standard terms of a party implies the exclusion of any other standard terms of the other party”.

Finally, if the offeror does not wish to be bound by the contract if the other party introduces substantial or simple modifications from the original offer, it shall emphasise through a prominent clause, but if the other party has also included a clause of this kind to avoid being bound by the modifications to the standard terms, the intention not to conclude the contract must be immediately notified within a reasonable time, before contract performance acts are began.

Option C: Clause of no conclusion of the contract

“If the standard terms of the other party were contradictory with [or “constitute a substantial change regarding”] those established in the form (...) of this part, the contract is not concluded unless there is an express confirmation of this part to the contrary”.

Nevertheless, to avoid all risk, the fact of being unable to find a uniform solution shows that the only true safe option is for the parties to make sure that there are standard terms and to compare them with their own standard terms, in order to express their objection to the inclusion of these standard terms of the contract as soon as possible, before acts of performance are begun.

Commentary

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