FORMATION OF CONTRACT UNDER

CISG
Project submitted to
Mr. Vinay Prakash Singh
(FACULTY: National Regulation of International Trade)

Project submitted by
Suman Sourav
Sec. C
Roll No. 128
SEMESTER VII
Date of submission:
05.04.2014

Hidayatullah National Law

University
Raipur, Chhattisgarh
Table Of Contents
1 | Page

Topics

Pg No.

Acknowledgement
. 3
Abbreviations
..4
Introduction
.5
1) Offer...
.....6
2) Acceptance..
....14
3) CISG and Indian Law.
..22
Conclusion
..24
Bibliography..
........25

2 | Page

ACKNOWLEDGEMENTS
I feel highly elated to work on the topic Formation of Contract under CISG because it has
significant importance in the present Social, Political and Legal scenario.
I express my deepest regard and gratitude for our Faculty of International Trade Law. His
consistent supervision, constant inspiration and invaluable guidance have been of immense help
in understanding and carrying out the importance of the project report.
I would like to thank my family and friends without whose support and encouragement, this
project would not have been a reality.
I take this opportunity to also thank the University and the Vice Chancellor for providing
extensive database resources in the Library and through Internet.

SumanSourav
Section C (Sociology Major)
Semester VII
B.A. L.L.B (Hons.)

3 | Page

ABBREVIATIONS

1.

& ..And

2.

CISGConvention

on

International Sale of Goods

3.

SCT.Standard Contract
Term

4.

Art....Article

5.

Ed.Edition

6.

Ibid..Ibidem

7.

P...Page

8.

E.g..example

4 | Page

INTRODUCTION
Taking into consideration the importance and volume of international business, a uniform law to
regulate the trade at the international level was an absolute must in the last quarter of the
twentieth century. The attempts to reach a uniform law in the area of international business were
successfully completed in 1980 with United Nations Convention on Contracts for the
International Sale of Goods.
Today we see 78 contracting states that signed the CISG and it has been accepted as a
considerably successful instrument that provides harmonization and unification in the regulation
of international business.
In this work we will deal with the issue of contract formation, which is governed explicitly by
the CISG and moreover it has a part that rules formation of international sales contracts and
follows the traditional offer- acceptance model in terms of the conclusion of a contract. 1
Although there is such an instrument for uniformity, it cannot be said that all issues related to a
sales contract is governed explicitly by the CISG. For example, validity of contract is excluded
from the application scope of the CISG2

This work basically deals with the formation of contract through understanding terms offer and
acceptance under the CISG in general and at some points on the problem of standard contract
terms.

1 P Schlechtriem, P Butler, UN law International Sales, 2009, p.65.

2 According to Art.4 (a) Convention, it is not concerned with: the validity of the contract
5 | Page

It is to be noted that India has still not been a contacting state to CISG but with the ongoing
scenario of the country it can be very well accepted that India might be a party to the contract in
the near future.

Chapter 1
OFFER
As is known, contract is a legal transaction that requires at least two persons and two
corresponding declarations of intent. First one of these corresponding declarations is called offer,
it has to receive the offeree in order to conclude an effective contract and has to include some
special criteria. These special criteria will be treated in more detail in this part.
I. Criteria for an Offer
Each proposal does not mean an offer that is why according to the CISG, a proposal has to fulfill
some requirements which are:1. A sufficient definiteness of the proposal;
2. An intention to be bound in case of acceptance; and
3. The effectiveness of the offer, in order to be accepted as an offer3.
1. Definiteness of Addressee and Public Offer
In the CISG, the proposal must firstly address one or more specific persons 4 or it is considered as
an invitation to make an offer unless otherwise the proposal is indicated to one or more
unspecific persons clearly as an offer by the offeror.5
3 P Schlechtriem, P Butler, UN law International Sales, 2009, p.69.
4 Art. 14, Para of CISG
5 Art. 14 of CISG
6 | Page

When the proposal addresses to a definite person or persons there is no problem but a problem
arises when the proposal is directed towards an unspecific group of persons, here it strictly
requires to show the difference between an offer which addresses to indefinite circle of people
and invitation to make offer.

According to Art.14 of the CISG, it is generally accepted that a party can make an offer to an
unspecific group of persons.6 For instance, a seller may send some catalogues that include
product descriptions and product price lists, to indefinite number or large number of people and
that may be interpreted as public offer.7 But according to Honnold, such an offer in cases of
acceptance may cause some practical difficulties.8 It is fair to say that by the reason of some
vague situations when a proposal is communicated to an indefinite group, Art.14 (2) 9 of the
CISG requires a clear indication of whether it is an offer and furthermore unless such a clear
indication is provided, that proposal will be just an invitation to make an offer.10
2. Intention to Be Bound in case of Acceptance
Secondly, the CISG puts a subjective criterion, which is the intention of the offeror. Accordingly,
a proposal requires being binding in order to be an effective offer under the CISG. Therefore, it
has to include the offeror`s intention which shows the readiness to be bound by offer in case of
acceptance. Such a criterion provides to an offer to be distinguished from a simple non-binding
proposals.

6 J Honnald, Uniform Law for international sales under the CISG, 3rd ed., 1999, p. 148.
7 ibid
8 ibid
9 A proposal other than one addressed to one or more specific persons is to be considered merely as an invitation
to make offers, unless the contrary is clearly indicated by the person making the proposal.

10 J Honnald, Uniform Law for international sales under the CISG, 3rd ed., 1999, p. 149.
7 | Page

In cases where the offeror wants to be bound by his offer, is a question of interpretation under
national legal systems, and it is fair to say, that under the CISG it has to be handled in each case
individually as well.11
Moreover, it should be mentioned here; intention to be bound and to be bound by offer
irrevocably have to be distinguished12; whereas intention to be bound is a criterion for an
effective offer in Art.14 of the CISG, offers position of being bound by offer irrevocably is
another issue which is handle in Art.16 of the CISG.
3. Sufficient Definiteness
Another important criterion for an offer is sufficient definiteness of proposal. 13 What is
understood under the sufficient definiteness of a proposal under the CISG is figured in the Art.14
(1).Accordingly in a proposal; goods, quantity and price are considered essential elements of a
contract and therefore, they have to be determined sufficiently.
It is obvious that if the essential terms of a contract are explicitly fixed, there will be no problem
of determination.
a) Indication of Nature and Quantity of Goods
Due to the fact that only an offer containing the fundamental elements of a sales contract can
lead to the successful conclusion, the elements such as nature and quantity of offered goods must
be determined or at least determinable in the offer. But hereby it is fair to say that the explicit
description of the goods is not strictly required; even it may be impliedly according to Art.14 (1)
determined14 so there may be just a simple indication of the goods and their amounts but at least
that indication must be interpretable.15 It is clear that silence has no function to refer to the
goods therefore an implicit determination of goods differs from silence. 16 Moreover, besides

11 Ferrari, CISG (Commentary), Art. 14, para. 11.

12 Ferrari, CISG (Commentary), Art. 14, para. 12.
13 Schlechtriem, Schwenzer, Commentary on the UN Convention on the International Sale of
Goods (CISG), ed.3,Art. 14, para 1

14 Ferrari, CISG (Commentary), Art. 14, para. 21.

8 | Page

written indications, a verbal indication is also acceptable to refer to the nature and quantity of
goods.17
b) Price Determination
Under the CISG, the term price is another element that has to be determined or at least
determinable, i.e. a proposal has to include it either implicitly or explicitly. 18 If there is neither a
determined price nor a determinable one, an effective offer does not exist pursuant to Art.14 (1)
of the CISG19 and a contract is not concluded effectively.
It is fair to say that under the CISG, the contract does not have to include an explicit fixed price,
for example; one party may want a late determination in order to take into consideration the
market price or by the reason of necessity of more information. Here even such an uncertain
determination fulfils the requirement of determinability of price under the criteria for offer.
Moreover, in cases a proposal refers to a price list or market price; it is adequate to accept a
determination impliedly.20

c) The Relation between Articles 14 (1) and 55 of the CISG

At the first instance Art.55 is seen in conflict with Art.14 of the CISG.

15 Schlechtriem, Schwenzer, Commentary on the UN Convention on the International Sale

of Goods (CISG), ed.3,Art. 14, para 8

161bid
17 ibid
18 See CISG Case Presentation at http://cisgw3.law.pace.edu/cases/050405s1.html, 5 Apr. 2005
19 Ferrari, CISG (Commentary), Art. 14, para. 32
20 Schlechtriem, Schwenzer, Commentary on the UN Convention on the International Sale of
Goods (CISG), ed.3,Art. 14, para 19

9 | Page

Whereas Art.14 (1) provides that an offer is only validly concluded if the parties have included
the price impliedly or explicitly into their contract, Art.55 only applies if the contract has been
validly concluded without determining the price. 21 Although (as has been mentioned above) this
situation is seen as an inconsistency between two provisions of the CISG, 22 with the support of
scholarly approaches it is easy to understand why both provisions do exist together.
According to Schlechtriem;
If the parties have performed the contract despite no definite price having been agreed, or
have in other way made clear that they wanted to perform the contract, the requirement of a
sufficiently definite or determinable price can be seen as having been excluded by the parties.
Accordingly, a valid contract has been concluded and the price has to be determined according to
Art.55 CISG.23
Art.55 of the CISG has an application scope in cases where the parties exclude any types of price
determination and conclude a valid contract.24
Art.55 of the CISG has a gap filling function in terms of open price contracts as well; because
the formation of contract is governed by usually national contract laws, if there is an existing
reservation (based on the Art. 92 of the CISG) on the application 25 of Part II CISG or the absence
of price determination arises from the usages or practices between the parties.26

21 P Schlechtriem, P Butler, UN law International Sales, 2009, p.71.

22 P Huber, A Mullis, The CISG: A New Text Book for Students and Practitioners, Sellier European Law
Publication, 2007, p.70.
23 P Schlechtriem, P Butler, UN law International Sales, 2009, p.72
24 P Huber, A Mullis, The CISG: A New Text Book for Students and Practitioners, Sellier European Law
Publication, 2007, p.76
25 Herre, CISG (Commentary) Art.92, para.2.
26 P Huber, A Mullis, The CISG: A New Text Book for Students and Practitioners, Sellier European Law
Publication, 2007, p.77
10 | P a g e

II. Termination of Offer

1. Effectiveness and Withdrawal of an Offer
If there is an effective offer the next step stays as the determination of effectiveness of an offer.27
Art. 15 of the CISG shows the rule as to whether and when an offer is effective and when it may
be withdraw and its first sentence says an offer becomes effective when it reaches the offeree.28
Art.15 of the CISG follows the approach based upon Receipt Theory in terms of effectiveness
of declarations29 under contract formation. Therefore, according to Art.15 of the CISG, for an
effective offer, the offeree has to receive it so contrary to Dispatch Theory, dispatching of
proposal does not suffice to become an offer.30
Another consequence which arises from Art.15 of the CISG is related to the terms withdrawal
and revocability31 of an offer under the CISG.32 However withdrawal and revocation are not
differently daily used words, they have different meanings under the CISG.33
Also, the2nd sentence of Art.15 of the CISG provides that an offer, even if it is irrevocable, may
be withdrawn if the withdrawal reaches the offeree before or at the same time as the offer. Both
27 J Lookofsky, Understanding the CISG, Kluwer Law International, 3rd Ed, 2008, p.52.
28 Art. 15 (1) of CISG
29 See Ersi, Bianca-Bonell Commentary on the International Sales Law, (1987), pg. 145-149 at
http://cisgw3.law.pace.edu/cisg/biblio/eorsi-bb15. html
30 Ibid
31 ibid
32 ibid
33 ibid
11 | P a g e

two terms revocability and withdrawal are seen together here. Although the provision
includes the irrevocability, Art.15 of the CISG mainly governs the right to withdraw.34
Regarding Art.15, it is required to make a distinction between withdrawal and revocation,
because their consequences in terms of the CISG are not corresponding. 35 To explain the
differences, distinction exists in different stages of contract formation. At first stage, as has been
written in Art.15 (1) of the CISG, an offer needs to reach the offeree in order to be effective. 36
Until an effective offer exists or at the time of effectiveness, it can be withdrawn by the offero 37 it
means that withdrawal can be before or at the time when offer reaches the offeree. Unless it is
withdrawn, it goes to the second stage and here it becomes already effective and under certain
conditions may be revoked.38
It has to be noted here, the revocation of an offer under Art.16 of the CISG is separated from the
term withdrawal under Art.15 (1) of the CISG.
2. Revocation of Offer
Whether an offeror is bound by his proposal is a question, which has different answers according
to Common Law and Civil Law Systems. It has to be said that CISG has reached a compromise
on revocation of offer between Common Law and German Law System.
a) Revocability of Offer under the CISG

34 J Lookofsky, Understanding the CISG, Kluwer Law International, 3rd Ed, 2008, p.52.
35 See Ersi, Bianca-Bonell Commentary on the International Sales Law, (1987), pg. 147 at
http://cisgw3.law.pace.edu/cisg/biblio/eorsi-bb15. html
36 See Ersi, Bianca-Bonell Commentary on the International Sales Law, (1987), pg. 147 at
http://cisgw3.law.pace.edu/cisg/biblio/eorsi-bb15. html
37 Art. 15(2) of CISG (2) An offer, even if it is irrevocable, may be withdrawn if the withdrawal reaches the
offeree before or at the same time as the offer.

38 See Ersi, Bianca-Bonell Commentary on the International Sales Law, (1987), pg. 147 at
http://cisgw3.law.pace.edu/cisg/biblio/eorsi-bb15. html
12 | P a g e

Art.16 (1)39 of the CISG allows to the offeror to revoke his offer, until the offeree dispatches his
acceptance40 so Art.16 (1) shows the basic principle that an offer is revocable under CISG 41 after
acceptance is dispatched by offeree, the offeror`s right to revoke drops. If offeror enjoys his right
to revoke, this revocation has to reach the offeree, before the offeree dispatches an acceptance in
response to the effective offer.42
Although, by Art.16 (1) of the CISG, the revocability of offer is provided, Art.16 (2) 43 of the
CISG sets an exception to revocability of offer. Firstly Art.16 (2) shows the irrevocability of the
offer, in cases if the offer fixes a time period for acceptance or it indicates itself that, it is
irrevocable.44 Secondly according to Art.16 (2) lit.b, in cases if the offeree reasonably relies that
offer is irrevocable and acts in reliance on it, the offer is not revocable.45

39 (1) Until a contract is concluded an offer may be revoked if the revocation reaches the offeree before he has
dispatched an acceptance.

40 P Schlechtriem, P Butler, UN law International Sales, 2009, p.73

41 P Huber, A Mullis, The CISG: A New Text Book for Students and Practitioners, Sellier European Law
Publication, 2007, p.81
42 See A Garro, Reconciliation of Legal Traditions in the U.N. Convention on Contracts for the
International Sale of Goods, (1989), pp. 443-483, p.455, at
http://cisgw3.law.pace.edu/cisg/biblio/garro1.html
43 (2) However, an offer cannot be revoked:(a) if it indicates, whether by stating a fixed time for acceptance or
otherwise, that it is irrevocable; or
(b) if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance
on the offer.

44 See G Giannini, The Formation of the Contract in the UN Convention on the International Sale of
Goods: A Comparative Analysis, Nordic Journal of Commercial Law, 2006, at
http://www.cisg.law.pace.edu/cisg/biblio/giannini.html#iii
45 See Ersi, Bianca-Bonell Commentary on the International Sales Law, (1987), pg. 157 at
http://cisgw3.law.pace.edu/cisg/biblio/eorsi-bb15. html
13 | P a g e

Art.16 of the CISG is considered as a compromise between the Civil Law and the Common Law
understanding of revocation of an offer.46 By that reason, in practice while conclusion of an
international sales contract, an interpretation problem may arise in terms of irrevocability of offer
between parties from different legal systems.47
3. Rejection of Offer and Expiry of Time Set for Acceptance
Under the CISG, rejection is the third termination ground apart from withdrawal 48 and
revocation of offer.49 Pursuant to Art.1750 of the CISG an offer is terminated through rejection by
offeree. Accordingly, rejection of an offer must be either expressly or by an implication 51 but if it
is an explicit rejection, it has to reach the offeror. The receipt theory here applies to declaration
of rejection as well.
Offer may be rejected even after the offeree dispatches acceptance but this acceptance does not
have to receive to the offeror.52 It means that the rejection avoids the conclusion of a contract
only if it reaches the offeror before or at the same time of the receipt of acceptance to the
offeror.53 The consequence of the receipt theory is seen here as well.

46 Ferrari, CISG (Commentary), Art.16, para. 1

47 See G Giannini, The Formation of the Contract in the UN Convention on the International Sale of
Goods: A Comparative Analysis, Nordic Journal of Commercial Law, 2006, at
http://www.cisg.law.pace.edu/cisg/biblio/giannini.html#iii
48 Art. 15 of CISG
49 Art. 16 of CISG
50 An offer, even if it is irrevocable, is terminated when a rejection reaches the offeror.
51 Ferrari, CISG (Commentary), Art.17, para. 1
52 P Schlechtriem, P Butler, UN law International Sales, Art. 17, para 3, 2009
53 ibid
14 | P a g e

According to Schlechtriem, the rejection of an offer should be considered in the same way as the
withdrawal of an acceptance.54 If the rejection reaches the offeror before the acceptance, a
contract is not concluded and it cannot be saved through applying Art.2155 of the CISG.56
Art.17 of the CISG reveals the result of the rejection and states that, the original offer can no
longer be accepted, even if it is irrevocable.57
Besides the above-mentioned termination grounds, under the CISG there is no provision that
indicates whether the expiry of time period for acceptance terminates the offer itself or not. It
should be noted that expiration of time for acceptance which has been written under Art.18
(2)58 does not terminate the offer itself. The time set for acceptance has a meaning that shows
until when offeror is bound by his offer, which is governed under Art.16 (2) does not have a
function to terminate offer after the time period expires.

54 ibid
55 Art. 21 (1) CISG: A late acceptance is nevertheless effective as an acceptance if without delay the offeror orally
so informs the offeree or dispatches a notice to that effect. Art. 21 (2) CISG: If a letter or other writing containing a
late acceptance shows that it has been sent in such circumstances that if its transmission had been normal it would
have reached the offeror in due time, the late acceptance is effective as an acceptance unless, without delay, the offer
or orally informs the offeree that he considers his offer as having lapsed or dispatches a notice to that effect.

56 P Schlechtriem, P Butler, UN law International Sales, Art. 17, para 3, 2009

57See M Viscasillas, Cross-References and Editorial Analysis: Article 19, at:
http://cisgw3.law.pace.edu/cisg/text/cross/cross-19.html
58 An acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror. An
acceptance is not effective if the indication of assent does not reach the offeror within the time he has fixed or, if no
time is fixed, within a reasonable time, due account being taken of the circumstances of the transaction, including
the rapidity of the means of communication employed by the offeror. An oral offer must be accepted immediately
unless the circumstances indicate otherwise.

15 | P a g e

Chapter 2
ACCEPTANCE
Acceptance is the second declaration of intent, which has to reach the offeror in order to
conclude an effective contract
Articles 18-22 of the CISG are the provisions that are related to the subject of acceptance. In this
part, acceptance under the CISG will be treated in detail.
I. Types of Acceptance
Under the CISG, firstly it has to be mentioned that the means of declaration are left optional to
offeree and actually there is no necessity of a certain form for acceptance but there are different
types of the acceptance, which hereby will be handled.
1. Acceptance by Explicit Declaration
Acceptance by explicit declaration can be divided into two different types which are firstly
acceptance by written declaration and secondly acceptance by oral statement. But here just the
acceptance by written declaration will be mentioned briefly.
Acceptance by written declarations is preferred mostly59 and made by any forms of written
statements such as letter, fax, email etc. and requires reaching the offeror as a result of the receipt

59 Viscasillias, Contract Conclusion under CISG, 1997, pp. 315-344, at

http://cisgw3.law.pace.edu/cisg/biblio/perales5.html#iii
16 | P a g e

theory60 and also, the declaration which addresses the offeror, must be given by the offeree
himself/herself or his legal representative.
2. The Special Case of Silence
Firstly it is important to say that under the CISG the offeree is not charged with a duty to reply to
the offeror.61 Art.18 of the CISG, sets a rule that actually protects the offeree from the traps of the
offeror, for example, if no reaction were enough to amount the acceptance in itself, through
sending goods and sending a proposal that stipulates in cases of not sending unsolicited goods
will constitute an acceptance, would mostly lead to unwelcome situations for the offeree. 62 It also
needs to be noted that the offeror may not obviate this rule63 by stating silence will be regarded
as offeree`s assent to accept.64
However silence or inactivity does not constitute an acceptance at first instance, this does include
some exceptional situations.65 The wording of Art.18 (1)66 provides the possibility for the silence
to be considered exceptionally as acceptance. The cases in which silence is accepted as
acceptance, requires taking into consideration the relevant circumstances that support silence
especially trade usages and practices.67

60 ibid
61 J Lookofsky, Understanding the CISG, Kluwer Law International, 3rd Ed, 2008, p.55
62 P Schlechtriem, P Butler, UN law International Sales, 2009, pg. 77
63 Art. 18 (1) of CISG
64 J Lookofsky, Understanding the CISG, Kluwer Law International, 3rd Ed, 2008, p.56
65 P Schlechtriem, P Butler, UN law International Sales, 2009, pg. 78
66 A statement made by or other conduct of the offeree indicating assent to an offer is an acceptance. Silence or
inactivity does not in itself amount to acceptance.

67 J Lookofsky, Understanding the CISG, Kluwer Law International, 3rd Ed, 2008, p.55
17 | P a g e

Through only performing an act, such as shipment of goods, payment of the price,68 the offeree
may communicate his acceptance effective, and conclude the contract even if the acceptance
does not have to reach the offeror and furthermore in cases if the offeree accepts an offer by
performing an act, the notification is not required to conclude an effective contract because the
acceptance becomes effective when the performance begins.69
II. Derivation of Acceptance from the Offer
A reply to an offer which purports to be an acceptance but contains additions, limitations or
other modifications is a rejection of offer and constitutes a counter offer.70
Accordingly, an acceptance must comply exactly with the offer 71 similarly in the traditional
conception; the acceptance must be a response like the mirror image of its offer.72 On the
contrary, acceptance does not require the same wording as used in the offer but a response, which
aims to be an acceptance, constitutes rejection and a counter-offer, if it derives from the content
of the offer.73
It is fair to say that the CISG takes into consideration the complexity of the international
commercial practices and based on that consideration, we see an exception to the Mirror Image
Rule under Art. 19 (2),74 as has been stated below;
However a reply to an offer which purports to be an acceptance but contains additional or
different terms which do not materially alter the terms of the offer constitutes an acceptance,
unless the offeror, without undue delay, objects orally to the discrepancy or dispatches notice to
68 P Schlechtriem, P Butler, UN law International Sales, 2009, pg. 77
69 J Lookofsky, Understanding the CISG, Kluwer Law International, 3rd Ed, 2008, p.57
70 Art. 19 (1) of CISG
71 J Lookofsky, Understanding the CISG, Kluwer Law International, 3rd Ed, 2008, p.57
72 J Lookofsky, Understanding the CISG, Kluwer Law International, 3rd Ed, 2008, p.89
73 J Lookofsky, Understanding the CISG, Kluwer Law International, 3rd Ed, 2008, p.57
74Farnsworth, Bianca-Bonell Commentary on the International Sales Law, 1987, p. 175at:
http://cisgw3.law.pace.edu/cisg/biblio/ farnsworth-bb19.html
18 | P a g e

that effect. If he does not so object, the terms of the contract are the terms of the offer with the
modifications contained in the acceptance.75
In spite of the additions or modifications of the offer, if there is no material alteration, Art.19 (2)
applies.
III. Standard Contract Terms and Battle of Forms
1. Inclusion of SCT into the Contract
Today it is accepted that, Standard Contract Terms (hereinafter SCT) provide facilitation to daily
trade and practice. Though SCT have a crucial role in terms of formation of contract, the concept
of SCT is not clearly provided under the CISG.
It is obvious that the standard terms will have effect when they are part of the contract. Actually,
in order to be a part, they have to be included into contract but here this raises the question of
how the inclusion of SCT may happen.
As has been mentioned above, the inclusion of SCT is not an issue precisely governed by the
CISG but the issue may be handled in respect of the Art. 19(2) of CISG. Pursuant to the Art.19
(2) of the CISG, while including the standard contract terms into contract, the parties` assent is
necessary. As a consequence of the same article, as long as the standard terms have no material
alterations (limitations as well) and where the other party does not oppose those terms, the SCT
may become the part of the contract.

2. Battle of Forms & the Theories for the Solution

Although, in many international sales cases, standard form documents are commonly used and
have important roles in standardizing and accelerating the contract formation process; 76 until a

75 Art. 19 (2) of CISG

76 P Huber, A Mullis, The CISG: A New Text Book for Students and Practitioners, Sellier European Law
Publication, 2007, p.70.
19 | P a g e

dispute exists, the parties usually are not aware of those incorporated standard forms, which they
communicate each other.77
Schlechtriem states that, Differences between a declaration of acceptance and offer are nearly
always the result of incorporation of, or attempts to incorporate standard terms of contract.78
Therefore it is clear thatif the parties exchange standard terms, which are inconsistent with each
other, a conflict occurs. That situation is especially called battle of the forms regarding the
conflicting SCTs between the parties.
In cases such a conflict in the standard terms (a battle of the forms) exists, two questions have to
be answered by the courts. Firstly was a valid contract formed? Secondly, if there is a formation
of valid contract, which terms are the parts of the contract? The latter determination is seen
mostly controversial.79
Indeed, the CISG has no special provision that governs the standard terms and to answer those
two questions.80 If there is the problem of conflicting standard terms in an international sales
contract, there are three approaches that treat the problem and reach the solutions in different
ways.81
a) Approach of Domestic Law
According to that approach, CISG and its general principles do not include sufficient solution for
the conflicting standard terms because the issue is related to the validity of contract, 82 which is
not governed by the CISG and therefore the domestic law has to be applied. But actually
77 See U Magnus, Last Shot vs. Knock OutStill Battle overthe Battle of Forms underthe CISG, 2007,
pp. 185-200, p.186. at: http://www.cisg.law.pace.edu/cisg/biblio/magnus4.html
78 P Schlechtriem, P Butler, UN law International Sales, 2009, Art.19, para 19
79 See M Viscasillas, Battle of the Forms, Modification of Contract, Commercial Letters of
Confirmation: Comparison of the United Nations Convention on Contracts for the International Sale of
Goods (CISG) with the Principles of European Contract Law (PECL) (2002), pp. 153-161, p. 156, at:
http:// digitalcommons.pace.edu/pilr/vol14/iss1/6
80 See B Piltz, Standard Terms in UN-Contracts of Sale, 2004, pp. 233244, at:
http://25.cisg.info/content/publikation.php?id=10
81 P Schlechtriem, P Butler, UN law International Sales, 2009, Art.19, para 21
20 | P a g e

regarding the aim of the CISG it is fair to say that this approach is not a way that the CISG wants
to reach in terms of the standard contract terms and the contract formation.
Also, in contrast to Domestic Law Approach scholarly arguments have to be pointed here.
Incorporation of standard terms is a matter of the contract formation which is explicitly ruled by
the CISG and thereby the problem of standard terms has to be resolved under the CISG instead
of domestic law and also, The courts should consider separately as first whether a valid contract
concluded and then as second step which terms are the parts of the contract have to be answered
according to the general principles upon which the CISG is based instead of domestic law.83
b) Last Shot Rule
This approach is considered as the most accepted one84 and follows strictly the offer- acceptance
rules.
As has been discussed in Art.19 of the CISG, a response with material modifications is not an
acceptance in addition to this it leads to a rejection and even a counter offer. In the same case if
the other party turns with a reply that includes material alterations at that moment this also means
a rejection and new counter-offer as well and this goes on like a ping pong game 85 through
mutually sending by parties their own conditions until one party commence to performing. If
there is a performance by one party, it means that the last submitted offer is accepted through a

82 According to Art.4 (a) Convention, it is not concerned with the validity of the contract.
83 C Moccia, The United Nations Convention on Contracts for the International Sale of Goods and the
Battle of the Forms, Fordham International Law Journal, 1990, pp. 649-679, p. 674.
84 See M Viscasillas, Battle of the Forms, Modification of Contract, Commercial Letters of
Confirmation: Comparison of the United Nations Convention on Contracts for the International Sale of
Goods (CISG) with the Principles of European Contract Law (PECL) (2002), pp. 153-161, p. 156, at:
http:// digitalcommons.pace.edu/pilr/vol14/iss1/6
85 See U Magnus, Last Shot vs. Knock OutStill Battle overthe Battle of Forms underthe CISG, 2007,
pp. 185-200, p.186. at: http://www.cisg.law.pace.edu/cisg/biblio/magnus4.html
21 | P a g e

performance, which indicates assent to the offer.86 Accordingly, the last sent form is the part of
the contract and the sender of the last form is the winner of the battle.87
Considering the real commercial law in which each party insists on their own conditions, we
agree that this theory is not adequate to solve the problem of the battle of forms.

c) The Knock out Rule

Pursuant to this approach the problem of the battle of the forms, is accepted as a gap-filling
problem, which has to be solved by the general principles of CISG.88 Here under the Knock out
Rule; Art.6 of the CISG, which stipulates the party autonomy, prevails and allows parties a
deviation from Art.19 of the CISG.89
When the parties are content with the essential terms of the contract, under the Knock out Rule,
it means that, parties agreed to exclude the conflicting standard terms and enter into the contract
with only essential terms.90Actually in other words, here the conflicting terms are knocking each
other out, and the provisions of the CISG are taking the place of those conflicting terms.91
In conclusion as has been discussed above, there is no consensus on the best way to overcome
the battle of forms neither in the literature[160] nor in the court decisions, but it is fair to say that

86 Art. 18 (1) of CISG

87 See M Viscasillas, Battle of the Forms, Modification of Contract, Commercial Letters of
Confirmation: Comparison of the United Nations Convention on Contracts for the International Sale of
Goods (CISG) with the Principles of European Contract Law (PECL) (2002), pp. 153-161, p. 157, at:
http:// digitalcommons.pace.edu/pilr/vol14/iss1/6
88 ibid
89 P Schlechtriem, P Butler, UN law International Sales, 2009, p. 82
90 P Huber, A Mullis, The CISG: A New Text Book for Students and Practitioners, Sellier European Law
Publication, 2007, p.94
91 P Schlechtriem, P Butler, UN law International Sales, 2009, Art. 19, para 21
22 | P a g e

when standard terms are contradicting with each other, then those terms may be excluded and
therefore, the rest of the terms may still be part of the contract.
IV. The exact Moment of the Contract Conclusion

Art.2392 of the CISG governs the exact moment of the contract conclusion. Accordingly, the
time when the acceptance becomes effective, the contract is concluded. Art.18 (2) of the CISG
also shows the time when acceptance becomes effective. Accordingly the acceptance has to
reach the offeror to become effective and just the dispatch of the acceptance by the offeree does
not suffice to get an effective acceptance and a concluded contract as well.

V. Late Acceptance

1. Under the CISG

Art.21 of the CISG governs the problem of the late acceptance 93 and states that even the late
acceptance may lead to a contract conclusion.94
Art.21 of the CISG distinguishes the reasons of late acceptance. 95 Whereas Art.21 (1)96 of the
CISG exists as general rule for late acceptance, Art.21 (2) 97 of the CISG becomes an exception to

92 A contract is concluded at the moment when an acceptance of an offer becomes effective in accordance with
the provisions of this Convention.

93 P Schlechtriem, P Butler, UN law International Sales, 2009, Art. 18, para 11

94 ibid
95 ibid
23 | P a g e

that general rule.98 Under Art.21 (1) of the CISG, there is a general rule for the effect of late
acceptance and Art.21 (2) of the CISG examines the lateness because of delay in transmission
and its results.
As the consequence ofArt.21 (1) and Art.21 (2) of the CISG, the offeror has right to choose to be
bound in response to the late acceptance but in first situation, the lateness arises from the offeree
s own behavior. if the offeror wants to be bound to the contract, he has to send a notification to
the offeree as soon as possible otherwise he does not have to send any notification. 99 On the
contrary in the latter article, the reason of lateness is separated from the offeree`s behaviour, that
reason arises from the delays in transmission. 100 Here the offeree has no fault in lateness and he
has reliance and expectations on the formation of the contract, that is why the silence in response
to that kind of late acceptance is of a binding legal consequence and accordingly unless there is
no notification of offeror to the offeree, this means that, the contract is concluded with the late
acceptance.101
As has been seen above, in case of the late acceptance under CISG, the offeror has the right to
refuse the late acceptance102 and for the cases under Art.21 (2) of the CISG, which covers the late
acceptance on account of delay in transmission, offerors silence against late acceptance is
96 A late acceptance is nevertheless effective as an acceptance if without delay the offeror orally so informs the
offeree or dispatches a notice to that effect.

97If a letter or other writing containing a late acceptance shows that it has been sent in such circumstances that if
its transmission had been normal it would have reached the offeror in due time, the late acceptance is effective as an
acceptance unless, without delay, the offeror orally informs the offeree that he considers his offer as having lapsed or
dispatches a notice to that effect.

98 Farnsworth, Bianca-Bonell Commentary on the International Sales Law, 1987, p. 192at:

http://cisgw3.law.pace.edu/cisg/biblio/ farnsworth-bb19.html
99 ibid
100 Farnsworth, Bianca-Bonell Commentary on the International Sales Law, 1987, p. 188 at:
http://cisgw3.law.pace.edu/cisg/biblio/ farnsworth-bb19.html
101 Ibid, p. 189
102 Ibid, -. 191
24 | P a g e

deemed as an approval of offerees acceptance, but offeror still has the power to declare not to be
bound to the contract.103 These separated results of Art.21 (1) and Art.21 (2) show us the CISG
tries to find a fair solution towards the problem of the late acceptance between the offeree and
the offeror through distinguishing the lateness reasons and their consequences in a balanced way.

Chapter 3
CISG AND INDIAN LAW
103 Ibid, p. 192
25 | P a g e

India is one of the countries that, despite having participated in the 1980 Vienna Diplomatic
Conference which debated the various Articles of the CISG, chose not to ratify this Convention.
Nevertheless, the CISG may still apply to an Indian contracting party even though India itself is
not a party to the Convention. First, it is possible that one of the parties entering into a contract
with the Indian party will be from a Contracting State whose laws will apply by virtue of laws of
private international law.104
These laws may well be the CISG. Secondly, an Indian party may well have his place of business
in a Contracting State and he may have entered into an agreement with a party whose business is
also in a Contracting State. In such a case, too, the CISG will apply.105 Thirdly, the CISG may
also apply in cases where none of the parties have their place of business in Contracting States
because the parties chose CISG as the applicable law. This is in consonance with the principles
of private international law.106
Unlike Singapore, China, Australia and several other countries, India has not ratified the United
Nations Convention on Contracts for the International Sale of Goods ('CISG'). Although diverse
countries have ratified it, quite a few, such as the United Kingdom, have not. Numerous
commentators have appraised it; some expressing admiration and some reservation.

104 Art. 1 (1)(b), CISG.

105 Art. 1 (1)(a), CISG.
106 Art. 1 (1)(b), CISG.
26 | P a g e

For example, while the Singapore Law Reform Committee's Report on the CISG recommends its
adoption,107 commentators like Arthur Rossett108 and Professor GH Trietel109 express reservations
about its adoption.
India's ratification of the CISG would mean that the CISG, and not the well-understood rules of
the Indian Sale of Goods Act 1930 ('1930 Act'), would govern the rights of Indian buyers and
sellers, when trading internationally. The 1930 Act is modeled on the English Sale of Goods Act
of 1893. India's trading community and its legal advisers, assisted by well-developed case law,
can predict with some precision the probable outcome of a course of action in the buying and
selling of goods. For India, adopting the CISG would be advisable only if the advantages of
doing so outweigh the disadvantages.
It should be worth noting that most of the provisions of part II of the CISG which deals with the
formation of the contract are similar to that which are laid down under the Indian Contract Act,
1950. Not only the part under formation but many other provisions under CISG are similar to
that of Indian Contract Act. Similarities relating to contract formation between the CSIG and
Indian law outweigh the differences, and that the CISG may be a viable alternative when dealing
with international sale of goods transactions.
If India ratifies the CISG then many advantages will come in hand with us. Our current Sales
Law (represented by the English Sale of Goods Act (SGA) 1979 which is in substance not very
different from the SGA 1893) which is 100 years old is not better suited than the Convention for
modern commercial contracts. The Convention serves a 'gap-filling' function when a crossborder contract is made by phone or even by fax or telex but in only a few words. Having the
Convention apply is better than having to choose an unknown foreign law e.g. Russian Law or
German Law as the applicable law of the contract. It serves as a neutral law acceptable to both
107 Report of the Sub-Committee on Commercial Law of the Law Reform Committee, 12 September
1994.
108 Arthur Rossett, 'Critical Reflections on the United Nations Convention on Contracts for the
International Sale of Goods', 1984, 45 Ohio State Law Journal, pg. 265-305.
109 Professor GH Trietel (Ed), Benjamin on Sale of Goods (4th ed), Chapter 18.
27 | P a g e

parties. The Convention recognises that the parties to international sales contracts may wish to
exercise broad contractual freedom. Article 6 enables them to exclude the application of the
Convention and to derogate from or vary the effect of any of its provisions. The Convention
helps to avoid difficult conflict of laws issues.

CONCLUSION
As has been evaluated that the formation of contract is also provided as a part under the CISG
and the issue of the formation of the contract is dealt with the Part II of the CISG (Art.14-24).
The traditional offer-acceptance model is the only model that the CISG explicitly speaks about.
In terms of the effectiveness the offer and the acceptance, we have seen the dominated position
of the receipt theory instead of the dispatch theory. Otherwise, if the dispatch theory was
accepted under the Part.II of the CISG, the offer and the acceptance as well, would be effective
after the dispatch of the offer by the offeror. Considering the termination reasons of the offer
under the CISG, we have dealt with firstly the withdrawal of the offer, which is acceptable only
in between time of the dispatch of the offer and its reach the offeree. Secondly, we have moved
on the revocability of the offer and shown that under the CISG, the offer is in principle revocable
unless there is no fixed time for acceptance or there is no reliance by the offeree on the
irrevocability of the offer. As a deviation from the principle of the receipt theory, we have
mentioned briefly that Art.16 (1) of the CISG, follows the Common Law rule and therefore; the
revocation has to reach the offeree before he dispatches an acceptance and thanks to the
exceptions in Art.16 (2) of the CISG. It should be noted that, some practical misunderstandings
may arise between the contract parties from different legal systems. Finally, as the third reason of
the termination of the offer, the rejection of the offer has been discussed. In terms of the
acceptance, the offeree is not charged with a reply in response to the offer and therefore in

28 | P a g e

principle silence is not deemed as acceptance in itself. As the last important point, the late
acceptance has been discussed through making comparison between the CISG and the German
approach.
In conclusion, it is fair to say that for the unification of the formation of the contract The CISG
has attempted to reach a compromise between civil law and common law systems and managed
to uniform the issue of the formation of contract between the contracting states.

BIBLIOGRAPHY

P Schlechtriem, P Butler, UN law International Sales: The UN Convention on

International Sale of Goods, 2009

J Honnald, Uniform Law for international sales under the CISG, 3rd ed., 1999
Schlechtriem, Schwenzer, Commentary on the UN Convention on the International Sale

of Goods (CISG), ed.3

P Huber, A Mullis, The CISG: A New Text Book for Students and Practitioners, Sellier

European Law Publication, 2007

J Lookofsky, Understanding the CISG, Kluwer Law International, 3rd Ed, 2008

WEBLIOGRAPHY

http://www.scribd.com/
http://books.google.com/
http://www.cisg.law.pace.edu/
http://www.wikipedia.org/

29 | P a g e