INTRODUCTION
Rules for Offer and Acceptance
Agreement involves the changing of negotiations into an agreed bargain or deal. The negotiating process is definitely not regarding contracts and the law has the responsibility to determine when that process has stopped and the stakeholders have reached finality in their commercial arrangement. The traditional process to finding the answer to the question, “Have the parties reached agreement?” is to simply implement the principles of offer and acceptance (, 2001). When a properly stated offer has been made by one party and is amenable to the other party, then there is an agreement reached at the moment of acceptance or, more accurately, at the instance of communication of acceptance.
This apparently very easy process raises a number of issues which must be analyzed, such as: Was an offer made at all? Who initiates an offer in various types of transactions, for instance, in auctions or tenders? Is a price list considered an offer? Can an advertisement be considered an offer? Then it is also important to answer critical questions about the process of acceptance, such as: does acceptance essentially have to be communicated? Can a person possibly accept in silence? Can a party accept by just getting on with the commercial task?
Consideration
It has already been proved that consideration includes the process of exchange. There are important rules regarding what the composition of an exchange and what things can possibly be exchanged in order to be qualified as a good consideration (, 2002). It is important to analyze these rules as well as investigating also the requisites of offer and acceptance. The relationship between the principles of offer and acceptance on the one hand and the principles of consideration on the other hand is that the process of exchange which constitutes an acceptance of an offer - in short an exchange of promises is brought about by acceptance - is at the same time the essential exchange which constitutes the consideration. All this issues will become simpler when the analysis of the principle of consideration is accomplished (, 2001).
Revocation of an Offer
It has already been discussed that an offer may come to an end in different ways. So long as this occurs prior to acceptance then a contract cannot come into form. And if somebody would withdraw an offer after acceptance, this would be classified as a breach of contract.
There are different ways in which an offer may come to an end. The five major ways are the following:
First, the party who made the offer may withdraw the offer. But this can not possible if the party who made the offer has already promised not to revoke the offer for a specified period of time. This is commonly referred to as an option.
Secondly, the offer may lapse naturally, either because the party who made the offer makes it definite that it will lapse after a specified period time or because it has become null (. 2001).
Thirdly, it is possible to indicate in the offer that it will come to an end if a specified situation occurs or does not occur.
Fourthly, the offer may lapse on the death of the party who made the offer.
Finally, the offer may become null if it is not approved by the party who made the offer, for instance when that party performs an offer to counter the first.
The party who made the offer may revoke the offer at any given time prior to acceptance. This can be possible even if he or she has mentioned that it will remain open for a specified period of time (, 1998).
The following cases discuss about getting the message across, that is, how does the party who made the offer make sure that the message that the offer is withdrawn can get through them? The simple answer is that the message must get through - actual communication is important.
1. What law will govern this contract? Can the parties agree that CISG will govern their relationship?
The parties involved can definitely agree that CISG will govern their relationship. As stated in of CISG,
(1) This Convention applies to contracts of sale of goods between parties whose places of business are in different States:
(a) when the States are Contracting States; or
(b) when the rules of private international law lead to the application of the law of a Contracting State.
Also, according to of the CISG,
(1) The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves.
(2) The parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned.
2. The contract involves the sale of goods (including parts and assembled products) as well as the supply of services. Can the CISG regulate the entire contract? If not, what parts?
There is no problem even if the contract involves the sale of goods (including parts and assembled products) as well as the supply of services. Therefore, CISG can regulate the entire contract. As stated in of the CISG,
This Convention does not apply to sales:
(a) of goods bought for personal, family or household use, unless the seller, at any time before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any such use;
(b) by auction;
(c) on execution or otherwise by authority of law;
(d) of stocks, shares, investment securities, negotiable instruments or money;
(e) of ships, vessels, hovercraft or aircraft;
(f) of electricity.
3. In the event that the parties agree that CISG will be the governing law, what aspects of the contract will be governed, nevertheless, by local law?
First and foremost, it is important for the MBI and its subsidiaries to really arrive at an agreement that CISG will be the basis for the formation of contracts. This is a simple step, but the hardest to accomplish most of the time. As stated in of the CISG,
This Convention governs only the formation of the contract of sale and the rights and obligations of the seller and the buyer arising from such a contract. In particular, except as otherwise expressly provided in this Convention, it is not concerned with:
(a) the validity of the contract or of any of its provisions or of any usage;
(b) the effect which the contract may have on the property in the goods sold.
4. If the parties agree that the CISG will be the governing law, how will the provisions of the CISG be interpreted in the event there is some dispute about their meaning? If some provision of the contract is unclear, how will it be interpreted?
In this scenario, it is definitely important for the MBI and its subsidiaries to have a clear understanding of the international sales rules under CISG once they all agree upon its usage. This will prevent any unnecessary misunderstanding amongst themselves as well as their interpretations of the rules. However, there are cases when misunderstanding or misinterpretations of rules become unavoidable. In such cases, according to of the CISG,
(1) In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade.
(2) Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law.
5. Must the contract be in writing? Must it be under seal?
According to of the CISG,
A contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses.
6. If one of the parties makes an offer and promises to keep it open for a period of 30 days, can it later change its mind and withdraw the offer?
The only critical part in this scenario is the period or duration of days where the offer remains open. If for example, the party who made the offer changed his / her mind after the 30 day period, then definitely the withdrawal process cannot be applied. According to of the CISG,
(1) An offer becomes effective when it reaches the offeree.
(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.
7. When does an acceptance become effective? Does it matter if the acceptance calls for minor changes in the terms contained in the offer?
To put it simply, the acceptance becomes effective once both parties arrive at a certain contract agreement. Minor changes do happen from time to time as far as contract stipulations are concerned. This is a normal occurrence, but for as long as both parties are reminded of the minor changes, then they are not considered as significant hindrances towards acceptance.
of the CISG states,
(1) 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.
(2) 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.
(3) However, if, by virtue of the offer or as a result of practices which the parties have established between themselves or of usage, the offeree may indicate assent by performing an act, such as one relating to the dispatch of the goods or payment of the price, without notice to the offeror, the acceptance is effective at the moment the act is performed, provided that the act is performed within the period of time laid down in the preceding paragraph.
8. What criteria will be used to determine if a party has breached?
Breaching of contracts is never a happy situation for both parties concerned. But there are times when suddenly one party feels unable to stand up to the merits of the contract, and therefore the only solution left is for that party to declare the contract as null and void. Chapter of the CISG states that,
A breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result.
9. If a party does breach, can the other parties avoid their obligations to perform? Can all of the provisions of the contract—including the choice of law clause—be avoided?
Chapter of the CISG states that,
A declaration of avoidance of the contract is effective only if made by notice to the other party.
10. If a party fails to perform, can a court intervene and order the party to perform? Are there any limits on what a court may order a party to do?
In the situation of MBI where it has subsidiaries in Ghana which abides by a civil law legal system and the other in Nigeria which has a common law legal system, then a court can definitely intervene because they are not under the jurisdiction of the CISG. of the CISG states that,
If, in accordance with the provisions of this Convention, one party is entitled to require performance of any obligation by the other party, a court is not bound to enter a judgment for specific performance unless the court would do so under its own law in respect of similar contracts of sale not governed by this Convention.
11. If nothing is said in the contract, where must the seller deliver the goods?
This is a very unusual scenario, but it does happen because of negligence of both parties concerned. As part of a well-constructed contract, the destination of delivery for a product or service is always an integral part of it. Missing this information is simply a terrible mistake. Fortunately, the CISG has a rule for such weird situations, and according to Chapter of the CISG, it states that,
(1) If the seller, in accordance with the contract or this Convention, hands the goods over to a carrier and if the goods are not clearly identified to the contract by markings on the goods, by shipping documents or otherwise, the seller must give the buyer notice of the consignment specifying the goods.
When must delivery be made?
Delivery of the products or goods is always crucial, especially if the products involved are perishable or hazardous if stored for a long time. Based on the contract, there must have been a place, an exact date and time of delivery.
states that,
The seller must deliver the goods:
(a) if a date is fixed by or determinable from the contract, on that date;
(b) if a period of time is fixed by or determinable from the contract, at any time within that period unless circumstances indicate that the buyer is to choose a date; or
(c) in any other case, within a reasonable time after the conclusion of the contract.
Where and when must documents of title be turned over?
states that,
If the seller is bound to hand over documents relating to the goods, he must hand them over at the time and place and in the form required by the contract. If the seller has handed over documents before that time, he may, up to that time, cure any lack of conformity in the documents, if the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense. However, the buyer retains any right to claim damages as provided for in this Convention.
12. What must a buyer do to reject nonconforming goods?
Nonconforming goods are unacceptable. It is a shame for such things to exist after an agreement or acceptance has been made by both parties. Again, this situation clearly reflects that one party is not sincere in the process of abiding by the agreed rules of the contract. Nonconforming goods are defined by the CISG, in , as follows:
(2) Except where the parties have agreed otherwise, the goods do not conform with the contract unless they:
(a) are fit for the purposes for which goods of the same description would ordinarily be used;
(b) are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller's skill and judgement;
(c) possess the qualities of goods which the seller has held out to the buyer as a sample or model;
(d) are contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods.
The buyer’s obligation, on the other hand, is stipulated in of the CISG, which states,
(1) The buyer must examine the goods, or cause them to be examined, within as short a period as is practicable in the circumstances.
(2) If the contract involves carriage of the goods, examination may be deferred until after the goods have arrived at their destination.
(3) If the goods are redirected in transit or re-dispatched by the buyer without a reasonable opportunity for examination by him and at the time of the conclusion of the contract the seller knew or ought to have known of the possibility of such redirection or re-dispatch, examination may be deferred until after the goods have arrived at the new destination.
In order to reject non-conforming goods, the buyer must do what says,
The buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it.
13. When must the buyer make payment?
of the CISG states that,
The buyer must pay the price on the date fixed by or determinable from the contract and this Convention without the need for any request or compliance with any formality on the part of the seller.
14. At what point in time will the buyer become liable for any accidental loss or damage suffered by the goods?
of the CISG states that,
Article 66
Loss of or damage to the goods after the risk has passed to the buyer does not discharge him from his obligation to pay the price, unless the loss or damage is due to an act or omission of the seller.
Article 67
(1) If the contract of sale involves carriage of the goods and the seller is not bound to hand them over at a particular place, the risk passes to the buyer when the goods are handed over to the first carrier for transmission to the buyer in accordance with the contract of sale. If the seller is bound to hand the goods over to a carrier at a particular place, the risk does not pass to the buyer until the goods are handed over to the carrier at that place. The fact that the seller is authorized to retain documents controlling the disposition of the goods does not affect the passage of the risk.
(2) Nevertheless, the risk does not pass to the buyer until the goods are clearly identified to the contract, whether by markings on the goods, by shipping documents, by notice given to the buyer or otherwise.
Article 68
The risk in respect of goods sold in transit passes to the buyer from the time of the conclusion of the contract. However, if the circumstances so indicate, the risk is assumed by the buyer from the time the goods were handed over to the carrier who issued the documents embodying the contract of carriage. Nevertheless, if at the time of the conclusion of the contract of sale the seller knew or ought to have known that the goods had been lost or damaged and did not disclose this to the buyer, the loss or damage is at the risk of the seller.
15. What duty does a party have to keep the damages caused by another party’s breach to a minimum?
of the CISG states that,
Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract.
16. What must a seller do if it wishes to seek damages—avoid the contract or obtain specific performance?
As stated in of the CISG,
If the contract is avoided and if, in a reasonable manner and within a reasonable time after avoidance, the buyer has bought goods in replacement or the seller has resold the goods, the party claiming damages may recover the difference between the contract price and the price in the substitute transaction as well as any further damages recoverable under article 74.
17. What must a buyer do if it wishes to seek damages—avoid the contract or obtain specific performance?
As stated in of the CISG,
If the contract is avoided and if, in a reasonable manner and within a reasonable time after avoidance, the buyer has bought goods in replacement or the seller has resold the goods, the party claiming damages may recover the difference between the contract price and the price in the substitute transaction as well as any further damages recoverable under article 74.
18. What excuses are available to a breaching party to justify its non-performance?
of the CISG states that,
1) A party is not liable for a failure to perform any of his obligations if he proves that the failure was due to an impediment beyond his control and that he could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences.
(2) If the party's failure is due to the failure by a third person whom he has engaged to perform the whole or a part of the contract, that party is exempt from liability only if:
(a) he is exempt under the preceding paragraph; and
(b) the person whom he has so engaged would be so exempt if the provisions of that paragraph were applied to him.
EVALUATION
Based on the case study of Mega Branch Industries (MBI), the rules for international sales as stipulated under the CISG achieve the dual aims i.e. the rules are certain enough to establish when a contract is formed yet flexible enough to cater for varied arrangement to the following extent:
1) Ample time is saved.
Since the rules for international sales are certain, defined and very clear, the definite result is the optimal usage of time. Since the objectives are known, time allotted to achieve these objectives is equally distributed and adjusted depending on situations. Otherwise, the time that will be used on achieving these objectives will exceed more than what is needed.
2) High quality service is maintained.
The CISG rules for international sales achieve its dual aims by helping improve the quality of contract management output. Without the rules, the contract management will be put into total disarray because of confusion.
3) Clarity of the contents and merits of the contract is maintained.
The CISG rules for international sales help achieve the dual aims in terms of making the content of the contract more concise and accurate. The stakeholders involved will have an easier time reaching an agreement because the approach will be direct to the point as specified by the defined rules and objectives. Without the rules, the content of the contract will be disorganized and difficult to understand (. 2001).
4) Unnecessary expenses and costs are prevented.
The CISG rules for international sales help achieve the dual aims in terms of helping to make the contract become more cost-effective. Expenses on unnecessary components of the contract can be avoided. Without the rules, the valid contract formation effort will result into a lacklustre spending that will bring forth no good results at all.
5) A sense of direction is established.
The CISG rules for international sales help achieve the dual aims in terms of providing a sense of direction by virtue of the establishment of the valid contract. The rules will provide the framework towards giving a sense of direction to the contract to be pursued by the stakeholders involved.
REFERENCES
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