Ingeborg Schwenzer

Old Habits Die Hard : traditional Contract Formation in a Modern World

Part II of the United Nations Convention on Contracts for the International Sale of Goods (“CISG” or “the Convention”), which consists of Articles 14 to 24, contains provisions regulating the formation of contract. Further provisions concerning contract formation are found in Articles 11 to 13 CISG concerning the principle of freedom from requirements as to form in commercial transactions and its limitations, as well as in Article 29 CISG, which regulates the possibility of modification or mutual termination of a contract. All these provisions, however, only set forth a scheme for determining the parties’ objective agreement by means of offer and acceptance. Important areas of contract formation are not dealt with in the CISG. One of these areas is the law of agency. Another area which is outside the scope of the Convention concerns the validity of the contract or any of its terms, including standard terms (Article 4(a) CISG). Whether a contract is void or voidable by vitiated consent, misrepresentation, fraud, lack of or limited legal capacity, or illegality, or whether a certain term can be regarded as abusive, are all questions left to be answered by the applicable domestic law. The UNIDROIT Principles of International Commercial Contracts (2004), however, address some of these questions and, most notably in international arbitration, may be used to complement the CISG in this regard. A difficult question is whether precontractual duties fall within the scope of the CISG. At the Vienna Conference, a proposal by the former German Democratic Republic to include a general liability for culpa in contrahendo was explicitly rejected. Thus, in general, this complex issue is left to the applicable domestic law. Nevertheless, certain precontractual duties to provide the other party with information during the negotiation process, especially with respect to the conformity of the goods, can be derived from principles of the Convention itself. Moreover, the CISG addresses the problems of breaking off negotiations and preventing the formation of contract exhaustively. As the CISG was drafted in the 1970s, questions which nowadays dominate contract formation, namely the exchange of electronic communication, were simply not contemplated in the drafting process of the Convention. However, the rules of the Convention have proven flexible enough to encompass the modern forms of communication. Today, there are two international sets of rules which may complement the provisions of the CISG in this regard, namely the United Nations Convention on the Use of Electronic Communications in International Contracts, which is now open for signature, and the ICC eTerms 2004. In this paper, the questions raised by electronic contracting will be dealt with in conjunction with the relevant CISG provisions. Due to historical reasons, the CISG follows the traditional nineteenth century approach to contract formation by two distinct declarations of intent, offer and acceptance. However, the reality of international sales contracts is rarely as simple as this. By contrast, the situation is often much more complex. Negotiations usually take a long time and agreement is reached step by step. In such a situation, one cannot single out certain declarations as offer and acceptance. Nevertheless, the CISG still governs the process of contract formation in these situations, as the core principle of substantive consensus is able to generate appropriate solutions. The CISG also appears to be rather traditional in another respect. The rules are orientated towards simple sales contracts, a mere exchange of money for goods. However, international

The Word is not Enough - Arbitration, Choice of Forum and Choice of Law Clauses Under the CISG

Form requirements particularly for arbitration clauses are widely perceived as an obstacle for efficiently resolving disputes on an international level. The paper discusses recent suggestions that the freedom of form principle under Art. 11 CISG extends to arbitration, forum selection or choice of law clauses in international sales contracts and thus supersedes any and all formal requirements in this regard. The authors establish that said clauses indeed are generally within the CISGs scope of application and that, consequently, questions of contract conclusion, interpretation, and remedies for breach of these clauses are governed by the CISG. Freedom of form under the CISG, however, was neither intended to nor should it apply to arbitration, forum selection or choice of law clauses. This result is further confirmed by the interplay of the CISG with other international conventions, first and foremost the 1958 New York Convention, as well as a careful analysis of the so called most-favourable-law-approach. The recent aim to do away with form requirements for arbitration, forum selection or choice of law clauses can thus not be reached by taking a detour to the CISG, but only by directly abolishing or adjusting these form requirements.