International contract law - website incorporation into contracts requires actual notice under the CISG.
The United Nations Convention on the International Sale of Goods (CISG) applies to contract formation and interpretation for certain international sale of goods transactions. (1) Upon a showing by both parties of mutual intent of exclusion, article 6 of the CISG allows contracting parties governed by the CISG to specifically exclude application of the CISG. (2) In Roser Technologies, Inc. v. Carl Schreiber GmbH, (3) the United States District Court for the Western District of Pennsylvania considered the inclusion of an exclusion contract term referenced by website link in a "battle of the forms" scenario, where the exchange of contrasting forms makes establishing contract formation uncertain. (4) The District Court held that when mutual intent to exclude has not been shown, as the website link did not incorporate the exclusion contract term into the contract, the court must undertake an analysis under the prevailing choice-of-law, the CISG. (5)
2013, Roser Technologies, Inc. (RTI), an American company, negotiated a contract with Carl Schrieber GmbH d/b/a CSN Metals (CSN), a German company, for the manufacture and sale of copper molding plates. (6) After two separate exchanges of forms, each exchange consisting of CSN quotation followed by RTI purchase order followed by CSN order confirmation, CSN notified RTI that RTI's credit line had been cut. (7) CSN then asked RTI to expedite payment or secure a letter of credit as an alternative payment option. (8) Claiming this demand evinced CSN's refusal to perform the contract and thus breached the contract, RTI then switched from CSN to an alternate supplier. (9) As a result, CSN then counterclaimed that RTI breached the contract by repudiation. (10)
The crux of the case related to which choice-of-law applied, whether German law, Uniform Commercial Code (UCC) or CISG. (11) RTI argued no choice-of-law existed because the UCC and CISG did not differ with respect to the issue before the court; CSN disagreed, saying a difference existed and CISG applied. (12) To examine the issue, the court performed an analysis of whether conflict exists as to the incorporation of CSN's standard conditions in the two different choice-of-law. (13) The court determined UCC section 2-207 differs in a significant manner from CISG articles 8 and 14 in that under UCC standard conditions become incorporated unless they would cause surprise or hardship to the other party, whereas under CISG articles 8 and 14 standard conditions become incorporated only when one party attempts to incorporate and the other party had reasonable notice of the attempted incorporation. (14) Finding a conflict, the court recognized CISG as controlling law since both Germany and the United States are contracting parties to the CISG. (15)
Despite asserting the CISG as controlling law, CSN supported the contention for inclusion of its standard conditions by relying on non-CISG case law, Citisteel USA v. General Electric Co., to suggest the standard for incorporation of CSN's website standard conditions of sale as objective, rather than subjective, intent. (16) The District Court disagreed, finding CSN's argument unpersuasive and citing U.S. CISG case law, Hanwha Corp. v. Cedar Petrochemicals, Inc., to demonstrate a preference for subjective intent, CSS Antenna, Inc. v. Amp hen ol-Tuchel Elecs., GmbH, to state the incorporation of homepage website references to be "ambiguous at best," and European CISG case law, the Tantalum powder case, to suggest applicable terms to a contract must be in the proposal of the party relying on them. (17) The court also cited other discrepancies in the "battle of the forms" as proof that opposing party RTI did not intend CSN's standard conditions to apply, as the RTI purchase orders contained contradictory details compared to the CSN order confirmation, including whether the orders were FOB destination or FOB origin, and whether payment became due within sixty or ninety days. (18) Lastly, the court found CSN's order confirmations stating that, "[i]f we have offered a payment target, a sufficient coverage by our credit insurance company is assumed. In case this cannot be obtained we have to ask for equivalent guarantees or payment in advance" to be a material term under Article 19 of the CISG, thereby making the order confirmations constitute not an acceptance but a counteroffer, a position consistent with CSN's argument. (19)
The swap of offer and counteroffer in the "battle of the forms"--where buyers and sellers exchange contrasting and often contradictory forms without agreement in forming a contract--has been recognized as one of the most difficult problems in contract law to resolve. (20) Adding to the difficulty, the CISG differs conceptually from both the common-law and UCC in approach. (21) Under common-law, an acceptance that added to or changed the term of the offer is deemed a rejection and counteroffer, with each form representing a counteroffer until the last one was accepted by conduct--the "last shot" rule. (22) By contrast, the UCC provides that "[a] definite and seasonable expression of acceptance ... operates as an acceptance even though it states terms additional to or different from those offered ..."--the "knock-out" rule, in which (when both parties are merchants) additional terms in the acceptance become part of the contract if expressly accepted by the offeror as long as the additional terms do not materially alter the contract, and the offeror does not object to the additional terms. (23) Taking a middle ground, the CISG operates, like common-law, as a version of the "last shot" rule, and as a "mirror image" in which "a reply to an offer which purports to be an acceptance but contains additions, limitations or other modifications is a rejection of the offer and constitutes a counter-offer" but softened by the proviso that if the additional terms are not material and the offeror does not object to them, then the purported acceptance is an acceptance and the additional or different terms become part of the contract. (24) In almost all cases, however, the CISG defines material terms so broadly that almost all terms can be classified as material. (25)
Given this challenge of varying law on an already vexing subject, United States courts in the main have looked to the UCC and domestic cases for guidance as to how to interpret the CISG and rarely reference international cases, with the justification that "virtually no case law on the Convention" exists. (26) Filanto, S.P.A. v. Chilewich International Corp. illustrates the extent to which a district court misapplied the CISG so as to render the ruling consistent with its own interpretation, an interpretation consistent with the UCC. (27) In Filanto, the point of contention became determining whether an arbitration clause, a material term under Article 19 of the CISG and purportedly excluded by Filanto, remained a part of the contract or not. (28) In the course of the negotiations Filanto, a manufacturer, had tried to limit a contract with one party, the "Russian
Contract," by returning a cover letter that sought to exclude all terms of the Russian Contract except those related to packing, shipment and delivery; a contract then became formed when the other party accepted delivery. (29) Ignoring the explicit statement of the CISG that "[s]ilence or inactivity does not in itself amount to acceptance," the court instead relied on the parties' prior course of dealing, a paradigmatic concept of the UCC. (30)
Such confusion of established U.S. case law and CISG principles extends to whether a CISG exclusion term can be found effective or not. (31) In a recent decision by a federal court, American Biophysics Corp. v. Dubois Marine Specialties, the court upheld a choice-of-law clause providing that the parties' agreement was to be "construed and enforced in accordance with the laws of the state of Rhode Island," a clause similar to the present case where "[s]upplies and benefits shall exclusively be governed by German law." (32) The application of laws on international sales of moveable objects and on international purchase contracts on moveable objects is excluded." (33) Adding to the challenge, the CISG requires courts to suspend traditional notions of contract enforcement and analysis by considering that, even when a written contract suggests the parties did not intend to exclude application of the CISG, further analysis must be performed to consider other evidence, oral or otherwise, showing the parties nonetheless intended to exclude the CISG. (34) Thus the CISG reflects a different legal philosophy suggesting written agreements should be viewed with skepticism. (35) Further, if the parties' actual intent, as opposed to the objective manifestation of intent as evidenced by the writing, can be determined, then the actual intent prevails over a contrary objective intent under the CISG. (36)
In Roser, (37) the United States District Court of the Western District of Pennsylvania considered whether an exclusion clause only referenced in a website link should be incorporated into a contract. (38) The court analyzed U.S. and European case law to narrowly interpret the requisite intent for incorporation of Article 8 of the CISG as subjective but requiring indicia of actual notice. (39) Evidence of actual notice includes clear language beyond a simple reference, the other party's actual knowledge of the attempted inclusion, discussion between the parties regarding incorporation, or evidence such as initials next to the attempted incorporation. (40) Even though the website link appeared on CSN's order confirmation, determined to be a counter-offer because of an additional material term regarding payment, the court found CSS Antenna persuasive in determining that the language describing the website was "ambiguous at best." (41) Given lack of foundational support for asserting a new incorporation by reference precedent, the court held that, without actual notice, website links did not constitute proper incorporation by reference in CISG jurisprudence. (42)
The precedent set in Roser abandons modern rules of contract formation and interpretation, returning contracting parties to a time before the UCC when the last party to send a form controlled the contract and contractual elements had to be expressly agreed to. (43) As the CISG automatically applies when parties are from signatory states and there are many key differences between the CISG and UCC for U.S. companies, the heavy presumption against opting out weighs as bias against non-European companies. (44) Tellingly, the court relies on a magic words interpretation of "[s]upplies and benefits shall exclusively be governed by German law" to note that there is no explicit reference of the CISG. (45) A deeper analysis would have been to understand that applying German law would require application of the CISG, while at the same time, pondering whether the intention was to apply German law per se or to not apply the CISG and list German law as a substitute. (45)
The Roser court also faced an awkward challenge because both parties had conflicted positions: CSN argued its standard conditions applied but not the CISG exclusion clause contained therein, and RTI argued that the CSN's standard conditions did not apply because the UCC and not CISG represented the correct choice-of-law. (47) By taking a conservative position to clarify the parties' positions, the court advanced a narrow interpretation of the CISG in which, despite the court's protestations, the U.S. cultural tradition of the primacy of the written word seemingly held supreme. (48) Thus the flexibility given in the CISG, "due consideration ... to all relevant circumstances of the case including the negotiations" was reduced to whether the language surrounding the website link had a reasonably clear and ascertainable meaning sufficient to put the other party on notice of intent to incorporate. (49)
Such carefulness in delineating clear versus unclear intent to incorporate standard conditions in a website seems shocking in the current era of browser and click-through licenses. (50) To note that the court only found one example of a CISG case referencing a website in the literature on international trade as governed by the CISG suggests the judiciary lacks comprehension of the modern computer age. (51) Some reasonable compromise between business efficiency and legal correctness must surely exist; to assert, as the Roser court's conclusion would have one believe, that every element of every form must be carefully negotiated and approved without recourse to shorthand techniques, would appear antithetical to the promised legal cost savings of the CISG. (52)
The finding that an unclear electronic incorporation by reference might be incorporated into the final contract represents a large step for a court, even given the time pressure exigencies of the modern age. (53) However, parties have a need to transact international business efficiently and sometimes with little regard as to how, and under which law, a contract might be found and interpreted. (54) By interpreting the CISG narrowly and within the limited confines of a few key cases, the Roser court held their analysis to a superficial level. (55) A deeper consideration may have given them the courage to embrace more fully the demands in contract law and philosophy of our current technological age. (56)
(1) See United Nations Convention on Contracts for the International Sale of Goods, April 11, 1980, 52 Red. Reg. 6262, 1480 U.N.T.S. 3 [hereinafter CISG].
(2) See CISG art. 6 (outlining when CISG may be excluded when forming contracts). CISG Article 6 provides that "[t]he parties may exclude the application of this Convention, or subject to article 12, derogate from or vary the effect of any of its provisions." Id. at art. 6. Article twelve of the CISG states:
Any provision of article 11, article 29 or Part II of this Convention that allows a contract of sale or its modification or termination by agreement or any offer, acceptance or other indication of intention to be made in any form other than in writing does not apply where any party has his place of business in a Contracting State which has made a declaration under article 96 of this Convention. The parties may not derogate from or vary the effect of this article.
Id. at art. 12. Note that when the parties include a choice-of-law clause that selects a jurisdiction within the United States or is a country that is another party to the CISG, then the CISG is applicable as the law of the selected jurisdiction. See William P. Johnson, Understanding Exclusion of the CISG: A New Paradigm Of Determining Party Intent, 59 BUFF. L. REV. 213, 223 (2011). This occurs even though the objective understanding of the choice-of-law clause might be that choosing the law of a party to the CISG means choosing the CISG, the drafters might have had an implicit intent to exclude the CISG. Id. at 226. During the drafting of the CISG a small minority of representatives from the Canadian delegation proposed such a view in amendments, with the result that the amendments were overwhelmingly rejected. Id. at 227. The basis of the rejection was based in part on the principle that the CISG after ratification becomes part of the national laws of that country. Id. Thus, the travaux preparatoires demonstrate that a choice-of-law clause should not automatically exclude the CISG. Id. at 228. In the United States the CISG is a treaty signed by the executive on behalf of the United States and ratified by the U.S. Senate in accordance with Article II of the U.S. Constitution. Id. at 225. Under the U.S. Constitution, all treaties under the authority of the United States represent the supreme law of the land. U.S. CONST. art. VI. Article VI provides in relevant part: "This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary Notwithstanding." Id.
(3) 81 U.C.C. Rep. Serv. 2d 693 (W.D. Pa. 2013).
(4) See id. at 7 (explaining court's reasoning for rejection of website incorporation). See John Murray, The Chaos of the Battle of the Forms: Solutions, 39 VAND. L. REV. 1307 (1986) (characterizing "battle of the forms" as "chaos"); see also John Murray, The Definitive "Battle of the Forms": Chaos Revisited, 20 J.L & COM. 1, 47 (2000) (affirming same opinion); see also John Honnold, Uniform Law of International Sales Under the 1980 United Nations Convention 228 (3rd ed. 1999), available at http://www.cisg.law.pace.edu/cisg/biblio/honnold.html (articulating challenges of "battle of the forms"). "Legal science has not yet found a satisfactory way to decide what the parties have agreed when they have consummated a transaction on the basis of the routing exchange of inconsistent terms." Id.
(5) See Roser, 81 U.C.C. Rep. Serv. 2d 693 at 7 (detailing how attempted exclusion is ineffective). The Roser court listed multiple grounds for the exclusion to be ineffective, including that the attempted exclusion did not explicitly reference the CISG. Id. The attempted exclusion also excluded on the basis of "moveable objects" a term not found in the CISG. Id. Most importantly, the standard conditions containing the attempted exclusion were determined not to be a part of the contract. Id. at 8-9.
(6) See id. at 1 (describing contractual negotiations as a standard swap of quotation, purchase order and order confirmation). The parties to the contract were in different states as required by Article 1(2) of the CISG. Id. at 6. RTF had a place of business at Titusville, Pennsylvania USA and CSN had a place of business at Neunkirchen, Germany. Id. The United States ratified the CISG on December 11, 1986. Id. Germany is also a contracting state to the CISG. Id.
(7) See id. at 2 (outlining factual events of contractual negotiations). By credit line cut, the inference is that RTI no longer had credit and would have to pay in some alternate means. Id. CSN informed RTI of three possible choices: payment in advance, L/C (letter of credit), or partial shipments in which the second shipment would leave as soon as the first one was paid for. Id. As the facts of the case reveal, apparently RTI found all of these choices unpalatable. Id.
(8) See id. at 2 (detailing CSN's openness to maintaining contract by other means).
(9) See id. at 9 (explaining RTI's decision to switch suppliers). The facts of the case do not suggest the actual motive for RTI's decision to abandon CSN as a supplier. Id. If the decision was purely a financial one, the implication would be that RTI would have similar financial problems with a new supplier. Id.
(10) See id. at 1 (stating CSN filed a counterclaim for RTI breach of contract by repudiation). The court found RTI's repudiation clear. Id. at 12. RTI sent a letter to CSN refusing to perform. Id. RTI later sent an email cancelling the order "due to CSN's inability to conform to RTIs terms listed on the P.O.'s." Id. CSN responded it did not accept the cancellation. Id. RTI then sent a follow-up letter and another letter relating to a cancellation of the purchase orders. Id. The Roser court found RTI repudiated the contract and therefore was in material breach in consideration of Article 71 of the CISG. Id. Article 71 of the CISG provides that: "A party may suspend the performance of his obligations if, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of his obligations as a result of ... his conduct in preparing to perform or in performing the contract." Id.
(11) See Roser, 81 U.C.C. REP. SERV. 2D 693 at 7 (deciding what body of law to apply to contract terms). Notably, RTI argued that "CSN can't create a scenario where the CISG applies" while at the same time maintaining CSN's standard conditions were not part of the contract. Id. at 7-8. CSN's standard conditions contained a putative CISG exclusion clause and so the inclusion of the standard conditions would theoretically lead to the application of German law. Id. at 7; but see supra note Error: Reference source not found and accompanying text (detailing how application of German law would have led to CISG). CSN argued its standard conditions did apply but that the exclusion was ineffective and CISG remained the correct choice-of-law. Id. at 8.
(12) See id. at 3 (stating RTI argued no choice-of-law issue). The UCC and CISG do not differ in their approach to the "battle of the forms." Id. RTI argued its purchase orders were offers and so the material terms in CSN's forms would not be included under either the UCC or CISG. Id. at 8. The court ultimately disagreed with this characterization. Id. at 12; see generally Maria del Pilar Perales Viscasillas, "Battle of the Forms" Under the 1980s United Nations Convention on Contracts for the International Sale of Goods: A Comparison With Section 2-207 UCC And The UNIDROIT Principles, 10 PACE INT'L L. REV. 97 (1998) (contrasting generally CISG to UCC).
(13) See id. at 3-7 (delineating Roser court's analysis).
(14) See id. (considering impact of UCC or CISG choice-of-law). The court found the determinant for whether standard conditions are incorporated under the UCC to be whether incorporation would result in surprise or hardship. Id. at 6. As provided by Article 19(1) of the CISG, "A reply to an offer which purports to be an acceptance but contains additions, limitations or other modifications is a rejection of the offer and constitutes a counter-offer." CISG art. 19(1). To determine notice under the CISG, the Roser court cited to Article 8 of the CISG. Roser, 81 U.C.C. REP. SERV. 2D 693 at 8. Article 8 of the CISG provides that: "For the purposes of this Convention statements made by and other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware of what that intent was." CISG art. 8(1). The Roser court found the determinants of actual notice to comprise clear language beyond a simple reference, actual knowledge of the other party of the attempted inclusion, discussion between the parties regarding incorporation or evidence such as initials next to the attempted incorporation. Roser, 81 U.C.C. REP. SERV. 2D 693 at 9. Similarly, Article 14 of the CISG provides that: "A proposal for concluding a contract addressed to one or more specific persons constitutes an offer if it is sufficiently definite and indicates the intention of the offeror to be bound in case of acceptance. CISG art. 14. A proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and price." Id. at art. 14(1); see also Precision Pine & Timber, Inc. v. U.S., 596 F.3D 817 (Fed. Cir. 2010) (citing language of contract insufficiently clear to incorporate provisions of Endangered Species Act); see also Logan & Kanawha Coal Co., LLC v. Detherage Coal Sales, LLC, 2012 WL 171375 (S.D. W. Va. 2012) (finding no incorporation by reference of arbitration clause); see also Kilgallen v. Network Solutions, Inc. 99F. Supp. 2d 125 (D. Mass. 2000) (holding decision to accept electronic clause enforceable if opportunity to see available); see also Gilles Cuniberti, Is the CISG Benefiting Anybody?, 39 VAND. J. TRANSNAT'L L. 1511 (2006) (arguing differences between UCC and CISG remove competitive advantage of CISG).
(15) See supra note Error: Reference source not found and accompanying text (detailing United States and Germany as signatories to CISG and therefore bound by its provisions).
(16) See id. at 8 (demonstrating CSN's reliance on objective intent to incorporate the standard conditions by website reference); see also Citisteel USA, Inc. V. Gen. Elec. Co., 78 F. APP'X 832 (3d Cir.2003). CSN relied on the Delaware law Citisteel case to suggest that "reliance...on subjective intent is misplaced." Id. at 836 n.6 as cited in Roser, 81 U.C.C. REP. SERV. 2D 693 at 8. If objective intent were the standard, the website reference should incorporate the standard conditions of the quotation. Id.
(17) See Roser, 81 U.C.C. REP. SERV. 2D 693 at 8 (countering CSN's suggestion of objective intent as standard); see also Hanwha Corp. v. Cedar Petrochemicals, Inc., 760 F.SUPP.2D 426, 430 (S.D.N.Y.2011); see also CSS Antenna, Inc. v. Amp hen ol-Tuchel Elecs., GmbH, 764 F.SUPP.2D 745 (D.Md. 2011); see also Oberster Gerichtshof [OGH] Tantalum Powder Case (Dec. 17, 2003), available at http://cisgw3.law.pace.edu/cases/031217a3.html.
(18) Roser, 81 U.C.C. Rep. Serv. 2d 693 at 8 (providing additional evidence as to why RTI did not intend standard conditions to apply to contract). Specifically, the purchase orders stated FOB destination whereas CSN's standard conditions state that orders are FOB origin. Id. The quotations state payment due within ninety days whereas the purchase orders state payment due within sixty days. Id.
(19) Id. at 9-10 (stating payment target language in CSN's order confirmations material under CISG Article 19). CISG Article 19(3) provides that material terms are: "[a]dditional or different terms relating among other things to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party's liability to the other or the settlement of disputes are considered to alter the terms of the offer materially." CISG art. 19(3); but see CLOUT Case No. 50 [Landericht Baden-Baden, Germany, 14 Aug. 1991]. Despite the clear language in CISG Article 19(3), additional terms in a contract requiring notification of a defect have been held to be part of a contract because the offer had not been materially offered. Id.; see also OLG Hamm, 22 September 1992 (Germany) (considering when offer said "Sacekn" and counter-offer "losen" is material); LG Giessen, 222 December 1992 (Germany) (considering advance payment request material change); Camara Nacional de adelacions en lo Comercial, 14 October 1993 (Arg.) (considering forum selection clause material).
(20) See CSS Antenna, Inc. v. Amphenol-Tuchel Electronics, GmbH, 764 F.Supp.2d 745 (D.Md.2011) (relating difficulty of resolving offers and counter-offers under CISG 19). The court held that where buyer sent a purchase order to seller that was an offer, but when seller sent back a purchase confirmation form which included a reference to seller's General Conditions that was not an acceptance because the General Conditions included terms, such as a forum selection clause, that materially altered buyer's offer, and thus constituted a counteroffer. Id; see also Hanwha Corp. v. Cedar Petrochemicals, Inc., 760 F. Supp. 2d 426 (S.D.N.Y. 2011) (finding no contract when disagreement over choice-of-law and non-binding); but see BTC-USA Corp. v. Novacare, 2008 WL 2465814 (D. Minn. 2008) (noting parties initialing of written document containing forum selection clause indicated agreement); Riccitelli v. Elemar New England Marble and Granite, LLC, 2010 WL 376711 (D. Conn. 2010) (recognizing material issue of fact regarding whether contract was formed based on parties course of conduct); Miami Valley Paper, LLC v. Lebbing Engineering & Consulting Gmbh, 2009 WL 818618 (S.D. Ohio 2009) (acknowledging material issue of fact of contract terms); Norfolk Southern Ry. Co. v. Power Source Supply, Inc., 2008 WL 2884102, 66 U.C.C. Rep. Serv. 2d 680 (W.D. Pa. 2008) (holding under CISG Article 19 disclaimers of implied warranty were part of contract); Golden Valley Grape Juice and Wine, LLC v. Centrisys Corp., 2010 WL 347897 (E.D. Cal. 2010) (identifying sales quote included terms so forum selection clause was part of enforceable agreement of parties); Solae, LLC v. Hershey Canada, Inc., 557 F. Supp. 2d 452 (D. Del. 2008) (highlighting oral contract followed by subsequent purchase order containing forum selection clause changed subsequent conduct of parties).
(21) See Honnold, supra note Error: Reference source not found at 228 (pronouncing dissatisfaction with UCC 2-207). He also states "UCC 2-207 tried to go further and, in effect, force through a marriage when the couple is quarreling at the altar. Personally I think the Convention's restraint is preferable." Id; see also Symposium on International Sale of Goods Convention, The New Uniform Law for International Sales and the UCC: A Comparison,The Int'l Lawyer, 26 (1984). Professor Honnold here dismisses "last shot" theories as casuistic and unfair. Id.; but see E. Allen Farnsworth, Formation of Contracts, in N.M. GALSTON AND H. SMIT, INTERNATIONAL SALES: THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS (1984) (indicating solution provided Convention is sensible but conservative). In practice, challenges also arise. Omri Ben-Shahar, An Ex-Ante View of the Battle of the Forms: Inducing Parties to Draft Reasonable Terms, 25 INT'L REV. L. & ECON. 350 (2005) (relating how in practice battles of forms do not receive uniform treatment). In actual cases, courts sometimes refuse to apply the last-shot rule of the CISG and instead apply the knockout rule. Id. This defiance occurs when domestic law typically utilize a version of the knockout rule, such as in U.S. and German courts. Id; see, e.g., Chateau Des Charmes Wines Ltd. v. Sabate USA Inc., 328 F. 3rd 528 (9th Cir. 2003) (employing knockout rule). In Germany, the Supreme Court held that "where the CISG applies ... according to the (probably) prevailing opinion, partially diverging general terms and conditions become an integral part of the contract (only) so far as they do not contradict each other; the statutory provisions apply the rest." VIII ZR 304/00 (English translation in http://www.cisg.law.pace.edu/cisg/wais/db/cases2/020109g1.html); see also Peter Schlechtriem, Battle of the Forms in International Contract Law (English translation in http://www.cisg.law.pace.edu/cisg/biblio/schlechtriem5.html).
(22) See Hyde v. Wrench, 3 Beav. 334, 6 E. R. C. 139 (employing rigid interpretation of mirror-image rule); Butler Machine Tool Co. Ltd. v. Ex-Cell-O Corporation (Endland) Ltd 1All E.R. 965, (1979) (standing as more modern approach). These cases represent the traditional view of the knock-out rule. Id.; see also Peter Winship, International Sales Contracts Under the 1980 Vienna Convention, 17 UCC.L.J. 68 (1984) (holding similarity between CISG Vienna Convention and Restatements). Section 59 Restatement (Second) of Contracts is equivalent to article 19(1) CISG as it has the principle of the exact identity in the offer and acceptance terms: "A reply to an offer which purports to accept it but is conditional on the offeror's assent to terms additional to or different from those offered is not an acceptance but is a counter-offer." Id. (citing to Restatement (Second) of Contracts 59 (1995)).
(23) See James J. White, Contracting Under Amended 2-207, 723, 729 WISC. L. REV. (2004) (characterizing explanation as oversimplification of [section] 2-207's language but consistent with practice followed by most courts). Under amended 2-207 the scope of the knockout rule is strengthened and no precedence accrues by virtue of timing, "the second record has the same power as the first." Id.
(24) See Louis F. Del Duca, Implementation Of Contract Formation Statute Of Frauds, Parol Evidence, And Battle Of Forms CISG Provisions in Civil and Common Law Countries, 25 J.L. & COM. 133, 144-145 (2005) (remarking how CISG article 19(2) acts to soften "apparent absolute negation" of counteroffer approach). Del Duca relates how the CISG by implication adopts an "expression of acceptance" type approach. Id. The CISG does not explicitly address the "battle of the forms" problem, unlike the UCC, and so recourse can be had to general principles of the CISG and international law. Id. at 146. CISG article 7(2) provides that, "[q]uestions 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." CISG art. 7(2).
(25) See supra note Error: Reference source not found and accompanying text (discussing criteria for materiality of material terms).
(26) See Roser, 81 U.C.C. Rep. Serv. 2d 693 at 4 (stating that "Few American courts, either state or federal, have interpreted Article 19). The lack of U.S. case law interpreting and applying the CISG has been routinely noted by the courts. Id.; Miami Valley Paper, LLC v. Lebbing Eng'g & Consulting Gmbh, 1:05-CV-00702, 2009 WL 818618 (S.D. Ohio Mar. 26, 2009) (acknowledging case law interpreting and applying CISG is sparse); Forestal Guarani, S.A. v. Daros Int'l, Inc., 613 F.3d 395 (3d Cir. 2010) (finding few U.S. decisions interpret Convention despite two decade existence of CISG). In 2009 there were thirteen opinions that recognized application or analyzed the CISG in some manner. Id.; William P. Johnson, U.N. Convention on Contracts for the International Sale of Goods, 44 INT'L. L. 238, 239-40 (2010) (relating opinions employing CISG).
(27) Filanto, S.P.A. v. Chilewich International Corp, 789 F. Supp. 1229 (S.D.N.Y. 1992) (demonstrating challenges of understanding the CISG). In Filanto, the court seemingly overlooked CISG 18(1) which states that "silence or inactivity does not in itself amount to acceptance." CISG art. 18(1); see also Gary Kenji Nakata, Filanto S.P.A. V. Chilewich Int'l Corp.: Sounds Of Silence Bellow Forth Under The CISG's International Battle Of The Forms. 7 TRANSNAT'L L. 141 (1994) (critiquing court's holding). As the first U.S. case to interpret the CISG, the findings of Filanto were especially analyzed. Id. at 141.
(28) See Nakata, supra note 27, at 158-59. Nakata implies that the Filanto court interpretation is based on the UCC 2-207-1, which states:
A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
Id. at 151 (citing to UCC art. 2-207(1)). But see CISG 18(2) (stating acceptance is not effective if indication of assent does not reach offeror within reasonable time).
(29) See Nakata, supra note 27, at 153-54 (detailing facts of Filanto case).
(30) See Nakata, supra note 27, and accompanying text (explaining UCC reasoning of time lapse and assent guided decision).
(31) See Johnson, supra note 2, and associated comments (opining on
difficulty of applying CISG in American courts). Johnson holds the influence of the UCC imposes a special difficulty for interpreting the CISG in the United States. Id. at 248; see also Chateau des Charmes Wines Ltd. v. Sabate USA Inc., 238 F.3d 5218, 531 n.3 (9th Cir. 2003) (noting different outcome under the CISG then appropriate under UCC art. 2); Miami Valley Paper, LLC v. Lebbing Eng'g & Consulting GMBH, No. 1:05-CV-00702, at *4-5 (S.D. Ohio Mar. 26, 2009) (noting several critical differences between law governing contract formationand CISG"); Barbara Berry, S.A. de C.V. v. Ken M. Spooner Farms, Inc., 254 F. App'x 646, 647 (9th Cir. 2007) (reversing district court's grant of summary judgment after error in not applying CISG).
(32) Johnson, supra note 2, at 215-16 (comparing choice-of-law clauses).
(33) Am. Biophysics Corp. v. Dubois Marine Specialties, 411 F. Supp. 2d 61, 62-64 (D.R.I. 2006) (holding Rhode Island choice-of-law term sufficient to exclude CISG)
(34) See Johnson, supra note 2, at 215-16 (opining U.S. courts ineluctably guided by traditional notions of contract law). Johnson holds American Biophysics out as the clearest example of misinterpretation by the courts. Id. at 230. The court relied on CISG Article 6 to derogate to Rhode Island law and critically found this sufficient to exclude application of the CISG. Id. By reviewing the cases relied on by American Biophysics, Johnson concludes each of the language cited by the court is not part of the holding and should not have been relied upon. Id.
(35) See Johnson, supra note 2, at 282-83 (stating subjective intent prevails over objective intent when applicable). A proper framework for CISG contract formation includes a robust written agreement to avoid turning to extrinsic evidence, a well-drafted choice-of-law clause, a clear merger clause, and the avoidance of activity contrary to the terms of the written agreement. Id. at 288-89.
(36) See Johnson, supra note 2, at 290-91 (maintaining addition of parole evidence to determine subjective intent).
(37) 81 U.C.C. Rep. Serv. 2d (West) 693.
(38) See id. at *8-*9 (considering whether website link incorporates standard conditions); supra note 16 (analyzing incorporation by reference through lens of subjective intent). But see Citisteel USA, Inc. v. Gen. Elec. Co., 78 F. App'x 832, 836 n.6 (3d Cir. 2003) (stating reliance on subjective intent misplaced in contract law formation).
(39) Roser, 81 U.C.C. Rep. Serv. 2d (West) 693, at *9 (analyzing U.S. and European law with regard to intent for incorporation).
(40) See id. at *12 (listing examples of actual notice sufficient for incorporation of contested term); supra note Error: Reference source not found (identifying relevant statutes for notice in CISG as Article 8 and Article 14); supra note Error: Reference source not found (countering CSN's suggestion of objective intent as standard).
(41) See Roser, 81 U.C.C. Rep. Serv. 2d (West) 693, at *9 (explaining language surrounding website link in CSS Antenna ambiguous for incorporation).
(42) See id. at *9 (finding CSS Antenna persuasive with regard to incorporation of standard conditions); Roser, supra note Error: Reference source not found, and accompanying text (finding incorporation in both common law and CISG when language intending incorporation sufficiently clear).
(43) See Viscasillas, supra note Error: Reference source not found, at 116 (deeming battle of forms arbitrary and favoring last person to send form). Viscasillas also criticizes the "last shot" method as too mechanical and formal in application. Id. at 117. However, Viscasillas finds that European case law has sufficiently relaxed the mirror image rule to allow a difference between material and non-material terms. Id.
(44) See Johnson, supra note Error: Reference source not found, at 253 (noting selecting "Uniform Commercial Code" choice-of-law evinces only implied exclusion of CISG). Even when both parties have choice-of-law selecting law other than CISG, courts hold the respective standard forms inadequate to opt out of CISG. Id. at 253-54
(45) See Roser, 81 U.C.C. Rep. Serv. 2d, at *7 (explaining exclusion of CISG must contain words specifically referencing CISG); CISG, supra note Error: Reference source not found and accompanying text (positing national law of signatory parties to Convention perforce mandates CISG application).
(46) See Roser, 81 U.C.C. Rep. Serv. 2d, at 7-9 (evaluating inclusions of standard conditions). The court's ruling might lead to the inference that RTI maintained the weaker position, relying neither on the standard conditions with the exclusion or case law but rather relying solely on argument to support UCC as choice-of-law. Id. at 7, 12.
(47) Id. at 7-9 (offering both parties inconsistent positions). The court thus had to find a reasoned position relying on the evinced intent of the parties and European and American case law analyzing the CISG. Id. at 4-10. In particular, the court in interpreting the treaty took care to address the holdings of American court decisions, the courts of other nations and commentaries. Id. at 5.
(48) Id. at 9 (finding website reference ambiguous in light of holding from CSS Antenna). The court failed to elucidate what difference would have made the reference clear and whether clarity would have indicated actual notice. Id.; see also supra note Error: Reference source not found and accompanying text (illustrating case law examples of incorporation by reference and requisite clarity).
(49) See Roser, 81 U.C.C. Rep. Serv. 2d., at n.8 (citing to CISG Article 8(3)). The court mentioned typically further discovery would be appropriate; however, the parties agreed no further documents would aid in the Court's determination. Id. at 9. The court therefore relied only on the documents in front of it. Id.
(50) See Kilgallen, 99 F. Supp. 2d., supra note Error: Reference source not found (referring to electronic world's assent to contract and its free availability to terms were sufficient). In Kilgallen, the court found a forum selection clause in an electronic renewal notice for domain name enforceable even though the party claimed to have never scrolled to the information. Id. The court suggested this represented the plaintiff's decision to accept the defendant's offer without taking minimal steps necessary to ascertain terms and conditions of the offer. Id.
(51) See Roser, 81 U.C.C. Rep. Serv. 2d., at 9 (relying solely on CSS Antenna).
(52) See Cuniberti, supra note Error: Reference source not found and accompanying text (arguing how theories of CISG increased legal certainty and decreased transaction costs not proven historically accurate). In a survey of 181 court decisions and arbitral awards applying the CISG, international buyers and sellers were found mostly not to address the issue of law. Id. at 1511. The expected benefits of the CISG from the international harmonization therefore appears to be of minimal benefit. Id.
(53) See Murray, supra note Error: Reference source not found (characterizing battling forms of contracting as "chaos").
(54) See generally Honnold, supra note Error: Reference source not found (describing challenges with battling forms of contracting).
(55) See generally Roser, 81 U.C.C. Rep. Serv. 2d., (describing how Roser narrowly interpreted CISG).
(56) See generally Viscasillas, supra note Error: Reference source not found (contrasting generally CISG and UCC).
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|Title Annotation:||Nations Convention on Contracts for the International Sale of Goods|
|Publication:||Suffolk Transnational Law Review|
|Article Type:||Case note|
|Date:||Mar 22, 2014|
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