5. Revocation

In its Art. 16(1) the CISG takes a middle ground between the principle of free revocability as is known in many common law jurisdictions and the principle of a binding offer known in many civil law jurisdictions:

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

Thus, the general rule is that an offer is freely revocable. However, once the offeree has dispatched its acceptance, the offeror is bound to its offer. Furthermore, by way of exception an offer can also be irrevocable under Art. 16(2):

(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

As can be taken from the wording of lit. a and is also confirmed by the drafting history, fixing a time for acceptance can merely be an indication and thus creates a rebuttable presumption that the offer is irrevocable (disputed). Clearer indications are phrases like “firm offer” or “fest” or – at least as concerns particular trades via Art. 9 – “option” or “guarantee”. In case of doubt, an interpretation according to Art. 8 is required.

Art. 16(2) continues:

(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.

Under this provision an offer is irrevocable if the offeror has either itself induced or at least become aware of circumstances leading to reasonable reliance in its offer to be irrevocable on the part of the offeree and the latter took action based on this reliance. Examples for circumstances in which reliance of the offeree is reasonable include situations in which the offeree has made clear to the offeror that it has a substantial interest in being able to rely on the offer, e.g. due to its own delivery obligations towards third parties, or situations in which assessing the offer in order to decide whether or not to accept it in itself takes significant financial effort.

Acts based on this reliance can for example be starting the production process, hiring additional personnel, or procuring or negotiating for necessary raw materials. Acting in that sense also includes omissions like deviating from one’s usual practice by not searching for alternative offers.

If a revocable offer is revoked it can no longer be accepted and thus cannot result in a contract. Making use of this possibility given by the CISG cannot lead to damage claims under domestic law (e.g. via the civil law notion of culpa in contrahendo) since the CISG exhaustively regulates the consequences of the revocation of an offer. If on the other hand an irrevocable offer is revoked it can still be accepted and result in a binding contract. In case the offeror keeps relying on its ineffective revocation in order to escape its duties under the contract this behavior forms an anticipatory breach of contract and the offeree can exercise its rights under Art. 72. Again, there is no room for damage claims based on domestic law.

Last modified: Monday, 19 September 2016, 4:35 PM