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A contract may be silent on one or more issues because the parties

simply did not think of them during the negotiations. Provided that the

parties have agreed on the terms essential to the type of transaction

concerned, a contract will nonetheless have been concluded and the

missing terms will be supplied on the basis of Arts. 4.8 or 5.1.2. See

comment 1 on Art. 2.1.2. Quite different is the case dealt with in the

present article: here the parties intentionally leave open one or more

terms because they are unable or unwilling to determine them at the time

of the conclusion of the contract, and refer for their determination to an

agreement to be made by them at a later stage, or to a third person.

This latter situation, which is especially frequent in, although not

confined to, long-term transactions, gives rise in essence to two

problems: first, whether the fact that the parties have intentionally left

terms open prevents a contract from coming into existence and second,

if this is not the case, what will happen to the contract if the parties

subsequently fail to reach agreement or the third person fails to make

the determination.

Para. (1) states that if the parties intended to conclude a contract,

the fact that they have intentionally left a term to be agreed upon in

further negotiations or to be determined by a third person does not

prevent a contract from coming into existence.

In cases where it is not expressly stated, the parties’ intention to

conclude a contract notwithstanding the terms left open may be

inferred from other circumstances, such as the non-essential character

of the terms in question, the degree of definiteness of the agreement as

a whole, the fact that the open terms relate to items which by their

very nature can be determined only at a later stage, the fact that the

agreement has already been partially executed, etc.

I l l u s t r a t i o n

1. A, a shipping line, enters into a detailed agreement with B, a

terminal operator, for the use of B’s container terminal. The

agreement fixes the minimum volume of containers to be discharged

or loaded annually and the fees payable, while the fees for

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additional containers are left to be determined if and when the

minimum volume is reached. Two months later A learns that B’s

competitor would offer better conditions and refuses to perform,

claiming that the agreement with B never resulted in a binding

contract because the question of the fees had not been settled. A is

liable for non-performance because the detailed character of the

agreement as well as the fact that both A and B began performance

immediately indicate clearly that their intention was to enter into a

binding agreement.

If the parties are unable to reach agreement on the open terms or

the third person does not determine them, the question arises as to

whether or not the contract comes to an end. According to para. (2) of

this article the existence of the contract is not affected “provided that

there is an alternative means of rendering the term definite that is

reasonable in the circumstances, having regard to the intention of the

parties”. A first alternative exists whenever the missing term may be

supplied on the basis of Art. 5.1.2; if the parties have deferred the

determination of the missing term to a third person to be nominated by

an instance such as the President of the Tribunal, or of the Chamber of

Commerce, etc., it may also consist in the appointment of a new third

person. The cases in which a given contract may be upheld by

resorting to such alternative means will, however, be quite rare in

practice. Few problems should arise as long as the term to be

implemented is of minor importance. If, on the other hand, the term in

question is essential to the type of transaction concerned, there must be

clear evidence of the intention of the parties to uphold the contract:

among the factors to be taken into account in this connection are

whether the term in question relates to items which by their very

nature can be determined only at a later stage, whether the agreement

has already been partially executed, etc.

I l l u s t r a t i o n

2. The facts are the same as in Illustration 1, the difference being

that when the minimum volume of containers to be loaded or

unloaded is reached the parties fail to agree on the fees payable in

respect of the additional containers. A stops performing, claiming

that the contract has come to an end. A is liable for nonperformance,

since the fact that the parties have started performing

without making future agreement on the missing term a condition

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for the continuation of their business relationship is sufficient

evidence of their intention to uphold the contract even in the

absence of such agreement. The fees for the additional containers

will be determined according to the criteria laid down in Art. 5.1.7.