MANNER OF FORMATION : OFFER AND ACCEPTANCE

UNIDROIT PRINCIPLES OF INTERNATIONAL COMMERCIAL CONTRACTS FORMATION

ARTICLE 2.1.1

(Manner of formation)

A contract may be concluded either by the acceptance of an offer or by conduct of the parties that is sufficient to show agreement.

COMMENT

1. Offer and acceptance

Basic to the Principles is the idea that the agreement of the parties

is, in itself, sufficient to conclude a contract (see Art. 3.2). The

concepts of offer and acceptance have traditionally been used to

determine whether, and if so when, the parties have reached

agreement. As this article and this chapter make clear, the Principles

retain these concepts as essential tools of analysis.

2. Conduct sufficient to show agreement

In commercial practice contracts, particularly when related to

complex transactions, are often concluded after prolonged negotiations

without an identifiable sequence of offer and acceptance. In such cases

it may be difficult to determine if and when a contractual agreement

has been reached. According to this article a contract may be held to

be concluded even though the moment of its formation cannot be

determined, provided that the conduct of the parties is sufficient to

show agreement. In order to determine whether there is sufficient

evidence of the parties’ intention to be bound by a contract, their

Formation Art. 2.1.2

35

conduct has to be interpreted in accordance with the criteria set forth in

Art. 4.1 et seq.

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

1. A and B enter into negotiations with a view to setting up a

joint venture for the development of a new product. After

prolonged negotiations without any formal offer or acceptance and

with some minor points still to be settled, both parties begin to

perform. When subsequently the parties fail to reach an agreement

on these minor points, a court or arbitral tribunal may decide that a

contract was nevertheless concluded since the parties had begun to

perform, thereby showing their intention to be bound by a contract.

3. Automated contracting

The language of this article is sufficiently broad to cover also cases

of so-called automated contracting, i.e. where the parties agree to use

a system capable of setting in motion self-executing electronic actions

leading to the conclusion of a contract without the intervention of a

natural person.

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

2. Automobile manufacturer A and components supplier B set up

an electronic data interchange system which, as soon as A’s stocks

of components fall below a certain level, automatically generates

orders for the components and executes such orders. The fact that

A and B have agreed on the operation of such a system makes the

orders and performances binding on A and B, even though they

have been generated without the personal intervention of A and B.

ARTICLE 2.1.1

(Manner of formation)

A contract may be concluded either by the

acceptance of an offer or by conduct of the

parties that is sufficient to show agreement.

COMMENT

1. Offer and acceptance

Basic to the Principles is the idea that the agreement of the parties

is, in itself, sufficient to conclude a contract (see Art. 3.2). The

concepts of offer and acceptance have traditionally been used to

determine whether, and if so when, the parties have reached

agreement. As this article and this chapter make clear, the Principles

retain these concepts as essential tools of analysis.

2. Conduct sufficient to show agreement

In commercial practice contracts, particularly when related to

complex transactions, are often concluded after prolonged negotiations

without an identifiable sequence of offer and acceptance. In such cases

it may be difficult to determine if and when a contractual agreement

has been reached. According to this article a contract may be held to

be concluded even though the moment of its formation cannot be

determined, provided that the conduct of the parties is sufficient to

show agreement. In order to determine whether there is sufficient

evidence of the parties’ intention to be bound by a contract, their

Formation Art. 2.1.2

35

conduct has to be interpreted in accordance with the criteria set forth in

Art. 4.1 et seq.

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

1. A and B enter into negotiations with a view to setting up a

joint venture for the development of a new product. After

prolonged negotiations without any formal offer or acceptance and

with some minor points still to be settled, both parties begin to

perform. When subsequently the parties fail to reach an agreement

on these minor points, a court or arbitral tribunal may decide that a

contract was nevertheless concluded since the parties had begun to

perform, thereby showing their intention to be bound by a contract.

3. Automated contracting

The language of this article is sufficiently broad to cover also cases

of so-called automated contracting, i.e. where the parties agree to use

a system capable of setting in motion self-executing electronic actions

leading to the conclusion of a contract without the intervention of a

natural person.

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

2. Automobile manufacturer A and components supplier B set up

an electronic data interchange system which, as soon as A’s stocks

of components fall below a certain level, automatically generates

orders for the components and executes such orders. The fact that

A and B have agreed on the operation of such a system makes the

orders and performances binding on A and B, even though they

have been generated without the personal intervention of A and B.

see UCC § 2-206. Offer and Acceptance in Formation of Contract.