This article deals with the situation where a contract has already

been concluded either orally or by the exchange of written

communications limited to the essential terms of the agreement, and

one party subsequently sends the other a document intended simply to

confirm what has already been agreed upon, but which in fact contains

terms which are additional to or different from those previously agreed

by the parties. In theory, this situation clearly differs from that

envisaged in Art. 2.1.11, where a contract has not yet been concluded

and the modifying terms are contained in the offeree’s purported

acceptance. Yet, since in practice it may be very difficult if not

impossible to distinguish between the two situations, the present article

adopts with respect to modifying terms contained in a writing in

confirmation the same solution as that envisaged in Art. 2.1.11. In

other words, just as for the modifications contained in an

acknowledgement of order, it is provided that terms additional to or

different from those previously agreed by the parties contained in a

writing in confirmation become part of the contract, provided that they

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do not “materially” alter the agreement and that the recipient of the

document does not object to them without undue delay.

It goes without saying that also in the context of writings in

confirmation the question of which of the new terms “materially” alter

the terms of the previous agreement can be answered definitely only in

the light of the circumstances of each individual case. On the other

hand, the present article clearly does not apply to cases where the

party sending the writing in confirmation expressly invites the other

party to return it duly counter-signed for acceptance. In such circumstances

it is irrelevant whether the writing contains modifications, and

if so whether or not these modifications are “material” since the

writing must in any case be expressly accepted by the addressee if

there is to be a contract.

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

1. A orders by telephone a machine from B, who accepts the

order. The following day A receives a letter from B confirming the

terms of their oral agreement but adding that B wishes to be present

at the testing of the machine on A’s premises. The additional term

is not a “material” modification of the terms previously agreed

between the parties and will therefore become part of the contract

unless A objects without undue delay.

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

that the modification contained in B’s writing in confirmation

consists in the addition of an arbitration clause. Unless the

circumstances indicate otherwise such a clause amounts to a

“material” modification of the terms previously agreed between the

parties with the result that it will not become part of the contract.

3. A orders by e-mail a stated quantity of wheat and B accepts

immediately by e-mail. Later on the same day B sends a letter to A

confirming the terms of their agreement but adding an arbitration

clause which is standard practice in the commodity sector

concerned. Since A cannot be surprised by such a clause, it is not a

“material” modification of the terms previously agreed and, unless

A objects without undue delay, the arbitration clause becomes part

of the contract.

The rule according to which silence on the part of the recipient

amounts to acceptance of the content of the writing in confirmation,

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including any non-material modifications of the terms previously

agreed, presupposes that the writing is sent “within a reasonable time

after the conclusion of the contract”. Any writing of this kind sent

after a period of time which, in the circumstances, appears to be

unreasonably long, loses any significance, and silence on the part of

the recipient may therefore no longer be interpreted as acceptance of

its content.

For the purposes of this article, the term “writing in confirmation”

is to be understood in a broad sense, i.e. as covering also those cases

where a party uses the invoice or another similar document relating to

performance to specify the conditions of the contract concluded either

orally or by informal correspondence, provided that such use is

customary in the trade sector and/or country concerned.

As a rule, a contract is concluded if the parties reach agreement on

the terms which are essential to the type of transaction involved, while

minor terms which the parties have not settled may subsequently be

implied either in fact or by law. See comment 1 on Art. 2.1.2 and also

Arts. 4.8 and 5.1.2.

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

1. A agrees with B on all the terms which are essential to their

intended contract for the distribution of A’s goods. When the

question subsequently arises of who should bear the costs of the

publicity campaign, neither party may claim that no contract has

come into existence by reason of the silence of the contract on this

point, as the missing term is not essential to the type of transaction

in question and will be implied in fact or by law.

Parties may, however, in a given case consider specific matters to

be of such importance that they do not intend to enter into a binding

agreement unless these matters are settled in a satisfactory manner. If

the parties, or one only of them, make such an intention explicit, the

contract as such does not come into existence without agreement on

those matters. By using the word “insists”, the present article makes it

clear that it is not sufficient for the parties to manifest their intention to

this effect simply in passing, but that it must be done unequivocally.

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 during the negotiations B repeatedly declares that the question

of who should bear the cost of the publicity campaign must be

settled expressly. Notwithstanding their agreement on all the

essential terms of the contract, no contract has come into existence

between A and B since B had insisted that the conclusion of the

contract was dependent on agreement regarding that specific term.

In commercial practice, particularly when transactions of

considerable complexity are involved, it is quite frequent that after

prolonged negotiations the parties sign an informal document called

“Preliminary Agreement”, “Memorandum of Understanding”, “Letter

of Intent” or the like, containing the terms of the agreement so far

reached, but at the same time state their intention to provide for the

execution of a formal document at a later stage (“Subject to Contract”,

“Formal Agreement to follow”). In some cases the parties consider

their contract as already being concluded and the execution of the

formal document only as confirmation of the already complete

agreement. If, however, both parties, or only one of them, make it

clear that they do not intend to be bound unless the formal document

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has been drawn up, there will be no contract until that time even if the

parties have agreed on all the relevant aspects of their transaction.

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

3. After prolonged negotiations A and B sign a “Memorandum

of Understanding” containing the terms of an agreement for a joint

venture for the exploration and exploitation of the continental shelf

of country X. The parties agree that they will at a later stage draw

up the agreement in formal documents to be signed and exchanged

at a public ceremony. If the “Memorandum” already contains all

the relevant terms of the agreement and the subsequent documents

are intended merely to permit the agreement to be properly

presented to the public, it may be taken that the contract was

already concluded when the first written document was signed.

4. The facts are the same as in Illustration 3, the difference being

that the “Memorandum of Understanding” contains a clause such as

“Not binding until final agreement is executed” or the like. Until

the signing and the exchange of the formal documents there is no

binding contract.