International Transactions

A contract is an agreement between parties that the law will enforce.  Under common law, a contract is said to exist when there is an offer, subsequent acceptance of that offer and enough consideration.  An offer lets the person or firm to whom it is made to prudently expect that the offering party is willing to be bound by the offer under the proposed terms.  The terms of the offer must be clear and certain.

Acceptance on the other hand is a clear expression of the offeree party’s agreement to the terms of the offer.

  Common law will basically consider whether the German toy maker’s price quotation was really an offer or an invitation to offer.  The most commonly referred authority in contract is that of Carlic vs. Smoke Ball company (2QB 256).  In the above case, a medicinal firm advertisement on its new wonder drug was held to be an offer.  Lord Justice Lindley when delivering judgement said that the promise was distinct and expressed in perfectly unmistakable language.

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Based on the above argument, the German toy maker offer of, KBG train sets locomotive four cars, transformer, 30 pieces of truck - minimum order 30 pieces – was clear and unmistakable hence Fun N Games Inc. acceptance should have been based on the offer per se without changing the terms for the contract to be binding.

Under the CISG 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 offerer to be bound incase of acceptance.

  A proposal shall be taken to be definite if it indicates the goods and expressly fixes the price or makes provisions for determining the quantity and the prices as per Article 14 part II. According to CISG the moment the offer reached the offeree it became effective hence Fun-N Games Inc. change of terms rendered the contract null and void.  This is merely due to the fact that a reply that purports to be an acceptance, but has additions, limitations or other modifications is generally considered to be a rejection or counter offer.  To avoid ambiguity Fun-N Games Inc. should have indicated that it did not intend to make an offer but merely an indication of interest to buy.

The implications of the German toy maker’s decision to ship the goods as per offer while overlooking the alterations made by Fun-N Games Inc. left Fun-N Games Inc. with only the option of either accepting, or refusing.  In which case, should it decide to refuse to accept and sue for breach of contract it would be held that there was no contractual relationship in existence since the terms of the offer were clear and certain.

Under the UCC, contract can be said to have been formed in any manner sufficient to show agreement even if the parties leave open terms. UCC allows an expression of acceptance to be operative unless the acceptance states that it is subject to the offerer’s consent to the additional or different terms contained in the acceptance.  Failure by Fun-N Games Inc. to include a clause that the contract is subject to other conditions legitimizes the contract.  UCC does not recognize contracts related to sale of goods and it would be mockery to justice to decide the case under common law due to its international nature.

It should be noted that if the terms of the contract are uncertain or incomplete, the parties are deemed not to have reached an agreement in law.  A contract cannot be said to exist on the basis of agreement to agree, and inability to agree on key issues such as price quotations may cause the entire contract to fail.  Nevertheless, a court may give effect to commercial contracts where possible by construing a reasonable contract construction.

Reference

Ewan McKendrik, Contract Law- Text, Cases and Materials (2005). Oxford University Press.