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SSRN Id2819915
SSRN Id2819915
1
The author received LL.B Degree with a Very Great Distinction from Mizan Tepi University, Ethiopia in 2014 and,
currently, he is pursuing LL.M in International Economic and Business Law at Haramaya University, Ethiopia. He is a
fulltime Assistant Lecturer at Wollega University School of Law, Ethiopia, and can be reached at
wakgarikebeta@gmail.com or kwakgarikebeta@gmail.com.
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1. Abstract
2
See United Nations Convention on Contracts for the International Sale of Goods, opened
for signature April 11, 1980, S. Treaty Doc. No. 98-9 (1980), 19 I.L.M. 668 [hereinafter
"CISG"].
3
The Contract Law of the People’s Republic of China, Adopted at the Second Session of the
Ninth National People’s Congress on March 15, 1997, entered in to force on 1st October
1999.
4
The UNIDROIT Principles of International Commercial Contracts, UNIDROIT (Rome), 1994.
5
The Civil Code of the Empire of Ethiopia, Proc. No. 165 of 1960, Arts. 1675 and the
following.
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Under the receipt theory, on the other hand, an offer or its acceptance is
not effective unless it reaches the other party. It can therefore be
withdrawn before it has reached the other party, and also, for similar
reasons, when the offer and its withdrawal or when the acceptance and
withdrawal reach the other party at the same time. Since an offer or
acceptance is not effective on dispatch it is still subject to withdrawal.
If therefore the offer has become effective, the question may be asked
whether it may be revoked. As we shall see later, the answer is in the
affirmative for the CISG and Chinese Contract law whereas it is in the
negative for the Ethiopian Contract law. This question cannot emerge in
connection with the acceptance, for once the acceptance has become
effective the contract is in being and a revocation is out of the question.
Art 15 of the CISG follows the approach based upon Receipt Theory in terms
of effectiveness of declarations not only for offer but also for acceptance7
under contract formation. Therefore, according to Art 15 CISG, for an
effective offer, the offeree has to receive it so contrary to Dispatch Theory,
dispatching of proposal does not suffice to become an offer.
6
What constitutes ‘reaching’ is provided for under Art 24 CISG. The full provision reads:
“For the purposes of this Part (Part II) of the Convention, an offer, declaration of acceptance
or any other indication of intention “reaches” the addressee when it is made orally to him or
delivered by any other means to him personally, to his place of business or mailing address
or, if he does not have a place of business or mailing address, to his habitual residence”.
7
Eorsi, in Bianca-Bonell Commentary on the International Sales Law, Giuffre, Milan(1987)
145-149 p. 146 available at: http://cisgw3.law.pace.edu/cisg/biblio/eorsi-bb15.html.
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b. Revocation of Offer
Art 16(1) CISG allows the offeror to revoke his offer, until the offeree
dispatches his acceptance.14 This provision indicates the principle that the
right to revoke an offer ceases at the time when an acceptance is dispatched
by the offeree. If the offeror enjoys his right to revoke, this revocation has
8
The term “withdrawal” comes from Anglo Saxon origin whereas the term “revocation” is of
Latin origin. See Eorsi, p. 147.
9
Eorsi, p. 147.
10
Id. p. 147-148.
11
J Lookofsky, Understanding the CISG, Kluwer Law International, 3rd (Worldwide) Ed.
2008, p.52.
12
Eorsi, p. 147
13
Vural Belkis, Formation of Contract According to the CISG, Ankara Bar Review, 2013. P.
135.
14
P Schlechtriem/P Butler UN Law International Sales, Springer- Verlag Berlin –Heidelberg,
2009, p. 73.
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Art 16(2) CISG provides for an exception to the revocability of offer. Firstly,
Art 16(2) lit. a shows irrevocability of offer where the offer fixes a time
period for acceptance or it explicitly indicates that it is irrevocable. There is
no consensus among legal scholars as to the legal consequences of a
premature revocation that violates the obligation not to revoke. It has been
suggested that the premature revocation is ineffective and that the offeree's
acceptance will thus form a contract for breach of which the offeror would be
liable for expectation damages.17 The other and more often expressed view
is that the premature revocation effectively precludes the formation of a
contract but subjects the offeror to delictual (tort) liability for the offeree's
reliance loss.18
Secondly, Art 16(2) lit. b provides that in case where the reasonably
believes that the offer is irrevocable and acts in reliance on it, the offer is
not revocable. The critical issue under paragraph (2) (b) is whether the
offeree reasonably relies on the offer's being irrevocable. Presumably, the
offeree (1) must have had a good reason for believing that the offer was
irrevocable and (2) must also have acted reasonably in relying on that belief.
Whereas Art 16(1) follows the Common Law approach, Art 16(2) exists as
an exception to that approach.
15
A Garro, Reconciliation of Legal Traditions in the UN Convention on Contracts for the
International Sale of Goods, 23 Int’l Law. (1989), p. 443-483, p. 455, available at:
http://cisgw3.law.pace.edu/cisg/biblio/garro1.html.
16
According to this rule, if the offeree dispatches an acceptance before the revocation
reaches, the offer may not be revoked anymore.
17
Pierre Bonassies, Report of French Law, in 1 Formation of Contracts, 775-776 (Rudolf B.
Schlesinger ed., 1968).
18
Hein Kötz, 1 European Contract Law, p. 22-23, (Tony Weir trans., 1997); Barry
Nicholas, French Law of Contract, p. 64-66, (1982); Konrad Sweigert and Hein
Kötz, Introduction to Comparative Law, p. 359-360, (3d rev. ed. Tony Weir trans.,
1998).
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c. Withdrawal of Acceptance
d. Revocation of Acceptance
Unlike the case for the offeror, the offeree is not entitled to revoke his
acceptance. As said earlier, revocation of offer is permissible because there
is a time gap between the offer’s arrival to the offeree and the latter’s
dispatching of the acceptance. In other words, no valid contract is concluded
until the time when the offeree shows his assent to the offer. This is not the
case for acceptance. Once an acceptance is made, there is no need for the
offeror to give his blessing for the proposal to be effective. Accordingly, any
act of revocation by the offeree after the offeror came to know the
acceptance amounts to a breach of a legally binding contract.
Under the UNIDROIT Principles and the new Chinese Contract Law an offer
becomes effective when it reaches the offeree.21 Accordingly, an offer may
be withdrawn if the withdrawal reaches the offeree before or at the same
time as the offer.22 This provision is definitely the same with Art. 2.3 of the
UNIDROIT Principles as both stipulate that an offer may be withdrawn if the
19
Art. 22, the CISG.
20
Vural, p. 147.
21
This is evident from Art. 2.3 of the UNIDROIT Principles and Art. 16 of the CL which
recognize the Receipt Doctrine.
22
Art. 17 of the Chinese Contract Law.
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b. Revocation of an Offer
Art 2.4 of the UNIDROIT Principles and Arts. 18 and 19 of the new Contract
Law set forth the same rule. An offer may be revoked if the revocation
reaches the offeree before it has dispatched an acceptance. It may not be
revoked if (a) the offeror indicates a fixed time for acceptance or otherwise
explicitly states that the offer is irrevocable; or (b) the offeree has reasons
to rely on the offer as being irrevocable and has made preparation for
performing the contract.
c. Withdrawal of Acceptance
Both the Chinese Contract Law and the UNIDROIT Principles provide that
acceptance may be withdrawn provided that acceptance may be withdrawn
provided that notice of withdrawal reaches the offeror before or at the same
time as the notice of acceptance.23 If the notice of the withdrawal reaches
the offeror after the arrival of the notice acceptance, a valid contract has
been conclude and, hence, the offeree cannot change its mind anymore.
Therefore, the offeree is precluded from revoking its acceptance and any
such act amounts to breach of contractual obligations calling for offeree’s
liability.
The offeror is at liberty to withdraw the offer within a prescribed time limit.
Accordingly, an offer shall be deemed not to have been made where the
offeree learns that it is revoked before or upon learning of the offer.25 This
indicates that there is no offer before the intended offer is communicated to
the addressee. According to Krzeczunowich,26 what one really revokes under
Art. 1693(1) is not a true offer, but the declaration of intention of Art.
23
Art. 27 of the Chinese Contract Law and Art. 2.10 of the UNIDROIT Principles.
24
As part of the 1960 Civil Code, the Ethiopian general Contract Law is regulated under
Arts. 1675 and the following of the code.
25
Art. 1693(1) of the Civil Code.
26
Krzeczunowich, G. Formation and Effects of Contracts in Ethiopian Law, p. 40. Available
at: www.abyssinialaw.com.
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Under the Ethiopian Contract law, the Dispatch Theory and Receipt Theory
are recognized in a contradictory manner when it comes to acceptance. This
confusion is created between Arts. 1692(1) and 1693(2). The former
provision states that a contract made between absent parties shall be
deemed to be made at the place where and time when the acceptance was
sent to the offeror. The latter, on the other hand, makes Art. 1693(1)
applicable to withdrawal of acceptance. With this reference, acceptance shall
be deemed not to have been made where the offeror learns that it is
withdrawn before or upon learning of the acceptance.
The contradiction lies in that, by virtue of Art. 1692(1), a valid contract has
been made between the parties at the time when the offeree dispatched the
acceptance.31 Accordingly, the offeree would be in a position not to be
capable of changing his mind. Contrary to this, Art. 1693(2) allows the
27
Art. 1678(a) provides that no valid contract shall exist unless the parties are capable of
contracting and give their consent sustainable at law.
28
Art. 1690(1), on the other hand, states that whosoever offers to another to enter into a
contract and fixes a time limit for acceptance shall be bound by his offer until the time limit
fixed expires.
29
Art. 1691(1) reads “whosoever offers to another to enter into a contract and does fix any
time limit shall be bound by his offer until the time when he can reasonably expect the
other party to decide on the offer”.
30
Krzeczunowich, p. 40.
31
This provision acknowledges the Dispatch Theory as recognized under the Ethiopian
Contract law.
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As noted earlier, the Ethiopian Contract law doesn’t recognize the right to
revoke in the proper sense of the term. Accordingly, the offeror is bound
forthwith when the offer comes to the knowledge of the offeree. By the same
scenario, the offeree is bound once the offeror came to know the
acceptance.
Under the CISG, an offer becomes effective at the time when it reaches the
offeree. Hence, the offeror is free to withdraw the offer before or at the
same time when it reaches the offeree. This indicates the recognition of the
Receipt Theory. It has to be noted that the second sentence of Art. 15 CISG
used the terms withdrawal and revocation interchangeably. As per Art. 16(1)
CISG, the offeror can revoke the offer after it reached the offeree but before
the offeree dispatches acceptance. The CISG permits an acceptance to be
withdrawn before it reaches the offeror. Revocation of acceptance, however,
is not possible. The same works for the Chinese Contract Law and the
UNIDROIT Principles.
When it comes to the Ethiopian Contract Law, Art. 1693(1) of the Civil Code
provides that the offeror can revoke the offer before or at the same time
the offeree came to know about the offer. In the proper sense of the term,
this provision is talking of withdrawal not of revocation. Accordingly, the
32
This provision recognizes the Receipt Theory.
33
Krzeczunowich, p. 40.
34
Id. p. 40.
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