- Arbitral Award
- ICC Court of Arbitration - Paris
APPLICATION OF CISG - CHOICE BY PARTIES OF LAW OF CONTRACTING STATE AS GOVERNING LAW OF CONTRACT (ART. 1(1)(B) CISG)
CONTRACT CONDITIONED UPON THE OCCURRENCE OF A FUTURE AND UNCERTAIN EVENT - ADMISSIBLE UNDER CISG (ART. 6 CISG) - QUESTION OF PERIOD OF TIME WITHIN WHICH SUCH EVENT MUST OCCUR - TO BE SETTLED BY APPLICABLE DOMESTIC LAW
OFFER - OFFER FIXING TIME FOR ACCEPTANCE - ACCEPTANCE NOT EFFECTIVE IF IT DOES NOT REACH OFFEROR WITHIN THE FIXED TIME (ART. 18(2) CISG)
An Austrian company acting as main contractor in a project of modernization of radio-communication systems in Austria contacted another Austrian company in view of its possible appointment as sub-contractor. The prospective sub-contractor entered into negotiation with a Swiss company to conclude a contract for the supply of the radio-communication equipment. The parties, with the approval of the main contractor, agreed that all orders concerning the supply of the equipment had to pass exclusively through the prospective sub-contractor, provided that the latter was awarded the sub-contract by the main contractor. However, the main contractor subsequently did not sub-contract the radio-communication systems to the prospective sub-contractor and ordered the equipment directly from the Swiss supplier. The prospective sub-contractor commenced arbitral proceedings against the Swiss supplier alleging breach of the exclusivity agreement.
The sole arbitrator held that the agreement between the Austrian prospective sub-contractor and the Swiss supplier was governed by CISG, as the parties had chosen Austrian law as the governing law and CISG had been incorporated into Austrian law. The agreement was considered to be a contract for the supply of goods to be manufactured or produced according to Art. 3(1) CISG.
According to the sole arbitrator the parties had subordinated the effectiveness of their agreement to the award of a sub- contract to the plaintiff. Although CISG does not expressly deal with the case where the entry into force of a contract depends on the occurrence of a future and uncertain event, according to the principle of party autonomy parties may well provide for such a condition in their contract (Art. 6 CISG). As to the question of the period of time within which the future event must occur, it had to be settled by the applicable domestic law.
In order to decide whether the future event could still occur, the sole arbitrator considered the relationship between the prospective sub-contractor and the main contractor. The former had made an offer to the latter fixing a time for acceptance, which had expired without an acceptance being made. The arbitrator, referring to Austrian law and also to Art. 18(2) CISG (though not stating why CISG was applied) held that an offer cannot be accepted after the time for acceptance has expired, unless the offeror orally informs the offeree without delay that it considers the late acceptance as effective (Art. 21(2) CISG).
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Original in German:
Published in English (trans.):
- The ICC International Court of Arbitration Bulletin Vol.6/N.2 - November 1995, 72-73}}