Course 1

The Importance of international commercial contracts, as main object of

international arbitration. The sources and interpretation of international
commercial contracts. Closing and form of international commercial contracts
(2h)

Section 1
The importance of international commercial contracts, as main object of
international arbitration. The sources of international commercial contracts
and unification by the main specialized international organizations

1. The Importance of international commercial contracts, as main object

of international arbitration
Contracts represent the core of international commercial law, as they
constitute the most important legal instrument for realizing external commercial
operations and international economic cooperation.
Contracts are the main source of international commercial obligations, which,
themselves represent the main object of international arbitration.

2. The sources of international commercial contracts law and the

unification process of said contracts
Drawing up unified provisions in the field of international commercial contracts
represents a historical process, which has and continues to be carried on by
specialized international organizations or bodies.
The most important of the organizations are: the U.N. and its specialized
bodies; other international organizations, the European Union, the International
Institute for the Unification of Private Law (UNIDROIT), the Paris International
Chamber of Commerce etc.
The unification methods mainly consist of adopting international conventions,
model laws, general rules, guides for drawing up contracts etc.
The unification of law is also applicable on a bilateral basis, especially by
adopting international conventions.
 2.1. The unification of international commercial contracts by the U.N.
and its specialized bodies

2.1.1. Institutional framework

The U.N., organization in which Romania is a full member since 1955, and its
specialized institutions with worldwide activity represent the most favourable
framework for drawing up international conventions and other instruments for unifying
international commercial contracts law.
The vast majority of such conventions have been drawn up after 1966, when
the United Nations Commission on International Trade Law (UNCITRAL) has been
established, as a specialized body of the U.N. in the field of international commercial
law.

2.1.2. The main international conventions drawn up by the U.N. which

Romania is a part to
- Convention on the Recognition and Enforcement of Foreign Arbitral Awards
(New York, 1958), ratified by Decree no. 186/1961;
- Convention on the Limitation Period in the International Sale of Goods (New
York, 1974) and the amending Protocol adopted in 1980 in Vienna, which Romania
became a party in by Law no. 24/1992;
- United Nations Convention on the Carriage of Goods by Sea (Hamburg,
1978) (the "Hamburg Rules"), ratified by Decree no. 343/1981;
- United Nations Convention on Contracts for the International Sale of Goods
(Vienna, 1980), which Romania adhered at by Law no. 24/1991;
- Convention for the Unification of Certain Rules for International Carriage by
Air (Montreal, 1999), adopted by the U.N. with the support of the International Civil
Aviation Organization, ratified by Government Ordinance no. 107/2000.

2.1.3. The main model laws adopted by the UNCITRAL

- UNCITRAL Model Law on International Commercial Arbitration (1985),
amended in 2006;
- UNCITRAL Model Law on International Credit Transfers (1992);
- UNCITRAL Model Law on Procurement of Goods (2011) with Guide to
Enactment (2012);
 - UNCITRAL Model Law on Electronic Commerce with Guide to Enactment
(1996);
- UNCITRAL Model Law on Cross-Border Insolvency with Guide to Enactment
(2013);
- UNCITRAL Model Law on Electronic Signatures with Guide to Enactment
(2001);
- UNCITRAL Model Law on International Commercial Conciliation with Guide
to Enactment and Use (2002).

2.1.4. The main arbitration and conciliation rules adopted by

UNCITRAL
- UNCITRAL Arbitration Rules (1976), revised in 2010, used in ad-hoc
arbitration, which has a wide practical application;
- UNCITRAL Conciliation Rules (1980).

2.2. The unification of international commercial contracts law by other

specialized international organizations
Important international conventions in certain fields of commercial contracts
have been adopted by other international organizations. Romania is a party to the
following ones:
A) In the field of international transport
a) for fluvial transport
- Convention on the Contract for the Carriage of Goods by Inland Waterway
(CMNI), adopted in Budapest in 2000 by the diplomatic conference organized jointly
by the Central Commission for the Navigation of the Rhine and the Danube
Commission in collaboration with the United Nations Economic Commission for
Europe, ratified by Romania by Law no. 494/2003;
b) for road transport
- Convention on the Contract for the International Carriage of Goods by Road
(CMR) (Geneva, 1956), adopted by the U.N. and ratified by Romania by Decree no.
451/1972 and the following protocol.
c) for transport by railway
- Uniform Rules Concerning the Contract for International Carriage of Goods
by Rail (CIM), which represents Appendix B to the Convention concerning
International Carriage by Rail (COTIF), signed in Berne in 1980 and ratified by
Romania by Decree no. 100/1983.
 d) for transport by air
- Convention on International Civil Aviation (Chicago, 1944), adopted by the
U.N. and ratified by Decree no. 194/1965, with the following protocols.
e) for transport by sea
- The United Nations Convention on the Carriage of Goods by Sea (The
Hamburg Rules), from 1978, ratified by Romania by Decree no. 343/1981.

B) In the field of international commercial arbitration

- European Convention on International Commercial Arbitration (Geneva,
1961), adopted by the U.N. and ratified by Decree no. 281/1963;
- Convention on the Settlement of Investment Disputes between States and
Nationals of Other States (Washington, 1965), ratified by Decree no. 62/1975.

2.3. The unification of international commercial contracts law in the

E.U.

2.3.1. Unification areas

In the E.U., the process for the unification of international contracts law in civil
and commercial matters (in the field of private law) has been ongoing in two different
areas: 1) conflict of laws (international private law) and 2) substantial law.

2.3.2. The unification of contracts international private law

Currently, at E.U. level, there is a continuous policy for the unification of the
law of the member states. This tendency mainly regards international private law,
where European regulations are adopted in order to directly apply in member states,
which solve issues concerning conflict of laws and jurisdiction. Unification in this area
has high priority in relation to the unification of substantial law, namely international
commercial law, which is considerably more reduced.
Unification of international private law of contracts has materialized in two
important instruments.
A) Regulation (EC) No 593/2008 of the European Parliament and of the
Council on the law applicable to contractual obligations (Rome I), adopted in
Strasbourg on 17 June 2008, entered into force on 24 July 2008 and applicable (with
few exceptions) since 17 December 2009.
 B) Principles, Definitions and Model Rules of European Private Law.
Draft Common Frame of Reference (DCFR), work prepared by the Study Group on a
European Civil Code and the Research Group on EC Private Law (Acquis Group)
and published in 2009 .
The scope of such regulation is to create a set of model rules of
material law (substantial law) in the form of a code, which constitute an instrument for
the autonomous interpretation of the main legal concepts used in the E.U. private
international law.
This work is divided into 10 books, each of them structured in chapters, as
follows: Book I - General provisions; Book II - Contracts and other juridical acts, with
the following chapters: Chapter 1 - General provisions; Chapter 2 - Non-
discrimination; Chapter 3 - Marketing and pre-contractual duties; Chapter 4 -
Formation; Chapter 5 - Right of withdrawal; Chapter 6 - Representation; Chapter 7 -
Grounds of invalidity; Chapter 8 - Interpretation; Chapter 9 - Contents and effects of
contracts; Book III - Obligations and corresponding rights, with the following chapters:
Chapter 1 - General; Chapter 2 - Performance; Chapter 3 - Remedies for non-
performance; Chapter 4 - Plurality of debtors and creditors; Chapter 5 - Change of
parties; Chapter 6 - Set-off and merger; Chapter 7 - Prescription; Book IV - Specific
contracts and the rights and obligations arising from them, divided in: Part A. Sales:
Chapter 1 -Scope and definitions; Chapter 2 - Obligations of the seller; Chapter 3 -
Obligations of the buyer; Chapter 4 - Remedies; Chapter 5 - Passing of risk; Chapter
6 - Consumer goods guarantees; Part B. Lease of goods: Chapter 1 - Scope of
application and general provisions; Chapter 2 - Lease period; Chapter 3 - Obligations
of the lessor; Chapter 4 - Remedies of the lessee: modifications of normal rules;
Chapter 5 - Obligations of the lessee; Chapter 6 - Remedies of the lessor:
modifications of normal rules; Chapter 7 - New parties and sublease; Part C.
Services: Chapter 1 - General provisions; Chapter 2 - Rules applying to service
contracts in general; Chapter 3 - Construction; Chapter 4 - Processing; Chapter 5 -
Storage; Chapter 6 - Design; Chapter 7 - Information and advice; Chapter 8 -
Treatment; Part D. Mandate contracts: Chapter 1 - General provisions; Chapter 2 -
Main obligations of the principal; Chapter 3 - Performance by the agent; Chapter 4 -
Directions and changes; Chapter 5 - Conflicts of interests; Chapter 6 - Termination by
notice other than for non-performance; Chapter 7 - Other grounds for termination;
Part E. Commercial agency, franchise and distributorship: Chapter 1 - General
provisions; Chapter 2 Rules applying to all contracts within the scope of this part;
Chapter 3 - Commercial agency; Chapter 4 - Franchise; Chapter 5 - Distributorship;
Part F. Loan contracts; Part G. Personal security: Chapter 1 - Common rules;
Chapter 2 - Dependent personal security; Chapter 3 - Independent personal security;
Chapter 4 - Special rules for personal security of consumers; Part H. Donation:
Chapter 1 - Scope of application and general provisions; Chapter 2 - Formation and
validity; Chapter 3 - Obligations and remedies; Chapter 4 - Revocation by the donor;
Book V - Benevolent intervention in anothers affairs, with the following chapters:
Chapter 1 - Scope of application; Chapter 2 - Duties of intervener; Chapter 3 - Rights
and authority of intervener; Book VI - Non-contractual liability arising out of damage
cause to another, with the following chapters: Chapter 1 - Fundamental provisions;
Chapter 2 - Legally relevant damage; Chapter 3 - Accountability; Chapter 4 -
Causation; Chapter 5 - Defences; Chapter 6 Remedies; Chapter 7 - Ancillary rules;
Book VII - Unjustified enrichment, with the following chapters: Chapter 1 - General;
Chapter 2 - When enrichment unjustified; Chapter 3 - Enrichment and disadvantage;
Chapter 4 - Attribution; Chapter 5 - Reversal of enrichment; Chapter 6 - Defences;
Chapter 7 - Relation to other legal rules; Book VIII - Acquisition and loss of ownership
of goods, with the following chapters: Chapter 10 - General provisions; Chapter 2 -
Transfer of ownership based on the transferors right or authority; Chapter 3 - Good
faith acquisition of ownership; Chapter 4 - Acquisition of ownership by continuous
possession; Chapter 5 - Production, combination and commingling; Chapter 6 -
Protection of ownership and protection of possession; Chapter 7 - Consequential
questions on restitution of goods; Book IX - Proprietary security rights in movable
assets, with the following chapters: Chapter 1 - General rules; Chapter 2 - Creation
and coverage; Chapter 3 - Effectiveness as against third persons; Chapter 4 -
Priority; Chapter 5 - Predefault rules; Chapter 6 - Termination; Chapter 7 - Default
and enforcement; Book X - Trust, with the following chapters: Chapter 1 -
Fundamental provisions; Chapter 2 - Constitution of trusts; Chapter 3 - Trust fund;
Chapter 4 - Trust terms and invalidity; Chapter 5 - Trustee decision-making and
powers; Chapter 6 - Obligations and rights of trustees and trust auxiliaries; Chapter 7
- Remedies for non-performance; Chapter 8 - Change of trustees or trust auxiliary;
Chapter 9 - Termination and variation of trusts and transfer of rights to benefit;
Chapter 10 - Relations to third parties.
 The Draft Common Frame of Reference is not a law, a politically authorized
instrument; it represents an academic work, as shown in its introductory part.
Therefore, the work cannot constitute the law applicable to contracts in the scope of
Article 3 of Rome I Regulation, but it can acquire the legal force of a contractual
clause only if the parties have included it in their contract by per relationem
mechanism.

2.3.3. The unification of substantial law of contracts

At the level of substantial law, unification materialized in the adoption of two
major works:

A) The Principles of European Contract Law

The Principles of European Contract Law are the work of the Committee for
European Contract law, composed of lawyers representing all EU member states
from the date of their elaboration. Their role was to meet the growing need of
community of lawyers and practitioners from EU to have an available and uniform
regulation regarding the contract law.
The object of the principles set out in art. 1:101 ("Application of the Principles")
. According to the text, these Principles are intended to be applied as general rules of
contract law in the European Communities. These Principles will apply when the
parties have agreed to incorporate them into their contract or that their contract is to
be governed by them. They may also be applied when the parties have agreed that
their contract is to be governed by "general principles of law", the "lex mercatoria" or
the like or when the parties have not chosen any system or rules of law to govern
their contract. These Principles may provide a solution to the issue raised where the
system or rules of law applicable do not do so.

B) Draft Regulation of the European Parliament and of the Council on

a Common European Sales Law
The European Commission presented on 11 October 2011 in Brussels, a
proposal of a European regulation in the matter of the buy-sale contract. This
legislative initiative has two parts:
a) On the one hand, contains an explanatory memorandum showing the
current regulations and the need to adopt such a uniform instrument at European
level. In this context, it is emphasized that the Common European Sales Law will be
a second contract law regime within the national law of each Member State. Where
the parties have agreed to use the Common European Sales Law, its rules will be the
only national rules applicable for matters falling within its scope. Where a matter falls
within the scope of the Common European Sales Law, there is thus no scope for the
application of any other national rules. This agreement to use the Common European
Sales Law is a choice between two different sets of sales law within the same
national law and does therefore not amount to, and must not be confused with, the
previous choice of the applicable law within the meaning of private international law
rules. Since the Common European Sales Law will not cover every aspect of a
contract (e.g. illegality of contracts, representation) the existing rules of the Member
State's civil law that is applicable to the contract will still regulate such residual
questions.
b) Proposal for a Regulation of the European Parliament and of the Council on
a Common European Sales Law. The Proposal is followed by two annexes: ANNEX I
which contains the text of the Common European Sales Law; ANNEX II - which
comprises the Standard Information Notice on the Common European Sales Law
that must be provided by the trader to the consumer before an agreement to use the
Common European Sales Law is made.
Currently, the project for the Common European Sales Law is at a standstill,
following a 2015 decision of the European Commission to abandon the existing work,
and to draft, instead, new measures to overturn contractual barriers in online sales
between Member States.

2.4. Unification of international trade agreements under the

auspices of UNIDROIT
2.4.1. General aspects
The International Institute for the Unification of Private Law ( UNIDROIT ) is an
independent intergovernmental organization based in Rome. UNIDROIT is linked to
the U.N. through a collaborative agreement. Romania is a member of UNIDROIT
since 1927.
The objectives of UNIDROIT, as specified in the Statute are, mainly examining
the ways in which we can harmonize and coordinate private right of states or groups
of states, and the preparation of uniform rules of private law to be adopted by the
Member States.
 Under the UNIDROIT - usually within Member States diplomatic conferences -
were adopted several international conventions, some measures directly related to
international trade law. Of these, only Romania is part of the UNIDROIT Convention
on Stolen or Illegally Exported Cultural Objects, adopted in Rome in 1995, ratified by
Law no. 149/1997.

2.4.2. Principles of international commercial contracts

2.4.2.1. Development
The most important work of unification of international commercial contract law
drafted by UNIDROIT is the "Principles of international commercial contracts".
The first edition of the Principles was published in 1994, being the result of
many years of research and discussion of a working group of lawyers representing all
major legal systems of the world, on five continents. Introducing the Principles to the
UNIDROIT Work Programme was made by the decision of the Governing Board of
the Institute in 1971, when a small pilot committee was created, where Professor
Tudor R. Popescu took part, the founder of the discipline of international trade law at
the Faculty of Law of the University of Bucharest, together with two other eminent
teachers, Ren David (Paris) and Clive M. Schmitthoff (London). Completion of the
project was done under the guidance of Professor Michael Joachim Bonell (Rome).
The good results obtained by applying the Principles by national legislators and
courts of justice or arbitration tribunals and the wide support which they enjoyed in
the scientific and business circles in different countries have led further work to
improve the Principles, which have materialized in the second edition of April 2004.
The latest edition from 2010 insubstantially amended the provisions of the
2004 edition but introduced 26 new articles, in response to the contemporary
international trade, mainly in the field of the refund of benefits in case of dissolution of
contracts, illegality regime of contracts, conditional contracts, plurality of debtors and
creditors.
2.4.2.2. Content
The UNIDROIT Principles document is presented in a normative form, which
in the 2010 edition contains a preamble and eleven chapters, with a total of 211
articles (unlike the 1994 edition, which had seven chapters with 120 articles and the
2004 edition which had ten chapters with 185 items). Each item is accompanied by
comments, which are part of the document.
 The content of the 2010 edition is as follows: Preamble, Chapter 1: General
Provisions, Chapter 2: Formation and authority of agents with Section 1: Formation;
Section 2: Authority of agents ; Chapter 3: Validity, with Section 1: General
Provisions, Section 2: Grounds for avoidance, Section 3 - Illegality, Chapter 4:
Interpretation, Chapter 5: Content, third party rights and conditions, Section 1:
Content, Section 2: Third party rights and Section 3: Conditions; Chapter 6 :
Performance with Section 1: Performance in general and Section 2: Hardship,
Chapter 7: Non-Performance with Section 1: Non-performance in general; Section 2 -
Right to performance; Section 3 : Termination and Section 4: Damages, Chapter 8 :
Set-off, Chapter 9: Assignment of rights, transfer of obligations, assignment of
contracts with Section 1: Assignment of rights, Section 2: Transfer of obligations and
Section 3 : Assignment of contracts, Chapter 10: Limitation periods; Chapter 11:
Plurality of obligors and obligees, with Section 1: Plurality of obligors and Section 2:
Plurality of obligees.
2.4.2.3. Legal Nature
As a legal nature, the UNIDROIT Principles are soft law provisions.
The Principles are not an international convention. As stated in the Preamble
("Purpose of the Principles ") These Principles set forth general rules for international
commercial contracts (para. 1). In fact, it is a system of law rules of international
commercial contracts, which were synthesized for consideration that are either
common to the different national legal systems, or were considered by their authors
as best suited to the specific conditions of international trade operations.
2.4.2.4. Role
The role of the Principles can manifest in many aspects (as paras. 2-7 in the
preamble):
A) the Principles can represent the law of the contract in two circumstances.
a) The parties have agreed that their agreement be governed by the
Principles.
The Principles apply when the parties agreed that the agreement or part of it is
to be governed by these principles.
The Principles are therefore an option, applicable only if the parties have
submitted to them by express provision of the contract, under the principle of
autonomy of will in their appointment of the contract law. By referring to the
Principles, the parties perform a per relationem mechanism, in that they incorporate
the Principles in the contract, giving them the legal force of a contractual cause.
According to art. 1.5 (Exclusion or modification by the parties) of the Principles, the
parties may exclude the application of these Principles or derogate from or vary the
effect of any of their provisions, except as otherwise provided in the Principles.

Under the provisions of art.1.4 (Mandatory rules ) of the Principles, however

nothing in these Principles shall restrict the application of mandatory rules, whether
of national, international or supranational origin, which are applicable in accordance
with the relevant rules of private international law. b) The parties have agreed
that their contract be governed by general principles of law, the lex mercatoria or the
like.
If the parties have inserted a clause in the contract that the contract will be
governed by " general principles of law ", the " customs of international trade ", the "
lex mercatoria " or any equivalent formula, the courts of law or or competent
arbitration tribunals, in solving a dispute concerning the contract may find that the
parties agreed to refer implicitly to these principles.

B ) the Principles may be a substitute for national law

The authors of the Principles consider that they can be applied by courts and
arbitration tribunals where the parties have not designated any national law as
applicable to their contract. Such a situation may occur especially in international
commercial arbitration when incident procedural rules provide that arbitrators may
apply the "rules of law which they consider appropriate in this case".
For the application of this role of the UNIDROIT Principles in Romanian
practice of international trade, Decision C.A.B. No. 261/29 September 2005
published in R.D.C. No. 11/2005, p. 214 -215, is relevant. In this case, the arbitration
tribunal found that the parties have expressly agreed that the relations between
themselves be governed by the contract, and in its absence, by "the general
principles of law recognized as applicable to international trade law, excluding any
national law. The arbitration tribunal has recognized the validity of this clause and
interpreted it as meaning that the "principles" referred to in the clause cited are the
UNIDROIT Principles. Following this interpretation, the arbitration tribunal applied the
international commercial usages, according to art. 1.8 para. 2 of the 1994 UNIDROIT
Principles.
 The Principles are applicable, according to the preamble commentary, also in
cases when the circumstances indicate that the parties concerned have excluded the
application of a national law or the contract has links to many law systems and none
of them provide sufficient grounds to apply exclusively.

C) the Principles may be used as a means of interpreting and supplementing

the uniform international legal instruments.
In the commentary to this paragraph of the preamble of the Principles, it is
stated that courts and arbitration tribunals tend increasingly more to abandon the
method of "conflict" in the interpretation of international conventions (i.e. their
interpretation by the rules of law in which these conventions are incorporated by the
ratification by the respective states) and doing the interpretation and completion of
agreements by reference to autonomous and uniform principles internationally. As
argument in this regard, Art. 7 para. 2 of the Vienna Convention (1980) is used,
according to which questions concerning matters governed by this Convention which
are not expressly settled in it are to be settled in conformity with the general
principles on which it is based or, in the absence of such principles, in conformity
with the law applicable by virtue of the rules of private international law.
D ) the Principles may be used to interpret or supplement domestic law
Courts and arbitration tribunals may appeal to the Principles, to this end, when
there are doubts about the correct solution to be adopted pursuant to law, or because
there are several possible versions or because there is no specific solution.
E) the Principles are a model for national and international legislators
Due to their intrinsic value, the Principles can be a model for national and
international legislators on drafting legislation in the field of international commercial
contracts. For this purpose, the Principles are a useful "international uniform
glossary".

2.5. Unification of international trade by ICC Paris

2.5.1. What is the ICC?
The International Chamber of Commerce in Paris ( ICC Paris ), founded in
1919 as a legal entity under French law, but with international vocation by way of its
structure and powers, is an NGO whose members are hundreds of thousands of
companies and business organizations in more than 130 countries. CCI has
committees or councils in over 60 countries, which coordinate its activities at national
level, usually in collaboration with local chambers of commerce and industry. The
Romanian National Committee of C.C.I. was created by the C.C.I.R. in 2001.
CCI main tasks are to represent the business community - its members
nationally and internationally -, to promote international trade and investment on the
basis of free and fair competition, to standardize and codify customs applicable in
international trade and provide a range of services for business circles. Among these
services, we mention especially the international commercial arbitration of the
International Court of Arbitration provided by the CCI and the expertise provided by
the International Centre for Expertise.

2.5.2. Ways of unification of contract law by the ICC

The activity of uniform international trade law in general and international
commercial contract law, in particular, is reflected by the development of uniform
rules, model contracts (contract drafting guidelines) model clauses (standard) and so
on, which are in fact, most often codified customary practices in the field of business.
A) Of the uniform rules adopted by C.C.I. Paris we can mention:
- Uniform Rules of C.C.I. regarding collections - Publication 322/1978, revised
and republished - Publication 522/1996
- Uniform Rules of C.C.I. regarding demand guarantees - Publication no.
758/2010
- Uniform Rules of C.C.I. regarding contract bonds, 1993 - Publication 524
- Official Rules of C.C.I. for the interpretation of trade terms - Incoterms 2010 -
Publication 715/2010
- Uniform Customs and Practice C.C.I. for documentary credits, revised
version in 2007 - Publication 600
B ) The most important model agreements adopted by the CCI are for :
- International sales - Publication 738/2013,
- Occasional intermediary contract- Publication 769/2015,
- International franchising - Publication 712/2011,
- Commercial agency contract - Edition II - a - Publication 766/2015,
- Distribution - Publication 776/2016,
- Model Turnkey Contracts for Major Projects - Publication No. 659/2007
- Model Subcontract - Publication No. 706/2011.
 C ) We underline model clauses with regard to:
- Force majeure - 2003
- Hardship - 2003 - Publication 650 .
- ICC Model Confidentiality Agreements - ICC Model Confidentiality Clause
2006 Edition = Publication 664
- ICC Legal Handbook on Global Sourcing Contracts - Publication 663
- ICC Anti - Corruption Clause, 2012

2.6. Unification of international trade law through bilateral

conventions
Romania is party to numerous bilateral agreements, among which:
- Trade agreements and / or international economic cooperation;
- Agreements on the promotion and reciprocal protection of investments,
- Conventions (agreements) for the avoidance of double taxation
- Treaties on legal assistance in civil, family and criminal matters.
These bilateral agreements are important in the matter under discussion
because, in addition to their provisions of public international law, they contain certain
provisions of interest for international commercial contract law (like bilateral
agreements on trade).

SECTION 2

INTERPRETATION OF INTERNATIONAL COMMERCIAL CONTRACTS

3. Interpretation of international commercial contracts by the rules

of common law, with specific applications for international
commercial contracts

3.1. Interpretation of contracts after the common intention

of the parties
3.1.1. Content of the rule
The rule that the interpretation of contracts is done after the common intention
of the parties, and not in the literal sense of the term, finds wide application in the
international commercial contracts.
 This rule is set out expressly in:
- Art. 8 para. 1 of the Vienna Convention (1980): for the purposes of this
Convention statements made by and other conduct of a party are to be interpreted
according to his intent where the other party knew or could not have been unaware
what that intent was.
- UNIDROIT Principles: according to art. 4.1 paragraph 1, a contract shall be
interpreted according to the common intention of the parties, and according to art. 4.2
para. 1, the statements and other conduct of a party shall be interpreted according to
that partys intention if the other party knew or could not have been unaware of that
intention.
3.1.2. Specific applications in international commercial contracts
In international commercial contracts, usually the rule we refer knows at least
two applications.
a) Thus, if the common intention of the parties cannot be established, the
manifestation of will must be interpreted as an objective criterion by reference to an
abstract legal figure, custom rule, the notion of " reasonable person " . Under this
criterion, the act of will of one of the parties shall be construed according to the
meaning that would be given by a reasonable person in the business world of
international trade, with the same training and in the same situation as the other
party.
This is enshrined in:
- Art. 8. para. 2 of the Vienna Convention (1980): statements made by and
other conduct of a party are to be interpreted according to the understanding that a
reasonable person of the same kind as the other party would have had in the same
circumstances.
- UNIDROIT Principles: according to art. 4.1 para. 2: if such an intention
cannot be established, the contract shall be interpreted according to the meaning that
reasonable persons of the same kind as the parties would give to it in the same
circumstances; conform art. 4.2 al. 2, if the preceding paragraph is not applicable,
such statements and other conduct shall be interpreted according to the meaning
that a reasonable person of the same kind as the other party would give to it in the
same circumstances.
b) If the parties' common intention cannot be inferred from the terms of the
contract sufficiently, this intention - and determining what should be understood by a
"reasonable person" in the same situation - will be established by external criteria
(extrinsic) of the contract generated, as a rule, by the international and commercial
nature of the contract. These criteria can be subjective - as, for example, the attitude
of the parties during the negotiations for the contract, their behaviour after the
conclusion of the contract, etc. -, and also objective, as the commercial context in
which the international agreement was reached, the scope of business covered,
occupational category of the parties and especially international trade usages and
habits established between the parties.
Provisions in this respect are in: - Article 8 paragraph 2 of the Vienna
Convention(1980):Iftheprecedingparagraphisnotapplicable,statementsmade
byandotherconductofapartyaretobeinterpretedaccordingtothe
understandingthatareasonablepersonofthesamekindastheotherpartywould
havehadinthesamecircumstance.
- UNIDROIT Principles: according to art. 4.3, in applying Articles 4.1 and 4.2,
regard shall be had to all the circumstances, including (a) preliminary negotiations
between the parties; (b) practices which the parties have established between
themselves; (c) the conduct of the parties subsequent to the conclusion of the
contract; (d) the nature and purpose of the contract; (e) the meaning commonly given
to terms and expressions in the trade concerned; (f) usages.
Provisions relating to the interpretation of the contract are found in the
Common European Sales Law, art. 58, according to which: A contract is to be
interpreted according to the common intention of the parties even if this differs from
the normal meaning of the expressions used in it. Where one party intended an
expression used in the contract to have a particular meaning, and at the time of the
conclusion of the contract the other party was aware, or could be expected to have
been aware, of that intention, the expression is to be interpreted in the way intended
by the first party. Unless otherwise provided in paragraphs 1 and 2, the contract is to
be interpreted according to the meaning which a reasonable person would give to it.
According to art. 59, in interpreting a contract, regard may be had, in
particular, to: (a) the circumstances in which it was concluded, including the
preliminary negotiations; (b) the conduct of the parties, even subsequent to the
conclusion of the contract; (c) the interpretation which has already been given by the
parties to expressions which are identical to or similar to those used in the contract;
(d) usages which would be considered generally applicable by parties in the same
situation; (e) practices which the parties have established between themselves; (f)
the meaning commonly given to expressions in the branch of activity concerned; (g)
the nature and purpose of the contract; and (h) good faith and fair dealing.

3.2. The principle of good faith and commercial loyalty.

Suppression of abuse of law in international commercial
contracts
3.2.1. Content of the rule
Contracts shall be construed according to the principle of good faith. This
common law principle knows a constant application and practice of international
trade. This principle is provided for the negotiation, conclusion and performance of
the contract by Article 1.7 of the UNIDROIT Principles, but is also applicable mutatis
mutandis for the interpretation of the content of the contract.
In a significant case, applying the principle of good faith, the court held that the
arbitration would be unfair in the sense that the interpretation of a clause by
quantitative tolerance of + / - 10 %, the seller would have the right to deliver, after the
expiry of the contract, new quantities of cargo within the tolerance of 10% (Decision
CAB nr.281/11 December 1982). In another case, it was held that where the seller
has delivered the incorrect invoice error (at a price lower than the real one), he is
entitled to correction of error and recover the difference from the buyer, under the
principle that the agreements must be performed in good faith (Decision CAB no.
53/19 July 1995). Because good faith is presumed, bad faith must be proven by any
means.
The principle of good faith in international trade compliance is provided also by
the Vienna Convention (1980), in Article 7 paragraph 1, according to which in the
interpretation of this Convention, regard is to be had to its international character
and to the need to promote uniformity in its application and the observance of good
faith in international trade.
3.2.2. Specific applications in international commercial contracts
At the level of international commercial contracts, the principle of good faith
knows some applications.
a) The first, this principle is supported by the principle of commercial loyalty.
The principle of fair trade is stated, usually, by parties which provide in their
contracts that they will be interpreted in accordance with good faith and loyalty that
should exist in international trade relations. Commercial loyalty is assessed
objectively (abstract), depending on the behaviour of a reasonable professional in the
same situation.
In some cases, this principle is enshrined in law, with (or within) the principle
of good faith. Such a situation exists, for example, in the Uniform Commercial Code
of the United States (art. 2 -103 ), which states that "good faith if a merchant means
honesty in attitude ( " honestity in fact " ) and observance of reasonable commercial
standards of professional loyalty ( " fair dealing in the trade " ) .
UNIDROIT Principles attache great importance to the principle of good faith,
which is corroborated with that of commercial loyalty in art . 1.7, which is inserted in
the very first chapter of rules dedicated to general principles of international
commercial contracts. The principle is conceived as being imperative, the text stating
that each party must act in accordance with good faith and fair dealing in
international trade. The parties may not exclude or limit this duty.
b) Natural corollary of the principle to which we refer is the repression of
abuse of law in international commercial contracts. UNIDROIT Principles define
abuse as party's malicious behaviour which occurs for instance when a party
exercises a right merely to damage the other party or for a purpose other than the
one for which it had been granted, or when the exercise of a right is disproportionate
to the originally intended result.
Suppression of abuse is expressed through sanctioning the inconsistent
behaviour of one Party ( "inconsistent behavior" ), art. 1.8., according to which a
party cannot act inconsistently with an understanding it has caused the other party to
have and upon which that other party reasonably has acted in reliance to its
detriment.
c ) A specific application of the principle of good faith in international trade
agreements is the rule of partiescooperation. According to art . 3 of the Common
European Sales Law, The parties are obliged to cooperate with each other to the
extent that this can be expected for the performance of their contractual obligations.
Interpretation of the contract based on good faith is regulated also in the
matter of sales contract, according to Common European Sales Law, which states
that each party has a duty to act in accordance with good faith and fair dealing.
Breach of this duty may preclude the party in breach from exercising or relying on a
right, remedy or defence which that party would otherwise have, or may make the
party liable for any loss thereby caused to the other party. The parties may not
exclude the application of this Article or derogate from or vary its effects.

3.3. Interpretation of contracts based on habit, equity and

law

This principle of interpretation is both recognized and applied explicitly or

implicitly, in international commercial contracts and the related arbitration practice.
UNIDROIT Principles establishe this rule of interpretation in art . 4.3 lit. b ) and
f ), cited above, in line with the principle of common intention of the parties.

3.4. Doubtful contract terms shall be interpreted in taking

legal effect, not in the sense of no effect
UNIDROIT Principles govern this principle in art . 4.5, according to which
Contract terms shall be interpreted so as to give effect to all the terms rather than to
deprive some of them of effect. The Commentary to this article gives the following
example : A commercial network television contracts with B, a film distributor for
regular supply of a number of those films to be broadcast on network A in the
afternoon, period when only those films that can be seen without restriction by all
viewers can be transmitted. Under the contract, the films submitted must "stand the
test of admissibility" of the competent authority checking. A dispute arises between A
and B in terms of the meaning of this clause. B claims that it implies just that films
must have obtained permission to broadcast, even if they are listed with the rate X,
while insisting that they should have been classified as acceptable for everyone. If
you cannot otherwise determine the meaning to be given to this provision, the
meaning given by A to B prevails because interpretation would deprive the clause of
all effects.
Specifically, in international commerce, the application of the abovementioned
principle is done in a more flexible manner than according to national law.
a) on the one hand, many of the international commerce concepts are set up,
by the law or by the parties, with the scope of maintaining, as much as possible, the
contractual relation at hand. This includes, for instance: clauses to protect against
risks (clauses to maintain the value, clauses to adapt the contract etc.); the many
ways of adapting the contract available for the creditor in case of nonperformance by
the debtor of his/her legal obligations, which lead to the resolution of the contract as
an exceptional last resort option (for instance, such is the case with the provisions of
the 1980 Vienna Convention); the possibility given to judges and arbitrators to adapt
the contract based on the new circumstances arisen during the performance of the
contract, whenever a hardship clause is provided for by the parties or recognized
based on lex causae etc.
b) on the other hand, however, the participants to international commerce, by
way of contractual clauses (or even by law, in some cases), accept, way more easily
than according to national law, the possibility to cease the contract and start new
contractual relations, whenever maintainting the contract evidently seems, for the
parties as well as the arbitrators in the litigation, a no longer viable solution. This
possibility is provided for by the parties, for instance, by way of clauses to protect
against risks (monetary or nonmonetary clauses), included in the contract.

3.5. Interpretation according to the nature of the contract

UNIDROIT Principles view this rule of interpretation in relation to the common
intention of the parties, art. 4.3. letter. d ), cited above.
Thus, in a case of an international commercial arbitration held it was held that
the international sale clause in the contract which states that the quality specification
of the goods will be decided without determining its part of this task shall be
construed to the necessary details to be agreed by the parties, and not unilaterally by
one of them, in accordance with the nature of the contract, which is a bilateral act
(Decision CAB nr.25/30 June 1971 ) .

3.6. Coordinated interpretation of contractual clauses

UNIDROIT Principles provide that terms and expressions shall be interpreted
in the light of the whole contract or statement in which they appear (art. 4.4).
For example, in one case, arbitration held that, when in an international
commercial contract there is a mismatch between the product name and its detailed
description (which corresponds to a different product ) or between product price
( expressed as a global figure) and detailed elements of its calculation, is should hold
the detailed identification prevailing as, we add, synthetic clauses on name and price
must be linked with the meaning resulting from the entire act (Decision CAB No. 22 /
July 7, 1970 ).
 3.7. Interpretation and adding of omitted clauses
UNIDROIT Principles adopt a special rule for the interpretation of omitted
clauses in a contract in art . 4.8. According to the text, where the parties to a contract
have not agreed with respect to a term which is important for a determination of their
rights and duties, a term which is appropriate in the circumstances shall be supplied.
In determining what is an appropriate term regard shall be had, among other factors,
to (a) the intention of the parties; (b) the nature and purpose of the contract; (c) good
faith and fair dealing; (d) reasonableness.
This text devotes actually analogy argument (ubi eadem est ratio eadem
solutio esse debet), known also in Romanian law .The rule should be applied with
caution, however, depending on the circumstances .

4. Interpretation of contracts by specific rules of international trade

law

4.1. Interpretation based on the international nature of the

contract
In a most general rule, in the interpretation of contracts, we do need to take
account of their international character and to promote uniform solutions in their
interpretation.
However, for matters related to these contracts, but not expressly settled by
them, we shall take account of the general principles which inspire those contracts or,
in the absence of these principles, the law applicable under international private law.
This rule of interpretation is provided in art . 7 of the Vienna Convention (1980 ) with
reference to the interpretation of its own rule, but it also extends to the international
sale of goods contracts that the Convention governs. According to the text, in the
interpretation of this Convention, regard is to be given to its international character
and to the need to promote uniformity in its application and the observance of good
faith in international trade.

4.2. Interpretation of contracts on international trade

usages and habits that have been established between the
parties
 4.2.1. Content of the rule
This principle is enshrined explicitly in art . 9 of the Vienna Convention (1980)
and the UNIDROIT Principles, art. 4.3 let. b ) and f ) cited above, in conjunction with
art. 1.9. According to art . 9 of the Vienna Convention, the parties are bound by any
usage to which they have agreed and by any practices which they have established
between themselves (al. 1). The parties are considered, unless otherwise agreed, to
have impliedly made applicable to their contract or its formation a usage of which the
parties knew or ought to have known and which in international trade is widely known
to, and regularly observed by parties to contracts of the type involved in the particular
trade concerned (al. 2).
4.2.2. Application of the rule in Romanian arbitration practice
The principle of interpretation of international commercial contracts based on
usages and habits is applied in Romanian practice, as shown in the following
examples.
a) In case of conflict between a custom or habit established between the
parties and an express contractual provision, contract clause prevails (See, in this
sense, Decision C.A.B no. 198/30 June 1982).
b ) Where the parties used in the contract expressions, formulas or typical
clauses ("terms" in English), common in trade, their interpretation is according to the
meaning that they are used in practice widely recognized and respected in
international trade.
This rule is derived from art. 9 paragraph 2 of the Vienna Convention (1980),
but is much older and particularly important because, in many cases, the parties use
expressions and formulas typical, to express synthetically the whole legal operation,
such as cargo delivery terms and related issues (eg. when using a commercial term
in Incoterms 2000), the manner of payment of the price (i.e., D / P which means
"documents against payment" or D/A "documents against acceptance") or certain
documents specific trade (for example, L/C letter of credit, B / L = Bill of lading) and
so on .
If the parties have corresponding terms used in international codified practices
such as the Incoterms 2010 rules, they will be interpreted in accordance with these
usages.
When there are internationally codified practices they prevail, in principle, as
rules of interpretation, over local usage.
 c) If the contract payment amount is written in figures and words, in the event
of precedence is taken into account the amount in letters. If the payment amount is
written several times, either in numbers or in letters, in the event of account shall be
taken into consideration the lower amount ( in dubio pro debitori) .
d) Thus, in a case the question of the interpretation of the phrase "The penalty
is free from the value of the damage" that the parties have used it in their contract,
arose.
The buyer claimant argued that this phrase must be understood in the sense
that the penalty is separate from the amount of damages that they suffered as a
result of delay in delivery of the goods of the other party. In this interpretation, it
appears that the default interest provided in the contract - and at this phrase it refers
- has the character of a civil fine and does not follow injury compensation, could be
so coupled with the damage.
In another interpretation, the expression can be understood as the penalty is
independent of the amount of damage, so that, regardless of the actual amount of
damage caused by delay in delivery, the debtor will be liable to pay conventional
penalty.
Arbitration panel ruled in that the second interpretation is correct, as it is
consistent with the purpose that a penal clause usually has. Indeed, if the parties
have determined in the contract a conventional penalty ( penalty clause ), its function
is usually compensatory - early determination of the amount of damage that the party
in delay owes the other party - and not only sanctioning, therefore aggregating it with
damages is not possible, in this case. (See, Decision C.A.B. nr.5/7 February 1973).
e) In another case, litigation regards - among others - the interpretation of two
contractual contradictory clauses.
In a service contract based on a standard form, from a Romanian company
( as a performer ) and a French firm (as ordinate ), there was an inconsistency
between a clause printed in the contract itself - that the contract has indefinite term -
and another, handwritten and signed by both parties, meaning that the contract is
concluded for a period of six months. The Arbitration tribunal resolved this
contradiction based on the commercial usage according to which clauses
handwritten and signed by the parties take precedence over the printed standard
contract, because they express the real intention of the parties.(See, Decision C.A.B.
no.15/1983).
 f ) In another litigation the interpretation " FOB Romanian ports " clause that
the parties have inserted it in their contract, arose, without mentioning if it is to be
given the significance of Incoterms, the RAFTD ( Revised American Foreign Trade
Definitions ) or, alternatively, a different meaning.
The contentious issue is of importance since both rules to which we shall refer
to interpret the FOB clause, but the differences between the solutions which they
retain are sometimes significant. The judges have done in this case the interpretation
clause after Incoterms rule, starting from the fact that they - unlike RAFTD -
Romanian firms are making the most common use of Incoterms when signing
contracts for the international sale of goods, which is likely to create a common
practice, in this respect, in Romanian practice (See Decision. C.A.B. no.93/1978,
commented by CAB).
g ) The arbitral tribunal found that the 10 % of the value of the goods
requested by the claimant as loss of profit ( lucrum cessans ) due to its inability to
resell the goods that have been delivered to the respondent, although not mentioned
in the contract or by law is a reasonable percentage given the international
commercial usages (See Decision. C.A.B. no. 85/3 September 1996).
h ) The arbitration body found that, in accordance with the customs, preparing
the draft contract of sale is the responsibility of the seller - as has been done, in fact,
in this case - and, consequently, there is a discrepancy between the copies of the
contract remaining in the hand of the seller and the buyer is solely attributable to the
seller . In other words, the buyer can be forced to comply with other terms than those
listed in his copy of the contract, which was materially prepared by the seller and only
the failure of the latter differ from the ones he has retained (See Decision .C.A.B.
no.16/31 March1973).
i) In a dispute between a Romanian company ( seller) and one Spanish
( buyer and the applicant ), arbitral body held in that, when the contract between the
parties provided for a penalty clause and the evidence in question to determine the
extent of the damage suffered by the applicant are contradictory and unconvincing, it
will determine the amount of damages to 8 % of the value of the goods delivered,
given that large and constant application of this level in arbitration practice justifies its
reference, with the significance of commercial usage (See, Decision.C.A.B.
no.158/1980).
 j ) The arbitral body retained for proof of contractual obligations, a way to
prove regulated by the usages of a particular domain.
Thus, in a case cited above, the French company refused to pay the fee to a
Romanian firm for the control of goods, under the contract for services concluded
between them, on the grounds that the latter has not executed an obligation to
control the amount of goods (in this case, furniture) delivered by another Romanian
company to the French company and the merchandise arrived defective in France.
The arbitral body held that the foreign company 's refusal to pay the fee is
unfounded because the defective merchandise delivered in France was not part of
the group that the Romanian company was required to control. This conclusion is
based on the fact that freight consignment does not carry its own seal of that
company or, as is customary, the control body applies this seal on any cargo
checked, thus attesting quality (8 See, Decision C.A.B. no.15/1983.)
k ) Also, it is considered that the seller's obligation to apply appropriate labels
on shoes for export, expressly provided for in the delivery contract, implies, according
to custom, his obligation to tag in the same way boxes containing shoes (See,
Decision C.A.B. no .71/3 March 1982).

4.3. Specific rules for interpreting contracts based on

standard clauses (defaults)
International Commercial Contracts based on predetermined terms (general
conditions, standard contracts, framework agreements, contracts of adhesion, etc.)
raise specific issues of interpretation.
a) Defaults clauses are considered incorporated in the contract only if they
referred to the Contracting Party and the other Party has explicitly agreed or, failing
such acceptance if the application of these clauses is customary between the parties
(in the sense that they explicitly accepted in previous relationships between the
parties) or commonly used (as customary) international trade branch covered
agreement, and the parties have not expressly excluded. In this respect, the
international arbitration practice has shown that setting specific, by stipulation of the
contract, of the connection with certain general conditions that complete it, is
sufficient for these general conditions incorporated in the contract to be considered
and therefore applicable to parties (Decision C.A.B. no. 53/26 February 1985 ).
 UNIDROIT Principles provide this rule in the context of standard clauses
regulation (art. 2.1.19). So, where one party or both parties use standard terms in
concluding a contract, the general rules on formation apply, subject to Articles 2.1.20
- 2.1.22 (para. 1). Standard terms are provisions which are prepared in advance for
general and repeated use by one party and which are actually used without
negotiation with the other party (para. 2).
According to the comment to this article, standard clauses proposed by one
party bind the other party only after acceptance, and depends on the circumstances
of the case if the parties have to expressly refer to standard clauses or incorporating
such terms may be implied. The standard clauses contained in the contract
document itself will normally be mandatory by simply signing the contract document
as a whole, at least as long as they are reproduced above the signature and not, for
example, on the back of the document. On the other hand, the standard clauses
contained in a separate document will, normally, have to be referred to expressly by
the party that intends to use them. Their default inclusion may be admitted only if
there is an established practice between the parties or usage of this exists. In this
regard, the following examples are offered: 1) A intends to enter into an insurance
contract with B to cover the risk of liability for accidents at work for its employees.
Parties sign a model contract presented by B after the completion of white spaces
referred, inter alia, to the premium and maximum insured amount. Under his
signature, A is obliged not only to terms that he negotiated separately with B, but also
to the General Conditions of the National Association of Insurers, which are printed
on the form. 2) A normally enters into contracts with its customers based on its own
standard terms that are printed on a separate document. When making an offer to B,
a new client, A makes no express reference to standard terms. B accepts the offer.
Standard Clauses are not incorporated in the contract unless he can prove that B
knew or should have known of his intention to conclude the contract only on the basis
of their standard terms, such as standard clauses were adopted in regular
transactions previous. 3) A plans to buy grain from the London stock market. The
contract between A and B, a broker at the stock exchange, makes no explicit
reference to the standard clauses that normally govern contracts concluded on the
stock brokerage in question. Standard terms are however incorporated in the
contract as applying to the type of contract in question may be considered custom.
 b ) When a default clause, by its content or by just its wording, presents an
unusual character, so that other party ( adherent ) could not reasonably expect that
this clause is incorporated into the contract, the clause will not be binding unless it
has been accepted expressly by the adherent.
Unusual character clauses represent, usually, the clauses which set special
rights for the part which proposes the general conditions (eg, limitations of liability for
this opportunity to terminate the contract unilaterally or to suspend execution ) or
obligations extremely burdensome for the adherent (certain disqualifications, limiting
the right to oppose exceptions, tacit extension of contract, covenants for jurisdiction
or arbitration, restricting freedom of contract in relation to third parties, etc.).
UNIDROIT Principles adopt similar rules in art . 2.1.20, according to which no
term contained in standard terms which is of such a character that the other party
could not reasonably have expected it, is effective unless it has been expressly
accepted by that party (al. 1). In determining whether a term is of such a character
regard shall be had to its content, language and presentation (al. 2).
c ) In case of ambiguity, the terms pre-set (especially general conditions )
proposed by one of the parties shall be interpreted in its detriment .
Article 4.6 of the UNIDROIT Principles establishes this rule in the following
terms: "If the contract terms supplied by one party are unclear, an interpretation
against that party is preferred."
d ) Where there is inconsistency between a clause expressly agreed by the
parties (handwritten or typewritten and signed by them ) and one default, the latter
prevails .
The UNIDROIT Principles, express this rule as follows: " In case of conflict
between a standard term and a term which is not a standard term the latter prevails "
( art. 2.1.21 ) e) In the event that both parties propose their own general conditions
and are disagreements among them, UNIDROIT Principles adopt a solution based on
the doctrine of " knock -out " in art . 2.1.22 ( " Battle of forms " ) . According to the
text, where both parties use standard terms and reach agreement except on those
terms, a contract is concluded on the basis of the agreed terms and of any standard
terms which are common in substance unless one party clearly indicates in advance,
or later and without undue delay informs the other party, that it does not intend to be
bound by such a contract. Another solution, known as the "ultimate reference" can
also be retained if inferred from the circumstances. According to this, particular
account shall be taken of the default terms proposed by the buyer, if the
circumstances do not indicate otherwise. Such a solution is deduced by applying by
analogy, as regards pre-set clauses, the provisions in art. 19 of the Vienna
Convention (1980 ) according to which a reply to an offer which purports to be an
acceptance but contains additions, limitations or other modifications is a rejection of
the offer and constitutes a counter-offer (para. 1). However, a reply to an offer which
purports to be an acceptance but contains additional or different terms which do not
materially alter the terms of the offer constitutes an acceptance, unless the offeror,
without undue delay, objects orally to the discrepancy or dispatches a notice to that
effect. If he does not so object, the terms of the contract are the terms of the offer
with the modifications contained in the acceptance (para. 2).
Additional or different terms relating, among other things, to the price,
payment, quality and quantity of the goods, place and time of delivery, extent of one
partys liability to the other or the settlement of disputes are considered to alter the
terms of the offer materially (para. 3).

4.4. The principle of cooperation of the contracting parties

International trade agreements are construed in the spirit of cooperation that
should exist between the contracting parties.
The principle of cooperation is provided for, with a character of generality, by
the UNIDROIT Principles in the context of the content of the contract, Art. 5.1.3
(Each party shall cooperate with the other party when such co-operation may
reasonably be expected for the performance of that partys obligations).
This principle, which is a specific application of the idea of good faith and the
principle of " nemo auditur propriam tupitudinem allegans own " from common law, is
consistently recognized in contractual arbitration practice of international trade, and
applies to both throughout its implementation and conclusion, including the realm of
contractual liability.
a) In reference to the time of the contracts conclusion, the obligation to
contribute to the setting of a clear contractual terms is borne by both parties equally,
even if using the printed form of one of them.
b ) However, as a principle, it should be noted that in any contracts both
parties have an obligation to act in good faith, to cooperate in order to achieve
effective and timely obligations, and specifically in this case we refer to, it was
charged that it is the duty of the buyer that, at the conclusion of the contract and
during its execution, to provide the seller with no reluctance, all the data necessary to
meet the agreed delivery .
c ) Finally, in the realm of contractual liability, it is constantly accepted in
international trade that the party claiming a breach of contract by the other party must
take reasonable steps in the circumstances, to limit loss and unrealized gain due
violation; if she neglects to do so, the other party may request a reduction of
damages equal to the amount of loss that could have been avoided.
This idea clearly expressed in art . 77 of the Vienna Convention (1980), is
applied consistently and traditionally by Romanian international trade arbitration
practice (eg Hot . CAB, nr.106/22 April 1980) . Under the provisions of art . 77, a
party who relies on a breach of contract must take such measures as are reasonable
in the circumstances to mitigate the loss, including loss of profit, resulting from the
breach. If he fails to take such measures, the party in breach may claim a reduction
in the damages in the amount by which the loss should have been mitigated.

4.5. Problems of interpretation arising from the language

(languages) in which the contract is drawn up
a) The situation in which the contract is concluded in one
language
Since international trade agreements are drafted very frequently in a foreign
language (mostly in English), the specific terms and phrases in the contract must be
interpreted in principle with the meaning that is given in the language of the contract,
even if different from the one given by the law applicable to the contract (lex causae).
This rule is especially applicable for use in contract, of specific techniques
terms, such as certain monetary units (eg the pound) or measure (eg. the gallon),
and the actual legal expressions.
b) Solutions on contract interpretation concluded in several
languages
For the assumption that an international trade agreement is drafted in several
languages, with equal legal value, for which the parties have not established a
hierarchy in place and because inconsistencies exist between variations, in doctrine
and international practice several solutions have circulated.
 UNIDROIT Principles provide that when a contract is drawn up in two or more
language versions which are equally authoritative there is, in case of discrepancy
between the versions, a preference for the interpretation according to a version in
which the contract was originally drawn up (art. 4.7).
In another solution, which we prefer, the arbitration court will consider the
applicable version which, considering the circumstances, prevails under real will of
the parties or, in case of impossibility of determining the will, that is written in the
debtors language. This solution is a result of usage of international trade according
to which the task of ensuring consistency between different copies of the contract lies
with the vendor and therefore appears attributable to its inconsistency.

Section 3
Conclusion of international commercial contracts

5. Principle of contractual freedom in general. Its manifestation in

the conclusion of international commercial contracts
Freedom of contract is a principle applicable to all contracts, both civilian and
commercial.
UNIDROIT Principles regulate it in art. 1.1, which states that "The parties are
free to enter into a contract and to determine its content". The commentary to this
article states that the principle of freedom of contract is considered to be particularly
important for international trade, as the foundation to an open international economic
order, focused on the concepts of market and competition.
According to art 1 of the Common European Sales Law Parties are free to
conclude a contract and to determine its contents, subject to any applicable
mandatory rules.
Regarding the conclusion of the sale contract under the Common European
Sales Law, it is stated that the agreement is concluded if: (a) the parties reach an
agreement; (b) they intend the agreement to have legal effect; and (c) the agreement,
supplemented if necessary by rules of the Common European Sales Law, has
sufficient content and certainty to be given legal effect (art. 30 al. 1).
The principle of contractual freedom is quite complex and it includes a
multitude of aspects, more importantly the following:
 a) the freedom of the parties to conclude the contract. Basically, this principle
refers to international commercial contracts, first of all, by the fact that such
contracts, no differently than civil contracts, are concluded by mutual agreement from
the parties, by meeting the offer with its acceptance.
Second of all, looking at Romanian participants to international commerce, this
principle implies the possibility to choose international partners, as well as to
negociate and determine the content of the contracts, with limitations imposed only
by public order provisions of Romanian private international law or any other legal
system representing lex causae in the particular case.
b) the freedom of the parties to determine the legal nature, object and content
of the concluded contracts. Also, the principle refers to the freedom of the parties to
change the contract, by mutual agreement, and to determine the limitations of its
effects (ceasing etc). Also, parties have the right to choose the law applicable to the
content and effects of their contract.
c) the freedom of proof in international commerciall litigations, which
represents a natural effect of the consensualism principle in concluding commercial
contracts.
d) the freedom of parties to choose the jurisdiction for settling disputes arisen
from the contract. This option implies the right of the parties to choose between
national courts jurisdiction and international commercial arbitration, within the
limitations imposed by jurisdiction provisions and procedural public order provisions.

6. The offer to contract

6.1. Definition of the offer
The offer to contract is defined in art. 2.1.2 of the UNIDROIT Principles,
representing "a proposal for concluding a contract.
6.2. The conditions of validity of the offer
In relation to international commercial contracts, the offer must be firm, given
as legal commitment (animo contrahendi negotii). This condition of the offer is
accepted by the UNIDROIT Principles, in art. 2.1.2, which states that a proposal for
concluding a contract constitutes an offer if it is sufficiently definite and indicates the
intention of the offeror to be bound in case of acceptance (s.n.).
The commentary notes, correctly, that such intent is rarely stated explicitly,
therefore must be inferred from the circumstances of each individual case.
 The binding offer, especially as the firm order, is addressed, in principle, to a
determined person. A non-commitment offer is usually addressed to unspecific
persons, but can be addressed to one or more specific individuals. According to the
commentary to the article, it shows that the proposal addressed to one or more
specific persons is more likely to be intended as an offer than is one made to the
public at large .
According to regulations on the contract for the international sale of goods, 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 offeror
to be bound in case of acceptance. A proposal is sufficiently definite if it indicates the
goods and expressly or implicitly fixes or makes provision for determining the
quantity and the price. A proposal other than one addressed to one or more specific
persons is to be considered merely as an invitation to make offers, unless the
contrary is clearly indicated by the person making the proposal (Article 14 of the
Vienna Convention ) .
Moreover, the offer must be accurate and complete, to contain all the essential
elements of a future contract, so as the pure and simple acceptance by the offeree to
make the conclusion possible. This character of the offer is retained by UNIDROIT
Principles, in art. 2.1.2, cited above.
Interpretation in a specific case, of the conditions of an offer, as mentioned
above, is made by the body of jurisdiction, which must take into account the nature of
the operation, international trade usages, habits between the parties and any other
relevant circumstances . In the commentary to art . 2.2, the Principles give the
following example: A renewed for a number of years a technical assistance contract
with B for technical assistance for As computers. A opens a second office with the
same computer type and asks B to also give him support for new computers. B
accepts and, despite the fact that A's offer does not specify the conditions of the
understanding, a contract has been concluded since the missing terms can be taken
from previous contracts as constituting a practice established between the parties.
Under the provisions of the Common European Sales Law, a similar solution is
adopted ( art. 31) according to which a proposal is an offer if: (a) it is intended to
result in a contract if it is accepted; and (b) it has sufficient content and certainty for
there to be a contract. An offer may be made to one or more specific persons. A
proposal made to the public is not an offer, unless the circumstances indicate
otherwise.

6.3. Withdrawal of the offer

Among present people (which are face to face inter praesentes) there appears
no issue with the offer, in principle, because the offer does not involve time on the
part of the tenderer, as acceptance must be expressed on place. If, exceptionally, the
offeror has given the other party a cooling-off period, the offer is irrevocable within
this period.
The problem of revocation of the offer arises, however, in international
contracts (and internal) concluded by correspondence (between absent - inter
absentes), because in this case between the time of issue of the offer and the time
when the acceptance reaches the offeror - the conclusion of the contract a period
of time is necessary (pre / ante - contract) or otherwise said, the agreement will be
performed ex intervallo. Practice proves that the frequency of inter absentes
contracts in international trade is higher than in domestic contracts, due to existent
distance, by definition, between the residences of the parties.
Analysis of the legal regime of inter absentes revocation of the offer involves a
distinction between the two situations, as the offer has reached the recipient or not.
A. As long as it has not reached the recipient, the offer may be revoked,
without any consequences for the offeror. The rule concerning the revocation is found
in art. 2.1.3 para. 2 of the UNIDROIT Principles, under which an offer, even if it is
irrevocable, may be withdrawn if the withdrawal reaches the offer before or at the
same time as the offer.
The same solution is also provided in article .15 of the Vienna Convention,
under which an offer becomes effective when it reaches the offer (al. 1). An offer,
even if it is irrevocable, may be withdrawn if the withdrawal reaches the offer before
or at the same time as the offer (al. 2).
B. In the event that the offer reached the recipient, the Principles provide, in
art . 2.1.4 that Until a contract is concluded an offer may be revoked if the revocation
reaches the offeree before it has dispatched an acceptance. However, an offer
cannot be revoked: (a) if it indicates, whether by stating a fixed time for acceptance
or otherwise, that it is irrevocable; or (b) if it was reasonable for the offer to rely on
the offer as being irrevocable and the offeree has acted in reliance on the offer.
 The rule is that, as long as the contract is not concluded, the offer is
revocable.
Revoking an offer produces two main consequences:
First of all, pursuant to revoking, a potential acceptance of the offer cannot
lead to the conclusion of the contract, because the consent of the parties has not
been achived.
Second of all, although the revoking prohibits the contract from being
concluded, it the revoking reaches the other party after it has performed the contract,
the revoking party is liable for damages. The solution of holding the revoking party
liable is intended to insure a balance between the parties and to insure fairness,
because accepting the possibility favourable to the offeror to revoke is offer is
balanced by the right given to the offeree who performed the contract even partially
to request restitution of costs made for this performance. In order for the revoking
party to be held liable for damages it is necessary for the performing party to have
acted in good faith. It has not acted in good faith if, when anticipating the revoking of
the offer, it starts performance in a hurry in order to hold the other party liable.
There are admitted two important exceptions to the rule of the revocation of
the offer, which significantly limit this rule, the trend is that it becomes, in fact,an
exception.
Thus, first, whether the offeror has set a deadline for accepting, the offer is
irrevocable (firm, open, guaranteed) on its duration. The offeror is setting this term,
usually by expressions such as: price is valid until ... " or" demand is firm until ... " .
Deadline set by the offeror should be possible, i.e. at least equal to the time strictly
necessary for the exchange of correspondence between the parties; failing would
make the offer be considered without limit.
Secondly, if a deadline for accepting is not set, the offer is irrevocable if it is
reasonable for the offeree to consider it irrevocable, and he acted accordingly.
This solution is provided by art. 16 of the Vienna Convention, according to
which a contract is concluded an offer may be revoked if the revocation reaches the
offeree before he has dispatched an acceptance. However, an offer cannot be
revoked: (a) if it indicates, whether by stating a fixed time for acceptance or
otherwise, that it is irrevocable; (b) if it was reasonable for the offeree to rely on the
offer as being irrevocable and the offeree has acted in reliance on the offer.
 The Common European Sales Law opts for a more permissive solution in the
matter of revocation of the offer in art. 32. Thus, an offer may be revoked if the
revocation reaches the offeree before the offeree has sent an acceptance or, in
cases of acceptance by conduct, before the contract has been concluded. Where a
proposal made to the public is an offer, it can be revoked by the same means as
were used to make the offer. A revocation of an offer is ineffective if: (a) the offer
indicates that it is irrevocable; (b) the offer states a fixed time period for its
acceptance; or (c) it was otherwise reasonable for the offeree to rely on the offer as
being irrevocable and the offeree has acted in reliance on the offer.

6.4. Termination of an offer

UNIDROIT Principles provide that "An offer is terminated when a rejection
reaches the offeror" ( art. 2.1.5 ). The same solution is offered by art. 17 of the
Vienna Convention.
According to the Common European Sales Law, when a rejection of an offer
reaches the offeror, the offer lapses ( art. 33 ).

7. Acceptance of the offer

7.1. Definition and types (ways) of acceptance
Acceptance of the offer is the second side of the consent. If the offer takes the
form of order, acceptance means confirmation.
Acceptance is of two kinds or otherwise said, can be given in two ways:
a) expressly when it is given by statement ( answer ) of the offeree in the
sense that it agrees with the offer, and
b) tacitly, if in the form of any other judicial act ( lato- sensu ) which can be
considered equivalent to express acceptance, that will undoubtedly result from the
recipient to accept the offer. In this situation, we mention, for example, execution,
starting of execution or at least the promise of performance of the contract, opening
the letter of credit for issuing a bill.
Both types have the same legal value. This principle is laid down in article 34
of the Common European Sales Law, according to which any form of statement or
conduct by the offeree is an acceptance if it indicates assent to the offer.

7.2. Acquiescence and silence (inactivity)

 UNIDROIT Principles, art. 2.1.6., state, in terms of acceptance and legal
regime of silence, the following solutions: A statement made by or other conduct of
the offeree indicating assent to an offer is an acceptance. Silence or inactivity does
not in itself amount to acceptance. An acceptance of an offer becomes effective when
the indication of assent reaches the offeror. However, if, by virtue of the offer or as a
result of practices which the parties have established between themselves or of
usage, the offeree may indicate assent by performing an act without notice to the
offeror, the acceptance is effective when the act is performed.
UNIDROIT Principles provide the following example, in the commentary to art.
2.1.6: "Based on a long-term contract for the supply of wine B has met regular orders
of A without explicitly confirming acceptance. On November 15 A ordered a large
stock for the New Year. B does not respond, nor delivers goods to the required date.
B breached the contract because, according to established practice between the
parties, the silence of B in terms of A's commands is deemed acceptance".
Vienna Convention regulates the legal regime of silence in art . 18 al. 1,
meaning that the statement made by or other conduct of the offeree indicating assent
to an offer is acceptance. Silence or inactivity does not in itself amount to
acceptance.
According to article 18 al. 3, however, if, by virtue of the offer or as a result of
practices which the parties have established between themselves or of usage, the
offeree may indicate assent by performing an act, such as one relating to the
dispatch of the goods or payment of the price, without notice to the offeror, the
acceptance is effective at the moment the act is performed, provided that the act is
performed within the period of time laid down in the preceding paragraph.
Under the provisions of art. 34 al. 2 of the Common European Sales Law,
silence or inactivity does not in Itself constitute acceptance.

7.3. Content of acceptance

There is a rule and an exception in this regard.
UNIDROIT Principles set in art . 2.1.11, that A reply to an offer which purports
to be an acceptance but contains additions, limitations or other modifications is a
rejection of the offer and constitutes a counter-offer. However, a reply to an offer
which purports to be an acceptance but contains additional or different terms which
do not materially alter the terms of the offer constitutes an acceptance, unless the
offeror, without undue delay, objects to the discrepancy. If the offeror does not object,
the terms of the contract are the terms of the offer with the modifications contained in
the acceptance.
The commentary on this article, exemplify the terms considered to not
substantially change the contents of the offer. It shows that what may qualify as
'substantial' amendment cannot be determined in the abstract but will depend on the
circumstances of each case. Additional or different terms relating to price or method
of payment, the time and place of execution of a non-pecuniary obligation, the extent
of one partys liability against the other or the settlement of disputes, will normally, but
not necessarily, represent a substantial modification of the offer. An important factor
to be taken into account is whether additional or different terms are commonly used
in the trade concerned and are therefore not surprising to the offeror. The Principles
offer an example: A orders a certain amount of wheat from B. In the order
confirmation, B adds an arbitration clause which is standard for the goods concerned.
Since A cannot be surprised by such a clause, it is not a 'substantial' amendment of
the terms of the offer and except A objects without undue delay, the arbitration clause
becomes part of the contract.
A regulation on which we have reservations is stated in art 2.1.12. According
to this article, If a writing which is sent within a reasonable time after the conclusion
of the contract and which purports to be a confirmation of the contract contains
additional or different terms, such terms become part of the contract, unless they
materially alter the contract or the recipient, without undue delay, objects to the
discrepancy.
The comment stated that the situation is clearly different from that envisaged
in Article 2.1.11, where a contract had not been concluded and the modifying terms
were contained in the alleged acceptance of the person to whom the offer was made.
However, since in practice it can be extremely difficult if not impossible to distinguish
between the two cases, this article adopts, regarding modifying terms contained in a
written document to confirm, the same solution as envisaged in Article 2.1.11 . It
offers an example: A orders by telephone equipment from B and B accepts the order.
The next day A receives a letter from B to confirm their verbal understanding terms
but adds that B wishes to be present at the testing of the equipment at the premises
of A. the additional term is not a " substantial " change of the terms which the parties
have agreed upon and thus will become part of the contract unless A objects without
delay.
Therefore, as a rule, to have the effect of concluding the contract ( consent
form ), the acceptance must be pure and simple, and must be perfectly consistent
with the contents of the offer .
The Romanian Arbitration International Trade Practice has consistently held
assertion of this rule and gives us many examples of situations of inconsistency
between offer and acceptance, regarding the essential elements of the contract,
which resulted in the arbitral body considering that the contracts were not concluded,
without the consent of the parties. These inconsistencies were borne on the nature of
the contract ( In a case, the seller has proposed a regular sale, and the buyer felt that
it is a barter Decision CAB nr.48/1973 ), but more often on the content of the
contract (eg, absence of agreement between the price, an essential element of the
contract, prevents it - Decision . C.A.B. No. 26 / July 8, 1972; in another case, it was
held that determining the port of destination of goods is an essential element of the
contract, if transportation is performed in accordance with clause CIF or C. & F.
Incoterms 1953, equal to CIF and CFR terms of Incoterms 2010, under which freight
rates, as part of the price, falls to the seller and, therefore, specification by the buyer
of another destination port than specified in the contract, prevents the conclusion of
the contract Decision. no .68/1974 C.A.B) .
By way of exception, acceptance with changes will not be considered a new
offer if the conditions mentioned in the text are fulfilled.
Similar rules are laid down in article 19 of the Vienna Convention, cited above,
which provides a rule (para. 1), an exception (para. 2 sentence I, part one) and an
exception to the exception (al. 2 sentence I, part II).
The same solution is provided in the Common European Sales Law, art. 38,
under which a reply by the offeree which states or implies additional or different
contract terms which materially alter the terms of the offer is a rejection and a new
offer (al. 1). Notion of materially alter the terms of the offer is qualified in al. 2 of the
same article, showing that additional or different contract terms relating, among other
things, to the price, payment, quality and quantity of the goods, place and time of
delivery, extent of one party's liability to the other or the settlement of disputes are
presumed to alter the terms of the offer materially.
 As an exception, a reply which gives a definite assent to an offer is an
acceptance even if it states or implies additional or different contract terms, provided
that these do not materially alter the terms of the offer. The additional or different
terms then become part of the contract (al. 3). A reply which states or implies
additional or different contract terms is always a rejection of the offer if: (a) the offer
expressly limits acceptance to the terms of the offer; (b) the offeror objects to the
additional or different terms without undue delay; or (c) the offeree makes the
acceptance conditional upon the offerors assent to the additional or different terms,
and the assent does not reach the offeree within a reasonable time.
As a general remark, we note that, under the principle of good faith that should
govern international economic relations, the parties are required to cooperate to
establish full content of the agreement.

7.4. Deadlines for acceptance

UNIDROIT Principles establish, on the time of acceptance, in substance, the
following solutions in art. 2.1.7: An offer must be accepted within the time the offeror
has fixed or, if no time is fixed, within a reasonable time having regard to the
circumstances, including the rapidity of the means of communication employed by
the offeror. An oral offer must be accepted immediately unless the circumstances
indicate otherwise.
The commentary to this article gives the following example: A sends B an offer
Monday morning by e -mail, asking B to respond "as soon as possible." While on
other occasions A and B have communicated by e -mail, in this case B accepts the
offer by letter, which reaches A on Thursday. The acceptance of B should be
regarded as late as in the circumstances where the acceptance by a letter arrives
three days after receiving the e-mail, cannot be considered to be made "as soon as
possible". We notice the use of the concept of "reasonable time" under the influence
of Anglo - Saxon terminology, as in the Vienna Convention (in art .18, para. 2).
Regarding the terms that acceptance must occur in for producing legal effects,
i.e. to lead to conclusion, a series of successive distinctions should be made:
A. The first, whether the tenderer has imposed a deadline for acceptance, the
solution is different for express or tacit acceptance.
a) An express acceptance is valid when it comes to the knowledge of the
offeror within the time he decided
 b) Regarding the tacit acceptance, in the spirit of Art. 2.1.7, is results that it is
valid when the fact equivalent to an acceptance occurs before the deadline given.
UNIDROIT Principles, in art. 2.1.6 last paragraph, cited above, indicate that it
is not necessary for the acceptant to send any special notification to the offeror
regarding the equivalent fact in the case of tacit acceptance.
B. Secondly, for an offer without acceptance period, if the contract is
concluded by correspondence, express acceptance must reach the offeror in a
reasonable time.
Regarding the time of acceptance, Common European Sales Law provides
that an acceptance of an offer is effective only if it reaches the offeror within any time
limit stipulated in the offer by the offeror. Where no time limit has been fixed by the
offeror the acceptance is effective only if it reaches the offeror within a reasonable
time after the offer was made. Where an offer may be accepted by doing an act
without notice to the offeror, the acceptance is effective only if the act is done within
the time for acceptance fixed by the offeror or, if no such time is fixed, within a
reasonable time (art. 36). Therefore, in the matter of a sales contract, for the same
rule is held as that contained in the UNIDROIT Principles.
Between present parties, acceptance should be given, in principle,
immediately. If the decision involves, based on the facts of the case, a time to think, it
should be taken within a reasonable time, according to the nature of the contract, in
which case, the rules regarding correspondence concluded contracts become
applicable.

7.5. The calculation of the period for acceptance

The calculation of the acceptance periods results from art. 2.1.8 of the
UNIDROIT Principles ("A period of time for acceptance fixed by the offeror begins to
run from the time that the offer is dispatched. A time indicated in the offer is deemed
to be the time of dispatch unless the circumstances indicate otherwise". In the
commentary to this article it is indicated that, for example, a letter mailing date is
indicated in its content; the e-mail date is indicated as the date of dispatch of the
offerors server ) and art. 1.12 of the UNIDROIT Principles (Official holidays or non-
business days occurring during a period set by parties for an act to be performed are
included in calculating the period. However, if the last day of the period is an official
holiday or a non-business day at the place of business of the party to perform the act,
the period is extended until the first business day which follows, unless the
circumstances indicate otherwise". This article is general, but most commonly it is
applicable to the period for acceptance of the offer).
Calculation of the acceptance period is also addressed by the Vienna
Convention on the international sale of goods, in art. 20. According to the text, a
period of time for acceptance fixed by the offeror in a telegram or a letter begins to
run from the moment the telegram is handed in for dispatch or from the date shown
on the letter or, if no such date is shown, from the date shown on the envelope. A
period of time for acceptance fixed by the offeror by telephone, telex or other means
of instantaneous communication, begins to run from the moment that the offer
reaches the offeree. Official holidays or non-business days occurring during the
period for acceptance are included in calculating the period. However, if a notice of
acceptance cannot be delivered at the address of the offeror on the last day of the
period because that day falls on an official holiday or a non-business day at the place
of business of the offeror, the period is extended until the first business day which
follows.

7.6. Late acceptance

Express acceptance is late when it reaches the offeror after the deadline for
acceptance fixed by him or, in the absence of a deadline, after the "reasonable time"
referred to above. Tacit acceptance is late if the fact equivalent to an acceptance is
carried out outside these limits.
UNIDROIT Principles, in art. 2.1.9, set, in terms of late acceptance, the
following solution: A late acceptance is nevertheless effective as an acceptance if
without undue delay the offeror so informs the offeree or gives notice to that effect. If
a communication containing a late acceptance shows that it has been sent in such
circumstances that if its transmission had been normal it would have reached the
offeror in due time, the late acceptance is effective as an acceptance unless, without
undue delay, the offeror informs the offeree that it considers the offer as having
lapsed.
The same solution is adopted also by the Vienna Convention, in art. 21.
According to Common European Sales Law, a late acceptance is effective as
an acceptance if without undue delay the offeror informs the offeree that the offeror is
treating it as an effective acceptance. Where a letter or other communication
containing a late acceptance shows that it has been sent in such circumstances that
if its transmission had been normal it would have reached the offeror in due time, the
late acceptance is effective as an acceptance unless, without undue delay, the offeror
informs the offeree that the offer has lapsed (art. 37).
Proving a late acceptance lies with the offeror, as the offeree only has
to prove that the acceptance occurred within the respective period.

7.7. Revocation of acceptance

The solution provided in the UNIDROIT Principles is regulated in art. 2.1.10,
the term used is the "withdrawal of acceptance" which is symmetrical with
"withdrawal of the offer." Under the provisions of the text, "An acceptance may be
withdrawn if the withdrawal reaches the offeror before or at the same time as the
acceptance would have become effective". The same solution is provided by the
Vienna Convention, in art. 22.

8. Negotiation of contracts
8.1. Content of negotiation
Offer and acceptance are the main pillars of the legal operation of concluding
the contract. Basically, in international trade, the offer is only rarely followed directly
by acceptance, typically between parties negotiations take place, i.e. a complex
process of negotiations in order to achieve their agreement. The offer is basically the
starting point and basis for ongoing negotiations involving presentation and arguing
the positions of the partners, discussing their possible objections, extracting and
gradually systematizing converged views etc. During the talks, especially for complex
contracts, parties sometimes change roles, the receiver of the initial offer sends
counter-offers, which are being answered by new offers, so the original offer may get
lost at the bargaining table, and the acceptance is expressed, in fact, by the parties
agreement to conclude the contract. Negotiations shall end when the agreement was
reached or when, on the contrary, the parties have decided not to conclude the
contract.
In the contract negotiation process other legal documents may come up as, for
example, letters of intent and some pre-contracts.
 Negotiations can be held between present persons or by correspondence, in
one or more stages, at the headquarters of one of the parties or in any other place
agreed by them.
The negotiations are governed, in the absence of statutory provisions, by
customs of international trade and by habits between the parties. Thus, for example,
international trade arbitration practice has shown that if, during negotiations, a draft
contract is drawn, this operation falls, as is customary, on the supplier of goods (the
seller).

8.2. Negotiating in bad faith

UNIDROIT Principles regulate this in art. 2.1.15. According to the text, A
party is free to negotiate and is not liable for failure to reach an agreement. However,
a party who negotiates or breaks off negotiations in bad faith is liable for the losses
caused to the other party. It is bad faith, in particular, for a party to enter into or
continue negotiations when intending not to reach an agreement with the other
party. The commentary to this article provides several suggestive examples.
Example 1: A learns about B's intention to sell his restaurant. A, who has no intention
of buying the restaurant, enters into long-term negotiations with B in order to prevent
B from selling the restaurant to C, a competitor of A. A, which interrupts the
negotiations when C buys another restaurant, is liable to B, who then manages to sell
the restaurant at a lower price than that offered by C, for the difference in price.
Example 2: A, who negotiates with B to promote the purchase of military equipment
by the armed forces of Bs country, finds out that B will not obtain the appropriate
export license from its governmental authorities, a prerequisite for permission to pay
the fees to B. A does not disclose this to B, and finally concludes the contract, which,
however, cannot be executed due to lack of licenses. A is liable to B for the costs
incurred after learning of the failure to obtain the required licenses. Example 3: A
enters into long-term negotiations for a bank loan from a representation of B. At the
last minute, the representation reveals that it had no authority to sign and that the
main headquarters decided not to approve the proposed contract. A, which
meanwhile had obtained the loan from another bank, is entitled to recover the costs
involved in the negotiations, as well as the profits it would have made during the
delay before getting the loan from another bank.
 International commercial jurisprudence has determined that, in such cases, it
is possible to hold the guilty party liable for tort.

8.3. Confidentiality obligation regarding the information

obtained during negotiations
UNIDROIT Principles govern this issue in art. 2.1.16, which provides: Where
information is given as confidential by one party in the course of negotiations, the
other party is under a duty not to disclose that information or to use it improperly for
its own purposes, whether or not a contract is subsequently concluded. Where
appropriate, the remedy for breach of that duty may include compensation based on
the benefit received by the other party.
From the text it results that, usually, the information obtained during
negotiations are confidential only if one party involved expressly declares them as
such. In this case, the other party is bound not to disclose the information to third
parties and not to use them for its own purposes, whether or not the contract in
question is concluded.
However, even without such an express declaration, the recipient may be
under an obligation of confidentiality. This is the case when, given the particular
nature of the information and professional qualifications of the parties, it would be
contrary to the general principle of good faith and fair dealing for the recipient to
disclose or use it for personal purposes after negotiations.
Breach of confidentiality involves liability for damages. The amount of
damages recoverable may vary independently of the conclusion of a special
agreement regarding non-disclosure of information. Even if the injured party has
suffered no loss, it may be entitled to recover from the party who breached
confidentiality, the benefits the latter has received from third party by disclosing or
using said information for its personal goals.

9. Concluding of contract
UNIDROIT Principles adopt the reception system regarding the moment of
concluding the contract. Thus, art. 2.1.6 para. 2 provides that "An (explicit)
acceptance of an offer becomes effective when the indication of assen reaches the
Offeror".
 Regarding the moment of concluding the contract for late acceptance, which
was deemed valid by the offeror, the UNIDROIT Principles provide that a late
acceptance is nevertheless effective as an acceptance if without undue delay the
offeror so informs the offeree or gives notice to that effect. (art. 2.1.9 para. 1).
In the case of tacit acceptance, if, by virtue of the offer or as a result of
practices which the parties have established between themselves or of usage, the
offeree may indicate assent by performing an act without notice to the offeror, the
acceptance is effective when the act is performed. (art. 2.1.6 para. 3).
The reception theory is also applied for the withdrawal of the offer, by art.
2.1.3, cited above. By "reaching the recipient" means that the offer, acceptance,
notification etc. is personally served or delivered at the headquarters or mailing
address of the person in question (art. 1.10 para. 3).
The reception system is also regulated by the Common European Sales Law,
in the provisions of art. 35, according to which where an acceptance is sent by the
offeree the contract is concluded when the acceptance reaches the offeror (para. 1).
Regarding tacit acceptance, where an offer is accepted by conduct, the contract is
concluded when notice of the conduct reaches the offeror (para.2). Notwithstanding
paragraph 2, where by virtue of the offer, of practices which the parties have
established between themselves, or of a usage, the offeree may accept the offer by
conduct without notice to the offeror, the contract is concluded when the offeree
begins to act (para. 3).
Common European Sales Law contains, in addition to the provisions relating
to the contract of sale, provisions that establish the right to withdraw in distance and
off- premises contracts between traders and consumers (art. 40-47).

10. The moment of concluding the contract when the parties act
by proxy
In connection with these matters it must be distinguished, depending on the
extent of the powers conferred on the trustee.
a) Thus, if the trustee is empowered only to submit an offer or acceptance to
the other party ( which is, by definition in another country), the contract is concluded
when the acceptance came to the offeror. The same applies if the authorized
representatives of the parties were to negotiate the contract, but not to sign. Thus, in
a case, representatives of both sides met in a third city, negotiated the contract, but it
was only signed by the representative of the seller, not the buyers, the latter sending
the draft contract to the headquarters of its principal to sign it himself. In this litigation,
C.A.B. considered, rightly, that the draft contract ( the result of negotiations carried on
by the trustees ), although signed by the sellers trustee has only the value of an
offer, as the buyers agent did not have authorization to sign the contract; therefore
the contract is considered concluded only when and at the place where the copy
signed by the purchaser (with acceptance value ) reached the seller ( Decision CAB
no. 3/12 January 1976).
b) If the trustee is empowered to conclude the contract, it will be considered as
concluded between present or absent persons, given the position of the trustee to a
third party contractor ( or his representative ), regardless of the location of the
principal. In this case, if the conclusion was, however, subject to ratification by the
principal, in the absence of further clarification of the parties, ratification represents a
suspensive condition which, if met, has retroactive effect, so that such a situation
does not influence the time and place of the contract, which therefore will be
considered as formed between the present or absent people, as distinguished above.

11. Subsequent establishment of certain elements of the contract

11.1. Subsequent establishment of certain elements of
the contract by the parties or in the manner determined
by them
If the parties have agreed or one of them asks unequivocally for one or more
elements of the contract to be set upon later, the contract will not be considered
completed until agreement is reached on that element(s), whether it is an essential or
nonessential element of the contract. Such arrangements are known, usually in
doctrine as "agreements to agree". In one particular case, in a contract of sale the
parties have inserted a clause to the effect that the goods quality specification will be
determined later, and CAB decided that without further agreement, the seller does
not owe the buyer damages for non-delivery of goods. Thus, C.A.B. retained,
although only implicitly, that in this situation, the contract cannot be considered
concluded, on the respective goods, as the item remained in suspension is essential
(Decision CAB no. 25/30 June 1971).
Once the parties have established to reach a later agreement on a contractual
element, they are obliged to conduct negotiations for this purpose, and the obligation
to initiate these negotiations rests, in principle, with the party more interested in the
quick conclusion of the contract.
This is regulated in art . 2.1.13 (Conclusion of contract dependent on
agreement on specific matters or in a particular form) of the UNIDROIT Principles.
According to the text, Where in the course of negotiations one of the parties insists
that the contract is not concluded until there is agreement on specific matters or in a
particular form, no contract is concluded before agreement is reached on those
matters or in that form.
Such a situation can occur regarding a non-essential element of the contract,
which becomes essential by the will of the parties. The commentary on this article
gives the following example: A agrees with B on all terms which are essential for the
contract they intend to conclude for the distribution of As goods. During negotiations,
B declares repeatedly that the problem that the cost of the advertising campaign
must be specifically addressed. Despite their agreement on all essential terms of the
contract, there was no contract between A and B because B has insisted that the
conclusion depended on the agreement on that clause.

11.2. Determination of the elements of the contract by a

third party
UNIDROIT Principles regulate the situation where the parties intentionally
leave an element of the contract as undetermined, including when they agree that
this element is determined by a third person, in art. 2.1.14. The text states: If the
parties intend to conclude a contract, the fact that they intentionally leave a term to
be agreed upon in further negotiations or to be determined by a third person does not
prevent a contract from coming into existence. The existence of the contract is not
affected by the fact that subsequently (a) the parties reach no agreement on the
term; or (b) the third person does not determine the term, provided that there is an
alternative means of rendering the term definite that is reasonable in the
circumstances, having regard to the intention of the parties. We note that the quoted
article regulates the circumstances in which the parties disagree or the third party
refuses to make the decision, regarding the validity of the contract if the contract
contains an alternative solution for such situations.
 In practice, the parties appeal to competent third parties or arbitration tribunals
to determine an element of the contract, especially in long or very complex
international commercial contracts.

12. Effects of licenses and other legal import-export

authorizations on concluding the contract
The problem of the effects of export-import licenses on the conclusion of
international commercial contracts arises, currently, less frequently in practice as
compulsory licenses are an exception, as a result of liberalization of exports and
imports. In contrast, other export / import authorizations are required in important
areas of international trade.
UNIDROIT Principles provide for the solution of partial nullity of the contract in
case of refusal to grant legal authorization, which is a condition of validity of the
contract (art. 6.1.17 para. 1). According to the text, The refusal of a permission
affecting the validity of the contract renders the contract void. If the refusal affects the
validity of some terms only, only such terms are void if, having regard to the
circumstances, it is reasonable to uphold the remaining contract.

13. The conclusion of the contract by electronic means

Of the international regulations to which we refer, adopted worldwide, one
stands out particularly: the UNCITRAL Model Law on Electronic Commerce with
Guide to Enactment adopted by UNCITRAL at the 29 session of 12 June 1996 and
endorsed by the U.N. Resolution of the General Assembly No. 51/162 of 16
December 1996. The Model Law contains 17 articles, an art. 5 bis was added in
1998.
We also note the adoption by the International Chamber of Commerce in
Paris, in 1997, of the International trade practices performed in digital form (General
Usage for International Digitally Ensured Commerce - Guidec).
In the European Union legislation, the EU Electronic Commerce Directive
2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain
legal aspects of information society services, in particular electronic commerce, in the
Internal Market (Directive on "electronic commerce"), is in effect and it was
transposed into Law no. 365/2002 on electronic commerce.
 Section 4
The form of the contract

14. The principle of mutual consent as an expression of freedom of

contract in the field of international commercial contracts
The principle of autonomy of will of the parties (contractual freedom) is
materialized in the form of international commercial contracts by mutual consent rule.
According to this principle, applicable equally to commercial law (domestic)
and common law, international trade agreements are concluded by the mere
agreement of the parties, which have the freedom to choose how to externalize their
consent.
The arbitration courts practice and international trade have been expressly in
favour of this principle.
UNIDROIT Principles do not impose a particular form for the valid conclusion
of a contract. Thus, nothing in these Principles requires a contract, statement or any
other act to be made in or evidenced by a particular form. It may be proved by any
means, including witnesses (art. 1.2). The contract is concluded, modified or
terminated by the mere agreement of the parties, without any further requirement
(art. 3.2).
According to the Common European Sales Law, Unless otherwise stated in
the Common European Sales Law, a contract, statement or any other act which is
governed by it need not be made in or evidenced by a particular form (art. 6).
Regarding the form of an international sales of goods contract, the Vienna
Convention does not subject the contract of sale to any requirement as to form. In
particular, Article 11 provides that no written agreement is necessary for the
conclusion of the contract. However, if the contract is in writing and it contains a
provision requiring any modification or termination by agreement to be in writing,
article 29 provides that the contract may not be otherwise modified or terminated by
agreement. The only exception is that a party may be precluded by his conduct from
asserting such a provision to the extent that the other person has relied on that
conduct.
As an exception to the principle of consensualism (mutual consent), namely
the cases in which an ad validitatem written form is required for contracts, are
expressly and limitatively provided by law and represent only a small part of the
general context of contracts.
If the law reuires for a written form of the contract, in just a few cases, more
often than that, the case is that the parties themselves impose this condition in
international commercial contracts. Jurisprudence, especially the Romanian one,
proves that we are facing an almost absolute extension of the consensual
(conventional) formalism in said contracts.
This situation is based on the fact that, beside the advantages that any written
form presents, concluding contracts in writing is especially important in international
commercial law, particularly for the following reasons: it allows for a better setting of
the content of the contract, which is, usually, quite complex, and which reduces the
risks of subsequent misunderstandings between the parties; perfectly contours
contractual obligations, setting them apart from mere precontractual negotiations,
rendering useless any previous documents which have not been contractually
incorporated; allows the parties to answer administrative requests (for instance,
banking procedures, border procedures, monetary exchange etc.); facilitates the
control over performance of the contractual obligations, which proves useful
especially in long term contracts, as the rule for international commercial contracts.
Whenever the law or the parties provide for a written form, any changes,
additions and annexes to the contract must be done in the same form.

Section 5
Features on the conditions of validity of international commercial
contracts

15. Vices of consent in international commercial contracts

Uniform regulations, doctrine and practice, especially arbitration practice, are
constant in the restrictive interpretation of the vices of consent in matters of
international trade.
Such an interpretation finds its most obvious reflection in the UNIDROIT
Principles. This uniform regulation defines error in art. 3.2.1 as "an erroneous
assumption relating to facts or to law existing when the contract was concluded".
This article makes no distinction between error of fact and error of law. As far
as we are concerned, we believe that the error of fact, in principle, does not
represent a vice of consent in international trade agreements, incompatible with the
professional trader. The error of law, which may frequently take the form of error on
foreign law is permissible if it is serious regarding the essential cause of the legal act
itself. UNIDROIT Principles regulate the error in art. 3.2.2. According to the text, a
party may only avoid the contract for mistake if, when the contract was concluded,
the mistake was of such importance that a reasonable person in the same situation
as the party in error would only have concluded the contract on materially different
terms or would not have concluded it at all if the true state of affairs had been known,
and (a) the other party made the same mistake, or caused the mistake, or knew or
ought to have known of the mistake and it was contrary to reasonable commercial
standards of fair dealing to leave the mistaken party in error; or (b) the other party
had not at the time of avoidance reasonably acted in reliance on the contract.
However, a party may not avoid the contract if (a) it was grossly negligent in
committing the mistake; or (b) the mistake relates to a matter in regard to which the
risk of mistake was assumed or, having regard to the circumstances, should be borne
by the mistaken party.
Provisions regarding the error are also found in art. 3.2.3 and 3.2.4 of the
Principles. According to the first article, An error occurring in the expression or
transmission of a declaration is considered to be a mistake of the person from whom
the declaration emanated. The second article says that A party is not entitled to
avoid the contract on the ground of mistake if the circumstances on which that party
relies afford, or could have afforded, a remedy for non-performance.
Regarding the error as vice of consent, the Common European Sales Law
distinguishes between error of fact and error of law. Under the provisions of art. 48, a
party may avoid a contract for mistake of fact or law existing when the contract was
concluded if:
(a) the party, but for the mistake, would not have concluded the contract or
would have done so only on fundamentally different contract terms and the other
party knew or could be expected to have known this; and
(b) the other party: (i) caused the mistake; (ii) caused the contract to be
concluded in mistake by failing to comply with any pre-contractual information duty
under Chapter 2, Sections 1 to 4; (iii) knew or could be expected to have known of
the mistake and caused the contract to be concluded in mistake by not pointing out
the relevant information, provided that good faith and fair dealing would have
required a party aware of the mistake to point it out; or (iv) made the same mistake.
A party may not avoid a contract for mistake if the risk of the mistake was
assumed, or in the circumstances should be borne, by that party. An inaccuracy in
the expression or transmission of a statement is treated as a mistake of the person
who made or sent the statement.
The same approach governed by the UNIDROIT Principles on error, is found
on fraud and violence. Regarding fraud, it is provided that A party may avoid the
contract when it has been led to conclude the contract by the other partys fraudulent
representation, including language or practices, or fraudulent non-disclosure of
circumstances which, according to reasonable commercial standards of fair dealing,
the latter party should have disclosed (art. 3.2.5). A mere exaggeration in an
advertisement or negotiations is not sufficient (see the commentary to art. 3.2.5).
For violence, the Principles provide that A party may avoid the contract when
it has been led to conclude the contract by the other partys unjustified threat which,
having regard to the circumstances, is so imminent and serious as to leave the first
party no reasonable alternative. In particular, a threat is unjustified if the act or
omission with which a party has been threatened is wrongful in itself, or it is wrongful
to use it as a means to obtain the conclusion of the contract (art. 3.2.6).
According to Common European Sales Law, regarding fraud (art. 49), a party
may avoid a contract if the other party has induced the conclusion of the contract by
fraudulent misrepresentation, whether by words or conduct, or fraudulent non-
disclosure of any information which good faith and fair dealing, or any precontractual
information duty, required that party to disclose. Misrepresentation is fraudulent if it is
made with knowledge or belief that the representation is false, or recklessly as to
whether it is true or false, and is intended to induce the recipient to make a mistake.
Non-disclosure is fraudulent if it is intended to induce the person from whom the
information is withheld to make a mistake.
In determining whether good faith and fair dealing require a party to disclose
particular information, regard should be had to all the circumstances, including:
(a) whether the party had special expertise;
(b) the cost to the party of acquiring the relevant information;
(c) the ease with which the other party could have acquired the information by
other means;
 (d) the nature of the information;
(e) the apparent importance of the information to the other party; and
(f) in contracts between traders good commercial practice in the situation
concerned.

Violence, as vice of consent, is regulated in Article 50 of the European

Common Sales Law in that a party may avoid a contract if the other party has
induced the conclusion of the contract by the threat of wrongful, imminent and
serious harm, or of a wrongful act.
The Common European Sales Law also includes, in the category of vices of
consent, leading to the annulment of the contract, unfair exploitation (art. 51). Thus, a
party may avoid a contract if, at the time of the conclusion of the contract:
(a) that party was dependent on, or had a relationship of trust with, the other
party, was in economic distress or had urgent needs, was improvident, ignorant, or
inexperienced; and (b) the other party knew or could be expected to have known this
and, in the light of the circumstances and purpose of the contract, exploited the first
partys situation by taking an excessive benefit or unfair advantage.
Romanian arbitration international trade practice has consistently expressed
the tendency of restrictively interpreting the vices of consent in trade agreements with
foreign elements, providing more examples, especially on fraud, including by
reluctance (in a case it was held that the mere silence of the seller, on the buyers
request to communicate the legal standards applicable to products shipped cannot
be a fraud by reluctance, especially since these are not secret documents - CA.B.
Decision no 83/ August 1, 1996), and moral violence (metus). It is symptomatic, in
this regard, a case in which the CAB ruled specifically on violence, but the concept is
valid for all the vices of consent. Thus, it have shown the following: " ... in trade, just
as fraud has its own colouring, meaning that it is not interpreted in the same way as
in civil matters, admitting traditionally, the" dolus bonus" as part of salesmanship,
violence also has a unique colouring. Threats must have a specific gravity that ...
must be assessed based on the conditions they occurred in, based on the quality of
the parties, on their training. Not infrequently, the trader is faced with various
constraints under threat of negative consequences. He is forced to accept onerous
conditions imposed by the partner because of unfavourable economic circumstances
or situation of his affairs. It is not surprising to renegotiate the price or other
contractual conditions, even during the execution of the contract. Likewise, tale quale
acceptance of the conditions stipulated in a contract of adhesion is a common
practice. Such constraints are not by themselves constitutive of violence. Otherwise,
it would jeopardize legal security, the pillar of commercial transactions and, in
general, of the legal state. For threats to become a constituent element of violence
they must have no choice but leave the victim with no other alternative but to consent
or to expose itself or its property to "a considerable and present harm". If the victim
has the means to annihilate threats, so does not fear them, it cannot invoke violence"
- Decision C.A.B. No. 96/26 September 1996). Moreover, physical violence seems
inconceivable given that international trade agreements concluded in most cases, are
entered into by correspondence ( inter absentes ).
UNIDROIT Principles regulate lesion in the same spirit shown above. Thus,
art. 3.2.7 provides that a party may avoid the contract or an individual term of it if, at
the time of the conclusion of the contract, the contract or term unjustifiably gave the
other party an excessive advantage. Regard is to be had, among other factors, to (a)
the fact that the other party has taken unfair advantage of the first partys
dependence, economic distress or urgent needs, or of its im providence, ignorance,
inexperience or lack of bargaining skill, and (b) the nature and purpose of the
contract.
Upon the request of the party entitled to avoidance, a court may adapt the
contract or term in order to make it accord with reasonable commercial standards of
fair dealing. A court may also adapt the contract or term upon the request of the party
receiving notice of avoidance, provided that that party informs the other party of its
request promptly after receiving such notice and before the other party has
reasonably acted in reliance on it.
The regime of error, deception, violence and injury caused by the act of the
third party is regulated in Article 3.2.8 of the Principles. According to the text, Where
fraud, threat, gross disparity or a partys mistake is imputable to, or is known or ought
to be known by, a third person for whose acts the other party is responsible, the
contract may be avoided under the same conditions as if the behaviour or knowledge
had been that of the party itself. Where fraud, threat or gross disparity is imputable to
a third person for whose acts the other party is not responsible, the contract may be
avoided if that party knew or ought to have known of the fraud, threat or disparity, or
has not at the time of avoidance reasonably acted in reliance on the contract.
 16. The cause in international commercial contracts
UNIDROIT Principles note, in the commentary to art. 3.1.2, the fact that in
international trade agreements, the requirement of cause has a minimum practical
importance, both for the 'determining cause' (consideration) of Anglo - Saxon law and
for the cause of Roman law systems, because in these contracts obligations are
almost always assumed by both parties.
In the securities field, the abstract character is the essence of the act.

17. The subject of international commercial contracts

UNIDROIT Principles govern aspects of the subject of international
commercial contracts in art. 3.1.3.
According to the first paragraph, The mere fact that at the time of the
conclusion of the contract the performance of the obligation assumed was impossible
does not affect the validity of the contract. This solution, which meets the modern
tendency in the matter under discussion, expresses the idea that, in principle, the
validity of the contract is not affected by the fact that upon conclusion, the execution
by one of the parties is impossible.
This rule includes the assumption that the contract is concluded for future
goods. This situation is very common in international trade and is supported by the
fungible nature of goods subject to benefit in kind. Pecuniary benefits (price, freight,
fees, insurance premiums, rent rates, interest etc.) may in turn be determined in the
future, as we shall see.
Paragraph 2 of Art. 3.1.3 provides that: The mere fact that at the time of the
conclusion of the contract a party was not entitled to dispose of the assets to which
the contract relates does not affect the validity of the contract.
According to this text, contracts that we refer to are, in principle, valid when
they have as object goods on which the party had no title or right available at the
conclusion of the contract, because the party can get that title or right after the
contract. Selling someone elses good is not, therefore, null de plano in international
trade.
A similar solution is established also by the Vienna Convention (1980), in art.
41, according to which the seller must deliver goods which are free from any right or
claim of a third party, unless the buyer agreed to take the goods subject to that right
or claim. However, if such right or claim is based on industrial property or other
intellectual property, the sellers obligation is governed by article 42.

18. Regime of nullity of international commercial contracts

UNIDROIT Principles establish some rules on the nullity of contracts we deal
with, in art. 3.2.9 - 3.2.16.
Confirmation of nullity is admissible. According to art. 3.2.9 If the party entitled
to avoid the contract expressly or impliedly confirms the contract after the period of
time for giving notice of avoidance has begun to run, avoidance of the contract is
excluded.
The right to invoke nullity is lost in the conditions of art. 3.2.10: If a party is
entitled to avoid the contract for mistake but the other party declares itself willing to
perform or performs the contract as it was understood by the party entitled to
avoidance, the contract is considered to have been concluded as the latter party
understood it. The other party must make such a declaration or render such
performance promptly after having been informed of the manner in which the party
entitled to avoidance had understood the contract and before that party has
reasonably acted in reliance on a notice of avoidance.
After such a declaration or performance the right to avoidance is lost and any
earlier notice of avoidance is ineffective.
The right of a party to avoid the contract is exercised by notice to the other
party (art. 3.2.11). Notice of avoidance shall be given within a reasonable time,
having regard to the circumstances, after the avoiding party knew or could not have
been unaware of the relevant facts or became capable of acting freely. Where an
individual term of the contract may be avoided by a party under Article 3.2.7, the
period of time for giving notice of avoidance begins to run when that term is asserted
by the other party (art. 3.2.12).
The rule is the partial nullity, according to art. 3.2.13, which states that Where
a ground of avoidance affects only individual terms of the contract, the effect of
avoidance is limited to those terms unless, having regard to the circumstances, it is
unreasonable to uphold the remaining contract.
Avoidance takes effect retroactively (art. 3.2.14). On avoidance either party
may claim restitution of whatever it has supplied under the contract or the part of it
avoided, provided that it concurrently makes restitution of whatever it has received
under the contract or the part of it avoided or, if it cannot make restitution in kind, it
makes an allowance for what it has received (art. 3.2.15).
A special regulation regarding damages caused if the guilty party knew the
cause of nullity is in art. 3.2.16. This article provides that irrespective of whether or
not the contract has been avoided, the party who knew or ought to have known of the
ground for avoidance is liable for damages so as to put the other party in the same
position in which it would have been if it had not concluded the contract.
Unlike damages for non-performance, damages provided for in this article
have the scope of putting the other party in the same position in which they would
have been if they had not signed the contract. The following case is given: A sells to
B a software product, and could not be unaware of Bs error in terms of its
unsuitability for use envisaged by B. Whether B avoids the contract or not, A is
responsible to B for all expenses incurred by B regarding the qualifications of its staff
to use the software, but not for loss of B as a consequence of the impossibility to use
the software for the intended purpose upon concluding the contract.
The UNIDROIT Principles institute regulations for so called illegal contracts,
in art. 3.3.1-3.3.2.
According to art. 3.3.1, where a contract infringes a mandatory rule, whether
of national, international or supranational origin, applicable under Article 1.4 of these
Principles, the effects of that infringement upon the contract are the effects, if any,
expressly prescribed by that mandatory rule (al.1). This provision has the purpose to
limit contractual freedom, by making it imperative for a contract to be in accordance
with mandatory provisions, namely legal provisions or public order principles.
A contract may expressly breach these provisions through its clauses,
performance, the manner in which it was concluded or the scope it has.
Breaching mandatory provisions will be sanctioned by means provided by the
regulation itself, for instance: avoidance of the contract, the right to damages of a
third party affected by such convention provided it lacks guilt.
Where the mandatory rule does not expressly prescribe the effects of an
infringement upon a contract, the parties have the right to exercise such remedies
under the contract as in the circumstances are reasonable (al. 2). Such remedies
may be: the right to move on performance of the contract, the right to consider the
contract void, adapting of the contract or its termination.
 In determining what is reasonable regard is to be had in particular to: (a) the
purpose of the rule which has been infringed; (b) the category of persons for whose
protection the rule exists; (c) any sanction that may be imposed under the rule
infringed; (d) the seriousness of the infringement; (e) whether one or both parties
knew or ought to have known of the infringement; (f) whether the performance of the
contract necessitates the infringement; and (g) the parties reasonable expectations
(al. 3).
Where there has been performance under a contract infringing a mandatory
rule under Article 3.3.1, restitution may be granted where this would be reasonable in
the circumstances (art. 3.3.2 al. 1). In the commentary to this article, the Principles
state that, including when, as a consequence of breaching mandatory provisions, the
parties are denied contractual remedies, it should still be determined whether they
could at least ask for the restitution of whatever they performed under the contract.
Restitution may be accepted when, according to the circumstances of the case, this
appears as the reasonable solution.
In order to determine what is reasonable, regard should be given to the criteria
set in art. 3.3.1 al. 3. If restitution is granted, the rules set out in Article 3.2.15 apply
with appropriate adaptations.