THE UNIFIED FIELD SOLUTION TO THE BATTLE OF THE FORMS UNDER THE U.N. SALES CONVENTION.

• Author: Alstine, Michael P. Van
• Position: United Nations Convention on Contracts for the International Sale of Goods

TABLE OF CONTENTS

Introduction 215 I. The U.N. Sales Convention: A "Milestone in Legal History" 220 A. The Convention as Supreme Federal Law 220 B. Scope and Significance 223 C. The Convention's Influence on International Trade 225 D. Misplaced Faith in Choice-of-Law and Choice-of-Forum Clauses 226 II. The Controversy: Dissensus in Contract Formation 232 A. Setting the Foundation: The CISG's Basic Formation Scheme 232 B. The Law Confronts Lawyering: Contracting in the Shadow of Standard Business Terms 237 C. The Opposing "Camps" in the Battle of the Forms 240 1. The Last Shot Approach 241 2. The Knock Out Approach 243 III. The Unnoticed Foundations for a Nuanced Approach 246 A. Acknowledging the Gravitational Pull of Uniformity 247 B. The Fundamentally Different Approach to Determining Party Intent 249 1. The Hierarchy of Interpretation Under the CISG 249 a. The Primacy of Actual Intent 251 b. The Subsidiary Role of Objective Interpretation 252 c. The Required Consideration of Surrounding Circumstances 253 2. The Impressive Work of U.S. Courts 254 C. The Special Treatment of Standard Business Terms 257 1. Foreign Courts Take the Lead 258 2. U.S. Courts Recognize Insights and Advance Uniformity 259 IV. The Unified Field Solution to the Battle of the Forms Under the CISG 262 A. The Convention's Flexible Formation Values 263 1. Recalling the Problem, Setting the Stage 263 2. Flexible Interpretive Norms Require a Flexible Solution 265 B. The Inadequacy of the Existing Approaches 267 1. The Last Shot Approach 267 2. The Knock Out Approach 269 C. A Flexible Solution for a Diverse Spectrum 270 1. No Forms, No Battle 271 2. One Form, Express Acceptance 273 3. Last Shot's Domain: Implied Acceptance 275 4. The Need for Nuance and the Search for Actual Intent 278 5. Knock Out's Domain: A Battle Truly Joined 281 Conclusion 285 INTRODUCTION

Ours is not an age of nuance. Simple and certain answers are the preferred course, the more so for complicated questions. But human affairs do not come in neat little boxes, and most forms of human interaction are messy, complicated, and idiosyncratic. The station of the law nonetheless is to distill commonalities, draw lines, and craft generally applicable norms of conduct. The problem is that as the subject of regulation grows in complexity and diversity, the ability of the law to make just generalizations decreases. And many fields of human activity reflect a true spectrum, such that certain rules and rigid categories cannot begin to capture the nuanced reality.

The challenges are even greater for relations and transactions that cross international borders. In this realm, differences in culture, language, practice, and jurisprudential perspective (among many others) make interjurisdictional generalizations exceedingly difficult. To make matters worse, each sovereign jurisdiction will have legal rules tailored to local values and customs. The resultant conflicts in national law can create existential uncertainties for international commercial (and other) transactions.

The first-order solution to this problem is an international treaty that creates a self-contained body of uniform law for all member states. Thankfully, such a treaty exists for the subject of our inquiry here: the international sale of goods. This treaty, the United Nations Convention on Contracts for the International Sale of Goods (the Convention or CISG), (1) both covers the most significant form of international commercial transactions and is itself the most successful effort in history to unify international commercial law. (2) Over ninety countries have ratified the treaty, including the United States in 1986. (3) In this country, the CISG also functions as a "self-executing treaty," which takes immediate and direct effect as supreme federal law without further action by Congress. (4)

The CISG broadly regulates not only the substantive rights of buyers and sellers, but also how parties form international sale contracts in the first place. (5) In practical terms, the latter subject is substantially more important, for in many--perhaps most--cases the process of contract formation is dispositive. The simple reason is that any enterprise of even modest sophistication will engage lawyers to prepare a set of comprehensive, one-sided standard business terms, and then will insist that those terms govern in all of its transactions. (6) If, then, a legal system's formation rules validate such an effort, the party can be assured of total victory. The problem is that the other party will have done the same and will have no desire to contract except on the basis of its own one-sided, all-inclusive terms. (7) The common consequence is a "battle of the forms." (8)

Unfortunately, in the charged political environment of the 1970s, (9) the drafters of the CISG simply were unable to agree on the rules to govern this common situation. (10) The result over the last three decades, not surprisingly, has been substantial judicial confusion and substantial scholarly controversy. (11) Indeed, because standard contract terms almost always contain a forum selection clause, courts commonly confront the argument that they do not even have the authority to hear a CISG dispute. (12) And as a practical matter, the answer to this question often is the entire game, for the cost and hassle of litigating in a distant and unfamiliar foreign court may mean that the fight is not worth the candle. This amply explains why by far the most common subject of U.S. court opinions on the CISG is the effect of forum selection clauses. (13)

The short of the matter is that the most important issue on the most important commercial law treaty is also subject to the most enduring controversy. The debate among courts and scholars generally has distilled into two opposing "camps": one that prizes structural simplicity and results in total victory (the "last shot" rule) and one that prefers a simple division of rights (the "knock out" rule). (14) More than two decades ago, I engaged in this debate through a lengthy law review article (15) and a book in the German language. (16)

Some legal insights, however, require time for marinating, for essential truths to distill through clouds of complexity and uncertainty. I now return to take stock of intervening developments and indeed to refine my own thinking. Reasoned reflection, with the benefit of time and insights from judicial struggles, now reveals that the proper analysis requires substantially more nuance than is reflected in either of the traditional approaches to the battle of the forms.

This Article begins by explaining the significance of the project. Part I sets the foundation by describing the CISG's broad influence on international trade as well as its special status in the United States as directly enforceable, supreme federal law. Part II then examines the CISG's basic contract formation scheme, and how the drafters' failure to address standard business terms left a structural flaw in the system. It then reviews the two leading approaches to this issue (last shot and knock out) that have coalesced over the thirty-plus years since the CISG entered into force in 1988.

Part III examines the truly impressive work of U.S. courts in analyzing the CISG's principles for determining party intent. Properly attracted by the "gravitational pull of uniformity," (17) these courts have recognized that--in marked contrast with traditional common law notions--the CISG requires a flexible, thoroughgoing search for a party's actual intent. Of equal consequence, they have seen that this has direct consequences for the treatment of standard business terms. I then explain that these twin developments provide an unnoticed foundation for a more sophisticated approach to the broader issue of the battle of the forms.

The analytical payoff comes in Part IV. The goal of this Part is no less than to provide a comprehensive, indeed definitive, solution to the enduring controversy over the battle of the forms under the CISG. To be sure, the CISG's express offer-acceptance provisions set the basic structure. But as I explain, two "formation values" provide the principles that unify the system. (18) The first is that the parties' actual agreement takes priority even over the express provisions of the Convention ("party autonomy"). (19) The second is a directive that, as a primary goal, a court seek out and give effect to the parties' actual intent. Together, these formation values provide the flexible norms that permit courts to apply traditional modes of legal analysis across the full, diverse array of battle of the forms cases.

The flaw in the two leading approaches to this issue under the Convention, as Part rV next explains, is that they fail to accommodate the complicated reality of modern international contracting. It is not that the last shot and knock out views are misguided in all respects. Rather, the problem is that each proceeds from a stylized assumption about how parties express contractual assent, but then wrongly seeks to apply that assumption beyond its narrow terrain. Seen in this way, the two views in fact are not in competition (at least not fully); rather, they simply focus on different points--different subsets of cases--along the same range of factual circumstances. It is as if the two have not recognized that they are residents of the same country because they have been too busy surveying the features of its distant coasts.

A refined understanding of the battle of the forms instead begins with a recognition that the subject matter is not a phenomenon, but rather a spectrum. Like most forms of human affairs, the interactions of international buyers and sellers come in a diverse array of forms, types, and practices. At one end of the factual spectrum, a party's standard business terms may prevail by express agreement; at the other, no principled reason will exist to prefer the interests of one party...