Dr. Hendrik Thies, Fachanwalt für Handels- und GesellschaftsrechtMeike Kapp-Schwoerer, Gesellschaftsrecht

Caution when Rejecting an Offer - Jurisdiction Clauses Might Stay Effective

In the event that an offer is partially rejected, the parts which are not explicitly objected to, will stay effective. The parties should not rely on choice of law clauses (Rechtswahlklausel) and jurisdiction clauses (Gerichtsstandsklausel) being automatically included in a partial rejection.

Background

The plaintiff, located in Hamburg, sent an offer to the defendant, based in Cyprus. The offer included a jurisdiction clause stipulating that the place of jurisdiction be Hamburg. The defendant partially objected to the offer, however without explicitly opposing the jurisdiction clause. It merely opposed in part to the scope of performance in the plaintiff's offer.

Referring to the jurisdiction clause, the plaintiff took legal action in Hamburg and demanded the payment of the purchase price from the defendant. The defendant objected to the international competence of German courts.

The judgment of the BGH dated 25 March 2015, Docket no.: VIII ZR 125/14

The German Federal Court of Justice (Bundesgerichtshof – “BGH”) affirmed the competence. Although the defendant objected to the offer in part, this does not affect the agreement on the place of jurisdiction if the defendant has not explicitly opposed to such agreement. The plaintiff in its capacity as the offerer may assume that its offer is valid if it was not opposed to. When in doubt, a slightly modified counteroffer it must be assumed that the party making the counteroffer has included all conditions of the original offer for which no deviating suggestions are made in the counteroffer. Accordingly, the conditions of the original offer remain effective to this extent.

Comment

In its present decision, the BGH deviates from art. 19 para. 1 of the United Nations Convention on Contracts for the International Sale of Goods (“CISG”) according to which the acceptance of an offer after significant changes is deemed a new offer. According to the BGH, parts of an offer that are not explicitly rejected stay effective despite the partial rejection of the offer. This applies in particular to jurisdiction clauses, governing law clauses, etc. As a result, the recipients of the offer (purchaser, ordering party, etc.) should assess closely whether they want to object to the offer only in part or reject it fully. In the latter case, an explicit and comprehensive rejection of the offer is necessary. Otherwise, the offer conditions which have not been objected to will stay effective. The decision of the BGH regarding the CISG could also have been made in similar form regarding the German regulation in sec. 150 para. 2 of the German Civil Code (Bürgerliches Gesetzbuch “BGB”). The BGH particularly emphasizes this fact in its decision. However, it must be considered when drafting a contract that the CISG provisions deviate considerably from the BGB in other areas of regulation.

A premature exclusion of the CISG, which is common in practice, is therefore not always advisable. Depending on the situation, the CISG may have an advantage over the German purchase law. Pursuant to the CISG, each contracting party is liable to compensate for damages for any breach of contract, irrespective of fault. However, only damage is considered which was predictable at the time of conclusion of the contract. Therefore, a contract pursuant to the CISG should by all means make regulations regarding these issues.

In particular parties to international purchase agreements are advised to specify applicable law and place of jurisdiction, e.g. in a framework agreement. By doing so, important contractual key points are defined clearly, and ambiguous statements of the parties regarding individual conditions of the contract which require interpretation are prevented.

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