1. be then calculated, while concluding the

1. AbstractThe law in some countries, the agreement on the price is a necessaryrequirement for the contract to be concluded (ex. France). According to the laws ofcertain other countries, the option of leaving the price open but prescribe as to how theprice would be then calculated, while concluding the contract is permitted (ex. USA,Russia etc.). The contracting parties are given the choice to be either bound by fixed-price as per article 14 or by an open-price mechanism as per article 55. The article 55 ismore suitable for long term business dealings. The application of article 55 by CISGcourt is subject to the fulfilment of condition that the contract is validly concluded. Thearticle 55 fills the gap when the parties have intentionally concluded the contract.The price applicable is the price the that was present at the time of conclusion ofthe contract. The price applied is generally the market price or prices “undercomparable circumstances”. The price is usually determined by the seller, as he has themost knowledge about the product. The provisions to involve an expert third party to fixthe price can also be made in the contract incase both the seller or the buyer have notbeen able to agree on a price. The unilateral fixing of prices often leads to disagreementand provide basis for a legal battle.The article 55 is rather difficult to apply when the prices of the goods sold areseasonal or complex. The spirit of article 55 is to break away from the shackles of article14(1) and uphold the essence of equality and mutual benefit for a friendly internationalbusiness.Keywords: CISG, open price, Article 55, Article 14, validly concludedCISG ARTICLE 55 332. Overview of CISG articlesThe United Nations Convention on Contracts for the International Sale of Goods(CISG) came in to existence in 1980 (UNCITRAL, 2016), and since then it has been inthe forefront to deal with International trade. The goal of the CISG is to provide acommon, transparent platform or framework for commercial business sale of goodsbetween parties (companies)operating in different countries. The CISG is a multilateralconvention or an agreement between the 88 (Nations, 2017) contracting states. Thesestates individually have different internal law traditions, different sizes of economies butstill bind to the same rights and obligations that are put forward by the CISG.Some of the important members (Nations, 2017) binding to CISG are United States ofAmerica, Germany, Netherlands, Australia, Switzerland etc. and few of the importantmembers NOT binding to this treaty are India, South Africa and United Kingdom.The CISG articles are broadly classified into 4 parts (UNCITRAL, 2016). Part I (Article1- Article 13) deals with the “The Sphere of application and General Provisions”.Part II (Article 14- Article 24) deals with “Formation of contracts”. The articles under thissection deals with when an acceptance of an offer becomes effective, the allowedreservations/exclusions by the contracting countries etc.Part III (Article 25- Article 89) deals with “Sale of goods”. This chapter deals withObligations of the seller and buyer, delivery of goods, remedies for breach of contractetc… The articles 53-65 of CISG deals primarily with the obligation of buyer and theremedy for the seller (Schwartz, 2015). The article under consideration, Article 55, is apart of Chapter III, and deals with “The obligation of the buyer” – Open price contracts.The final part, Part IV, contains with “Final provisions” articles 89-101. In this deals withthe relationship between conventions and other international agreements comprisingthe provisions related to the matters governed by this convention, the designateddepository, the declarations by contracting countries that they are not bound by part II orby Part III etc.CISG ARTICLE 55 44This paper discusses the definition of article 55, its jurisdiction, different ways toconclude the project but limited only to concluding by fixing the price of the goods soldor by concluding with leaving the price open and some important court cases tovisualize under what circumstances the article 55 is applied.3. Article 55 of CISG3.1. Definition:The article 55 of CISG (Globalsaleslaw, 2017) states that, “Where a contract hasbeen validly concluded but does not expressly or implicitly fix or make provision fordetermining the price, the parties are considered, in the absence of any indication to thecontrary, to have impliedly made reference to the price generally charged at the time ofthe conclusion of the contract for such goods sold under comparable circumstances inthe trade concerned.”The article 55, deals with how the general principles or references of pricedetermination when the contract is deemed valid, but the contract does not explicitlystate the price or implicitly provide a provision for determining the price of goods sold.3.2. Applicability:The application of article 55 is based on the premise that the contract is valid, butthere is more to it. There have been several cases where in the courts have rejected theclaims to determine the prices based on article 55, citing that the claimants were notable to prove that the contract has been actually concluded. One such case can seen inseen in 5.3. Also, if the contract is not a contract of sale (within the meaning of theconvention) then the article 55 becomes inapplicable.Further, to apply article 55 the one of the parties must have his place of business in oneof the member of the contracting states which has agreed to do business in accordancewith CISG contract of sale (Part III) and not formation of contract (Part II) and thedomestic law (national legal systems) of the should allow the conclusion of the contractwithout the price being fixed or determinable. For example, in the legal system ofFrance (Code civil), an agreement of price is mandatory for the sale to be valid,CISG ARTICLE 55 55whereas in the United States the Uniform Commercial Code (UCC), is more flexible andbroader than article 55, implying that, it would be of less concern if the American law isused for open price contracts (Schwartz, 2015).The article 55 is not applicable when parties have agreed to a price or a mechanism todetermine the price. The article 55 does not covet the judges or arbitrators to establishthe prices in such cases (UNCITRAL, 2016).Additionally, When the price has not been specified, the judges and the arbitrators holdintension of the parties to ascertain whether the parties really wished to keep the priceopen and conclude the contract. The contracts are interpreted in the purview of article 8and article 9 to gather insight on the intentions.3.3. Instance of calculation of priceWhile applying article 55 it is important that the same price is applied that existedat the time of the conclusion of the contract. The assumption is that price that wasprevailing at the time of making the contract is in general the agreed price. In fact, if thecontract has been concluded as per the previous paragraph, neither the seller nor thebuyer can dispute the price at the time of delivery of goods. They are obliged to concuron the price, even if the price increases or decreases prospectively benefiting either theseller or buyer respectively.3.4. Determination of priceWhile the article 14 (globalsaleslaw, 2017) provides a framework, as to whichconditions are a prerequisite to conclude an offer, the article 55 provides moreautonomy to both the parties. Article 55 admits the fact that there need not beconsideration of price while concluding the contract. The article 55 according to(Mistelis, 2005) makes an implied assumption that there can exist an expertdetermination, in the sense that, for such price disputes no judicial remedy exists andboth the parties should be directly determining the price or could involve an expertneutral third party for the determination of the price.CISG ARTICLE 55 664. Interplay with Article 14There is a stark contradiction in the way the article 14 and article 55 are stated.Although they affect each other, they tend to co-exist in their realm.Table 1 Article 14 and Article 55 of CISGThe above table provides the glance of both the articles under discussion. Thearticle 14 clearly anticipates that the price or a method to determine the price is amandatory component for an offer to be considered as “sufficiently definite”, whereasarticle 55 is pinning on the contract being “validly concluded”. This situation is mainpoint of controversy, what happens if article 55 conflicts with article 14 or the other wayaround. Similar bone of contention has been expressed by Professor Allan Farnsworth(Farnsworth, 1984). The applicability of the law uses, either the view of the legalscholars Fransworth or Honnold. Fransworth is of the opinion that article 55 onlyoperates if contract is validly concluded under article 14(1) and further articulates thatthey both regulate different issues and are not contradictory to each other. According to(Gabuardi, 2001) “article 14 only establishes ground for those cases in which thecontracting parties exchange the offers and acceptance without making an expresscommitment to be bound even if the price has not been fixed” while article 55 institutesground for those cases where in the parties committed to an agreement and are boundCISG ArticlesArticle 14 (1)A proposal for concluding a contractaddressed to one or more specificpersons constitutes an offer if it issufficiently definite and indicates theintention of the offeror to be bound incase of acceptance. A proposal issufficiently definite if it indicates thegoods and expressly or implicitly fixes ormakes provision for determining thequantity and the price.Article 55Where a contract has been validlyconcluded but does not expressly orimplicitly fix or make provision fordetermining the price, the parties areconsidered, in the absence of anyindication to the contrary, to haveimpliedly made reference to the pricegenerally charged at the time of theconclusion of the contract for such goodssold under comparable circumstances inthe trade concernedCISG ARTICLE 55 77to the agreement, even though the price is not fixed. According to Honnold view, the keyelements of article 14 “definiteness” and “offeror’s intention to be bound” and that theintention of the offeror’s intentions as the main element for a valid contract (Tajudin,2014). The application of either article 14 or article 55 can only be determined after thethorough analysis and circumstances of the cases.5. Analysis of previous judgmentsFrom the above section we saw that in certain situation it is not straight forwardas to whether article 14 needs to be applied or article 55 needs to be applied. Thearticle 55 is sometime referred to as “gap-filling” provision (Mistelis, 2005) , indicatingthat the application of article 55 is subject to and limited to situations where a contract isdeemed validly concluded but have not agreed or have agreed to postpone the priceterm. In this section let’s look at some of the cases from the CISG archive which hasused or had option to use article 55, why it was applied and why the court couldn’t applythe article 55. Let us analyze few of the cases and their judgement.5.1. Case where article 14 was applied instead of article 55CLOUT Case No. 106, Austria 10 November 1994 Supreme Court (Chinchillafurs case) (United Nations, 1995)Summary of the case: The Austrian buyer (defendant) ordered a large quantity ofpelts of middle or better quality from a German supplier (plaintiff) at a price between 35and 65 German Marks per piece. Pelts were sold to the Austrian buyer was sold price of60 German Marks per pelts, further sold to an Italian, without verification. The Italianrejected the pelts citing quality reasons and the rejection cascaded to the German. TheAustrian refused to pay for the price.Analysis of the judgement: The court found that the CISG was applicable sincethere was an international sales contract in the sense of article 1(1)(a) was involved.Further, it was found that the order was sufficiently definite to constitute an offer underarticle 14 of CISG, since it was reasonable for anyone in the same circumstances ofthat of a seller. The court observed that since the price range was also sufficientlyCISG ARTICLE 55 88definite, justful and known in advance and the buyer did not make any qualms about thequality, quantity or price while accepting the delivery for rejection, the application ofarticle 55 does not hold any ground.5.2. Case where article 55 was applied for right reasonsCLOUT Case No. 215, Switzerland 3 July 1997, Bezirksgericht (United Nations,1995)Summary of the case: The Dutch seller (plaintiff) sold raw materials for theSwizz buyer (defendant) to manufacture. After the defendant used 10% of the rawmaterials, the cooperation between the two was terminated and the defendantreturned all the raw materials back to the seller. The plaintiff sued the defendant forthe price of the whole shipmentAnalysis of the judgement: The judge held that, the conduct of the defendantmay be necessary to determine whether a contract has been concluded under article8 (3) CISG – Interpretation of conduct of a party (CISG-online.ch, 2017). The buyerhad sufficient knowledge that he would not be using all the raw materials that hewould buy and had asked seller to send the invoices without any apprehensions.Since the purchase price was not fixed between the parties the court applied article55 CISG to determine the price. The court ordered that the price be equal to theusual price as per seller’s invoice. The applicable interest rates were fixed based onlaw applicable pursuant to the forum’s rules of private international law, which led toDutch law.5.3. Case where article 55 failed due to lack of sale of contractCLOUT Case No. 1451, Czech Republic, 25 June 2008, Supreme Court of CzechRepublic (United Nations, 1995)Summary of the case: The case encompasses a dispute between a German seller(plaintiff) and a Czech buyer (defendant) related to a payment of the manufacturedpaint, damages and interest for late payment. The plaintiff claimed that thedefendant had violated the obligations of the contract to pay for the price of theCISG ARTICLE 55 99goods. The plaintiff also presented the necessary documents for the contract of salebetween the two parties.Analysis of the judgement: It was determined that the price of the from the article55 the price or provision to determine the price of the goods need not be explicitlystated, provided a contract of sale is validly concluded according to the rules ofarticle 18 CISG. The documentary evidence provided by the plaintiff however findany grounds to confirm that the contract had been validly concluded and thedefended had no obligation to pay for the goods nor the late payment charges6. How is the price fixed?Article 55 provides a statutory and an autonomous guidance (Mistelis, 2005). It canbe assumed that price has been fixed implicitly. The price is assumed to be the pricethat is prevailing “under comparable circumstances” or according to a seller’s pricelists which the buyer has or should have the cognition (Enderlein & Maskow, 1992)or when the constant prices were used with the intension of creating a long-termbusiness contract, with the assumption that price change may occur over a period oftime. The inclusion of the timing (reference point) as to when the price to be takeninto consideration (at the time of conclusion of contract and not during the executionof the sale) nullifies any gain for the seller due to increase in price or loss for thebuyer due to decrease in price. The article 55’s provides both the parties theautonomy to make agreements related to the pricing structure. However, it does notgive any indication as to who determines the price nor who needs to take initiative tofix the price. In practice, it is usual the seller who determines the price as he is theone who makes the invoice; particularly, if the seller, has to fix the price it has toprice that is reasonable i.e. there has to be a reasonable proportion between priceand the seller’s prime cost. The common calculation to determine the price sumsprime costs plus reasonable profits (Enderlein & Maskow, 1992). When there isdifference in prices, the average price or the representative sellers price is taken inconsideration. Also taken into account are the qualitative features, technicalparameters design and marketability of the goods (Enderlein & Maskow, 1992). Thefixing of an arbitrary price would be termed unbinding.CISG ARTICLE 55 1010When the sales are made “under comparable circumstances” delivery and thepayment terms need to be given through considerations with respect to thosedefined by the incoterms or to the discounts that are generally given. (UNCITRAL,2016)The CISG, does not specify explicitly the use of third party to determine the price(Akrami, Yusoff, & Isa, 2014); it is often left to the parties to do so. Additionally, thecontract can eventually include an agreement when a third party or an arbitraltribunal can fix the price from the beginning or when the parties do not reach anagreement. If the parties wish to delegate the responsibility of fixing the price to anexpert third party then the price fixed by the third party will be deemed final andbinding, unless it is possible to prove that the expert determination of the price isfixed in bad faith by the third party. If it became impossible by all the methods abovethen the considered price in article 55 will be imposed (Akrami, Yusoff, & Isa, 2014).Thus, Article 55 brings in more objectivity in the method used to fix the price anddoesn’t rely on the seller’s price for determination of the price.One of the popular cases where even the court found it difficult to fix the price wasthe “Pratt & Whitney v. Malev”, 25 September 1992, CLOUT Case No. 53 SupremeCourt, Hungary. In this case Malev Hungarian airlines (defendant) had planned topurchase 2 jumbo jet aircraft from either Boeing or Airbus but planned to buy andengine separately. The plaintiff, Pratt & Whitney, made two simultaneous andalternative offers to sell different types of aircraft engines, but without fixing the price.The defendant chose a type of engine from ones offered and placed an order. Theplaintiff claimed that the contract had been concluded. Pratt filed a case againstMalev for breach of contract. The Supreme court held that the contract wasconcluded as both the offer and acceptance were vague with no provision todetermine the price (Supreme Court, 1992).The courts held that, article 55 cannot beused to determine the price of an offer for a product, such as a jet engine, for whichno market price exists (PRESENTATION, 1992). This judgment demonstrates thepotential pitfall of article 55, when the goods in question are unique or specializedcategoryCISG ARTICLE 55 11117. ConclusionArticle 55 states that “where a contract has been validly concluded but does not …expressly or implicitly fix or make provision for determining the price, the parties areconsidered … to have impliedly made reference to the price …”, so what is thecourse of action, if in the future the price of the goods is impossible to decide due tosome circumstances as seen in the (Malev case above) or in industries such assteel and oil where the time gap is large between signing the contract and time ofdelivery. Does article 55 still hold good to solve the situation when the prices arevolatile or seasonal or complex or is it out of purview? It could be argued that for thecontracts that involve volatile price the time of delivery matters more than the time ofconclusion as stated in article 55. Similarly, for seasonal products, it would be moreappropriate to choose the time of delivery as the prices will only be known then.This is certainly one of the drawbacks of article 55. The interplay between article 14and article 55 also remains one of the contentious issue that has led to varying andconflicting interpretation (Akrami, Yusoff, & Isa, 2014).The article 55 can hardly be applied in isolation, it becomes all the more crucial tounderstand the seller and buyer behavior or conduct for the court to determinewhether the contract is concluded or not. The articles 8(2) dealing with conduct,understanding and prevalent circumstances (CISG-online.ch, 2017) and (3) dealingwith contracts involving sale of goods and other services by seller and being tied todomestic law (CISG-online.ch, 2017), the article 18(2) and article 23 directing whenthe acceptance becomes effective and the contract is concluded respectively gainsat most prominence. The courts or the arbitrators have to ascertain whether theparties really wanted to their open-price agreement to be binding or not (Tajudin,2014).The application of article 55 is also limited to the countries whose domestic lawallows concept of concluding the contract with leaving the price open.However, the article 55 fills the gap when the parties have intentionally concludedthe contract, even during emergency cases even without proper offer or acceptance.The importance to autonomy related to fixing the price and choosing the expert thirdparty arbitrator is in particular appreciable. According to (Mistelis, 2005) theCISG ARTICLE 55 1212application of article 55 to “save” the contract the methods to determine the pricesare not controversial. In totality, the spirit of article 55 is to break away from theshackles of article 14(1), promoting equality and mutual benefits for long termfriendly relation among states and minimize the opportunistic behavior by the partieswho try to hide behind the cloak of article 14(1) to emancipate from the contractual