A contract may be concluded either by the acceptance of an offer or by conduct of the parties that is sufficient to show agreement.
1. Offer and acceptance
Basic to the Principles is the idea that the agreement of the parties is, in itself, sufficient to conclude a contract (see Article 3.1.2). The concepts of offer and acceptance have traditionally been used to determine whether, and if so when, the parties have reached agreement. As this Article and this Chapter make clear, the Principles retain these concepts as essential tools of analysis.
2. Conduct sufficient to show agreement
In commercial practice contracts, particularly when related to complex transactions, are often concluded after prolonged negotiations without an identifiable sequence of offer and acceptance. In such cases it may be difficult to determine if and when a contractual agreement has been reached. According to this Article a contract may be held to be concluded even though the moment of its formation cannot be determined, provided that the conduct of the parties is sufficient to show agreement. In order to determine whether there is sufficient evidence of the parties’ intention to be bound by a contract, their conduct has to be interpreted in accordance with the criteria set forth in Article 4.1 et seq.
1. A and B enter into negotiations with a view to setting up a joint venture for the development of a new product. After prolonged negotiations without any formal offer or acceptance and with some minor points still to be settled, both parties begin to perform. When subsequently the parties fail to reach an agreement on these minor points, a court or arbitral tribunal may decide that a contract was nevertheless concluded since the parties had begun to perform, thereby showing their intention to be bound by a contract.
3. Automated contracting
The language of this Article is sufficiently broad to cover also cases of so-called automated contracting, i.e. where the parties agree to use a system capable of setting in motion self-executing electronic actions leading to the conclusion of a contract without the intervention of a natural person.
2. Automobile manufacturer A and components supplier B set up an electronic data interchange system which, as soon as A’s stocks of components fall below a certain level, automatically generates orders for the components and executes such orders. The fact that A and B have agreed on the operation of such a system makes the orders and performances binding on A and B, even though they have been generated without the personal intervention of A and B.