A contract is concluded, modified or terminated by the mere agreement of the parties, without any further requirement.
The purpose of this Article is to make it clear that the mere agreement of the parties is sufficient for the valid conclusion, modification or termination by agreement of a contract, without any of the further requirements which are to be found in some domestic laws.
1. No need for consideration
In common law systems, “consideration” is traditionally seen as a prerequisite for the validity or enforceability of a contract, as well as for the modification or termination of a contract by the parties.
However, in commercial dealings this requirement is of minimal practical importance since in that context obligations are almost always undertaken by both parties. It is for this reason that Article 29(1) CISG dispenses with the requirement of consideration in relation to the modification and termination by the parties of contracts for the international sale of goods. The fact that this Article extends this approach to the conclusion, modification and termination by the parties of international commercial contracts in general can only bring about greater certainty and reduce litigation.
2. No need for cause
This Article also excludes the requirement of “cause” which exists in some civil law systems and is in certain respects functionally similar to the common law “consideration”.
1. At the request of its French customer A, bank B in Paris issues a guarantee on first demand in favour of C, a business partner of A in England. Neither B nor A can invoke the possible absence of consideration or cause for the guarantee.
It should be noted, however, that this Article is not concerned with the effects which may derive from other aspects of cause, such as its illegality (see Comment 2 on Article 3.1.3).
3. All contracts consensual
Some civil law systems have retained certain types of “real” contract, i.e. contracts concluded only upon the actual handing over of the goods concerned. These rules are not easily compatible with modern business perceptions and practice and are therefore excluded by this Article.
2. Two French businessmen, A and B, agree with C, a real estate developer, to lend C EUR 300,000 on 2 July. On 25 June, A and B inform C that, unexpectedly, they need the money for their own business. C is entitled to receive the loan, although the loan is generally considered a “real” contract in France.