Legal Enforceability of Intentional Open Price in the US, England and the United Nations

Abstract

Uncertainty regarding the price of goods has caused parties to divert from traditional fixed-price approaches to relational, open-price contract. This leads to different approaches under the various sales laws. The Uniform Commercial Code (UCC) in the US was drafted to cope with the changing market by allowing parties to opt for open price term at the time of entering into a contract, while the English Sale of Goods Act 1979 (SGA) and the United Nations Convention on Contracts for the International Sale of Goods (CISG) provide limited flexibility in setting the price, favouring traditional fixed-price contracts. As a result, the courts in the SGA and CISG jurisdictions are less likely to enforce contracts where parties intentionally leave the price open, even in cases where parties initially intend to be bound by the contract.

This thesis provides an assessment of the effectiveness of the UCC in coping with relational sales contracts regardless of their duration. It compares the UCC with the SGA and the CISG Nations sales using examples of relevant court decisions from both jurisdictions, and critically evaluates the difference between flexibility in setting the price at the time of entering into a contract under the UCC, and flexibility applied by the courts to remedy a contract upon affected by market changes.

This evaluation enables the thesis to propose ways in which SGA and the CISG might be made more adaptable with regard to relational sales, by following the example of the UCC in allowing open price as a choice for parties rather than as a remedy given by the courts to uphold a relational contract.