Ho Chi Minh University of Law

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GROUP’S PRESENTATION
Subject:
Lecturer: Nguyễn Thị Minh Phương
Group: 05
Members
Ord. Name Student Code
1 Nguyễn Ngọc Quý 2153801011174

2 Phạm Hùng Anh 2153801013019

3 Huỳnh Ngọc Thanh Ngân 2153801013163

4 Trần Thị Vân Anh 2153801014018

5 Nguyễn Huỳnh Minh Châu 2153801014036

6 Nguyễn Trần Minh Hà 2153801015062

7 Bùi Ngọc Bảo Trân 2153801015269

8 Phan Trần Diễm Vy 2153801015291

Ho Chi Minh City, January 4th, 2025

 Filanto, S.p.A. v. Chilewich International Corp

Abstract: Contract for the International Sale of Goods (CISG) plays an essential role in
resolving international trade disputes. This study focuses on analyzing the case “Filanto
S.p.A. v. Chilewich International Corp.,” a U.S. case that applied the CISG, particularly
concerning contract formation and arbitration clauses involving a third country. It further
examines how the court applied and interpreted CISG provisions such as Articles 8 and 18,
highlighting the significance of silence in contract acceptance and the freedom to choose
governing law. Additionally, the study discusses scholarly perspectives and related legal
cases to provide practical insights into applying the CISG in international transactions.

Keywords: CISG; international sales contracts; commercial arbitration; silence; legal

interpretation; applicable law; offer.
I. Summary
1. Parties
Claimant:
- Filanto S.p.A
- Place of business: Italy
- Role in transaction: Seller
Respondent:
- Chilewich International Corporation
- Place of business: USA
- Role in transaction: Buyer
1. Summary of dispute
Filanto S.p.A agreed to sell shoes to Chilewich International Corporation, pursuant to a
master agreement that required disputes to be arbitrated in Moscow. Even though, at that
time, both of them are members of CISG. To fulfill the agreement, Filanto entered into
multiple contracts with Chilewich. Pursuant to one purported contract Filanto supplied
shoes but Chilewich made only partial payment. Filanto sued in a New York court to
recover the price. Alleging that the contract incorporated the Russian master agreement by
reference, the buyer sought a stay of proceedings to permit arbitration.1
The Court justified its application of the CISG by explaining the CISG was ratified by the
US Senate in 19862, and entered into force between the US and other signatories, including
Italy, as of January 1, 19883. Citing article l(l)(a) of the CISG, the court stated that "absent a
choice of law provision, the CISG governs all contracts between parties with places of

1United Nations Commission on International Trade Law (1993), Case Law on Uncitral Texts,
A/CN.9/SER.C/ABSTRACTS/2, page 2 - 3
2 Filanto, 789 F. Supp at 1237
3 Id
business in different nations, so long as both nations are signatories to the [CISG].” 4In so
holding, the court observed that Filanto had its factories in Italy and Chilewich’s principle
place of business was located in White Plains, New York 5. Thus, the court applied the rules
of the CISG to the facts presented. Moreover, while Article 18(1) of the CISG generally
states that silence does not constitute acceptance, the court determined that, under Article
8(3), the parties' prior dealings established an obligation for the manufacturer to promptly
object. The manufacturer’s failure to do so in a timely manner was interpreted as acceptance
of Chilewich’s offer.

Chilewich signed an agreement (the “Russian Contract”) with the Soviet Foreign Economic
Association. The Russian Contract obligated supplying footwear and also contained an
arbitration clause stating that disputes were to be settled in Russia. Chilewich contacted
Filanto to supply the footwear. Chilewich sent Filanto a standard merchant’s memo for
signature by both parties to confirm the delivery and performance. Both Filanto and
Chilewich agreed that this constituted an offer. The memo provided that Filanto and
Chilewich agreed that the terms of the Russian Contract governed, including the Russian
Arbitration clause.6 Filanto sued in a New York court to recover the price. Alleging that the
contract incorporated the Russian master agreement by reference, the buyer sought a stay of
proceedings to permit arbitration.7
The court justified applying the CISG by noting that the treaty had been ratified by the U.S.
Senate in 1986 and came into effect between the U.S. and other signatory countries,
including Italy, on January 1, 1988. Referring to Article 1(1)(a) of the CISG, the court
explained that the CISG applies to contracts between businesses in different nations when
both countries are signatories to the convention, absent a specific choice of law. Since
Filanto operated in Italy and Chilewich’s principal place of business was in White Plains,
New York, the court determined the CISG was applicable to the case.8
Although Article 18(1) of the CISG generally states that silence does not equate to
acceptance, the court relied on Article 8(3), which allows consideration of prior dealings
between the parties. It concluded that Filanto’s failure to promptly object created an
obligation under their established course of dealings, leading to an interpretation that Filanto
had accepted Chilewich’s offer. Thus, the court applied the CISG’s provisions to the
dispute.9

4 Id
5 Filanto, 789 F. Supp at 1230
6 Sunil R. Harjani, 'The Convention on Contracts for the International Sale of Goods in United States Courts', 23
Houston Journal of International Law (Hous. J. Int'l L.) (2004), page 69
7United Nations Commission on International Trade Law (1993), Case Law on Uncitral Texts,
A/CN.9/SER.C/ABSTRACTS/2, page 2 - 3
8 Sunil R. Harjani, 'The Convention on Contracts for the International Sale of Goods in United States Courts', 23
Houston Journal of International Law (Hous. J. Int'l L.) (2004), at 70
9 Aforementioned document (see Footnote 7)
Therefore, Chilewich is not bound by the arbitration clause specifying Moscow. In doing so,
the court interpreted Filanto's silence as an objection to the proposition that Filanto had a
"duty" to relay to Chilewich.10

2. Claims of the parties

Plaintiff's relief sought:
- Filanto sought damages for the breach, including compensation for the goods delivered and
related losses11.
Defendant's relief sought
- Chilewich sought to enforce the arbitration clause requiring disputes to be resolved in
Moscow rather than litigated in U.S. courts12.

II. Argument
1. The arguments of the Plaintiff

The plaintiff, Filanto, argued that the arbitration clause in the contract should not apply to
their dispute. Filanto contended that they had not agreed to the arbitration clause that
required disputes to be settled in Moscow. Instead, Filanto wanted the arbitration to take
place in New York. They argued that the terms of the Russian contract, which included the
arbitration clause, were not fully accepted by them and therefore should not govern their
agreement with Chilewich.13

Besides, payment obligations were tied to the agreement to sell a substantial number of
boots between Filanto and Chilewich. Filanto claimed that Chilewich breached the contract
by refusing to accept the boots that were delivered. Filanto argued that they had fulfilled
their obligations by delivering the goods as per the agreement, and hence, they were entitled
to payment.14

2. The arguments of the Defendant

The defendant, Chilewich International Corp., argues that the Memorandum Agreement it
signed and sent to Filanto on March 13 was an offer. Filanto’s retention of this agreement
and acceptance of Chilewich's performance (like the May 11 letter of credit) prevents
Filanto from denying the contract. Chilewich views Filanto’s late return of the signed
agreement with modifications as ineffective because it occurred months later. Instead, it
sees this as a proposal for modification, which Chilewich rejected. Thus, according to

10 Gary Kenji Nakata, 'Filanto S.p.A. v. Chilewich Int'l Corp.: Sounds of Silence Bellow Forth Under the CISG’s
International Battle of Forms', 7 Transnational Lawyer (Transnat’l Law.) (1994), at p.194.
11 Aforementioned document (see Footnote 9) at p.154
12 Aforementioned document (see Footnote 9) at p.154
13 Filanto, SpA v. Chilewich Intern. Corp., 789 F. Supp. 1229 (S.D.N.Y. 1992), Justia US Law,
https://law.justia.com/cases/federal/district-courts/FSupp/789/1229/1640743/, accessed on December 23rd 2024.
14 Filanto, SpA v. Chilewich Intern. Corp., 789 F. Supp. 1229 (S.D.N.Y. 1992), Justia US Law,
https://law.justia.com/cases/federal/district-courts/FSupp/789/1229/1640743/, accessed on December 25th 2024.
Chilewich, Filanto is bound by the original terms of the March 13 Memorandum
Agreement, which includes an arbitration provision from the referenced Russian Contract.15

Besides, Chilewich argued that Filanto failed to meet the required standards or
specifications of the boots as per the contract, and therefore, they were justified in refusing
to accept the goods. This non-performance by Filanto, according to Chilewich, meant that
they were not obligated to make the payment. In summary, Chilewich’s defense was based
on the premise that the terms of the Russian contract, including the arbitration clause, were
applicable to their agreement with Filanto, and that Filanto’s non-performance justified their
refusal to pay.16

3. The arguments and ruling of the judge

The Court's judgment is divided into two parts, Jurisdiction and Merit.

Firstly, about the Arbitration Clause, the judge had to determine if the arbitration clause in
the Russian contract, which required disputes to be resolved in Moscow, was binding on
Filanto. The judge concluded that this clause was indeed binding, based on the conduct and
prior dealings between Filanto and Chilewich. This meant that any disputes arising from the
contract had to be resolved through arbitration in Moscow

About Jurisdiction, by upholding the arbitration clause, the judge effectively ruled that the
jurisdiction for resolving the dispute was Moscow, as stipulated in the arbitration clause.
This meant that the court in which the case was being heard did not have jurisdiction over
the substantive matters of the dispute, and the case needed to be resolved through arbitration
in Moscow.17

Secondly, the court's decision included the following:

No Rejection of Terms After Performance Begins: The court ruled that Filanto could not
reject parts of the offer's terms after Chilewich had begun performing under the contract.
Once Chilewich had started fulfilling the contract, Filanto had to comply with all the
initially accepted terms.

Contract Formation by Conduct: The court concluded that the contract between Filanto and
Chilewich was formed by conduct and prior dealings, and the terms of the Russian contract
were implicitly incorporated into the agreement between the two parties.18

15 Filanto, SpA v. Chilewich Intern. Corp., 789 F. Supp. 1229 (S.D.N.Y. 1992), Justia US Law,
https://law.justia.com/cases/federal/district-courts/FSupp/789/1229/1640743/, accessed on December 23rd 2024.
16 Filanto, SpA v. Chilewich Intern. Corp., 789 F. Supp. 1229 (S.D.N.Y. 1992), Justia US Law,
https://law.justia.com/cases/federal/district-courts/FSupp/789/1229/1640743/, accessed on December 25th 2024.
17 Filanto, SpA v. Chilewich Intern. Corp., 789 F. Supp. 1229 (S.D.N.Y. 1992), Justia US Law,
https://law.justia.com/cases/federal/district-courts/FSupp/789/1229/1640743/, accessed on December 30th 2024.
18 Filanto, SpA v. Chilewich Intern. Corp., 789 F. Supp. 1229 (S.D.N.Y. 1992), Justia US Law,
https://law.justia.com/cases/federal/district-courts/FSupp/789/1229/1640743/, accessed on December 30th 2024.
The court's decision emphasized the importance of adhering to agreed-upon terms and
performance, especially when those terms included a binding arbitration clause.

III. Team’s perspective

1. Team’s conclusions
Filanto, S.p.A. v. Chilewich International Corp is the first US case raising significant issues
under CISG. The applicability of CISG to the transaction in Filanto might have had a
decisive effect on the outcome of the case. Under Article 1(1)(a) of the CISG, the
Convention applies automatically to international sales contracts unless explicitly excluded
by the parties. In this case, the CISG's principles were central to the court's analysis,
particularly concerning whether Filanto's silence or delayed objection to the terms proposed
by Chilewich constituted acceptance of the arbitration clause. Furthermore, Article 18(1)
which reads silence is not usually an acceptance and relying on CISG Article 8(3), Filanto
was certainly under a duty to alert Chilewich in a timely fashion to its objections.
Consequently, the phrase "other conduct" mentioned in Article 8 to encompass Filanto's
silence, and thus ruled that Filanto accepts the offer by its silence. Thus, if a counter-offer or
offer lacks a specific time limit, the business should promptly respond in writing to either
accept or propose a counter-offer to the initial offer, clearly outlining any differences in its
new terms. Additionally, it is essential to refrain from performing the contract until the
parties reached have explicit agreements on critical matters, such as the arbitration clause.

2. Legal basis
2.1. CISG applicable
Article 1(1)(a): Since both the United States and Italy are signatories to the
Convention, the Court will interpret the “agreement in writing” requirement of the
Arbitration Convention in light of, and with reference to, the substantive international
law of contracts embodied in the Sale of Goods Convention. The CISG governs
contracts for the sale of goods between parties in different nations that are
signatories, unless explicitly excluded by the parties.
2.2. Key CISG provisions interpreted and applied
Article 18(1): Silence or inactivity does not in itself amount to acceptance.
Article 8(3): The Court may evaluate the parties' prior relationship under this article
to determine whether conduct signifies acceptance.
Therefore, under Article 8(3) CISG, Filanto had a duty to alert Chilewich of its
objections promptly due to their extensive prior dealings.
Article 19(3): The court held that the change in the arbitration clause constituted a
material alteration to the offer. Therefore, the seller's letter dated August 7 was
considered a new offer.
 2.3. Key CISG provisions interpreted
Article 11: It allows contracts for the international sale of goods to be validly
concluded without requiring them to be in writing or subjected to formal evidentiary
rules. This provision essentially rejects the Statute of Frauds, which mandates written
agreements in certain circumstances, and the parol evidence rule
Article 81(1): The court referenced this article to underline the severability of
arbitration clauses from the main contract.
2.4. Key CISG provisions applied
Article 19(1): Under Article 19(1) of the CISG, a reply to an offer that appears to be
an acceptance but includes additions or modifications is a rejection of the offer and a
counteroffer.
3. Theoretical basis
3.1. The views of the jurisdiction or involved parties in relevant cases
3.1.1. Gasoline and gas oil case19
a. Background:
The Hungarian Plaintiff (Seller) and the Austrian Defendant (Buyer) signed a supply
contract over the delivery of gasoline and gas oil for the period of 1 February 1994 to
31 January 199520, agreeing that Austrian law would govern the contract. After this
supply contract had ended , the Seller proposed a new draft contract, stating that
payments would be made in US dollars and that Austrian law would still apply in
case of disputes. In practice, the Buyer did not sign this second contract but
continued to place orders with the Seller, resulting in unpaid invoices amounting to
US$ 4,948,668.43 USD 4,948,668.43, which the Seller claims.
A further Hungarian joint-stock corporation (the assignor of the Buyer) had
maintained a business relationship with the Seller’s predecessor in title 21. The
Buyer’s assignor held a compensation claim against the Seller. By written agreement
of 14 June 1995, this Hungarian joint-stock corporation assigned the account
receivable to the Buyer and the Seller was notified.
The Seller demands The Buyer payment of USD 4,949,668.43 for the delivery of gas
oil and gasoline. The Buyer objects that the claim was redeemed due to Buyer’s set-
off with a counterclaim of 609,810,397 Ft. (The Court recounts Buyer’s submissions
regarding the Buyer’s assignor’s asserted claim against Seller.)
b. Legal issue:
Can the CISG be applied to govern the contractual relationship between the parties?
c. Judgment:

19 https://cisg-online.org/search-for-cases?caseId=6572, accessed on December 22th 2024.

20 https://cisg-online.org/files/cases/6572/translationFile/614_25732166.pdf, accessed on December 23th 2024.
21 Id (20).
 According to the Court, Austrian law was correctly applied based on the parties' valid
choice of law agreement. The choice of Austrian law includes the CISG, which forms
part of the Austrian legal system.
Although Hungary had declared a reservation under Article 96 of the CISG, under
the formal requirements prescribed by Austrian law, the exchange between the
parties still constituted a validly concluded contract.
The Buyer challenged the application of the CISG, arguing that it was implicitly
excluded when Austrian law was chosen. However, at the time of the conclusion of
the contract, both Austria and Hungary are member states of the CISG. Under Article
1(1)(a) of the CISG, the parties, who have
their places of business in different Contracting States, concluded a (framework)
contract for the delivery of goods. Therefore, the choice of Austrian law generally
includes the CISG, which forms part of the Austrian legal system22.
If the CISG applies, parties wishing to exclude its governance over their contract
must agree to do so explicitly or implicitly. However, the Buyer does not claim that
the parties explicitly excluded the CISG, and there is no evidence of implicit
exclusion either. An implicit exclusion requires clear intent from the parties. In the
absence of sufficient clarity regarding an intention to exclude the Convention, as
interpreted under Article 8 CISG, the CISG remains applicable.
The Supreme Court determined that the CISG applies when two parties to an
installment contract are based in different States and select the law of a CISG
member State, even if they do not explicitly state the Convention's application. A
general choice of law does not imply an exclusion of the CISG, as it forms part of the
chosen law and takes precedence over conflicting non-unified laws.
The inclusion of Incoterms, as in this case, does not necessarily signal an intention to
exclude the CISG, as Incoterms address only specific aspects of a sales contract and
do not require a different legal framework from the CISG. Moreover, the Buyer’s
appeal fails to demonstrate how Incoterms would override the CISG. Consequently,
the CISG was not excluded under Article 6, as the choice of law clause clearly
referred to Austrian law in its entirety, not selectively.
3.1.2. Elinette Konfektion Trading ApS v. Elodie S.A. „Les Mariées
d'Elodie“23
a. Background:
A Danish seller, plaintiff, alleged that a French buyer, defendant, had ordered
women’s clothing from it. The Seller sued the Buyer for the outstanding purchase
price (the defendant be ordered to pay FRF 23,811.20 with specified interest).
Denying the existence of an order or a contract with the seller, the Buyer contested
the jurisdiction of the court24. The Seller presented evidence, including an order form
and invoices, but the Buyer argued the goods were returned because they were not
22 Id (20).
23 https://cisg-online.org/search-for-cases?caseId=6454, accessed on December 22th 2024.
24 https://cisg-online.org/files/cases/6454/abstractsFile/486_26692221.pdf, accessed on December 23th 2024.
 ordered, suggesting the seller’s representative may have unilaterally prepared the
order.
The Seller's director, testified that in early 1996, the Seller shipped goods and
invoices to the Buyer, a new client, following standard procedure. The Buyer gave no
response, but shortly before 15 March 1996, the Seller's agent reported the Buyer
intended to return the goods, offended by a request for immediate payment for a
discounted initial shipment, unrelated to the original order. The Buyer’s attorney
argued that no purchase agreement was made, which the Buyer denies entering25.
b. Legal issue:
Was the offer accepted in this situation?
c. Judgment:
The first instance court dismissed the case for lack of jurisdiction, and the seller
appealed26. The court of appeal reviewed the case.
Referring to Article 11 and under Article 18(1) CISG, silence or inaction does not
constitute acceptance, and the absence of prior dealings between the parties further
weakened the seller’s claim. The court found that as the parties had no prior business
dealings, the Buyer’s silence could not be interpreted as an implied acceptance of the
offer allegedly made by the Seller27.

3.1.3. CLOUT case No. 232 [GERMANY Oberlandesgericht [Appellate

Court] München 11 March 1998
a. Background:

CLOUT Case No. 23228 was heard by the Oberlandesgericht München (Munich Court of
Appeal), Germany, on March 11, 1998. The dispute involved an international sales contract
under the United Nations Convention on Contracts for the International Sale of Goods
(CISG) between two parties:

● The claimant (seller) was a company based in Germany, and

● The defendant (buyer) was a company based in the Netherlands.

The parties had engaged in negotiations and exchanges regarding the terms of the sales
contract. The seller made an offer with specific conditions regarding price, quantity, and
delivery time. However, the buyer responded with modified terms (including changes to
price and delivery time). The seller argued that these changes were fundamental, and
therefore the buyer's response could not be considered an acceptance of the contract but
rather a counteroffer. The buyer, on the other hand, argued that the contract had been
formed and that they had accepted the seller's terms.

25 https://cisg-online.org/files/cases/6454/fullTextFile/486_52809008.pdf, accessed on December 23th 2024.

26 Id (24).
27 Id (24).
28 CLOUT case No. 232 [GERMANY Oberlandesgericht [Appellate Court] München 11 March 1998,
[https://www.uncitral.org/clout/clout/data/deu/clout_case_232_leg-1455.html], accessed 01/01/2022024
The dispute centers around whether the buyer's response can be considered an acceptance of
the original offer's terms, and whether these changes fundamentally altered the nature of the
contract, leading to a lack of agreement between the parties.

b. Legal issue:
1. Can the buyer's response be considered an acceptance of the offer under
Article 18 of the CISG?
2. Do the changes in the buyer's response fundamentally alter the offer under
Article 19 of the CISG, thus creating a new offer?
3. How does the court determine the reasonable intent of the parties in this case
under Article 8 of the CISG?

c. Judgment:

The Oberlandesgericht München court issued its ruling after analyzing the relevant
provisions of the Vienna Convention (CISG):

● Article 18 CISG: The court concluded that the buyer's response could not be
considered an acceptance of the contract. The changes in the terms of the response
(such as price, quantity, and delivery time) had altered the fundamental conditions of
the original offer. Therefore, the response was not an acceptance of the contract but
rather a modification of the offer.
● Article 19 CISG: The court determined that the modifications in the buyer's
response had fundamentally altered the conditions of the original offer. These
changes made the buyer's response a new offer, and therefore, it could not be
considered an acceptance of the contract.
● Article 8 CISG: The court applied Article 8 to determine the parties' intentions by
considering the negotiations and conduct of the parties. The court concluded that the
seller did not agree to the changes in the buyer's response, and thus no contract was
formed.

3.1.4. GERMANY Bundesgerichtshof [Federal Supreme Court] 9

January 200229
a. Background:
The dispute over powdered milk occurred between a company in Germany (the
seller) and a company in the Netherlands (the buyer). The seller agreed to sell
2,557.5 metric tons of powdered milk to the buyer, with the goods intended for
export to Algeria and Aruba during Q1/1998. However, customers in these countries
complained about a portion of the powdered milk being damaged, and the buyer
subsequently claimed compensation for the losses from the German seller. The seller

29 [https://cisg-online.org/files/cases/6594/translationFile/651_52762818.pdf]
acknowledged the loss and agreed to replace the damaged powdered milk but refused
to compensate for the loss as requested by the buyer.

In the seller's offer to the buyer, there was a standard clause stating: "We sell the
goods entirely subject to our general terms and conditions. Any opposing statutory
provisions or general terms and conditions of the buyer are not accepted and do not
form part of the contract."

The seller's general terms included a warranty provision and a clause regarding
damage notification: "The buyer must inspect the goods immediately upon receipt
and note any complaints on the delivery receipt... Defects not reported upon receipt
may only be complained about within the statutory warranty period... If the buyer
does not act accordingly, the buyer cannot make any claims regarding the warranty."

On the other hand, the buyer's confirmation letter contained a standard clause stating:
"Regardless of whether the seller reimburses part or all of the purchase price, the
seller's liability for any loss in all cases is limited to the invoice amount for the goods
delivered."

These conflicting standard clauses fundamentally altered the content of the seller's
original offer. Despite this, the Federal Supreme Court of Germany upheld that the
contract between the seller and the buyer was valid. The Court ruled that none of the
standard terms in the conflicting clauses formed part of the contract and that these
clauses were excluded from the agreement. The Court refused to invoke any of the
standard clauses that would benefit one party over the other. The buyer's standard
clause was found to be reasonable and balanced, but since it conflicted with the
seller’s terms, the Court could not apply the seller’s clauses selectively.

b. Legal Issues:
● Can conflicting standard terms in the offer and acceptance, as per Article 19
of the CISG, be excluded if they fundamentally alter the content of the offer?
● How should conflicting standard terms in the offer and acceptance be handled
under the CISG when they contradict each other and would materially alter
the offer's content?
● Do the conflicting standard clauses in this case create an issue of the
formation of the contract under CISG provisions, or should they simply be
excluded without affecting the overall validity of the contract?
c. Judgement:
The Federal Supreme Court of Germany ruled that the contract was valid, even
though the standard terms in the offer and acceptance were in conflict. The Court
found that the conflicting standard clauses, which would alter the fundamental
 content of the offer, did not form part of the contract. These clauses were excluded
from the agreement.

The Court made a clear statement: despite the conflicting standard clauses, the
contract was still formed and legally valid according to Article 19 of the CISG, but
the conflicting clauses would be replaced by the applicable provisions of the CISG.
The Court emphasized that such conflicts should not result in the failure of contract
formation. Instead, the conflicting terms were disregarded, and the contract's
formation was maintained under the CISG's relevant rules.

The German Federal Supreme Court’s ruling shows a clear message: even when
standard terms in the offer and acceptance conflict and alter the offer’s content, the
contract can still be formed. The conflicting terms do not invalidate the contract but
are instead replaced by the applicable provisions of the CISG. This illustrates that
courts typically prefer to exclude conflicting standard terms rather than declaring the
contract non-existent.

3.2. The views of scholar

3.2.1. Ronald A. Brand and Harry M. Flechtner (1993)30:
The commentary by Brand and Flechtner underscores the complexities of applying
the CISG in international trade, particularly in contract formation and arbitration, and
highlights the need for clear and explicit contractual agreements to avoid disputes.
The article's first part analyzes the substantive commercial law aspects of the Filanto
case, highlighting its relevance for future U.S. court decisions under the CISG. The
second part focuses on transactional considerations, examining the impact of Filanto
and similar decisions from foreign courts and arbitral tribunals on planning
transnational contract provisions for dispute resolution31.
According to the authors, Article 19 of the CISG largely adheres to the mirror-image
rule, where a reply to an offer with modifications constitutes a rejection and counter-
offer. However, under Article 19(2), a reply with immaterial changes may still be
considered acceptance unless the offeror objects promptly. Article 19(3) defines
material terms broadly, including price, payment, and dispute resolution, which often
block contract formation if altered32.
In the Filanto case, CISG's application significantly impacted the outcome. The seller
argued that their response rejecting arbitration constituted a counter-offer, which the
buyer implicitly accepted through subsequent actions. While the court acknowledged

30 Ronald A. Brand & Harry M. Flechtner, “Arbitration and Contract Formation in International Trade: First
Interpretations of the U.N. Sales Convention”, 12 Journal of Law & Commerce (J.L. & Com.) (1993).
31 Id (22), page. 240.
32 Id (22), page. 245.
 the validity of this under CISG, it ultimately ruled in favor of the buyer based on the
seller's delay in responding and silence during critical stages of performance33.
Further, the court determined that the seller’s response did not form a contract under
the CISG, as it included a material alteration (excluding arbitration), which was
considered a counter-offer in this case. The seller argued that the buyer accepted this
counter-offer by acknowledging contractual obligations in subsequent
communications. While the court recognized the validity of the seller's argument
under the CISG, it ultimately ruled in favor of the buyer based on the seller’s silence
and inaction for an extended period and the buyer's compliance with initial
contractual obligations. In determining the existence of an agreement to arbitrate,
rather than the formation of the overall contract, the court gave CISG only a
secondary role. The court primarily relied on U.S. domestic law, citing the
Restatement (Second) of Contracts and related cases to conclude that Filanto's silence
bound it to Chilewich's arbitration term. CISG Article 18 was mentioned only in
passing. Additionally, the court treated CISG as a supplementary source of principles
rather than as the governing law34.
While the Filanto case did not directly apply CISG to the issue at hand, the Sales
Convention was prominent in the court’s analysis and central to the seller’s
argument. The case underscores several key lessons for commercial lawyers,
particularly highlighting the importance and relevance of CISG in international trade
disputes. “The Convention is the law potentially applicable to a huge number of
international transactions. Unless the parties agree otherwise, sales of goods
between a U.S. party and a party located in any other ratifying country are governed
by CISG, provided the contract (or the offer from which it grew) arose after the
effective date of the Convention for both countries”35.
3.2.2. Gary Kenji Nakata (1994)36:
In part V of this article, Nakata critiques the court's interpretation of the CISG. The
author argues that the court's reliance on Filanto's silence as acceptance may not
align with the CISG's provisions, emphasizing the need for clear communication in
international contract.
The court's opinion in Filanto S.p.A. v. Chilewich Int'l Corp. contained four
discrepancies: (1) its reasoning for applying CISG was questionable; (2) Chilewich's
offer to Filanto may have lapsed due to Filanto's delayed response; (3) Chilewich
may not have properly commenced performance by opening a letter of credit; and (4)
Filanto may not have had a duty to alert Chilewich of objections37.
In the third part, “another item overlooked by the court is that Chilewich's offer to
Filanto may have lapsed”. First, Chilewich's offer to Filanto, made on March 13,
33 Id (22), pages. 245-246.
34 Id (22), page. 247.
35 Id (22), pages. 247-248.
36 Nakata Gary Kenji. “Filanto S.p.A. v. Chilewich Int'l Corp.: Sounds of Silence Bellow Forth Under the CISG's
International Battle of the Forms”. Transnational Lawyer, Vol. 7, Issue 1, 1994.
37 Id (34), page. 156.
 1990, might have lapsed because Filanto only replied on August 7, 1990, nearly five
months later. According to CISG Article 18(2), an acceptance must reach the offeror
within a reasonable time. If five months is deemed unreasonable by trade usage, the
offer could have expired, and Filanto's response could be treated as a new offer. This
argument supported Filanto’s case but was not accepted by the court. Second, the
court assumed that Chilewich commenced performance by opening a letter of credit.
However, merely opening a letter of credit does not constitute payment or significant
performance. Typically, the advising bank would notify the exporter (Filanto) of its
availability, but further actions might be required to confirm performance. The court
neither addressed these issues nor justified its assumption38.
In the fourth part, according to the author, Filanto may not have had a duty to alert
Chilewich of its objections. In this case, the court concluded that Filanto had a duty
to alert Chilewich of its objections promptly due to their extensive prior dealings. It
interpreted Filanto's silence as acceptance under the first part of CISG Article 18(1),
which states that conduct indicating assent constitutes acceptance. However, this
contradicts the second part of Article 18(1), which explicitly states that silence or
inactivity does not equate to acceptance. The court addressed this inconsistency by
invoking CISG Article 8(3), allowing it to consider the parties' prior relations to
determine if silence constituted acceptance. This approach reflects a controversial
judicial interpretation, as it overrides the explicit language of Article 18(1) without
sufficient evidence of prior dealings to justify the decision39.
3.2.3. Sunil R. Harjani (2004)40:
The case Filanto S.p.A. v. Chilewich Int’l Corp., discussed in Part V, Section A of
this article, represents the first judicial interpretation of the CISG in the United
States. Its intricate details demand more than a brief summary to fully convey its
complexity41. The author provides a detailed account of the complex facts, which
revolve around whether an arbitration agreement existed between the parties.
The case is significant because it involved applying the CISG provisions related to
contract acceptance and the “battle of the forms” 42. According to the author, the court
relied on Articles 18(1) and 8(3) of the CISG but did not extend its analysis to the
broader interpretative methodologies. The court did not consider any of the
authorized interpretation methods mentioned in Part III of this article in addition to
the CISG43. The court relied on domestic case law to conclude that “an offeree who
knowing that the offeror has commenced performance, fails to notify the offeror of its
objection to the terms of the contract within a reasonable time will, under
circumstances, be deemed to

38 Id (34), pages. 158-159.

39 Id (28), pages. 159-160.
40 Sunil R. Harjani, 'The Convention on Contracts for the International Sale of Goods in United States Courts', 23
Houston Journal of International Law (Hous. J. Int'l L.) (2004).
41 Id (38), page. 69.
42 Id (38), page. 71.
43 Id (38), page. 71.
 have assented to those terms.”44 Furthermore, the court cited to the Restatement
(Second) of Foreign Relations and two Southern District of New York cases to
establish its ruling. It interpreted CISG Article 18(1) to allow conduct as acceptance
and Article 8(3) to permit consideration of prior dealings, concluding that silence
paired with past interactions could indicate acceptance, despite Article 18(1)'s
explicit exclusion of silence. This conclusion was partly influenced by domestic case
law45, despite a lack of evidence for prior dealings between the parties 46. According
to the author, had the court considered the UNIDROIT Principles, it would have
recognized that explicit actions, not silence, are required to indicate acceptance 47
under Articles 2.6(1) and 2.6(3), even with established practices between parties.
However, the Southern District of New York has allowed silence as acceptance under
the CISG when backed by prior dealings48.
Additionally, the court also overlooked Article 18(2), which invalidates acceptance if
assent does not reach the offeror within a reasonable time. For instance, Chilewich's
offer, made on March 13, 1990, was only answered by Filanto on August 7, 1990,
about five months later, raising questions about whether the offer had expired 49.
Therefore, it's possible that the court have failed to read all the relevant provisions of
the CISG50.
The Filanto case, as the first U.S. interpretation of the CISG, demonstrated openness
to international contract law, according to the author. However, the court neglected to
consider legislative history, scholarly commentary, or the Convention's general
principles when interpreting Articles 18(1) and 8(3), the author notes. Instead, it
relied on domestic case law when the CISG's text proved insufficient. Although not
an exemplary CISG interpretation, it established a foundational precedent for future
U.S. cases involving the Convention51.
3.2.4. Eun-Ok Park (2021)52:
The case Filanto S.p.A. v. Chilewich Int’l Corp. is thoroughly analyzed in “Section
2.2: Formation of Arbitration Agreement” as one of outstanding U.S. cases for
formation of contract and arbitration agreements under the CISG, provides
meaningful implications53. The court's central focus was on determining whether the
arbitration agreement embedded in the contract was enforceable, and it applied the
CISG as the governing law, given that both the U.S. and Italy are signatories.
The court relied on Article 8(3) to discern the parties' intentions during contract
formation by analyzing their conduct, prior communications, and surrounding
44 Filanto, 789 F. Supp. at 1240 (citing to Restatement (Second) Contracts § 69(1).
45 Id (38), page. 71.
46 Nakata, supra note 131, at 155–56.
47 BURTON & EISENBERG, supra note 111, at 336.
48 Filanto, 789 F. Supp. at 1240.
49 Nakata, supra note 131, at 158–59.
50 Id (38), page. 73.
51 Id (38), page. 73.
52 Eun-Ok Park, 'CISG as a Governing Law to an Arbitration Agreement', 25(7) Journal of Korea Trade (JKT) (2021).
53 Id (50), page. 112.
 circumstances. It also invoked Article 81(1) to reinforce the principle of severability,
affirming that arbitration clauses are part of the main agreement but are separable
when questions regarding the main contract's validity arise. This principle ensures
that arbitration clauses remain unaffected even if the primary contract's enforceability
is disputed.54
The author details the intricate facts of the case: Filanto initially delayed responding
to Chilewich’s Memorandum Agreement, which incorporated an arbitration clause
from the original contract between Chilewich’s agent and Raznoexport 55. When
Filanto eventually signed and returned the agreement, it included a letter stating it
accepted only specific provisions (e.g., packing, shipment, and acceptance),
excluding the arbitration clause. Chilewich contended that Filanto’s acceptance was
implicit through its action of utilizing the letter of credit provided.
The author also highlights the court’s interpretation of the severability doctrine,
clarifying that dispute resolution provisions are inherently tied to the main contract
during formation but remain legally independent when enforcement issues arise 56.
Specifically, the court highlighted the principle that dispute resolution clauses are
initially treated as integral parts of the main contract and governed by the same
formation rules. However, when the main contract's validity is contested, these
clauses become legally independent, ensuring their enforceability remains unaffected
by disputes over the primary agreement. Thus, arbitration clauses included in main
contracts are interconnected at first but are ultimately separable when needed57.
3.3. The group’s perspective
Firstly, when an offer from a partner does not have a specific validity period, the
business should respond to accept or reject the old offer in writing as soon as
possible, with clear statements about the differences in their new offer. Additionally,
it is important to avoid executing the contract before reaching clear agreements
between the parties on important issues such as arbitration clauses.
Secondly, according to Article 15.1 of the CISG, to ensure that their offer is valid,
businesses need to carefully verify that they have received confirmation from their
partner that the document has been received, to avoid the partner disputing the
validity of the offer.
Thirdly, it is necessary to clarify the issue of choosing the applicable law to govern
the international sales contract between the parties. The contract should explicitly
specify the chosen applicable law and whether there are any exclusion clauses to best
align with the interests of the parties involved.

54 Id (50), page. 113.

55 Id (50), pages. 112-113.
56 Id (50), page. 113.
57 Id (50), page. 113.
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Id (50), page. 113.

LIST OF ABBERVIATIONS

No. Abberviation Meaning

1 CISG United Nations Convention on Contracts
for the International Sale of Goods
2 USD United States Dollar
3 UNIDROIT International Institute for the Unification
of Private Law