Note: On 13 January 2005, YPF (Supplier) contracted to supply 4,000 MT of cyclohexane CFR to Tricon (Intermediate Broker) by 15 March 2005. The contract required Intermediate Broker to provide a standby letter of credit. Intermediate Broker subsequently contracted with Citgo (Distributor) on 9 March 2005 to resell the cyclohexane by 20 April 2005. On 14 March 2005, Supplier advised Intermediate Broker that the shipment would be delayed until 18 March 2005, and that supplier needed an amended standby to reflect the change of delivery date from 15 March 2005 to 23 March 2005. Intermediate Broker complied, but the ship was delayed for nearly two months due to engine problems, while the market price of cyclohexane plummeted. Distributor settled with Intermediate Broker under terms that allowed distributor to pursue its rights against Supplier for Intermediate Broker's loss of USD 450,000.

Distributor sued Supplier for damages for breach of contract alleging that Supplier failed to meet its duty to act reasonably and in good faith, and that Intermediate Broker never agreed to the amended delivery date. The United States District Court for the Southern District of Texas, Houston Division, Miller, J., denied Supplier's motion for summary judgment due to unresolved issues of fact regarding the duty to act reasonably and in good faith. However, the Judge ruled that as a matter of law, Intermediate Broker had accepted Supplier's offer to modify the delivery date.

The Judge noted that under CISG Article 18(1), silence or inactivity does not in itself amount to acceptance, but the Judge ruled that providing the amended standby, which extended the delivery date in response to a proposal to modify the contract, constituted conduct indicating assent. The Judge stated that Intermediate Broker's "provision of the amended letters of credit extending the date is 'other conduct of the offeree indicating assent to an offer.' [Intermediate Broker] thus accepted the proposed revision to the load date and [Supplier's] late loading of the cargo was not a breach of contract."



The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.