03 - The commercial letter of confirmation

What is the commercial confirmation letter used for? There are only a few projects, without a change. In case of a change of the conditions, an amendment to the contract is necessary. Basically, one need to look into the contract, to see, how such a change can be effectively agreed. But the legislation in Germany, has also allowed other ways: the commercial confirmation letter.

This procedure is used more often, than one may think. Imagine a typical situation in a project, where a change is agreed in an oral meeting, between the parties. Such an approach is usual the case, when the submitted planning documents, are subject to an examination by the customer. In the subsequent discussions, the parties then agree on the final design and implementation. This meeting, can formally be understood as an oral contract negotiation.

If no meeting report has been created, the agreements are not documented, and can later lead to disputes, about their validity. In these cases, it is important that a confirmation of the agreed regulations, is sent in writing to the other party, clearly documenting that the contract will be changed accordingly. This refers to changes, as well as to definitions or interpretations of contractual content. A commercial letter of confirmation is given, if the letter refers to a previously (supposedly) concluded, contract. This is especially the case, if the negotiations were held only oral.

The commercial letter of confirmation, is an exception to the principle that silence in legal transactions is fundamentally irrelevant. There is no legal obligation to answer. In the case of a commercial confirmation letter, there is an obligation to comment, from Section 242 of the German Civil Code. The other side, must contradict the alleged agreement. A contract, or a change, has been concluded, despite the silence of the negotiating partner.

It should be noted that regulations in a contract, can regulate another binding procedure. In these cases, the contractual regulation may have priority, so that a change, via a commercial confirmation letter, is only partially effective, or even ineffective. Particular caution is required, if the contract is based on a different legal system. Such strict regulations, are mostly required by the customer, in order to avoid unwanted changes and additional costs. If such exclusions exist in the contract, they are usually associated with a high, administrative burden. The only solution then is, for the parties, to agree on a simplified process, for defined changes as an addendum to the contract.

Attention: With common law, e.g. the Anglo-American law, there exists no commercial confirmation letter! § 2-201 UCC demands a written form requirement, for all goods transactions. As a result, a merchant can never rely on an oral agreement alone. Silence, cannot be counted as consent, so that in the event that there is no mutual fulfilment, a commercial letter of confirmation does not help.