The Effects of Floating Price in Iranian Civil Law

Abstract

From a legislative history perspective, the requirement that the subject matter of a contract, particularly the price, be known and determined was a fundamental principle governing the law of obligations and, more specifically, an essential condition for the contract of sale. However, with the advancement of technology, the increasing complexity of economic and commercial relationships, and the necessity of expediting international transactions and exchanges, this principle has lost its rigidity. Consequently, regulations allowing the conclusion of sales contracts with a floating price have been codified in the legal systems of most economically and industrially advanced countries. The rapid expansion of international trade and the need for states to adapt to modern conditions have pushed the global community towards drafting uniform regulations, culminating in the adoption of the 1980 Vienna Convention on Contracts for the International Sale of Goods (CISG). This convention, recognized as an international law to which many developed countries have acceded, includes provisions concerning floating prices. Similarly, Iranian law also recognizes the possibility of concluding sales contracts with a floating price. According to the aforementioned legal sources—including the 1980 Vienna Convention and Iranian law—the contract of sale with a floating price manifests in various forms. One instance arises when the contracting parties, instead of explicitly specifying the price, establish methods and criteria for its determination. The most significant type of floating price occurs when the parties to the contract neither determine the price at all nor provide any mechanism for its determination. Notably, the primary disputes concerning floating prices pertain to this latter scenario, where no explicit or implied standard for determining the price exists. As a result, the acceptance of such an arrangement—where the price is entirely undetermined—has been conditioned on the fulfillment of certain requirements and characteristics under the aforementioned legal frameworks. Pursuant to the provisions of the 1980 Vienna Convention, if the parties enter into such a sales contract, the prevailing price in commercial practice at the time of contract formation serves as the criterion for determining the buyer's financial obligation.