Dedon v. Janus Revisited: Purchase Orders and Arbitration
Posted on March 2, 2011
Yesterday’s case of the day, Dedon GmbH v. Janus et Cie, got me thinking about an interesting point, though one that is, strictly speaking, outside of the Letters Blogatory scope of coverage. It is not uncommon, in domestic or international trade, for a seller to deliver goods to a buyer upon receipt of a purchase order. In the interim, the seller may send the buyer an acknowledgment of the purchase order. Both the purchase order and the acknowledgement (if there is one) may contain boilerplate terms.
Dedon focused on the limitation of the court’s powers to compel arbitration (or, presumably, to confirm an award) where the arbitration agreement was neither in writing nor evidenced by an exchange of letters or telegrams. In a classic battle of the forms, where one party’s form contains an arbitration agreement, and the other does not, what will happen? How does the New York Convention interact with the U.C.C. or the C.I.S.G. on this point?
Under Article 19(2) of the C.I.S.G., additional terms in an acceptance which do not materially alter the terms of the offer form part of the contract unless to offeror objects. Section 2-207 of the U.C.C. is similar.
It seems to me there are two questions: (1) is the addition of an arbitration agreement a material addition to the contract, such that it does not form a part of the contract when included in an seller’s acknowledgment; and (2) is the exchange of forms, one of which contains an arbitration agreement, an exchange of letters or telegrams under the Convention?
1. In some states, e.g., North Carolina, see Frances Hosiery Mills, Inc. v. Burlington Indus., Inc., 204 S.E.2d 834 (N.C. 1974), arbitration clauses are deemed material changes to a contract, such that they the offeree cannot make them part of the contract by including an arbitration agreement in its acknowledgment. But there are cases that come out the other way in some circumstances. See, e.g., Dixie Aluminum Prods. Co. v. Mitsubishi Int’l Corp., 785 F.Supp. 157 (N.D. Ga. 1992).
2. A judge here in Massachusetts has held that an exchange of a purchase order and an acknowledgment form cannot give rise to an “agreement in writing”:
The phrase “exchange of letters or telegrams” suggests a level of interchange that is not present during a mere exchange of forms.
AGP Indus., SA v. JPS Elastomerics Corp.,511 F.Supp.2d 212 (D. Mass. 2007). But again, the cases are not unanimous. See Aster Chocolate Corp. v. Mikroverk Ltd., 704 F.Supp. 30 (E.D.N.Y. 1989).
The bottom line is that merchants have to consider both the applicable law of sales (U.C.C., C.I.S.G., etc.) and the New York Convention when determining whether the unilateral addition of an arbitration agreement in a battle of the forms situation will result in an enforceable agreement to arbitrate.