Battle of forms: un interessante caso di conflitto tra condizioni generali di contratto risolto da una corte statunitense

Tuttavia la percezione della problematica appare ancora insufficiente da parte del ceto imprenditoriale del nostro paese. Nel contributo si annota una pronuncia di una corte statunitense che ha ritenuto non applicabile la clausola delle condizioni generali di vendita dell’azienda produttrice italiana che prevedeva come foro competente quello di Firenze. Le condizioni erano redatte in italiano, lingua mai utilizzata dalle parti nelle trattative e non erano state espressamente accettate dall’azienda compratice]

Companies routinely conduct business using standard form contracts rather than negotiating specific provisions and terms for a one transaction. Often, a purchase order and a sales acknowledgment are sent, but with different terms. Each party thinks that its terms govern the transaction. In cases of disputes, the question of whose form trumps the others arises and each party is often surprised to learn that its form may not be as binding as it thought. This article will address what is commonly known as “the battle of the forms:” conflicting and different terms in forms exchanged during a commercial transaction. In addition, the article will provide useful advice on how to avoid some of the problems that might arise while conducting business with standard forms.

In the United States, many commercial transactions are governed by the Uniform Commercial Code (“UCC”). The Code sets forth the basic guidelines for the commercial transactions it governs. All states but Louisiana have adopted the UCC, and most of these states have their own version of this federal statute. Article 2 of the UCC establishes rules governing the formation, performance, and enforcement of contracts concerning the purchase and sale of goods.

Specifically, Article 2-207 of the UCC deals with situations where the forms exchanged between the parties have different or additional terms. It also provides the answer for which terms become part of the final agreement, provided that the conduct of the parties shows that a contract has been formed. The Article states that the terms of the contract are those that appear in the records of both parties, those to which both parties agree (regardless of whether they are in the records or not) and any terms that might be supplied or incorporated by the UCC itself [This is the amended version of § 2-207. The amendments were adopted in 2004. The previous version provided that additional terms to a contract for the sale of goods are to be construed as additions to the contract and do not become part of the contract between merchants if the terms “materially alter” the contract, unless both parties agree to the alternation. The UCC provided that additional terms did not become part of the contract when the agreement is between a consumer and merchant].

It often happens that an American buyer, in its purchase order, will include a provision that states that the choice of forum is New York, or Illinois for example, while the Italian supplier will state in the sales acknowledgment that the choice of forum is an Italian city, such as Bologna or Rome. Regardless of the contradicting terms, the parties conduct business, as if a valid and enforceable agreement were in place. However, in many cases, neither party will be able to claim that its choice of forum provision is binding on the relationship, since the parties did not agree on the term. The valid forum will be the one chosen by the party who decides to seek a legal remedy.

The case Posh Poosh Inc. and G Style Couture, Inc. v. Nieri Argenti S.a.S, 815 N.Y.S.2d 495 (2006) is an excellent example of how a company can conduct business, think that it is protected, yet not be when it comes to litigation. In this case, the American plaintiffs (a designer of couture pet carriers and accessories and ladies’ handbags and accessories) filed suit against the Italian manufacturer Nieri Argenti, for breach of contract. The Plaintiffs had engaged Defendant to manufacture various fine leather and related goods. At the bottom of twelve invoice forms sent to Plaintiffs appears a seven-line paragraph written in tiny type in Italian, under the heading “CONDIZIONI GENERALI DI VENDITA.” The last sentence of this paragraph reads: “Per controversie è competente il Foro di Firenze.” Other than this paragraph, most of the invoice is either written in English or translated into English. It was undisputed that Defendant could communicate in English, while Plaintiffs did not speak or understand Italian.

During the course of business, the parties did not discuss the forum for resolution of disputes. A contract existed between the parties, but they never signed any written purchase agreement. The parties did enter into two written Confidentiality and Non-Disclosure Agreements with respect to Plaintiff’s proprietary information, both of which were written in English and provided that New York and international law would govern the construction of those agreements.

In the case, the Defendant argued that the court should respect the forum selection clause written on the bottom of its invoices. However, the court expressed its doubts whether the provision would be enforceable because it was written in Italian and the Plaintiffs did not read or understand Italian. Court instead relied on the Uniform Commercial Code of New York. As the previous version of the UCC, Section § 2-207(2)(b) of the New York Commercial Code provides that additional terms to a contract for the sale of goods “are to be construed as proposals for additions to the contract” and do not become part of the contract between merchants if the terms “materially alter it,” unless both parties explicitly agree to the alteration.

The court reasoned that the forum selection clause is a material term of a contract for the sale of goods between merchants. Thus, the Plaintiffs had to agree to this additional term in Defendant’s invoices for it to be part of the contract. The Plaintiffs never agreed to the term. There was no evidence that the Plaintiffs had signed and returned any of the invoices to indicate their assent to the forum selection clause or in any other way explicitly agreed to it. Thus, the forum selection naming Firenze courts to hear disputes was unenforceable.

In contrast, other cases with similar facts found that a party had agreed to an additional clause included on an invoice when the buyer admitted knowledge that an arbitration clause was included on the invoice, and when a buyer had explicitly expressed with the terms of an agreement by signing and returning the form seven times.

From this case, it is possible to learn a lesson or two to try to avoid the problems that this defendant experienced. All provisions are potentially important in contracts, even minor ones such as forum selection or choice of law. When entering into a contractual relationship, do so formally and agree upon which terms will govern the relationship. If the parties are in Italy and New York, as in this case, it may make sense to choose a forum that is inconvenient for both parties or to choose arbitration in a neutral forum, such as London. If a provision is extremely important for a party (whether forum selection or another), it is important to bring the provision to the other party’s attention and make sure that the party agrees to the term. Otherwise, it likely will not be considered part of the agreement.

*

FACTS:

Plaintiffs Posh Pooch, Inc. (“Posh”) and G Style Couture, Inc. (”G Style”) filed suit against Defendant Nieri Argenti (“Nieri”), an Italian corporation. Defendant moved to dismiss based on lack of personal jurisdiction and based on a forum selection clause on Defendant’s invoices. The court dismissed both motions.

Plaintiffs design couture pet carriers and accessories and ladies’ handbags and accessories. Plaintiffs engaged Defendant to manufacture various fine leather and related goods. Plaintiff picked up some of the goods in Italy, but at least seven shipments were sent to Plaintiffs in New York. At the bottom of twelve invoice forms sent to Plaintiffs appears a seven-line paragraph written in tiny type in Italian, under the heading “CONDIZIONI GENERALI DI VENDITA.” The last sentence of this paragraph reads: “Per controversie è competente il Foro di Firenze.” Other than this paragraph, most of the invoice is either written in English or translated into English. It was undisputed that Defendant could communicate in English, while Plaintiffs did not speak or understand Italian.

During the course of business, the parties did not discuss the forum for resolution of disputes. A contract existed between the parties, but they never signed any written purchase agreement. The parties did enter into two written Confidentiality and Non-Disclosure Agreements with respect to Plaintiff’s proprietary information. Both were written in English and both provided that New York law and international law would govern the construction of those agreements.

LEGAL ARGUMENT:

Defendant argued that the court should respect the forum selection clause written on the bottom of its invoices. The court doubted whether it would be enforceable because it was written in Italian and Plaintiff did not read or understand Italian. Court instead relied on the Uniform Commercial Code of New York, which governs disputes arising out of the sale of goods.

Section § 2-207(2)(b) provides that additional terms to a contract for the sale of goods “are to be construed as proposals for additions to the contract” and do not become part of the contract between merchants if the terms “materially alter it,” unless both parties explicitly agree to the alteration.

Court reasoned that the forum selection clause is a material term of a contract for the sale of goods between merchants. Thus, Plaintiff had to agree to this additional term in Defendant’s invoices for it to be part of the contract. Plaintiff never agreed to the term. There was no evidence that Plaintiffs signed and returned any of the invoices to indicate their assent to the forum selection clause or in any other way explicitly agreed to it. Thus, the forum selection naming Firenze courts to hear disputes was unenforceable.

In contrast, other cases with similar facts found that a party had agreed to an additional clause included on an invoice when the buyer admitted knowledge that an arbitration clause was included on the invoice, and when a buyer had explicitly expressed with the terms of an agreement by signing and returning the form seven times.

The court also found that personal jurisdiction could be exercised over Defendant due to its contacts with New York, as New York law allows courts to exercise jurisdiction over a foreign defendant based merely on the shipment of goods into New York.

LESSON:

All provisions are potentially important in contracts, even minor ones such as forum selection or choice of law. When entering into a contractual relationship, do so formally and agree upon which terms will govern the relationship. If the parties are in Italy and New York, as in this case, it may make sense to choose a forum that is inconvenient for both parties or to choose arbitration in a neutral forum, such as London.

If a provision is extremely important for you (whether forum selection or another), make sure that it is brought to the other party’s attention and make sure that the party agrees to the term. Otherwise, it likely will not be considered part of the agreement.

Tuttavia la percezione della problematica appare ancora insufficiente da parte del ceto imprenditoriale del nostro paese. Nel contributo si annota una pronuncia di una corte statunitense che ha ritenuto non applicabile la clausola delle condizioni generali di vendita dell’azienda produttrice italiana che prevedeva come foro competente quello di Firenze. Le condizioni erano redatte in italiano, lingua mai utilizzata dalle parti nelle trattative e non erano state espressamente accettate dall’azienda compratice]

Companies routinely conduct business using standard form contracts rather than negotiating specific provisions and terms for a one transaction. Often, a purchase order and a sales acknowledgment are sent, but with different terms. Each party thinks that its terms govern the transaction. In cases of disputes, the question of whose form trumps the others arises and each party is often surprised to learn that its form may not be as binding as it thought. This article will address what is commonly known as “the battle of the forms:” conflicting and different terms in forms exchanged during a commercial transaction. In addition, the article will provide useful advice on how to avoid some of the problems that might arise while conducting business with standard forms.

In the United States, many commercial transactions are governed by the Uniform Commercial Code (“UCC”). The Code sets forth the basic guidelines for the commercial transactions it governs. All states but Louisiana have adopted the UCC, and most of these states have their own version of this federal statute. Article 2 of the UCC establishes rules governing the formation, performance, and enforcement of contracts concerning the purchase and sale of goods.

Specifically, Article 2-207 of the UCC deals with situations where the forms exchanged between the parties have different or additional terms. It also provides the answer for which terms become part of the final agreement, provided that the conduct of the parties shows that a contract has been formed. The Article states that the terms of the contract are those that appear in the records of both parties, those to which both parties agree (regardless of whether they are in the records or not) and any terms that might be supplied or incorporated by the UCC itself [This is the amended version of § 2-207. The amendments were adopted in 2004. The previous version provided that additional terms to a contract for the sale of goods are to be construed as additions to the contract and do not become part of the contract between merchants if the terms “materially alter” the contract, unless both parties agree to the alternation. The UCC provided that additional terms did not become part of the contract when the agreement is between a consumer and merchant].

It often happens that an American buyer, in its purchase order, will include a provision that states that the choice of forum is New York, or Illinois for example, while the Italian supplier will state in the sales acknowledgment that the choice of forum is an Italian city, such as Bologna or Rome. Regardless of the contradicting terms, the parties conduct business, as if a valid and enforceable agreement were in place. However, in many cases, neither party will be able to claim that its choice of forum provision is binding on the relationship, since the parties did not agree on the term. The valid forum will be the one chosen by the party who decides to seek a legal remedy.

The case Posh Poosh Inc. and G Style Couture, Inc. v. Nieri Argenti S.a.S, 815 N.Y.S.2d 495 (2006) is an excellent example of how a company can conduct business, think that it is protected, yet not be when it comes to litigation. In this case, the American plaintiffs (a designer of couture pet carriers and accessories and ladies’ handbags and accessories) filed suit against the Italian manufacturer Nieri Argenti, for breach of contract. The Plaintiffs had engaged Defendant to manufacture various fine leather and related goods. At the bottom of twelve invoice forms sent to Plaintiffs appears a seven-line paragraph written in tiny type in Italian, under the heading “CONDIZIONI GENERALI DI VENDITA.” The last sentence of this paragraph reads: “Per controversie è competente il Foro di Firenze.” Other than this paragraph, most of the invoice is either written in English or translated into English. It was undisputed that Defendant could communicate in English, while Plaintiffs did not speak or understand Italian.

During the course of business, the parties did not discuss the forum for resolution of disputes. A contract existed between the parties, but they never signed any written purchase agreement. The parties did enter into two written Confidentiality and Non-Disclosure Agreements with respect to Plaintiff’s proprietary information, both of which were written in English and provided that New York and international law would govern the construction of those agreements.

In the case, the Defendant argued that the court should respect the forum selection clause written on the bottom of its invoices. However, the court expressed its doubts whether the provision would be enforceable because it was written in Italian and the Plaintiffs did not read or understand Italian. Court instead relied on the Uniform Commercial Code of New York. As the previous version of the UCC, Section § 2-207(2)(b) of the New York Commercial Code provides that additional terms to a contract for the sale of goods “are to be construed as proposals for additions to the contract” and do not become part of the contract between merchants if the terms “materially alter it,” unless both parties explicitly agree to the alteration.

The court reasoned that the forum selection clause is a material term of a contract for the sale of goods between merchants. Thus, the Plaintiffs had to agree to this additional term in Defendant’s invoices for it to be part of the contract. The Plaintiffs never agreed to the term. There was no evidence that the Plaintiffs had signed and returned any of the invoices to indicate their assent to the forum selection clause or in any other way explicitly agreed to it. Thus, the forum selection naming Firenze courts to hear disputes was unenforceable.

In contrast, other cases with similar facts found that a party had agreed to an additional clause included on an invoice when the buyer admitted knowledge that an arbitration clause was included on the invoice, and when a buyer had explicitly expressed with the terms of an agreement by signing and returning the form seven times.

From this case, it is possible to learn a lesson or two to try to avoid the problems that this defendant experienced. All provisions are potentially important in contracts, even minor ones such as forum selection or choice of law. When entering into a contractual relationship, do so formally and agree upon which terms will govern the relationship. If the parties are in Italy and New York, as in this case, it may make sense to choose a forum that is inconvenient for both parties or to choose arbitration in a neutral forum, such as London. If a provision is extremely important for a party (whether forum selection or another), it is important to bring the provision to the other party’s attention and make sure that the party agrees to the term. Otherwise, it likely will not be considered part of the agreement.

*

FACTS:

Plaintiffs Posh Pooch, Inc. (“Posh”) and G Style Couture, Inc. (”G Style”) filed suit against Defendant Nieri Argenti (“Nieri”), an Italian corporation. Defendant moved to dismiss based on lack of personal jurisdiction and based on a forum selection clause on Defendant’s invoices. The court dismissed both motions.

Plaintiffs design couture pet carriers and accessories and ladies’ handbags and accessories. Plaintiffs engaged Defendant to manufacture various fine leather and related goods. Plaintiff picked up some of the goods in Italy, but at least seven shipments were sent to Plaintiffs in New York. At the bottom of twelve invoice forms sent to Plaintiffs appears a seven-line paragraph written in tiny type in Italian, under the heading “CONDIZIONI GENERALI DI VENDITA.” The last sentence of this paragraph reads: “Per controversie è competente il Foro di Firenze.” Other than this paragraph, most of the invoice is either written in English or translated into English. It was undisputed that Defendant could communicate in English, while Plaintiffs did not speak or understand Italian.

During the course of business, the parties did not discuss the forum for resolution of disputes. A contract existed between the parties, but they never signed any written purchase agreement. The parties did enter into two written Confidentiality and Non-Disclosure Agreements with respect to Plaintiff’s proprietary information. Both were written in English and both provided that New York law and international law would govern the construction of those agreements.

LEGAL ARGUMENT:

Defendant argued that the court should respect the forum selection clause written on the bottom of its invoices. The court doubted whether it would be enforceable because it was written in Italian and Plaintiff did not read or understand Italian. Court instead relied on the Uniform Commercial Code of New York, which governs disputes arising out of the sale of goods.

Section § 2-207(2)(b) provides that additional terms to a contract for the sale of goods “are to be construed as proposals for additions to the contract” and do not become part of the contract between merchants if the terms “materially alter it,” unless both parties explicitly agree to the alteration.

Court reasoned that the forum selection clause is a material term of a contract for the sale of goods between merchants. Thus, Plaintiff had to agree to this additional term in Defendant’s invoices for it to be part of the contract. Plaintiff never agreed to the term. There was no evidence that Plaintiffs signed and returned any of the invoices to indicate their assent to the forum selection clause or in any other way explicitly agreed to it. Thus, the forum selection naming Firenze courts to hear disputes was unenforceable.

In contrast, other cases with similar facts found that a party had agreed to an additional clause included on an invoice when the buyer admitted knowledge that an arbitration clause was included on the invoice, and when a buyer had explicitly expressed with the terms of an agreement by signing and returning the form seven times.

The court also found that personal jurisdiction could be exercised over Defendant due to its contacts with New York, as New York law allows courts to exercise jurisdiction over a foreign defendant based merely on the shipment of goods into New York.

LESSON:

All provisions are potentially important in contracts, even minor ones such as forum selection or choice of law. When entering into a contractual relationship, do so formally and agree upon which terms will govern the relationship. If the parties are in Italy and New York, as in this case, it may make sense to choose a forum that is inconvenient for both parties or to choose arbitration in a neutral forum, such as London.

If a provision is extremely important for you (whether forum selection or another), make sure that it is brought to the other party’s attention and make sure that the party agrees to the term. Otherwise, it likely will not be considered part of the agreement.