Standard Bent Glass v. Glassrobots OY ( 2003 )

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
6-20-2003
Standard Bent Glass v. Glassrobots OY
Precedential or Non-Precedential: Precedential
Docket No. 02-2169
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PRECEDENTIAL
Filed June 20, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 02-2169
STANDARD BENT GLASS CORP.,
Appellant
v.
GLASSROBOTS OY,
a Corporation Registered in Finland
On Appeal from the United States District Court
for the Western District of Pennsylvania
D.C. Civil Action No. 00-cv-02423
(Honorable Maurice B. Cohill, Jr.)
Argued February 28, 2003
Before: SCIRICA, Chief Judge,* GREENBERG and
GIBSON,** Circuit Judges
(Filed June 20, 2003)
* Judge Scirica began his term as Chief Judge on May 4, 2003.
** The Honorable John R. Gibson, United States Circuit Judge for the
Eighth Judicial Circuit, sitting by designation.
2
RONALD T. ELLIOTT, ESQUIRE
(ARGUED)
THOMAS W. KING, III, ESQUIRE
Dillon, McCandless, King, Coulter
& Graham
128 West Cunningham Street
Butler, Pennsylvania 16001
Attorneys for Appellant
THOMAS J. SWEENEY, JR.,
ESQUIRE (ARGUED)
DANIEL P. ORIE, ESQUIRE
Eckert, Seamans, Cherin & Mellott
600 Grant Street, 44th Floor
Pittsburgh, Pennsylvania 15219
Attorneys for Appellee
OPINION OF THE COURT
SCIRICA, Chief Judge.
On appeal is a motion to compel arbitration in a
commercial dispute. At issue are principles of contract
formation under the Uniform Commercial Code.
I.
A.
Standard Bent Glass, a Pennsylvania corporation, set out
to purchase a machine for its factory that would produce
cut glass, and in March 1998, commenced negotiations
with representatives of Glassrobots Oy, a Finnish
corporation. On March 19, 1998, Glassrobots tendered a
written offer to sell Standard Bent Glass a glass fabricating
system. The initial offer was rejected but negotiations
continued and, in February 1999, reached a critical
juncture. On February 1, Standard Bent Glass faxed an
offer to purchase a glass fabricating system from
Glassrobots.1 The offer sheet commenced, “Please find
1. The specific offer was for the purchase of a glass bending and
tempering furnace and a flat laminating line 200/400.
3
below our terms and conditions related to ORDER
# DKH2199,” and defined the items to be purchased, the
quantity, the price of $1.1 million, the payment terms, and
installation specifics, instructions, and warranties. The
letter concluded, “Please sign this ORDER and fax to us if
it is agreeable.”
On February 2, Glassrobots responded with a cover
letter, invoice, and standard sales agreement. The cover
letter recited, in part: “Attached you’ll find our standard
sales agreement. Please read it through and let me know if
there is anything you want to change. If not, I’ll send you
2 originals, which will be signed.” Glassrobots did not
return, nor refer to, Standard Bent Glass’s order.
Later that day, Standard Bent Glass faxed a return letter
that began, “Please find our changes to the Sales
Agreement,” referring to Glassrobots’s sales agreement. The
letter apparently accepted Glassrobots’s standard sales
agreement as a template and requested five specific
changes. The letter closed, “Please call me if the above is
not agreeable. If it is we will start the wire today.”
The five changes addressed using a wire transfer in lieu
of a letter of credit, payment terms, late penalty for
shipment delays, site visits, and technical specifications. All
were straightforward modifications and spelled out in the
Standard Bent Glass letter. On February 4, Standard Bent
Glass wired the down payment to Glassrobots. On February
8, the wire transfer cleared Glassrobots’s bank account.
On February 5, Glassrobots sent Standard Bent Glass a
revised sales agreement. The revised agreement
incorporated nearly all of the requested changes, except for
the late penalty for shipment delays. Also, the revised
agreement did not mirror the payment terms requested by
Standard Bent Glass (although the payment terms were
altered in Standard Bent Glass’s favor).
Glassrobots’s cover letter accompanying the revised
agreement recited, “Attached you’ll find the revised sales
agreement. . . . Please return one signed to us; the other
one is for your files.” Section 12.1 of the standard sales
agreement provided that “[t]his Agreement shall come into
4
force when signed by both parties.” Standard Bent Glass
never signed the agreement.
On February 9, Standard Bent Glass sent another fax to
Glassrobots: “Just noticed on our sales agreement that the
power is 440 ± 5. We must have 480 ± 5 on both pieces of
equipment.” There was no further written correspondence
after February 9. No contract was ever signed by both
parties. Nevertheless, the parties continued to perform.
Glassrobots installed the glass fabricating system. On
August 5, both parties signed the Acceptance Test Protocol,
which stated: “We undersigners hereby certify the
performance and acceptance test according to the Sales
Agreement TSF II 200/320 between Standard Bent Glass
Corp., USA and Glassrobots Oy has been carried out. All
the equipment fulfill the conditions mentioned in the same
Agreement, in quality an [sic] quantity.” In November 1999,
Standard Bent Glass made its final payment to
Glassrobots.
Subsequently, Standard Bent Glass noticed defects in the
equipment. The parties disputed the cause of the defects,
and on November 8, 2000, Standard Bent Glass filed a
complaint against Glassrobots in state court. After removal
to federal court, Glassrobots filed a motion to compel
arbitration under an appendix to the standard sales
agreement that Standard Bent Glass claims it never
received. The District Court granted Glassrobots’s motion
and Standard Bent Glass appealed.2
B.
At issue is whether there was a valid agreement and
whether that agreement contained a binding arbitration
clause. Glassrobots’s standard sales agreement included
three references3 to industry guidelines known as Orgalime
2. We review de novo the District Court’s interpretation of the United
Nations Convention on the Recognition and Enforcement of Foreign
Arbitral Awards. Kahn Lucas Lancaster, Inc. v. Lark Int’l Ltd., 186 F.3d
210, 215 (2d Cir. 1999) (“The district court’s construction of the
Convention, like the construction of any statute, is a matter of law which
we review de novo.”).
3. The cover letter to the standard sales agreement referred to the
enclosure of certain appendices, including Orgalime S92. Section 11.1 of
5
S92, which recites “General Conditions for the Supply of
Mechanical, Electrical, and Associated Electronic Products.”4
Section 44 of Orgalime S92 provided a binding arbitration
clause for all contractual disputes:
All disputes arising in connection with the contract
shall be finally settled under the Rules of Conciliation
and Arbitration of the International Chamber of
Commerce by one or more arbitrators appointed in
accordance with the said rules, supplemented as
necessary by the procedural rules of the law of the
country of the Supplier’s place of business most closely
connected with the contract.
The standard sales agreement also contained a reference
to binding arbitration in section 6.2 (“Completion Date”):
“When the above has been satisfactorily fulfilled, both
parties will agree in writing upon the Completion Date as
being the date of the Acceptance Test. In the event that the
parties cannot agree as to the Completion Date, the matter
shall be submitted to arbitration as set out later in this
Agreement.”
Standard Bent Glass admits it received the standard
sales agreement. But Standard Bent Glass denies the
Orgalime S92 appendix was attached to the standard sales
agreement, contending it received the appendix after the
February 1999 negotiation period.5
the agreement provided: “As to the other conditions shall apply Orgalime
S92 General Conditions for the Supply of Mechanical, Electrical and
Associated Electronic Products.” Section 13 listed the annexes to the
agreement, including “Appendix VI Orgalime S92.”
4. Juha Karisola, the Glassrobots managing director, averred that
“Orgalime is the European Federation of National Industrial Associations
representing the European mechanical, the [sic] electrical, electronic and
metal article industries. The Orgalime S92 General Conditions are
frequently used in international trade and are commonly incorporated, in
whole or in part, into Glassrobots’ international contracts.”
5. Michael Hartley, president of Standard Bent Glass, averred that “[t]he
Orgalime S92 document was never provided to me by Glassrobots or
anyone else and that I have never seen or read the Orgalime S92
document until sometime after February/March of 2000.” Moreover,
Hartley maintained he disliked arbitration clauses and “[sought] to avoid
any provisions in contracts which require arbitration.”
6
II.
As noted, the District Court granted Glassrobots’s motion
to compel arbitration. Based on its application of contract
principles, the court found “the agreement of the parties is
represented by the February 5, 1999 Sales agreement.” The
court then examined whether that agreement included a
binding arbitration clause. The court noted but declined to
credit Standard Bent Glass’s denial it had ever received the
Orgalime S92 appendix to the sales agreement, which
purportedly included the arbitration clause.6 Based on
multiple references in the revised sales agreement to
Orgalime S92, and its arbitration clause, the court found
the parties’ conduct “affirmatively manifests the parties’
consent to the arbitral clause contained in the Sales
Agreement.”
A.
Because this dispute involves the sale of goods, the
Uniform Commercial Code applies, specifically 13 Pa.C.S.
section 2207 (adopting UCC section 2-207). The UCC
addresses “the sad fact that many . . . sales contracts are
not fully bargained, not carefully drafted, and not
understandingly signed by both parties.” 1 James J. White
& Robert S. Summers, Uniform Commercial Code § 1-3, at 6
(4th ed. 1995). In these cases, we apply UCC section 2-207
to ascertain the terms of an agreement. Step-Saver Data
Sys., Inc. v. Wyse Tech. & The Software Link, 939 F.2d 91,
98 (3d Cir. 1991).7
6. Whether Standard Bent Glass received the Orgalime S92 appendix is
an issue of fact. We believe, therefore, the District Court should not have
“decline[d] to credit” Standard Bent Glass’s claim at this stage of the
proceedings.
7. Pennsylvania adopted UCC section 2-207 in its entirety. See 13
Pa.C.S. § 2207. With diversity jurisdiction, we will apply the choice of law
provision of the forum state. Klaxon Co. v. Stentor Electric Mfg. Co., 313
U.S. 487, 496 (1941); Woessner v. Air Liquide, Inc., 242 F.3d 469, 472
(3d Cir. 2001). Because performance occurred in Pennsylvania, we apply
Pennsylvania law. See Knauer v. Knauer, 470 A.2d 553, 557-58 (Pa.
Super. Ct. 1983) (noting relevant factors in determining the law
applicable to an issue). The United Nations Convention on the
7
The UCC, as adopted by Pennsylvania, recognizes a
party’s acceptance of a contract through performance and
does not require a signed agreement. Under UCC section 2-
201(3)(a), a party’s partial performance removes an
agreement from the Statute of Frauds. In a commercial
transaction involving the sale of goods, where the parties’
performance demonstrates agreement, we look past
disputes over contract formation and move directly to
ascertain its terms:
We see no need to parse the parties’s various actions to
decide exactly when the parties formed a contract. . . .
The parties’s performance demonstrates the existence
of a contract. The dispute is, therefore, not over the
existence of a contract, but the nature of its terms.
When the parties’s conduct establishes a contract, but
the parties have failed to adopt expressly a particular
writing as the terms of their agreement, and the
writings exchanged by the parties do not agree, UCC
§ 2-207 determines the terms of the contract.
Step-Saver, 939 F.2d at 98.
Standard Bent Glass contends it never agreed to a
contract with Glassrobots, pointing to the lack of a signed
agreement and the failure of the parties to achieve a
meeting of the minds on all contract provisions.
Notwithstanding this argument, the parties here completed
performance. Glassrobots fully installed the glass
fabrication equipment in Standard Bent Glass’s factory.
Standard Bent Glass made its final contractual payment to
Glassrobots in November 1999. Because the parties’
performance establishes a contract, we will apply UCC
section 2-207 to ascertain the contract’s terms.
International Sale of Goods, 15 U.S.C. App., Art. 1(1)(a), generally
governs contracts for the sale of goods between parties whose place of
business is in nations that are signatories to the treaty, absent an
express choice of law provision to the contrary. The United States is a
signatory to the CISG, but Finland is not a signatory to the portion of
the CISG, Art. 92, that governs contract formation. Because the parties
have not raised the CISG’s applicability to this dispute, we decline to
address it here.
8
B.
Under UCC section 2-207(1), the offeree’s expression of
acceptance or transmission of a written confirmation
generally results in the formation of a contract.8 This is true
unless the offeree makes that expression or confirmation
“expressly conditional” on the offeror’s assent to the
proposed additional or different terms.
The flexibility permitted under section 2-207 allows
parties to begin performance expediently rather than wait
for all contract details to be resolved. This structure is well
suited to the fast-paced environment of commercial
dealings. Where parties perform but do not explicitly agree
on a single uniform document, sections 2-207(2) and (3)
govern proposed additional or different terms to the
contract.
Here, Standard Bent Glass initiated written negotiations
between the parties on February 1. This exchange
represented an offer from Standard Bent Glass to purchase
the glass fabricating machine from Glassrobots. The
8. UCC § 2-207 provides:
(1) A definite and seasonable expression of acceptance or a written
confirmation which is sent within a reasonable time operates as an
acceptance even though it states terms additional to or different from
those offered or agreed upon, unless acceptance is expressly made
conditional on assent to the additional or different terms.
(2) The additional terms are to be construed as proposals for addition
to the contract. Between merchants such terms become part of the
contract unless:
(a) the offer expressly limits acceptance to the terms of the offer;
(b) they materially alter it; or
(c) notification of objection to them has already been given or is
given within a reasonable time after notice of them is received.
(3) Conduct by both parties which recognizes the existence of a
contract is sufficient to establish a contract for sale although the
writings of the parties do not otherwise establish a contract. In such
case the terms of the particular contract consist of those terms on which
the writings of the parties agree, together with any supplementary terms
incorporated under any other provisions of this Title.
9
Standard Bent Glass offer contained a set of terms and
conditions. On February 2, Glassrobots responded by
enclosing its standard sales agreement, which contained a
different set of terms and conditions. Later that day,
Standard Bent Glass sent its own response, accepting the
terms of the Glassrobots standard sales agreement and
proposing five specific modifications. Referring to the
Glassrobots agreement, the Standard Bent Glass letter
began, “Please find our changes to the Sales Agreement.”
This communication from Standard Bent Glass
constituted either: (1) a definite and seasonable expression
of acceptance under section 2-207(1); (2) a counteroffer; or
(3) a rejection followed by conduct by both parties sufficient
to recognize a valid contract under section 2-207(3). By
using the Glassrobots standard sales agreement as a
template and by authorizing a wire transfer of the down
payment, Standard Bent Glass demonstrated its intent to
perform under the essential terms of Glassrobots’s
standard sales agreement. Accordingly, its response was a
definite and seasonable expression of acceptance of
Glassrobots’s offer.
Noteworthy was Standard Bent Glass’s own immediate
performance on the February 2 agreement. On February 4,
Standard Bent Glass initiated a wire transfer to Glassrobots
for the down payment. The following day, Glassrobots
adopted most, but not all, of the proposed modifications,
and began to perform on the agreement. This was the last
significant exchange of written documents between the
parties. The parties continued to perform, with Glassrobots
constructing and installing the desired equipment and
Standard Bent Glass timely paying for it.
In sum, Standard Bent Glass’s conduct constituted a
definite and seasonable expression of acceptance that
evinced the formation of a contract rather than a
counteroffer or rejection. For these reasons, there was a
valid contract on the Glassrobots terms of February 2 that
incorporated any non-material additions proposed by
Standard Bent Glass.9
9. Standard Bent Glass’s proposed changes represented additional or
different terms to the contract, to be interpreted under section 2-207(2)
in the case of a future dispute. Whether they are part of the parties’
agreement is not relevant here.
10
C.
The remaining question is whether the contract included
the Orgalime S92 arbitration clause. Arbitration clauses
must be clear and unequivocal. Genuine issues of fact will
preclude an order to arbitrate. See 8-38 James Wm. Moore
et al., Moore’s Federal Practice — Civil § 38.33 (3d ed.
2003). As we have stated:
Before a party to a lawsuit can be ordered to
arbitrate and thus be deprived of a day in court, there
should be an express, unequivocal agreement to that
effect. If there is doubt as to whether such an
agreement exists, the matter, upon a proper and timely
demand, should be submitted to a jury. Only when
there is no genuine issue of fact concerning the
formation of the agreement should the court decide as
a matter of law that the parties did or did not enter
into such an agreement.
Sandvik AB v. Advent Int’l Corp., 220 F.3d 99, 106 (3d Cir.
2000) (quoting Par-Knit Mills, Inc. v. Stockbridge Fabrics Co.,
636 F.2d 51, 54 (3d Cir. 1980)).
On this point, the threshold issue is whether Standard
Bent Glass acceded to a binding arbitration clause. As
noted, under UCC section 2-207(1), the Standard Bent
Glass response of February 2 constituted a definite and
seasonable expression of acceptance of the Glassrobots
offer. Where a buyer makes a definite and seasonable
expression of acceptance of a seller’s offer, a contract is
formed on the seller’s terms. The contract may include
additional or different non-material terms proposed by
either party, depending on whether the other party formally
objects to the terms.
The seller’s terms may include documents or provisions
incorporated by reference into the main agreement.
Traditional documents incorporated by reference into
contracts include accepted industry guidelines or parallel
agreements between the parties. Incorporation by reference
is proper where the underlying contract makes clear
reference to a separate document, the identity of the
11
separate document may be ascertained, and incorporation
of the document will not result in surprise or hardship.10
Here, on February 2, Glassrobots sent its standard sales
agreement to Standard Bent Glass. That agreement
contained references to Orgalime S92, which included the
arbitration clause, as well as an explicit reference to
arbitration as the method of dispute resolution. First, the
cover letter to the agreement referred to the enclosure of
certain appendices, including Orgalime S92. Second,
section 6.2 provided that, if the parties could not agree to
a completion date, “the matter shall be submitted to
arbitration as set out later in this Agreement.” Third,
section 11.1 expressed that “[a]s to the other conditions
10. Under the common-law rule, “the paper to be incorporated into a
written instrument by reference must be so referred to and described in
the instrument that the paper may be identified beyond all reasonable
doubt.” PaineWebber, Inc. v. Bybyk, 81 F.3d 1193, 1201 (2d Cir. 1996)
(“While a party’s failure to read a duly incorporated document will not
excuse the obligation to be bound by its terms, a party will not be bound
to the terms of any document unless it is clearly identified in the
agreement.”). Where a seller attempts to incorporate a 207-page booklet
into a one-page contract, and then tries to avail itself of an arbitration
clause buried on page 66 of the booklet, with no other mention of
arbitration, the common-law rule protects the buyer from a clause that
was not properly incorporated by reference. See Weiner v. Mercury Artists
Corp., 130 N.Y.S.2d 570, 571 (N.Y. App. Div. 1954) (rejecting
incorporation by reference where reference was not clear); 11 Richard A.
Lord, Williston on Contracts § 30.25 (4th ed. 1999) (“So long as the
contract makes clear reference to the document and describes it in such
terms that its identity may be ascertained beyond doubt, the parties to
a contract may incorporate contractual terms by reference to a separate,
noncontemporaneous document, including a separate agreement to
which they are not parties, and including a separate document which is
unsigned.”).
At first blush, this approach seems harsh, especially if a party claims
it never received an incorporated document. If the matter here involved
a non-merchant individual as the product buyer, or if the reference to
arbitration had been buried, the analysis might very well be different.
But the goal of commercial contract law is to efficiently facilitate
business transactions between seasoned merchants. It is appropriate to
require a merchant to exercise a level of diligence that might not be
appropriate to expect of a non-merchant.
12
shall apply Orgalime S92 General Conditions for the Supply
of Mechanical, Electrical and Associated Electronic
Products.” Finally, section 13 listed Orgalime S92 as one of
the appendices to the agreement.
Although proposing five changes to the standard sales
agreement, Standard Bent Glass did not alter or respond to
any of the references to the Orgalime S92 arbitration
clause. On February 5, Glassrobots provided Standard Bent
Glass with a revised sales agreement that included the
same four references. Standard Bent Glass should have
advised Glassrobots it had not received Orgalime S92, if
that were the case. Its failure to object to the arbitration
terms of Orgalime S92, absent surprise or hardship, makes
those terms part of the contractual agreement.
D.
Even in a commercial transaction, a provision will not be
incorporated by reference if it would result in surprise or
hardship to the party against whom enforcement is sought.
Standard Bent Glass has not demonstrated surprise nor
hardship. According to the Karisola affidavit, unrefuted by
Standard Bent Glass, the Orgalime S92 arbitration
provision accords with industry norms. The Orgalime S92
general conditions are frequently used in international
trade and the submission of disputes to arbitration is
common industry practice. And Standard Bent Glass was
represented in negotiations by its president, who averred he
had “extensive experience in international trade.”
Standard Bent Glass’s only evidence of surprise is its
president’s affidavit that he never received a copy of
Orgalime S92. Its only evidence of hardship is that the
company disfavors arbitration clauses generally. Even
viewing any factual issues in a light favorable to Standard
Bent Glass, the evidence is insufficient to prove surprise or
hardship. As the Court of Appeals for the Second Circuit
recently stated:
Surprise includes both a subjective element of what a
party actually knew and an objective element of what
a party should have known. . . . A profession of
surprise and raised eyebrows are not enough. Instead,
13
to carry its burden the nonassenting party must
establish that, under the circumstances, it cannot be
presumed that a reasonable merchant would have
consented to the additional term.
Aceros Prefabricados, S.A. v. TradeArbed, Inc., 282 F.3d 92,
100 (2d Cir. 2002) (quotations omitted).11
The Orgalime S92 arbitration clause was incorporated in
the Glassrobots counter-offer of February 2.12 Standard
Bent Glass demonstrated a definite and seasonable
expression of acceptance as to this offer and both parties
performed on their contractual relationship. The arbitration
clause is incorporated by reference into the parties’
contract.
III.
An arbitration provision in an international commercial
agreement is governed by the United Nations Convention on
the Recognition and Enforcement of Foreign Arbitral
Awards (“CREFAA”). Where a dispute arises from an
international commercial agreement, a court must address
11. The Court of Appeals for the Second Circuit expressly rejected
Aceros’s claim that “surprise and hardship are self-evident where, as
here, there was no reference to nor mention [of] arbitration until after
suit was filed.” Aceros Prefrabricados, 282 F.3d at 101. Here, the
Glassrobots standard sales agreement contained four references to the
Orgalime S92 arbitration clause.
12. Even if we did not incorporate by reference the arbitration clause, the
clause did not constitute a “material alteration” of the parties’
contractual relationship. Under UCC section 2-207(2)(b), absent
objection, additional terms become part of the contract unless “they
materially alter it.” A material alteration is one that would “result in
surprise or hardship if incorporated without express awareness by the
other party.” Aceros Prefabricados, 282 F.3d at 100 (quoting UCC § 2-
207 cmt. 4). Here, Standard Bent Glass admits it received the Orgalime
S92 document at some point during the year 2000, while the parties’
relationship remained ongoing and prior to the commencement of the
instant dispute. Therefore, we might construe the arbitration clause as
an additional term proposed by Glassrobots and not objected to by
Standard Bent Glass. As noted, it does not appear the outcome of
arbitration would result in surprise or hardship to Standard Bent Glass.
14
four factors to determine whether the arbitration agreement
falls under CREFAA. If the answers are all in the
affirmative, the court must order arbitration unless it
determines the agreement is null and void. Ledee v.
Ceramiche Ragno, 684 F.2d 184, 186-87 (1st Cir. 1982).
The first of these questions, whether there is “an agreement
in writing to arbitrate the subject of the dispute,” is at issue.13
Convention on the Recognition and Enforcement of Foreign
Arbitral Awards, art. II, § 2; 9 U.S.C. §§ 201-208. Article II,
section 2 of CREFAA provides: “The term ‘agreement in
writing’ shall include an arbitral clause in a contract or an
arbitration agreement, signed by the parties or contained in
an exchange of letters or telegrams.”
The parties stipulate they did not sign an agreement in
writing. At issue is whether an arbitral clause was
contained in the exchange of letters that occurred. The
answer depends on article II of CREFAA.
Two courts of appeals have addressed this issue but
analyzed the relevant section differently. In Sphere Drake
Insurance PLC v. Marine Towing, Inc., 16 F.3d 666, 669 (5th
Cir. 1994), the Court of Appeals for the Fifth Circuit
interpreted article II, section two as imposing the signature
and exchange of letters requirements only where the
parties’ consent to arbitrate is evidenced by an independent
agreement to arbitrate, and not an arbitral clause in a
contract. In Kahn Lucas Lancaster, Inc. v. Lark International
Ltd., 186 F.3d 210 (2d Cir. 1999), the Court of Appeals for
the Second Circuit disagreed, holding that the modifying
phrase “signed by the parties or contained in an exchange
of letters or telegrams” applied to both “an arbitral clause
13. Questions two through four are not pertinent here. Those questions
are: “(2) Does the agreement provide for arbitration in the territory of a
signatory of the Convention?; (3) Does the agreement arise out of a legal
relationship, whether contractual or not, which is considered as
commercial?; (4) Is a party to the agreement not an American citizen, or
does the commercial relationship have some reasonable relation with one
or more foreign states.” Both the United States and Finland are
signatories to CREFAA; the agreement arises out of a commercial
relationship; and Glassrobots is not an American corporation. Therefore,
only question one is at issue.
15
in a contract” and “an arbitration agreement.” Id. at 216-
18.
We agree with the Court of Appeals for the Second
Circuit. The CREFAA provision includes a comma after
“arbitration agreement,” demonstrating an intent to apply
the signature and exchange of letters requirements to both
an arbitral clause within a contract or a separate
arbitration agreement. To read it otherwise would ignore
the treaty’s inclusion of the “arbitral clause in a contract”
language. Thus, the plain language provides that an
arbitration clause is enforceable only if it was contained in
a signed writing or an exchange of letters.14
Since the parties here did not sign an agreement in
writing, we look to whether the incorporated arbitration
clause was contained in a series of letters. As noted, the
contract here was contained in the February 2 exchange of
letters. Though the arbitration clause may not have been
included in that exchange, it was incorporated by reference
in the letters. This is all CREFAA requires.
CREFAA reinforces a strong federal policy in favor of
arbitration over litigation. This policy “applies with special
force in the field of international commerce.” Mitsubishi
Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614,
631 (1985) (noting strong policy favoring arbitration);
Scherk v. Alberto-Culver Co., 417 U.S. 506, 520 (1974)
(noting that the goal of CREFAA as well as the purpose of
its implementation by Congress was “to encourage the
recognition and enforcement of commercial arbitration
agreements in international contracts and to unify the
standards by which agreements to arbitrate” are enforced);
Sandvik, 220 F.3d at 104 (“The presumption in favor of
arbitration carries ‘special force’ when international
commerce is involved, because the United States is also a
signatory to [CREFAA].”) (quoting Mitsubishi Motors, 473
14. In requiring an agreement in writing, article II, section 2 of CREFAA
prohibits the enforcement of an oral agreement to arbitrate an
international dispute. Beyond the clear prohibition against an oral
agreement, CREFAA does not require a signed writing—the agreement in
writing to an arbitral clause may be unsigned if it is exchanged in a
series of letters.
16
U.S. at 631)). Given this strong policy, the incorporation
here is sufficient to satisfy CREFAA.
IV.
The parties formed an agreement under UCC section 2-
207(1) that incorporated by reference the Orgalime S92
arbitration clause. This was proper under CREFAA. For the
foregoing reasons, we will affirm the judgment of the
District Court.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit