DeMarco, a New York corporation, is a converter of textile fabrics. Nygard, a Canadian corporation, manufactures women’s apparel. On or about May 11, 1989, Nygard ordered certain fabric from DeMarco by telephone.

Nygard memorialized the order with a purchase order sent to DeMarco on or about May 15, 1989. In response to Nygard’s purchase order, DeMarco immediately sent a sales confirmation form to Nygard. However, DeMarco did not sign Nygard’s purchase order, and Nygard did not sign DeMarco’s sales confirmation. On or about June 15, 1989, Nygard placed another order for DeMarco’s fabric by mailing a second purchase order to DeMarco.

DeMarco responded to Nygard’s second purchase order by forwarding a second sales confirmation to Nygard. Again, neither party signed the other’s form. It appears that DeMarco did deliver its fabric to Nygard, and Nygard did accept the fabric.

Nygard now alleges that the fabric it purchased from DeMarco was delivered late and was of unacceptable quality. Nygard withheld payment for the fabric due to these alleged defects. In addition, Nygard claims that it suffered damages of approximately $200,000 because of DeMarco’s alleged breach of contract. DeMarco maintains that it fully performed all its obligations for the sale and delivery of the fabric ordered by Nygard, and seeks payment from Nygard for the merchandise.

DeMarco argues that arbitration is required in the instant case due to a provision included in the sales confirmation form which it sent to Nygard.

The provision provides that, ‘‘[a]ll controversies arising out of, or relating to this contract, or any modification thereof, shall be settled by arbitration in the City of New York under the Rules of the General Arbitration Council of the Textile Industry.’’ Far from being ‘‘prominently displayed’’ on the sales confirmation as DeMarco asserts, the arbitration provision is the smallest type on the printed, single-page form. The clause is clearly a ‘‘boilerplate provision.’’

Nygard, on the other hand, claims that the parties have not agreed to resolve their contractual disputes by arbitration. Nygard’s purchase orders set forth, in the same size print as DeMarco’s arbitration clause, a provision for settling disputes which arise concerning the agreement. Nygard’s provision states that, ‘‘[i]n the event of a dispute the Seller and the Buyer consent to the exclusive jurisdiction of the Manitoba Court of Queen’s Bench. . . . [I]n the event of any proceedings commenced by the parties, or if the parties agree to arbitrate any dispute, all such proceedings shall be initiated and conducted at Winnipeg, Manitoba, Canada.’’ Nygard alleges that the above provision clearly demonstrates its intent not to arbitrate disputes arising under the purchase orders.

The Court’s decision in the instant case turns on whether an arbitration agreement is to be inferred in the contract between the parties. For the reasons stated below, the Court grants Nygard’s motion to stay arbitration.

Discussion The parties’ exchange of purchase orders and sales confirmations typifies the historic ‘‘battle of forms,’’ which has received much attention in past court decisions. Apparently, the parties concur that an agreement was reached for the sale of DeMarco’s fabric to Nygard. However, no memorial or contract embodying the agreement was properly executed. Absent such a memorial or contract, determining specific terms of the agreement depends upon the contractual intention of the parties, as construed under principles of New York contract law.
Section 2-207 of New York’s Uniform Commercial Code provides the statutory rule to determine if additional terms included in a written confirmation are to become part of the parties’ agreement. The New York Court of Appeals has held that the addition of an arbitration clause materially alters the parties’ agreement. Thus, in New York, the well-settled rule is that ‘‘the parties to a commercial transaction ‘will not be held to have chosen arbitration as the forum for the resolution of their disputes in the absence of an express, unequivocal agreement to that effect.’’’
Under these principles of contract law, the parties have not agreed to arbitrate their disputes concerning the contract. DeMarco’s sales confirmation form does include an arbitration clause. Nygard’s purchase order, on the other hand, states that disputes will be resolved in Canadian court, unless the parties have otherwise agreed to arbitrate. No such agreement to arbitrate was reached by the parties. As provision for arbitration is ‘‘clearly a proposed additional term’’ to the parties’ agreement which ‘‘materially alters’’ the agreement in the context of the battle of the forms, N.Y.U.C.C. §2-207(2)
mandates that the provision not be included in the terms of the contract. The Court declines to compel arbitration where no arbitration agreement has been entered into under the clear rules of contract law.
DeMarco asserts that arbitration is required when a party fails to object within a reasonable time to the inclusion of an arbitration clause in a printed sales agreement. See Imptex Int’l Corp. v. Lorprint Inc.; Lehigh Valley Industries, Inc. v. Armtex, Inc. The rule of law put forward by DeMarco is not applicable in the context of the battle of the forms. In Imptex Int’l Corp., the parties entered into a sales contract through a broker. Both the broker’s confirmation and the seller’s sales confirmation contained arbitration clauses, yet the buyer claimed that since it had not signed the seller’s or the broker’s forms, there was no binding arbitration agreement. In Lehigh Valley, a case decided before Matter of Marlene Indus. Co., the seller sent a signed contract containing an arbitration clause. The buyer did not object to the seller’s contract, did not respond with a contract of its own, accepted goods under the contract, and ordered further goods referring to the seller’s contract by number. The court held that the buyer’s conduct, viewed in light of the common use of arbitration in the textile industry, waived his right to object to arbitration.........

Questions 

1. How does the inclusion of an arbitration provision affect the battle of the forms?
2. What is the effect of a long relationship between the parties on the application of the battle of the forms?
3. What is your opinion of this decision?