Terra, Inc., a New York sweater manufacturing company, orally placed an order for fabrics with Yarner, Inc. (also a New York-based business) and then sent to Yarner a purchase order, which did not provide any term related to how any dispute between the parties would be settled. Yarner sent back an acknowledgment of the order, which contained a clause under which any dispute must be submitted to arbitration. Terra retained the acknowledgment and did not object to the arbitration clause.

Assume that the purchase order is an offer and the acknowledgment is an acceptance of the offer.

Question 1: Is the acceptance binding?

Question 2: If so, is the arbitration clause part of the acceptance?