Stemcor USA, Inc. v. Trident Steel Corp.
471 F. Supp. 2d 362 (2006)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under UCC § 2-207(2)(a), additional terms in an acceptance, such as an arbitration clause, do not become part of a contract between merchants if the original offer expressly limits acceptance to the terms of the offer.
Facts:
- Between October 2000 and April 2002, Trident Steel Corporation purchased steel casings from Stemcor USA, Inc. through a series of twelve sales agreements.
- Trident initiated each purchase by sending Stemcor a purchase order form.
- Each of Trident's purchase orders contained a clause stating: "No terms or conditions, other than those stated herein...shall be binding upon purchaser, unless mutually agreed upon in writing."
- In response to each order, Stemcor sent an acknowledgement form, alternately labeled a “Sales Contract” or a “Sale Note,” prior to shipping the goods.
- Each of Stemcor's acknowledgement forms included a paragraph stating that if a settlement cannot be reached through negotiation, disputes may be submitted to arbitration in New York.
- Stemcor then delivered the steel casings, which Trident accepted.
- Trident modified and resold the casings to oil well operators, who later alleged the casings were defective.
Procedural Posture:
- Three oil well operators sued Trident Steel Corporation in Texas state courts, alleging the steel casings purchased from Trident were defective.
- In each of these actions, Trident filed a third-party complaint against its supplier, Stemcor USA, Inc., seeking indemnification.
- Stemcor filed a demand for arbitration with the American Arbitration Association, asserting that its sales agreements with Trident contained a binding arbitration clause.
- Trident responded to the arbitration demand by asserting that no valid agreement to arbitrate existed.
- Stemcor filed a petition in the U.S. District Court for the Southern District of New York to compel arbitration and to stay the Texas state court actions against it.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does an arbitration clause included in a seller's acknowledgement form become a part of the contract under UCC § 2-207 when the buyer's initial purchase order expressly limits acceptance to its own terms?
Opinions:
Majority - Koeltl, District Judge
No, an arbitration clause in a seller's acknowledgement form does not become part of the contract when the buyer's purchase order expressly limits acceptance to its own terms. The court analyzed the dispute under UCC § 2-207, which governs the "battle of the forms." First, the court determined that Stemcor's acknowledgement form operated as an acceptance under § 2-207(1), not a counteroffer, because it was not "expressly made conditional" on Trident's assent to the additional terms. The language in Stemcor's form merely purported to be a final agreement, which is insufficient to make it a counteroffer. Because the acknowledgement was an acceptance, the court then applied § 2-207(2) to determine if the additional term (the arbitration clause) became part of the contract. Under § 2-207(2)(a), an additional term is excluded if "the offer expressly limits acceptance to the terms of the offer." The court found that Trident's purchase order contained clear language to this effect. Therefore, the exception in § 2-207(2)(a) applied, and Stemcor's arbitration clause was precluded from becoming part of the contract.
Analysis:
This decision provides a clear application of the UCC § 2-207 framework for resolving a "battle of the forms" dispute. It emphasizes the high bar for an acceptance to be considered a counteroffer under § 2-207(1), requiring unambiguous language that acceptance is conditional on assent to new terms. The case also clarifies the independent operation of the exceptions in § 2-207(2), establishing that an additional term can be excluded under subsection (a) (offer limits acceptance) regardless of whether it would be considered a "material alteration" under subsection (b). This holding serves as a strong precedent for offerors seeking to control the terms of a contract by including express limitation clauses in their initial offers.
