Valero Marketing & Supply Co. v. Greeni Oy & Greeni Trading Oy
373 F. Supp. 2d 475, 2005 WL 1411065 (2005)
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Rule of Law:
Under UCC § 2-207, a choice-of-law clause in a written confirmation that attempts to replace the UN Convention on Contracts for the International Sale of Goods (CISG) with a domestic law constitutes a material alteration to the contract. Therefore, the clause does not become part of the contract unless expressly agreed to by the other party.
Facts:
- On or about August 15, 2001, Valero Marketing & Supply Company (Valero), a U.S. corporation, and Greeni Oy (Greeni), a Finnish corporation, entered into an oral contract for the sale of 25,000 metric tons of naphtha.
- The contract stipulated that Greeni would deliver the naphtha to Valero's tanks in New York Harbor between September 10-20, 2001.
- On the same day as the oral agreement, Greeni's broker faxed a confirmation stating the contract would be governed by English law.
- On or about August 17, 2001, Valero sent its own written confirmation which stated that New York law would apply; Greeni did not object to this term.
- On August 30, 2001, Greeni nominated the vessel Bear G to transport the naphtha, but Valero rejected the vessel based on a negative safety report.
- Despite the rejection, Greeni used the Bear G. On September 14, 2001, the parties formed a second agreement for Valero to accept delivery via barges from the Bear G, with a price discount if delivery occurred between September 20-24, 2001.
- The Bear G arrived in New York Harbor on September 22, 2001.
- Greeni ultimately failed to deliver any naphtha to Valero by either the original September 20 deadline or the revised September 24 deadline.
Procedural Posture:
- Valero Marketing & Supply Company (Plaintiff) sued Greeni Oy and Greeni Trading Oy (Defendants) in the U.S. District Court for breach of contract.
- Valero filed a motion for partial summary judgment, asking the court to find Greeni liable for the breach as a matter of law.
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Issue:
Does a party's written confirmation containing a choice-of-law provision that opts for a specific state's law, thereby replacing the otherwise applicable UN Convention on Contracts for the International Sale of Goods (CISG), constitute a material alteration of the contract under UCC § 2-207?
Opinions:
Majority - Debevoise, Senior District Judge
Yes, a choice-of-law provision in a confirmation that displaces the CISG in favor of domestic law is a material alteration under UCC § 2-207. The court reasoned that the United Nations Convention on Contracts for the International Sale of Goods (CISG) automatically governs contracts for the sale of goods between parties from signatory nations, such as the United States and Finland. While parties can opt out of the CISG, simply including a generic choice-of-law clause for a domestic jurisdiction (like 'New York law') is insufficient because the CISG, as a federal treaty, is part of that jurisdiction's law under the Supremacy Clause. To effectively opt out, parties must expressly state that the CISG does not apply. Alternatively, analyzing the issue under UCC § 2-207 (which applies to contract formation since Finland opted out of CISG Part II), the court found that adding a term to replace the governing international legal framework (CISG) with a domestic one (New York's UCC) fundamentally changes the parties' obligations and is thus a 'material alteration.' Because it was a material alteration, Valero's proposed term did not become part of the contract, and the CISG remained the governing law.
Analysis:
This decision provides critical guidance for parties involved in international sales, clarifying the high bar for opting out of the CISG. It establishes that a mere choice-of-law clause for a U.S. state is ambiguous and insufficient to displace the Convention. By holding that displacing the CISG constitutes a 'material alteration' under UCC § 2-207, the case reinforces the default applicability of the CISG and prevents one party from unilaterally changing the governing legal regime through a 'battle of the forms.' This ruling pressures commercial parties to be explicit and deliberate in their contractual negotiations if they wish to avoid the application of international sales law.
