Question

Collins LLC is a manufacturer of carpets that are sold to retailers throughout the United States. Collins employs a team of sales people that cold call and subsequently meet with commercial buyers with samples of carpet.  During one such meeting, PMart, a large retail chain, places an oral order for 2,500 8’x10’ Series K carpets that are marketed as made from a synthetic polyester fiber which is resistant to stains and is less expensive than a traditional fiber.

Following the meeting, Collins LLC sends a confirmation notice to PMart that states:

“Confirmation Notice: 2,500 8’x10’ Series K carpets, assorted designs, catalog no. K88094.  Unit Cost: $100. Payment due on receipt. FOB Seller. In the event of a dispute, the parties agree to enter into binding arbitration using AAA arbitration rules.”

Collins subsequently delivered 2,500 carpets to PMart, but upon inspection PMart determined that the carpets were not made from the materials shown during the meeting where the order was placed, and rejects the goods.  When Collins refused to refund PMart’s payment, PMart files a civil lawsuit for breach of contract in the federal district court.  Collins moves to dismiss on the grounds that the parties are obliged to arbitrate their disputes privately.  Using the UCC § 2-207, discuss whether an agreement was reached by the parties, and if so, whether the dispute must be resolved by binding arbitration.

Answer 1

Under the Uniform Commercial Code (UCC) § 2-207, Additional Terms in Acceptance or Confirmation:

Part 3 of this section states that the conduct of both the parties which recognizes the existence of a contract is more than sufficient to establish the contract for sale though there is nothing in writing that it is a contract. Hence, this sale contract implies that the terms and conditions are explicitly applied as per the written agreement as made by Collins. As per the terms mentioned in the contract, both parties’ dispute can be resolved using AAA arbitration rules. Since PMart has agreed for the sale via the contract made by Collins, this particular contract contains the term that “In the event of a dispute, the parties agree to enter into binding arbitration using AAA arbitration rules. In addition to this contract term, any other supplementary terms incorporated under any other provisions of this Act also is applicable.