Standard Bent Glass Corp. v. Glassrobots Oy

• Decision Date: 20 June 2003
• Docket Number: No. 02-2169.,02-2169.
• Citation: 333 F.3d 440
• Parties: STANDARD BENT GLASS CORP., Appellant v. GLASSROBOTS OY, a Corporation Registered in Finland.
• Court: U.S. Court of Appeals — Third Circuit

333 F.3d 440

STANDARD BENT GLASS CORP., Appellant v. GLASSROBOTS OY, a Corporation Registered in Finland.

No. 02-2169.

United States Court of Appeals, Third Circuit.

Argued February 28, 2003.

Filed June 20, 2003.

Ronald T. Elliott (Argued), Thomas W. King, III, Dillon, McCandless, King, Coulter & Graham, Butler, for Appellant.

Thomas J. Sweeney, Jr. (Argued), Daniel P. Orie, Eckert, Seamans, Cherin & Mellott, Pittsburgh, for Appellee.

Before SCIRICA, Chief Judge,^* GREENBERG and GIBSON,^** Circuit Judges.

OPINION OF THE COURT

SCIRICA, Chief Judge.

On appeal is a motion to compel arbitration in a commercial dispute. At issue are principles of contract formation under the Uniform Commercial Code.

I.

A.

Standard Bent Glass, a Pennsylvania corporation, set out to purchase a machine for its factory that would produce cut glass, and in March 1998, commenced negotiations with representatives of Glassrobots Oy, a Finnish corporation. On March 19, 1998, Glassrobots tendered a written offer to sell Standard Bent Glass a glass fabricating system. The initial offer was rejected but negotiations continued and, in February 1999, reached a critical juncture. On February 1, Standard Bent Glass faxed an offer to purchase a glass fabricating system from Glassrobots.¹ The offer sheet commenced, "Please find below our terms and conditions related to ORDER # DKH2199," and defined the items to be purchased, the quantity, the price of $1.1 million, the payment terms, and installation specifics, instructions, and warranties. The letter concluded, "Please sign this ORDER and fax to us if it is agreeable."

On February 2, Glassrobots responded with a cover letter, invoice, and standard sales agreement. The cover letter recited, in part: "Attached you'll find our standard sales agreement. Please read it through and let me know if there is anything you want to change. If not, I'll send you 2 originals, which will be signed." Glassrobots did not return, nor refer to, Standard Bent Glass's order.

Later that day, Standard Bent Glass faxed a return letter that began, "Please find our changes to the Sales Agreement," referring to Glassrobots's sales agreement. The letter apparently accepted Glassrobots's standard sales agreement as a template and requested five specific changes. The letter closed, "Please call me if the above is not agreeable. If it is we will start the wire today."

The five changes addressed using a wire transfer in lieu of a letter of credit, payment terms, late penalty for shipment delays, site visits, and technical specifications. All were straightforward modifications and spelled out in the Standard Bent Glass letter. On February 4, Standard Bent Glass wired the down payment to Glassrobots. On February 8, the wire transfer cleared Glassrobots's bank account.

On February 5, Glassrobots sent Standard Bent Glass a revised sales agreement. The revised agreement incorporated nearly all of the requested changes, except for the late penalty for shipment delays. Also, the revised agreement did not mirror the payment terms requested by Standard Bent Glass (although the payment terms were altered in Standard Bent Glass's favor).

Glassrobots's cover letter accompanying the revised agreement recited, "Attached you'll find the revised sales agreement.... Please return one signed to us; the other one is for your files." Section 12.1 of the standard sales agreement provided that "[t]his Agreement shall come into force when signed by both parties." Standard Bent Glass never signed the agreement.

On February 9, Standard Bent Glass sent another fax to Glassrobots: "Just noticed on our sales agreement that the power is 440 ± 5. We must have 480 ± 5 on both pieces of equipment." There was no further written correspondence after February 9. No contract was ever signed by both parties. Nevertheless, the parties continued to perform. Glassrobots installed the glass fabricating system. On August 5, both parties signed the Acceptance Test Protocol, which stated: "We undersigners hereby certify the performance and acceptance test according to the Sales Agreement TSF II 200/320 between Standard Bent Glass Corp., USA and Glassrobots Oy has been carried out. All the equipment fulfill the conditions mentioned in the same Agreement, in quality an [sic] quantity." In November 1999, Standard Bent Glass made its final payment to Glassrobots.

Subsequently, Standard Bent Glass noticed defects in the equipment. The parties disputed the cause of the defects, and on November 8, 2000, Standard Bent Glass filed a complaint against Glassrobots in state court. After removal to federal court, Glassrobots filed a motion to compel arbitration under an appendix to the standard sales agreement that Standard Bent Glass claims it never received. The District Court granted Glassrobots's motion and Standard Bent Glass appealed.²

B.

At issue is whether there was a valid agreement and whether that agreement contained a binding arbitration clause. Glassrobots's standard sales agreement included three references³ to industry guidelines known as Orgalime S92, which recites "General Conditions for the Supply of Mechanical, Electrical, and Associated Electronic Products."⁴ Section 44 of Orgalime S92 provided a binding arbitration clause for all contractual disputes:

All disputes arising in connection with the contract shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said rules, supplemented as necessary by the procedural rules of the law of the country of the Supplier's place of business most closely connected with the contract.

The standard sales agreement also contained a reference to binding arbitration in section 6.2 ("Completion Date"): "When the above has been satisfactorily fulfilled, both parties will agree in writing upon the Completion Date as being the date of the Acceptance Test. In the event that the parties cannot agree as to the Completion Date, the matter shall be submitted to arbitration as set out later in this Agreement."

Standard Bent Glass admits it received the standard sales agreement. But Standard Bent Glass denies the Orgalime S92 appendix was attached to the standard sales agreement, contending it received the appendix after the February 1999 negotiation period.⁵

II.

As noted, the District Court granted Glassrobots's motion to compel arbitration. Based on its application of contract principles, the court found "the agreement of the parties is represented by the February 5, 1999 Sales agreement." The court then examined whether that agreement included a binding arbitration clause. The court noted but declined to credit Standard Bent Glass's denial it had ever received the Orgalime S92 appendix to the sales agreement, which purportedly included the arbitration clause.⁶ Based on multiple references in the revised sales agreement to Orgalime S92, and its arbitration clause, the court found the parties' conduct "affirmatively manifests the parties' consent to the arbitral clause contained in the Sales Agreement."

A.

Because this dispute involves the sale of goods, the Uniform Commercial Code applies, specifically 13 Pa.C.S. section 2207 (adopting UCC section 2-207). The UCC addresses "the sad fact that many ... sales contracts are not fully bargained, not carefully drafted, and not understandingly signed by both parties." 1 James J. White & Robert S. Summers, Uniform Commercial Code § 1-3, at 6 (4th ed.1995). In these cases, we apply UCC section 2-207 to ascertain the terms of an agreement. Step-Saver Data Sys., Inc. v. Wyse Tech. & The Software Link, 939 F.2d 91, 98 (3d Cir.1991).⁷

The UCC, as adopted by Pennsylvania, recognizes a party's acceptance of a contract through performance and does not require a signed agreement. Under UCC section 2-201(3)(a), a party's partial performance removes an agreement from the Statute of Frauds. In a commercial transaction involving the sale of goods, where the parties' performance demonstrates agreement, we look past disputes over contract formation and move directly to ascertain its terms:

We see no need to parse the parties's various actions to decide exactly when the parties formed a contract.... The parties's performance demonstrates the existence of a contract. The dispute is, therefore, not over the existence of a contract, but the nature of its terms. When the parties's conduct establishes a contract, but the parties have failed to adopt expressly a particular writing as the terms of their agreement, and the writings exchanged by the parties do not agree, UCC § 2-207 determines the terms of the contract.

Step-Saver, 939 F.2d at 98.

Standard Bent Glass contends it never agreed to a contract with Glassrobots, pointing to the lack of a signed agreement and the failure of the parties to achieve a meeting of the minds on all contract provisions. Notwithstanding this argument, the parties here completed performance. Glassrobots fully installed the glass fabrication equipment in Standard Bent Glass's factory. Standard Bent Glass made its final contractual payment to Glassrobots in November 1999. Because the parties' performance establishes a contract, we will apply UCC section 2-207 to ascertain the contract's terms.

B.

Under UCC section 2-207(1), the offeree's expression of acceptance or transmission of a written confirmation generally results in the formation of a contract.⁸ This is true unless the offeree makes that expression or confirmation "expressly conditional" on the offeror's assent to the proposed additional or different terms.

The flexibility permitted under section 2-207 allows parties to begin performance expediently rather than wait for all contract details to be resolved. This structure is well suited to the fast-paced environment of commercial dealings. Where parties perform but do not explicitly agree on a single uniform document, sections 2-207(2) a...