Contracts I, Pages 414–420

C. Itoh & Co. v. The Jordan International Co.

United States Court of Appeals, Seventh Circuit, 1977

Facts:

Plaintiff submitted a purchase order for a certain quantity of steel coils to defendant. In response, defendant sent its acknowledgment form, stating that the seller's acceptance is expressly conditional on Buyer's assent to the additional or different terms and that Seller should notify Buyer at once if its terms and conditions were not acceptable. One of the terms was a broad provision for arbitration. Plaintiff neither expressly assented nor objected to the additional arbitration term. Plaintiff then entered into a contract to resell the steel coils to Riverview Steel Cop. This contract contained an arbitration term too, with an exemption for quality.

After plaintiff received the coils from defendant, Riverview advised plaintiff that the coils were defective and refused to pay for them. Plaintiff then sued defendant. Defendant filed a motion requesting a stay pending arbitration.

Procedural History:

District court denied the stay, concluding that defendant's arbitration clause's quality exception with Riverview applied to plaintiff's clause with defendant.

Issue:

Whether the district court properly denied a stay of the proceedings pending arbitration under 9 U.S.C. § 3.

Rule:

UCC § 2-207

Reasoning:

As plaintiff never assented to defendant's term, no contract was formed initially. Under UCC § 2-207(3), the contract formed by each party's fulfillment comprises the terms on which the parties agree and any supplementary terms incorporated under any other provision of the act. The supplemental terms are limited to the standardized "gap-fillers." Since arbitration is not one of those, it does not exist here.

Holding:

Yes, a stay was properly denied, as a contract without the arbitration clause was formed. Affirmed.

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