A Finnish seller and an US buyer (situated in Pennsylvania) entered into negotiations for the sale of machinery that would produce cut glass. During the negotiations the parties sent each other their respective sales standard terms, but neither agreed to the other's terms. Both parties performed the contract and, after the machinery had been delivered and installed, signed a document certifying that the machinery met the contract requirements. However, subsequently the buyer noticed defects in the machinery. Since the parties disputed the cause of the defects, the buyer brought an action against the seller in a court in Pennsylvania. The seller, invoking an arbitration clause contained in an appendix to its sales standard terms, filed a motion to compel arbitration. The buyer objected that it had never agreed to the arbitration clause.
The Court decided in favour of the seller since it held that the arbitration agreement was binding on the buyer. It based its decision on Pennsylvania law (more precisely on Section 2-207 U.C.C.) and not on CISG, notwithstanding the fact that both the United States and Finland have ratified CISG. Indeed Finland has made a reservation under Art. 92 CISG and therefore was not bound by Part II CISG on contract formation. |