COMMERCE & INDUSTRY INSURANCE COMPANY V. BAYER CORPORATION
742 N.E.2d 567 (2001)
NATURE OF THE CASE: Bayer Corporation (D) appealed over the nonenforceability of an
arbitration provision appearing in the plaintiff's, Malden Mills Industries, Inc. (P1),
orders purchasing materials from D.
FACTS: P1 manufactures internationally-known apparel fabrics and other textiles. An
explosion and fire destroyed several P1's buildings at its manufacturing facility. P1 and
its insurers, Commerce and Industry Insurance Company and Federal Insurance Company (P) sued
numerous defendants, including D. The alleged cause of the fire was the ignition, by static
electrical discharge, of nylon tow (also known as bulk nylon fiber), which was sold by D
(but manufactured by a French business entity) to P1. P1 initiated purchases of nylon tow
from D either by sending its standard form purchase order to D, or by placing a telephone
order to D, followed by a standard form purchase order. Each of P1's purchase orders
contained, on the reverse side, as one of its 'terms and conditions,' an arbitration
provision stating: 'Any controversy arising out of or relating to this contract shall be
settled by arbitration in the City of New York or Boston as P1 shall determine in accordance
with the Rules then obtaining of the American Arbitration Association or the General
Arbitration Council of the Textile Industry, as P1shall determine.' Another 'term and
condition' appearing in paragraph one on the reverse side of each purchase order provides:
'This purchase order represents the entire agreement between both parties, notwithstanding
any Seller's order form, whether sent before or after the sending of this purchase order,
and this document cannot be modified except in writing and signed by an authorized
representative of the buyer.' D filled the orders and sent an invoice with each shipment. On
its face, located at the bottom of the form in capital letters:
'TERMS AND CONDITIONS: NOTWITHSTANDING ANY CONTRARY OR INCONSISTENT CONDITIONS THAT MAY BE
EMBODIED IN YOUR PURCHASE ORDER, YOUR ORDER IS ACCEPTED SUBJECT TO THE PRICES, TERMS AND
CONDITIONS OF THE MUTUALLY EXECUTED CONTRACT BETWEEN US, OR, IF NO SUCH CONTRACT EXISTS,
YOUR ORDER IS ACCEPTED SUBJECT TO OUR REGULAR SCHEDULED PRICE AND TERMS IN EFFECT AT TIME OF
SHIPMENT AND SUBJECT TO THE TERMS AND CONDITIONS PRINTED ON THE REVERSE SIDE HEREOF.'
The following 'condition' appears in paragraph fourteen on the reverse side of each invoice:
'This document is not an Expression of Acceptance or a Confirmation document as contemplated
in Section 2-207 of the Uniform Commercial Code. The acceptance of any order entered by P1
is expressly conditioned on P1's assent to any additional or conflicting terms contained
herein.'
P1 paid its bills to D within thirty days of receiving an invoice. D demanded that P1
arbitrate its claims against D. The judge concluded that subsection (3) of 2-207 governed,
and, pursuant thereto, the arbitration provision was not enforceable because the parties had
not agreed in their writings to arbitrate. The judge rejected D's argument that Ps should be
equitably estopped from refusing to proceed under the arbitration provision. This appeal
resulted.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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