Originally from Dispute Resolution Journal

TEXTILES—ARBITRABILITY—ARBITRATION CLAUSE IN CONFIRMATION CONTRACT CONFIRMING ORAL AGREEMENT TO PURCHASE GOODS—UCC §2-207(2)(b)

An arbitration provision contained in a written contract confirming an oral agreement for the sale of goods was unenforceable against the recipient of the written contract, in the absence of an "express agreement to arbitrate." Schubtex, a jobber, had orally agreed to purchase synthetic textile goods from Snyder, a converter of yarns. Shortly after the oral agreement was made, Snyder sent Schubtex a printed confirmation of order form which contained a clause providing for arbitration of disputes. Schubtex retained the confirmation contract without objecting to the inclusion of the arbitration clause. When a dispute subsequently arose over whether the shipped goods conformed to the contract, Snyder demanded arbitration. Although the lower courts had determined that a valid arbitration agreement existed, the Court of Appeals reversed, holding that "the evidence adduced at trial is insufficient as a matter of law to support a finding of an express agreement to arbitrate." The court based its decision on the holding In Matter of Marlene Industries Corp. iCarnac Textiles, Inc.), 45 N.Y.2d 327, 408 N.Y.S.2d 410 (1978), where it ruled that an arbitration clause contained in a written acknowledgment of order was a "material alteration" of a purchase order and "could not be binding upon the prospective purchaser merely by virtue of the prospective purchaser's retention, without objection, of the acknowledgment of order form containing the clause. (See UCC §2-207, subd [2], par [b].)" The court, however, noted that in appropriate cases an agreement to arbitrate future disputes could be implied "from a course of past conduct or the custom and practice in the industry," but that such agreement would have to be supported by evidence of an express agreement to arbitrate. Since no evidence of an express agreement to arbitrate was presented in the case before it, the court deemed the arbitration clause to be invalid.

Schubtex, Inc. v. Allen Snyder, Inc., N.Y.L.J., )an. 2, 1980, p. 1, col. 6 (Ct. App.).