Filanto, S.p.A. v. Chilewich International Corp.

Brief Fact Summary.

Filanto (plaintiff), agreed to sell many boots to Chilewich (defendant). Chilewich previously had an agreement obligating to send boots to a Russian company.  A memorandum agreement was sent from Chilewich to Filanto stating that the Russian contract’s terms would govern the contract between them. When a dispute arose between the parties Filanto sued Chilewich. Chilewich argued that the Russian contract formed part of the three contract and the dispute had to be arbitrated in Moscow. Filanto moved hold arbitration proceedings in New York.

Synopsis of Rule of Law.

In dismissing some part of an offer's terms, an offeree may not postpone dismissal until after the offeror has started execution.

Facts.

Filanto, S.p.A. (Filanto) (plaintiff), an Italian shoe maker, consented to sell a substantial number of boots to Chilewich International Corporation (Chilewich) (defendant), a New York export-import firm, to be sent to Moscow. Preceding making the agreement with Filanto, Chilewich had entered an agreement committing Chilewich to send boots to a Russian company. The Russian contract incorporated an understanding expecting disputes to be mediated in Moscow. The Filanto-Chilewich contract was then commenced by a memorandum agreement sent from Chilewich to Filanto with respect to two shipments of boots to Russia, expressing that the Russian contract's terms would represent the agreement amongst Chilewich and Filanto. Five months after Chilewich sent the memorandum agreement, and two months after Chilewich opened a line of credit for Filanto on the agreement, Filanto signed and returned the memorandum agreement with a note expressing that Filanto saw just three parts of the Russian contract to apply to the Filanto-Chilewich contract. A debate emerged between the parties, and Filanto documented suit against Chilewich. After filing, however, Filanto sent a letter to Chilewich that relied on a Russian contract agreement that was not one of the three parts Filanto accepted to dispute Chilewich’s claim that some of the boots were in poor condition. Chilewich contended that the Russian contract framed only part of the Filanto-Chilewich contract, with the end goal that the dispute had to be mediated in Moscow. Filanto moved to order arbitration or to rather hold arbitration proceedings in New York.

Issue.

In dismissing some part of an offer's terms, may an offeree delay dismissal until after the offeror has started execution?

Held.

No. In dismissing some part of an offer's terms, an offeree may not postpone dismissal until after the offeror has started execution.

Dissent.

N/A

Concurrence.

N/A

Discussion.

An offeree who delays dismissing an offer's term until after the offeror has started execution will be held to that term. The United Nations Convention on Contracts for the International Sale of Goods (CISG) administers universal contracts made between parties who dwell in CISG signatory countries. While Uniform Commercial Code (UCC) § 2-207 states that a response to an offer modifying the offer’s, terms accepts the offer and proposes a modification of the terms, CISG Article 19 follows the old common-law rule that a response to an offer changing the offer's terms rejects the offer and makes a counteroffer. CISG Article 18 expresses that an offeree may accept an offer through conduct showing consent to the offer. Silence or inactivity is insufficient, yet the parties' past and subsequent communications might be considered while deciding if the offeree accepted the offer through conduct. Besides, the Restatement (Second) of Contracts § 69 holds an offeree to an offer's terms where the offeror has started to perform and the offeree did not protest in a reasonable amount of time. Here, Filanto and Chilewich both live in CISG signatory countries, and the CISG accordingly administers the agreement at issue. Filanto waited until five months after receiving memorandum agreement from Chilewich, and two months after Chilewich had opened the line of credit, to object the Russian contract's terms. Besides, Filanto was glad to utilize terms of the Russian contract to which Filanto had beforehand protested when those terms served Filanto's contention against Chilewich's claim in regards to the quality of the boots. Thus, Filanto is bound by the memorandum agreement's terms, including the Moscow mediation agreement. In like manner, Filanto's motion to enjoin or move arbitration is denied.