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If it walks like a duck and quacks like a duck ... it's a contract!
by David Greenberg
Assistant Vice President, International
I handled a case last year that was quite interesting. In fact, it ended up setting a precedent for similar arbitration cases.
Our client was a Chinese manufacturer who sold goods to an American company. Each sale the Chinese firm made to the American company, fourteen in all, included a document with the words “Sales Contract” conspicuously placed at the top. Both the Chinese manufacturer and the American buyer signed each of these documents, above spaces clearly labeled "buyer" and "seller". Also featured as part of each document was a readily visible and well-phrased Binding and Final Arbitration clause.
When the buyer didn’t pay, the client invoked the arbitration clause and began arbitration through CIETAC (China International Economic and Trade Arbitration Commission).
On the advice of his attorney, the buyer simply ignored the Chinese arbitration proceedings. When the case came to ABC-Amega for enforcement of the resulting default award, the respondent (buyer) entered a defense stating that these documents were not “contracts” but merely order confirmations.
That defense was, of course, completely without merit. It was the old story: “If it walks like a duck and quacks like a duck, it must be a duck,” or in this case, a contract. Moreover, even if the documents actually were order confirmations as asserted by the buyer, the Uniform Commercial Code of the United States, Article 2-207 permits the addition of terms and conditions to any agreement as long as there is no material alteration of the agreement. Therefore, the Binding and Final Arbitration clause included as part of the signed Order Confirmation [or “Sales Contract”] document is valid.
Given the facts, the defendant’s arguments were downright silly. Nevertheless, since approximately 90% or more of all sales contracts emanating from China contain arbitration clauses identical to those used by our client, the case had to be fought to a conclusion in U.S. District Court, to avoid setting an adverse precedent.
The matter was eventually resolved with the court granting a Summary Judgment on Arbitration in favor of our client (the Chinese company). And, as a result, the “walks like a duck …” precedent was clearly set – not only in our client’s favor, but for sellers worldwide.
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This information is provided by ABC-Amega Inc. -- providing 1st and 3rd party commercial collection services since 1929, and collecting in more than 200 countries worldwide. For further information, contact firstname.lastname@example.org.