Filanto Spa V. Chilewich Intl Corp

Chapter 10 Case Brief

Name of the Case: Filanto, SpA v. Chilewich International Corp.

984 F.2d 58 (1992)

Facts:

Filanto SpA (plaintiff), an Italian shoe manufacturer, agreed to sell a large number of boots to Chilewich International Corporation (defendant), a New York export-import firm, to be sent to Moscow. Prior to creating the contract with Filanto, Chilewich had entered into an agreement obligating Chilewich to send boots to a Russian company. The Russian contract included an agreement requiring disputes to be arbitrated in Moscow. The Filanto - Chilewich contract was then initiated by a memorandum agreement sent from Chilewich to Filanto regarding two shipments of boots to Russia, stating that the Russian contract’s terms would govern the contract between Chilewich and Filanto. Five months after Chilewich sent the memorandum agreement, Filanto signed and returned the memorandum agreement with a note stating that Filanto understood only three sections of the Russian contract to apply to the Filanto - Chilewich contract. A dispute arose between the parties, and Filanto filed suit against Chilewich. After filing, however, Filanto sent a letter to Chilewich that relied on a Russian contract provision that was not one of the three sections Filanto accepted in order to dispute Chilewich’s claim that some of the boots were in poor condition. Chilewich argued that the Russian contract formed part of the Filanto - Chilewich contract, such that the dispute had to be arbitrated in Moscow. Filanto moved to enjoin arbitration or to instead hold arbitration proceedings in New York.

Issue:

1. Whether the CISG or the US Uniform Commercial Code governs this dispute,
2. Whether the Russian arbitration clause is a part of the contract or not, and
3. Whether Filanto (as a result of the second issue) must accept an arbitrational tribunal in Moscow.

Rules:

1. CISG Article 1(1)(a): This Convention applies to contracts of sale of goods between parties whose places of business are in different States:

a) when the States are Contracting States; or

b) when the rules of private international law lead to the application

of the law of a Contracting State.

1. CISG Article 8(3): In determining the intent of a party or the understanding a reasonable person would have had, due consideration is to be given to all relevant circumstances of the case including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties.”
2. CISG Article 19: Additional or different terms relating, among other things, to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party's liability to the other or the settlement of disputes are considered to alter the terms of the offer materially.

Application:

1. Response to Issue 1) The United Nations Convention on Contracts for the International Sale of Goods (CISG) governs international contracts made between parties who reside in CISG signatory countries. Here, Filanto S.p.A. and Chilewich Int’l Corp. both reside in CISG signatory countries, and the CISG therefore governs the contract at issue.
2. Response to Issue 2)

1. UCC 2-207: a response to an offer modifying the offer’s terms accepts the offer and proposes a modification of the terms
2. CISG Article 19 : follows the old common-law rule that a response to an offer modifying the offer’s terms rejects the offer and makes a counteroffer
3. CISG Article 18 : an offeree may accept an offer through conduct indicating assent to the offer. Silence or inactivity is insufficient, but the parties’ previous and subsequent interactions may be considered when determining whether the offeree accepted the offer through conduct
4. Restatement of Contracts 69 : holds an offeree to an offer’s terms where the offeror has begun to perform and the offeree did not object in a reasonable amount of time

1. Response to Issue 3)
   Filanto SpA put off time to object to the terms of Russian contract after receiving the memorandum agreement from Chilewich, as well as changing in stance to Russian Contract when the terms, and serving their claim regarding the quality of the boots.  Therefore, Filanto is bound by the memorandum agreement’s terms, including the Moscow arbitration agreement. Accordingly, Filanto’s motion to enjoin or move arbitration is denied

Conclusion:

After reviewing all the correspondence and the conduct of each party, the court concluded that the arbitration clause was indeed part of the contract. The court holds that

1. Filanto is bound by the terms of the March 13 Memorandum Agreement,
2. and also must arbitrate its dispute in Moscow.