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CISG CASE PRESENTATION

United States 5 May 2003 Federal Appellate Court [9th Circuit] (Chateau des Charmes Wines Ltd. v. Sabaté USA, Sabaté S.A.)
[Cite as: http://cisgw3.law.pace.edu/cases/030505u1.html]

Primary source(s) of information for case presentation: Case text

Case Table of Contents


Case identification

DATE OF DECISION: 20030505 (5 May 2003)

JURISDICTION: United States [federal court]

TRIBUNAL: U.S. Circuit Court of Appeals (9th Circuit) [federal appellate court]

JUDGE(S): Betty B. Fletcher, Alex Kozinski, Stephen S. Trott

CASE NUMBER/DOCKET NUMBER: 02-15727

CASE NAME: Chateau des Charmes Wines Ltd. v. Sabaté USA Inc., Sabaté S.A.

CASE HISTORY: 1st instance District Court (Northern District of California), CV-01-04203-MMC [reversed]; petition for certiorari filed 24 September 2003. See <http://www.goldsteinhowe.com/blog/files/Sabate cert.pdf>. For related proceedings, see District Court (Northern District of California) 10 November 2003; see also District Court (Northern District of California) 29 June 2005, Case No. C-01-4203 MMC (order denying plaintiff's motion for sanctions for failure to produce evidence); see also McDowell Valley Vineyards, Inc. v. Sabaté USA, Inc. et al., District Court (Northern Dist. of California) 2 November 2005 and related Canadian procedings: Chateau des Charmes Wines Ltd. v. Sabaté USA, Inc. et al., Ontario Superior Court of Justice 28 October 2005

SELLER'S COUNTRY: France and U.S.A. (defendant)

BUYER'S COUNTRY: Canada (plaintiff)

GOODS INVOLVED: Wine corks


Case Summary

Prepared by Ryan E. Thompson

A buyer from Canada and a seller from France entered into a contract for the sale of wine corks. The court addressed the following issues: (1) whether the parties orally concluded a contract; and (2) whether the forum selection clause contained in seller’s invoice modified the original terms of the contract or rather constituted a separate agreement between the parties. The Court applied CISG articles 11, 29, and 19(3), determining, in relevant part, that: (1) a contract was orally concluded; and (2) the forum selection clause contained in the invoice was neither a modification of the original contract or a separate agreement as the buyer’s silence did not constitute acceptance of the forum selection clause.

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Case abstracts

Abstract of this Circuit Court opinion contained in a subsequent District Court opinion that cites this case

Excerpt from Commerica Bank v. Whitehall Specialities, Inc., U.S. District Court, Central District California, Eastern Division, dated 28 October 2004:

      "In [Chateau des Charmes Wines, Ltd. v. Sabaté USA], the Ninth Circuit addressed the issue of whether invoices containing a forum selection clause modified an oral sales contract under the United Nations Convention on Contracts for the International Sale of Goods (C.I.S.G."). Id. at 531. Chateau des Charmes, a winery in Ontario, Canada, orally agreed over the telephone to purchase a number of corks from Sabaté USA. Id. at 529. Sabaté France made eleven shipments of corks to Chateau des Charmes, each of which contained an invoice with a forum selection clause providing for the resolution of disputes in 'the Court of Commerce of the City of Perpignan." Id. Chateau des Charmes found tainted corks and sued Sabaté USA and Sabaté France for breach of contract, among other claims, in federal district court in California. Sabaté USA and Sabaté France moved to dismiss based on the forum selection clause, which the district court granted. Id.

      "The Ninth Circuit found that Sabaté USA and Sabaté France had attempted to modify their oral agreement with Chateau des Charmes by including a forum selection clause in the invoices. Id. at 531. The Ninth Circuit noted that the C.I.S.G. allowed for the modification of a contract based on the 'mere agreement' of the parties. Id. (quoting C.I.S.G. art. 29(1)). The C.I.S.G. also specifically provided that the modification of a contract to include a forum selection clause was a material alteration. Id. Considering the facts of the case, the Ninth Circuit stated that '[n]othing in the Convention suggests that the failure to object to a party's unilateral attempt to alter materially the terms of an otherwise valid agreement is an "agreement" within the terms of Article 29.' Id. According to the Ninth Circuit, there was 'no indication that Chateau des Charmes conducted itself in a manner that evidenced any affirmative assent to the forum selection clauses in the invoices.' Id. The Ninth Circuit rejected the notion that, pursuant to the C.I.S.G., Chateau des Charmes accepted the offer merely by performing its obligations under the oral contract. Id. Since the forum selection clause was not part of the contract, the Ninth Circuit reversed the district court's dismissal of the case based on the forum selection clause. Id. at 531-32." Comerica Bank v. Whitehall Specialties, Inc, 2004 WL 3101564, 28 October 2004 (a case the Comerica court distinguished from Chateau des Charmes because the Chateau des Charmes case was governed by the CISG, whereas the Comerica case is governed by the UCC).


UNCITRAL case abstract

UNITED STATES: Chateau des Charmes Wines Ltd. v. Sabaté USA Inc. 5 May 2003

Case law on UNCITRAL texts (CLOUT) abstract no. 576

Reproduced with permission of UNCITRAL

Abstract prepared by Peter Winship, National Correspondent

The issue before the court was whether it should dismiss the suit because the parties had agreed to an exclusive forum selection clause designating a foreign court.

The buyer, a company in Ontario, Canada, concluded several contracts with a corporation, with its place of business in the United States, to purchase specialty wine corks manufactured by that corporation's parent company in France. The parent company supplied the corks but the buyer alleged that contrary to the seller's representations the corks did not prevent "cork taint," a distasteful flavour left by some corks. The buyer brought suit for breach of contract against both the parent and subsidiary companies. The sellers moved to dismiss the suit on the ground that the buyer was bound by a forum selection clause printed in the sellers' invoices paid by the buyer. The district court dismissed the suit and the buyer appealed.

The appellate court stated that the Convention governed whether the parties had agreed to a choice of forum clause because the parties had their places of business in different Contracting States pursuant to art. 1(1)(a) CISG.

The court found that the forum selection clause on the invoices was not binding because the clause materially altered the offer as per art. 19(3) CISG. The court also found no evidence that the buyer had affirmatively agreed to the clause under art. 8(3) CISG. The appellate court therefore reversed the district court's dismissal of the case.

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Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]. Note, however, that the CISG "was not mentioned by either party in the proceedings before the [District] Court or in their briefs before the Ninth Circuit [Court of Appeals]." Chateau des Charmes Wines Ltd v. Sabaté USA, Sabate S.A., 29 June 2005, 2005 WL 1528703 (N.D. Cal.), n.2.

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 8(3) ; 11 ; 14 ; 18 ; 19(3) ; 29 [Also cited: Articles 3(2) ; 23 ]

Classification of issues using UNCITRAL classification code numbers:

8C [Interpretation in light of surrounding circumstances];

11A [Writing or other formality for conclusion of contract unnecessary];

14A [Criteria for an offer (basic criterion): intention to be bound];

18A3 [Criteria for acceptance: silence or inactivity insufficient];

19C [Modifications that are material];

29A [Modification of contract by agreement: failure to object to unilateral attempt to modify contract not an agreement to modify contract]

Descriptors: Intent ; Formal requirements ; Offers ; Counter-offer ; Modification of contract ; Formation of contract

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Editorial remarks

Excerpt from Larry A. DiMatteo et al., 34 Northwestern Journal of International Law & Business (Winter 2004) 299-440 at 357 and 332

"It is important to understand the reach of Article 19. It is limited to issues of contract formation and not to modifications of contract. Thus, it is universally accepted that where a contract has been validly concluded, one party may not change a material term in the contract without the acceptance of the other party. The court in Chateau des Charmes Wines Ltd. v. Sabate USA Inc. found that where an oral agreement did not contain a forum selection clause, one party's attempt to include such a provision in subsequent invoices did not alter the contract.[317] Because the contract had already been concluded, any new terms were merely offers which required express assent and did not create an obligation to reject the term. The court noted that the mere performance of obligations under the oral contract did not indicate assent to what would be additional material terms under Article 19(3).[318]

[...]

"[T]he court ... found that one party's unilateral attempt to modify an agreement failed where there was no indication that the other party accepted or agreed to the new terms. The parties had orally agreed to the essential terms of the contract, but a forum selection clause which was not part of the original agreement, was included in subsequent invoices. According to the court, it would be illogical to make the forum selection clause contained in the invoices part of the contract. The court stated that '[n]othing in the Convention suggests that the failure to object to a party's unilateral attempt to alter materially the terms of an otherwise valid agreement is an "agreement" within the terms of Article 29.' The court took into account the various circumstances recommended in Article 8(3) to determine the parties' intent, but concluded that there was no evidence or conduct that indicated the party had agreed to the modifications added to the invoice."

317. See Chateau des Charmes Wines Ltd. v. Sabate USA Inc., 328 F.3d 528 (9th Cir. 2003).

318. Id. at *8. The Supreme Court of Spain took a similar approach in a case where one party attempted to renegotiate the price of a concluded contract and the proposed modification was not accepted. See Internationale Jute Maatschappij BV v. Marín Palomares S.L., Tribunal Supremo, [Supreme Court] 454/2000, Jan. 28, 2000 (Spain), available at <http://cisgw3.law.pace.edu/cases/000128s4.html> [English translation by Alexandro Osuna González, translation edited by Patricia Rincón Martín]. Finding that the original contract was not impaired by the subsequent attempt to modify, the court cited Article 19: "a reply to an offer which purports to be an acceptance but contains additions, limitations or other modifications is a rejection of the offer and constitutes a counter-offer." Id. The court's reasoning is difficult to ascertain as it referred primarily to Spanish civil law and its previous rulings throughout the opinion, but approach appears consonant with that of the U.S. court.

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=899&step=Abstract>; <http://www.ca9.uscourts.gov/ca9/newopinions.nsf/1A2AF3B55A2B5FC988256D1A007A6C99/$file/0215727.pdf?openelement>

CITATIONS TO TEXT OF DECISION

Original language (English): Text presented below; see also 328 F.3d 528

Translation: Unavailable

CITATIONS TO COMMENTS ON DECISION

English: Lookofsky, Understanding the CISG in the USA (2nd ed. 2004) § 2.6 n. 81 & § 3.8 n. 93; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 29 para. 2; Keith A. Rowley, "The Convention on the International Sale of Goods", in: Hunter ed., Modern Law of Contracts, Thomson/West (03/2007) §§ 23:11, 23:13, 23:16, 23:20

French: Claude Witz, Recueil Dalloz, No. 33 / 7218 (22 September 2005) 2285, 2291

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Case Text

United States Court of Appeals, Ninth Circuit

(Chateau des Charmes Wines Ltd.
v.
Sabaté USA Inc., Sabaté S.A.)

No. 02-15727

Argued and Submitted March 31, 2003
Filed May 5, 2003

Appeal from the United States District Court for the Northern District of California, Maxine M. Chesney, District Judge, Presiding. D.C. No. CV-01-04203- MMC. Benjamin M. Zuffranieri, Jr., Hodgson Russ LLP, Buffalo, NY, for the plaintiff-appellant. David C. Winton, Law Office of David C. Winton, San Francisco, CA, for the defendant-appellee. Before Betty B. Fletcher, Alex Kozinsk, and Stephen S. Trott, Circuit Judges.

OPINION

Per Curiam

Chateau des Charmes Wines, Ltd. ("Chateau des Charmes"), a Canadian company, appeals the dismissal of its action for breach of contract and related claims arising out of its purchase of wine corks from Sabaté, S.A. ("Sabaté France"), a French company, and Sabaté USA, Inc. ("Sabaté USA"), a wholly owned California subsidiary. The district court held that forum selection clauses in the invoices that Sabaté France sent to Chateau des Charmes were part of the contract between the parties and dismissed the case in favor of adjudication in France. Because we conclude that the forum selection clauses in question were not part of any agreement between the parties, we reverse.

Factual Background and Procedural History

The material facts pertinent to this appeal are not disputed.[1] Sabaté France manufactures and sells special wine corks that it claims will not cause wines to be spoiled by "cork taint," a distasteful flavor that some corks produce. It sells these corks through a wholly owned California subsidiary, Sabaté USA.

In February 2000, after some preliminary discussions about the characteristics of Sabaté's corks, Chateau des Charmes, a winery from Ontario, Canada, agreed by telephone with Sabaté USA to purchase a certain number of corks at a specific price. The parties agreed on payment and shipping terms. No other terms were discussed, nor did the parties have any history of prior dealings. Later that year, Chateau des Charmes placed a second telephone order for corks on the same terms. In total, Chateau des Charmes ordered 1.2 million corks.

Sabaté France shipped the corks to Canada in eleven shipments. For each shipment, Sabaté France also sent an invoice. Some of the invoices arrived before the shipments, some with the shipments, and some after the shipments. On the face of each invoice was a paragraph in French that specified that "Any dispute arising under the present contract is under the sole jurisdiction of the Court of Commerce of the City of Perpignan." On the back of each invoice a number of provisions were printed in French, including a clause that specified that "any disputes arising out of this agreement shall be brought before the court with jurisidiction to try the matter in the judicial district where Seller's registered office is located." Chateau des Charmes duly took delivery and paid for each shipment of corks. The corks were then used to bottle Chateau des Charmes' wines.

Chateau des Charmes claims that, in 2001, it noticed that the wine bottled with Sabaté's corks was tainted by cork flavors. Chateau des Charmes filed suit in federal district court in California against Sabaté France and Sabaté USA alleging claims for breach of contract, strict liability, breach of warranty, false advertising, and unfair competition. Sabaté France and Sabaté USA filed a motion to dismiss based on the forum selection clauses. The district court held that the forum selection clauses were valid and enforceable and dismissed the action. This appeal ensued.

Discussion

I.  Although we review a district court's decision to enforce a forum selection clause for abuse of discretion, Kukje Hwajae Ins. Co., Ltd. v. M/V Hyundai Liberty, 294 F.3d 1171, 1174 (9th Cir.2002), whether the parties agreed to a forum selection clause is a question of law that we review de novo. Cf. Helash v. Ballard, 638 F.2d 74, 75 (9th Cir.1980) (per curiam) (existence of contract based on undisputed facts is a question of law).[2]

     1.  The question before us is whether the forum selection clauses in Sabaté France's invoices were part of any agreement between the parties. The disputes in this case arise out of an agreement for a sale of goods from a French party and a United States party to a Canadian party. Such international sales contracts are ordinarily governed by a multilateral treaty, the United Nations Convention on Contracts for the International Sale of Goods ("C.I.S.G."), which applies to "contracts of sale of goods between parties whose places of business are in different States ... when the States are Contracting States." C.I.S.G., art. 1(1)(a), 15 U.S.C.App., 52 Fed.Reg. 6262 (March 2, 1987). The United States, Canada, and France are all contracting states to the C.I.S.G. 15 U.S.C.App. (Parties to the Convention). And none has acceded to the Convention subject to reservations that would affect its applicability in this case. Moreover, because the President submitted the Convention to the Senate, which ratified it, see Public Notice 1004, U.S. Ratification of 1980 United Nations Convention on Contracts for the International Sale of Goods: Official English Text, reprinted in 15 U.S.C.App.; Letter of Transmittal from President Reagan to the Senate of the United States (Sept. 21, 1983), reprinted in 15 U.S.C.App., there is no doubt that the Convention is valid and binding federal law. Accordingly, the Convention governs the substantive question of contract formation as to the forum selection clauses.

Our conclusion that the C.I.S.G. governs the issues in this appeal is not in conflict with authority from our sister circuits that have applied state law. Both the Second Circuit and the First Circuit have confronted the question of what law governs issues of contract formation that are antecedent to determining the validity of and enforcing forum selection clauses. In Evolution Online Sys. Inc. v. Koninklijke Nederland N.V., KPN, 145 F.3d 505, 509 (2d Cir.1998), the Second Circuit applied New York law to a dispute between a Dutch company and a New York corporation regarding the production of computer software and the provision of technical services presumably because the Convention does not apply "to contracts in which the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labor or other services." C.I.S.G., art. 3(2). The First Circuit's decision in Lambert v. Kysar, 983 F.2d 1110, 1119 (1st Cir.1993), involved the resolution of an interstate dispute that had no international dimension.

II.  2.  Under the C.I.S.G., it is plain that the forum selection clauses were not part of any agreement between the parties. The Convention sets out a clear regime for analyzing international contracts for the sale of goods: "A contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form." C.I.S.G., art. 11. A proposal is an offer if it is sufficiently definite to "indicate[ ] the goods and expressly or implicitly fix[ ] or make[ ] provision for determining the quantity and the price," id., art. 14, and it demonstrates an intention by the offeror to be bound if the proposal is accepted. Id. In turn, an offer is accepted if the offeree makes a "statement ... or other conduct ... indicating assent to an offer." Id., art. 18. Further, "A contract is concluded at the moment when an acceptance of an offer becomes effective." Id., art. 23. Within such a framework, the oral agreements between Sabaté USA and Chateau des Charmes as to the kind of cork, the quantity, and the price were sufficient to create complete and binding contracts.[3]

The terms of those agreements did not include any forum selection clause. Indeed, Sabaté France and Sabaté USA do not contend that a forum selection clause was part of their oral agreements, but merely that the clauses in the invoices became part of a binding agreement. The logic of this contention is defective. Under the Convention, a "contract may be modified or terminated by the mere agreement of the parties." Id., art. 29(1). However, the Convention clearly states that "[a]dditional or different terms relating, among other things, to ... the settlement of disputes are considered to alter the terms of the offer materially." Id., art. 19(3). There is no indication that Chateau des Charmes conducted itself in a manner that evidenced any affirmative assent to the forum selection clauses in the invoices. Rather, Chateau des Charmes merely performed its obligations under the oral contract.

Nothing in the Convention suggests that the failure to object to a party's unilateral attempt to alter materially the terms of an otherwise valid agreement is an "agreement" within the terms of Article 29. Cf. C.I.S.G., art. 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."). Here, no circumstances exist to conclude that Chateau des Charmes' conduct evidenced an "agreement." We reject the contention that because Sabaté France sent multiple invoices it created an agreement as to the proper forum with Chateau des Charmes. The parties agreed in two telephone calls to a purchase of corks to be shipped in eleven batches. In such circumstances, a party's multiple attempts to alter an agreement unilaterally do not so effect. See In re CFLC, Inc., 166 F.3d 1012, 1019 (9th Cir.1999).

Conclusion

Because the contract for the sale of corks did not contain the forum selection clauses in Sybaté France's invoices, there was nothing for the district court to enforce, and its dismissal of this action was an abuse of discretion. The action is reinstated.

REVERSED and REMANDED.


FOOTNOTES

1. We, of course, do not determine the merits of Chateau des Charmes' claims against Sabaté France and Sabaté USA.

2. Whether we review under an abuse of discretion standard or a de novo standard, we reach the same conclusion.

3. In this respect, the regime of the C.I.S.G. differs from that of the Uniform Commercial Code, which would require a contract for the sale of corks for the value involved here to be evidenced by a writing. See U.C.C. 2-201.

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