ICC Chem. Corp. v. Vitol, Inc. - 425 F. App'x 57 (2d Cir. 2011)

Rule:

The materiality of a term is a question of fact the court reviews for clear error. The burden of proving the materiality of the alteration must fall on the party that opposes inclusion. Arbitration agreements do not, as a matter of law, constitute material alterations to a contract; rather, the question of their inclusion in a contract under Section 2-702(2)(b) is answered by examining, on a case-by-case basis.

Facts:

ICC Chemical Corporation ("ICC") agreed to purchase mixed xylenes, a petroleum product, from Vitol, Incorporated ("Vitol"), through an independent broker, Moab Oil ("Moab"). On July 2, 2009, Moab sent a confirmation to ICC and Vitol the same day, setting forth certain terms of the agreement, including price, quantity, quality, delivery, and payment. Several days after, Vitol transmitted a written confirmation repeating many of the terms of the Moab confirmation and setting forth certain additional terms mandating, among other things, arbitration of disputes. ICC received the Vitol confirmation and never expressed any disagreement with the document’s terms; however, it argued that the arbitration clause in the Vitol confirmation materially altered the agreement between the parties because no reasonable merchant would have consented to the additional term. The district court found that the arbitration clause was not material. ICC appealed.

Issue:

Did the arbitration clause materially alter the agreement between ICC and Vitol?

Answer:

No.

Conclusion:

The Court noted that a material alteration was one that would result in surprise or hardship if incorporated without express awareness by the other party. To carry the burden of showing surprise, a party must establish that, under the circumstances, it cannot be presumed that a reasonable merchant would have consented to the additional term. In this case, the Court held that ICC failed to demonstrate the required objective surprise regarding the arbitration clause. ICC has failed to adequately distinguish the arbitration clause in the contract in question from other arbitration clauses that were “sometimes” used in the industry. Under the circumstances, the district court's finding that the arbitration clause was not material was not clear error.