Addressing a conflict between language in a written agreement and online terms and conditions of sale, the United States Court of Appeals for the Ninth Circuit, in an unpublished opinion, upheld a district court decision to enforce the online terms and conditions rather than the written agreement where the online terms and conditions expressly stated that they governed in the event of such a conflict. Fadal Machining Centers, LLC v. Compumachine, Inc., Case No. 10-55719 (9th Cir., Dec. 15, 2011). The case was heard in federal court on diversity jurisdiction (with Judge Conlon N.D. Ill., sitting by designation).
Plaintiff Fadal, a manufacturer of machines and machine parts, sued one of its exclusive distributors, Compumachine, for breach of contract and the duty of good faith for non-payment. The forum selection provision in the parties’ distributorship agreement designated the United States District Court for the Central District of California as the forum related to the agreement. The distributorship agreement also provided, however, that Fadal would unilaterally establish “the terms of sale … from time to time.” Each of the 15 allegedly unpaid invoices attached to Fadal’s complaint referred to the terms and conditions of sale on Fadal’s website, which terms and conditions included a clear and comprehensive mandatory arbitration clause: claims or disputes “arising out of or related to this agreement, or the breach thereof” shall exclusively be submitted to arbitration in Los Angeles under the Commercial Arbitration Rules of the American Arbitration Association. Importantly, the terms and conditions expressly stated that its provisions prevailed over any other agreement.
The district court dismissed the complaint without prejudice under Fed. R. Civ. P. 12(b)(6) because the terms and conditions of sale required submission of disputes to arbitration. The Court of Appeals for the Ninth Circuit upheld the district court’s decision, holding that there was no question that the parties entered into an arbitration agreement, that the arbitration agreement’s broad language encompassed the question of arbitrability, and that the distributorship agreement clearly expressed the parties’ intent that the defendant would be bound by terms and conditions as established by plaintiff.
Practice Note: This case illustrates the importance of harmonizing written agreements, including language in invoices and terms and conditions of sale, whether they be on paper or online, and whenever they may be made effective. Where multiple agreements purport to apply to the same transaction, the parties should be aware of the interplay and overlap among them. This case also illustrates, perhaps, the need to pay attention to so-called boilerplate.