Don’t Want To Arbitrate? Pay Attention To All Of Your Contract
You are a business. You sign a two page purchase order contract that references additional “terms and conditions” on the “following pages,” but there are no following pages. You believe that language is boilerplate and of no specific meaning, but you do not inquire further. Think that an arbitration clause contained in those referenced but unsupplied “terms and conditions” is unenforceable? Think again. According to the Fourth Circuit’s recent decision in Logan & Kanawha Coal Co., LLC v. Detherage Coal Sales, LLC, the referenced terms and conditions may be enforceable.
Applying an elevated standard of diligence to merchants, the Fourth Circuit enforced the arbitration clause in the “terms and conditions” that were referenced, but not exchanged, in a purchase order, and found it to be of “little moment” that no “following pages” were actually exchanged. Holding that a merchant need not have actually received the additional terms and conditions in order to be bound by them, the Fourth Circuit rejected arguments that: (1) the purchase order’s reference to “terms and conditions” on the “following pages” was mere boilerplate language of no effect, since there actually were no following pages; and (2) the terms and conditions were unenforceable because there were multiple, and slightly differing, versions of the purchase order that had been previously exchanged between the businesses, and therefore no terms were specifically agreed upon.
The take-away for businesses? Words matter. Read your contracts carefully, and diligently inquire about any missing terms (or pages), lest you may agree to something more than intended.