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Referencing “attached T&Cs” in a purchase order? Better make sure they’re actually attached

Catching up on reading, here’s an opinion from a Texas appeals court — possibly driven by a desire to preserve an arbitration award — about the point at which an exchange of emails and attachments will become a binding contract: A customer referenced its own “attached” T&Cs in a purchase order that it emailed to a vendor, but it didn’t actually attach its T&Cs. As a result, the customer found itself bound by the vendor’s T&Cs, which were attached to the vendor’s own emails to the customer. See ETC Intrastate Procurement Co., LLC v. JSW Steel (USA), Inc., No. 14-19-00915-CV, slip op. at 12-13 (Tex. App.—Houston [14th Dist.] Mar. 16, 2021) (affirming, as modified, confirmation of arbitration award in favor of vendor).

Here’s how it played out:

  • The customer emailed a request for quotation (“RFQ”) to the vendor. The RFQ stated that the customer’s standard terms and conditions (“T&Cs”) were attached — but in fact the T&Cs weren’t attached.
  • The customer’s (unattached) T&Cs included a boilerplate rejection of the vendor’s T&Cs. As we’ll see, however, the court didn’t give effect to that rejection.
  • The vendor responded with a sales quotation, which said that the vendor’s own T&Cs were attached — which they were. Unsurprisingly, the vendor’s T&Cs likewise included a boilerplate rejection of the customer’s T&Cs.
  • The customer eventually emailed the vendor a purchase order, which stated that the customer’s standard T&Cs were attached — but again, the customer’s T&Cs weren’t actually attached.
  • Here’s where it gets a bit weird: The vendor emailed the customer an order confirmation, which stated in part that the customer’s standard T&Cs would apply to the order — but yet again, the customer’s T&Cs weren’t attached to the vendor’s order-confirmation email.
  • Three weeks later, the customer belatedly emailed the customer’s standard T&Cs to the vendor.
  • The customer allegedly didn’t pay all of what it owed the vendor, so the vendor sought arbitration under its T&Cs (and was eventually awarded damages for breach).
  • During the arbitration and afterwards, the customer objected to arbitration, claiming that its T&Cs, which didn’t have an arbitration provision, were the ones that governed; the customer argued that its purchase order was a counteroffer and so the contract was not formed until the vendor sent its order confirmation, which supposedly had the effect of accepting the customer’s counteroffer.
  • The trial judge remarked that he had ordered arbitration because the case was too complicated for a jury to understand. (The appeals court dismissed that remark as “immaterial.”)

Both the trial court and the appeals court seem to have relied on the customer’s failure to actually attach its referenced T&Cs to its emails; the appeals court held, in essence, that because the customer failed to actually attach its referenced T&Cs, the customer thereby accepted the vendor’s previously-attached T&Cs. See id., slip op. at 12-13.

(This was thus a different kind of Battle of the Forms than would have been the case if each party had successfully rejected the other’s T&Cs; such a situation would have been governed by UCC § 2-207(2) and the Dropout Rule in § 2-207(3).)

Lesson: When contracting by email, be sure to attach — or at least provide a link to — your own T&Cs.

Editorial comment: The court seems to have used a hypertechnical approach here to try to preserve arbitration. On the facts, it seems quite clear that the parties agreed that the customer’s T&Cs would apply, and those T&Cs didn’t include an arbitration provision. Alternatively, the court could have held that the customer’s failure to attach its T&Cs was a clerical mistake, and consequently the customer had effectively rejected the vendor’s T&Cs, and thus the Dropout Rule in § 2-207(3) would have applied — which would have knocked out the arbitration provision.

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