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Smart Summary

Factual and Procedural Background

Chateau des Charmes Wines, Ltd., a Canadian winery, entered into telephone agreements with Sabaté USA, a California subsidiary of Sabaté France, to purchase a total of 1.2 million special wine corks designed to prevent "cork taint." The parties agreed on price, quantity, payment, and shipping terms, but no other terms were discussed, and they had no prior dealings. Sabaté France shipped the corks in eleven installments, each accompanied by invoices containing forum selection clauses specifying French jurisdiction. Chateau des Charmes accepted delivery and paid for all shipments. Subsequently, Chateau des Charmes discovered that the wines bottled with these corks were tainted and filed suit in federal district court in California alleging breach of contract and related claims. Sabaté France and Sabaté USA moved to dismiss based on the forum selection clauses in the invoices. The district court granted the motion, enforcing the forum selection clauses and dismissing the case in favor of adjudication in France. Chateau des Charmes appealed this dismissal.

Legal Issues Presented

  1. Whether the forum selection clauses contained in Sabaté France’s invoices were part of the binding contract between Chateau des Charmes and Sabaté USA/France.
  2. What law governs the formation and validity of the forum selection clauses in this international sale of goods dispute.
  3. Whether the district court abused its discretion in enforcing the forum selection clauses and dismissing the case.

Arguments of the Parties

Defendants-Appellees (Sabaté France and Sabaté USA)

  • Argued that the forum selection clauses printed on the invoices became part of the contract despite the oral agreement lacking such terms.
  • Contended that the multiple invoices containing the clauses incorporated them into the parties' agreement.

Plaintiff-Appellant (Chateau des Charmes)

  • Maintained that the forum selection clauses were not part of the contract as the parties only agreed orally on price, quantity, and payment terms without discussing forum selection.
  • Asserted that the invoices’ forum selection clauses were unilateral attempts to alter the contract terms and were never affirmatively accepted.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Kukje Hwajae Ins. Co., Ltd. v. M/V Hyundai Liberty, 294 F.3d 1171 (9th Cir. 2002) Standard of review for enforcement of forum selection clauses is abuse of discretion. The court applied this standard but also reviewed the existence of the forum selection agreement de novo.
Helash v. Ballard, 638 F.2d 74 (9th Cir. 1980) (per curiam) Existence of contract based on undisputed facts is a question of law, reviewed de novo. Guided the court’s de novo review of whether the forum selection clauses were part of the contract.
Evolution Online Sys. Inc. v. Koninklijke PTT Nederland N.V., KPN, 145 F.3d 505 (2d Cir. 1998) Application of state law versus CISG in contract formation for mixed goods and services contracts. Distinguished the present case where CISG clearly applied because the contract was for goods.
Lambert v. Kysar, 983 F.2d 1110 (1st Cir. 1993) Application of state law in interstate (non-international) contract disputes. Noted as a contrast to the international nature of the present case governed by CISG.
In re CFLC, Inc., 166 F.3d 1012 (9th Cir. 1999) Multiple attempts by one party to alter an agreement unilaterally do not create binding contract modifications. Supported the court’s rejection of the argument that repeated invoices incorporating forum clauses created an agreement on forum.

Court's Reasoning and Analysis

The court began by identifying the applicable law governing the formation of the contract and the forum selection clauses: the United Nations Convention on Contracts for the International Sale of Goods (C.I.S.G.), as the parties are from contracting states (Canada, France, and the U.S.). The C.I.S.G. governs contract formation without requiring writing and defines clear rules for offer and acceptance. The oral telephone agreements between Chateau des Charmes and Sabaté USA, specifying cork type, quantity, and price, were sufficient to form binding contracts under the C.I.S.G.

The court then addressed whether the forum selection clauses printed on Sabaté France's invoices became part of the contract. It found that such clauses materially altered the terms of the original oral agreements and required affirmative assent to be incorporated, as per C.I.S.G. Article 19(3). Chateau des Charmes' mere acceptance of the goods and payment did not constitute assent to these additional terms. The court rejected the argument that multiple invoices containing the clauses created an agreement, emphasizing that unilateral attempts to change material contract terms without agreement are ineffective.

Accordingly, the court concluded that the forum selection clauses were not part of the contract and thus the district court erred in enforcing them and dismissing the case.

Holding and Implications

REVERSED and REMANDED.

The court held that the forum selection clauses contained in Sabaté France’s invoices were not part of the binding contract formed by the parties’ oral agreements. The district court’s dismissal based on enforcement of those clauses was an abuse of discretion. The case was reinstated for further proceedings in the original forum. This decision directly affects the parties by allowing the suit to proceed in California and does not establish new precedent beyond clarifying the application of the C.I.S.G. to forum selection clauses in international sales contracts.

CHATEAU DES CHARMES WINES LTD., Plaintiff-Appellant, v. SABATE USA INC., Sabate S.A., Defendants-Appellees.

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. 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.

We, of course, do not determine the merits of Chateau des Charmes's claims against Sabaté France and 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 jurisdiction 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).

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

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 PTT 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 5904 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.

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.

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.

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's 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 Sabaté 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.

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CHATEAU DES CHARMES WINES LTD. v. SABATE USA
(May 5, 2003)