Publication
title
Battle of the Forms and Jurisdiction Clauses
AUTHOR(S)
DATE
April 24, 2008
EXPERTISE
Is it possible for a jurisdiction clause to apply to a contractual relationship even though the clause appeared in fine print on standard-form documents issued only after the initial offer and acceptance? The Quebec Court of Appeal recently answered in the affirmative.
In Matrox Graphics Inc. c. STMicroelectronics Inc., Matrox is suing STMicroelectronics ("ST") in the Quebec Superior Court for a defective computer component supplied by ST.[i] ST invoked a jurisdiction clause ("Clause 19") that provided that the buyer, Matrox, would submit to the jurisdiction of the Texas courts in case of a dispute. The Quebec Court of Appeal recently ruled on ST's motion for a declinatory exception.[ii]
In first instance, the Superior Court held that the clause was not applicable since Matrox had made it clear on its initial purchase order issued to ST that any "different or conflicting terms and conditions which may appear on any order acknowledgement submitted by the seller" would not apply ("Clause 5"). While Matrox's purchase order did not stipulate a forum in case of a dispute, ST's subsequent documents such as the order acknowledgement, delivery receipt, and invoice did contain Clause 19.
The Superior Court held that Clause 19 was indeed a "different or conflicting" term and condition since Matrox's purchase order did not provide for Texas as a forum, or for any forum at all. The Superior Court's reasoning was that since a clause similar to Clause 19 did not appear in Matrox's purchase order, it was therefore a "different" term or condition within the meaning of Clause 5.
The Court of Appeal disagreed with the Superior Court's reasoning, but nonetheless came to the same conclusion, remarking in obiter that Matrox's attempt to exclude all "different or conflicting terms and conditions" only applied to the terms and conditions relating to cancellation, delivery scheduling, and invoice timing, since the exclusion came as the fifth clause after four clauses relating to those issues.
Even though the initial offer and acceptance took the form of a purchase order issued by Matrox, on which ST indicated its consent by writing "ok" and faxing the purchase order back to Matrox, the Court of Appeal held that Matrox should be deemed to have tacitly accepted Clause 19 that appeared in subsequent documents issued by ST given that those documents were part of the commercial exchange of documents between the parties. The Court of Appeal acknowledged that this conclusion imposes a heavy burden of verification on those who exchange purchase orders and subsequent confirmatory documents in the course of commercial relationships.
This type of commercial relationship, which is very common among distributors and suppliers operating in a larger chain of production and subject to time constraints, can lead to uncertainty as to which party's terms and conditions apply. In fact, US jurisprudence has even coined an expression for this situation, referring to it as the "battle of the forms".
While the Court of Appeal did not lay down a hard and fast rule for determining the winner of such a battle of the forms, it is clear that the interpretation of all of the facts and circumstances of a commercial relationship can lead a party to be saddled with obligations it did not bargain for.
Quebec parties should therefore take measures to ensure that their commercial relationships with their contractual counterparties cannot be interpreted to entail tacit acceptance of terms and conditions they did not bargain for.
The Court of Appeal ultimately dismissed ST's attempt to have the suit referred to Texas given the wording of Clause 19. The clause reads as follows:
Buyer agrees that it will submit to the personal jurisdiction of the competent courts of the State of Texas and of the United States sitting in Dallas County, Texas, in any controversy or claim arising out of the sale contract, and that service of process mailed to it at the address appearing on the reverse side hereof by registered mail, return receipt requested, shall be effective service of process in any such court.
The Court of Appeal applied the principles from the Supreme Court of Canada decision in GreCon Dimter Inc. v. J.R. Normand Inc.,[iii] and held that the wording of the clause had neither the necessary imperative character nor the degree of clarity and specificity required to confer exclusive jurisdiction on a foreign court. The Court of Appeal accepted Matrox's argument that the wording of Clause 19 is such that it is not an exclusive forum selection clause but rather an attornment clause, also known as a submission-to-jurisdiction clause or a service-of-suit clause.
What this means is that the clause only seeks to ensure that if ST sues Matrox, it can choose to sue Matrox in the Texas courts without giving rise to a jurisdictional challenge by Matrox. Through Clause 19, Matrox will be deemed to have waived any such jurisdictional objection, hence its description as an "attornment" clause. Since in this case Matrox is suing ST, Clause 19 is simply not triggered.
The decision of the Court of Appeal highlights the importance of the wording of jurisdiction clauses. Even if a party loses the so-called battle of the forms, it may nonetheless prevail because the wording of the clause invoked by its counterparty does not support that party's contention. Businesses need to be aware not only of the nature of terms and conditions that may be considered implicitly applicable to them, but they also need to be aware of the wording in order to understand their proper scope.
[i]. Ogilvy Renault acted for Matrox in these proceedings.
[ii]. 2007 QCCA 1784.
[iii]. [2005] 2 S.C.R. 401.
The purpose of this document is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of Ogilvy Renault LLP or any member of the firm on the points of law discussed.
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