Custom Tiles, Conflicting Delivery Terms, and an Arbitration Clause
On March 3, Grove Ceramics (seller) and Hearth Kitchen (buyer) orally agree to a sale of 600 custom-glazed tiles at $22 each, delivery by May 15. Grove emails a signed “Order Confirmation” stating the price, quantity, and delivery date and adding, “Any dispute shall be resolved by binding arbitration in Dover.” Hearth replies by email: “We have a deal, but we need delivery by May 10 or we lose the restaurant opening.” Grove does not respond. Grove ships on May 12; Hearth rejects the shipment and buys comparable tiles elsewhere for $31 each. Grove sues for the contract price; Hearth counterclaims for breach and seeks cover damages. The parties are merchants under UCC Article 2. The jurisdiction has adopted UCC §§ 2-201, 2-204, 2-206, 2-207, and 2-712.
1. Did the parties form an enforceable contract, and which delivery date governs?
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Yes, a contract was formed on March 3. The oral agreement contained price, quantity, and subject matter, and UCC Article 2 permits formation by any manner showing agreement. The statute of frauds is satisfied between merchants under UCC § 2-201(2): Grove sent a signed confirmation sufficient against itself, and Hearth did not give written objection within ten days.
Hearth's reply-“we have a deal, but we need delivery by May 10”-is not a rejection. It expressly affirms the deal and proposes a changed delivery date. Because a contract already existed, the May 10 request is a proposed modification under § 2-209. Grove never assented; silence is not acceptance of a modification. The original May 15 date therefore governs. Grove's May 12 shipment was timely. Hearth's rejection was wrongful, and Hearth cannot treat Grove as the breaching party.
2. Is the arbitration clause part of the contract and enforceable?
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Probably not. The arbitration clause appeared for the first time in Grove's confirmation after the oral agreement. Under UCC § 2-207(2), an additional term in a merchant's confirmation becomes part of the contract unless it materially alters the bargain, is objected to, or causes surprise or hardship. A binding arbitration clause is commonly treated as a material alteration because it waives court adjudication and was not within the parties' original understanding. Hearth's failure to object within ten days preserves the statute-of-frauds point, but it does not necessarily waive a material-alteration objection.
The clause is therefore likely excluded. Even if a court took the minority view that arbitration is only procedural, it would still need to decide whether the clause was within the parties' agreement; the facts show no express assent. The enforceability conclusion should be stated conditionally, but the stronger exam answer is that Grove cannot compel arbitration on this record.
3. What damages can Grove recover, and can Hearth recover cover damages?
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Because Grove delivered within the governing May 15 term, Hearth's rejection was a breach, and Hearth's cover purchase cannot support § 2-712 damages; cover is available only when the seller breaches. Grove may recover its remedies for buyer's breach. If Grove resold the custom tiles in a commercially reasonable manner, it can recover the difference between the contract price and the resale price plus incidental damages under § 2-706. If no resale occurred, Grove can seek damages measured by the difference between the contract price and market price, or lost profits under § 2-708.
Grove's demand for the full contract price is available under § 2-709 only if the goods were accepted, lost or damaged after risk passed, or cannot reasonably be resold after reasonable effort. The facts do not establish that precondition, so the court should require proof. Hearth's counterclaim for cover damages fails. If the arbitration clause is excluded, the court retains jurisdiction.