Solae, LLC v. Hershey Canada, Inc.

Solae, LLC v. hershey Canada, Inc.

BACKGROUND AND FACTS

Solae, a U.S. limited liability company with its principal place of business in St. Louis, Missouri, had sold
soy lecithin to Hershey Canada, Inc., a Canadian corporation with its primary place of business in
Mississauga, Ontario (Canada), since 2003. The soy lecithin was incorporated into Hershey’s products
sold throughout Canada. Solae and Hershey negotiated contracts at the end of each calendar year for
Hershey’s orders of soy lecithin in the upcoming year.

In January 2006, the parties reached an agreement whereby Hershey would order up to 250,000 pounds
of soy lecithin from Solae in 2006 at a price of U.S. $1.2565 per pound.In June 2006, Hershey faxed a
purchase order to Solae for 40,000 pounds of soy lecithin to be delivered to Hershey’s manufacturing
plant in Smith Falls, Ontario, in September 2006. Solae sent an order confirmation to Hershey in June
2006. The order confirmation did not contain Solae’s standard conditions of sale nor did it contain a
forum selection clause. In September 2006, Solae shipped 40,000 pounds of soy lecithin to Her-shey. An
invoice sent to Hershey concurrent with the shipment contained the conditions of sale, including a
forum selection clause providing that “the courts of Delaware shall have exclusive jurisdiction over any
dis-putes or issues arising under this Agreement.”
In October 2006, Hershey discovered that the soy lecithin was contaminated with salmonella. The con-
tamination was discovered after Hershey had incor-porated the contaminated soy lecithin into over two
million units of product shipped throughout Canada. The contamination resulted in a large-scale recall of
Hershey’s chocolate products, the temporary closure of the Smith Falls plant, and an extensive
investigation by the Canadian government. Hershey notified Solae of the contaminated soy lecithin,
informed Solae that it would hold Solae responsible for damages incurred as a result of the incident, and
refused to accept delivery or pay for any additional lots of soy lecithin, including a lot for which an order
had been placed in October 2006.
Solae filed a lawsuit in March 2007 seeking a deter-mination of the parties’ rights with respect to the
June and October 2006 orders. Hershey moved to dismiss Solae’s complaint for lack of personal
jurisdiction. The issue before the court was whether the forum selection clause contained within Solae’s
conditions of sale were part of the parties’ contract such that the court could exercise personal
jurisdiction over Hershey.
FARNAN, DISTRICT JUDGe
The parties dispute the relevant contract governing this dispute. If the relevant contract contains a
forum-selection clause, Hershey Canada’s contentions regarding personal jurisdiction are largely
irrelevant. Accordingly, the Court must determine whether Her-shey Canada is bound by a forum
selection clause.
The parties agree that the United Nations Conven-tion of Contracts for the International Sale of Goods
(“CISG”) governs contract formation here. Under the terms of the CISG, “a contract is concluded at
the moment when an acceptance of an offer becomes effective in accordance with the provisions of this
Con-vention.” CISG, Art. 23. An offer must be “sufficiently definite,” and “demonstrate an intention by
the offerer to be bound if the proposal is accepted.” Id. Art. 14. An offer is accepted, and a contract is
formed when the offeree makes a statement or other conduct, “indicating assent to an offer.” Id. Art.
18. The CISG does not contain a statute of frauds, stating that “a contract of sale need not be concluded
in or evidenced by writing and is not subject to any other requirement as to form.” Id. Art. 11. Courts
have held that a binding contract exists when the parties sufficiently agree to the goods, the quantity
and the price. See, e.g., Chateau Des Charmes Wines, Ltd. v. Sabate U.S.A., Ltd. [citation omitted].
Having reviewed the record in light of the appli-cable legal standard, the Court is not persuaded by
Solae’s contention that its Conditions of Sale control the disputed transaction. . . . The record is clear
that [the parties] reached agreement as to the amount of soy lec-ithin Solae was obligated to sell
Hershey Canada during the calendar year 2006, and the price at which Solae was obligated to sell. Under
this agreement, Hershey Canada was obligated to purchase a substantial quan-tity of soy lecithin from
Solae at the price agreed upon. The Court concludes that this is sufficient to create a complete and
binding contract under the CISG (the “2006 Contract”).
Because the 2006 Contract did not include a forum-selection clause, the Court must now determine
if the forum-selection clause contained in the Con-ditions of Sale subsequently became part of the 2006
Contract under the CISG. As Hershey Canada points out, this issue was addressed by the Ninth Circuit in
Chateau Des Charmes Wines Ltd., 328 F.3d 528:
Under the Convention, a “contract may be modified or terminated by the mere agreement of
the parties.” [CISG], 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 mate-rially.” Id. Art 19(3). There is no indication that [the buyer]
conducted itself in a manner that evidenced any affirmative assent to the forum selection
clauses in the invoices. Rather, [the buyer] merely performed its obligations under the oral
contracts. 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 “agree-ment” within
the terms of Article 29.
Id. at 531. Here, as in Chateau, Solae has set forth no substantive evidence indicating that Hershey Can-
ada agreed to a modification of the terms of the 2006 Contract, beyond Hershey Canada’s receipt of the
Con-ditions of Sale. Solae has not set forth evidence refut-ing statements that Hershey Canada’s
material analyst at the Smith Falls plant was not authorized to negoti-ate contractual terms or to
commit Hershey Canada to Solae’s Conditions of Sale, and the Court does not agree with Solae’s
contention that because multiple invoices and pre-shipment confirmations containing these Conditions
of Sale were sent to Hershey Canada over “years of sales and dozens of transactions,” these terms
necessarily became part of the 2006 Contract. “[A] parties’ multiple attempts to alter an agreement
unilaterally do not so effect.” Chateau, 328 F.3d at 531. In sum, the Court concludes that Hershey
Canada’s contin-ued performance of its duties under the 2006 Contract did not demonstrate its
acceptance of the terms con-tained in the Condition of Sales, and the Court further concludes that
Solae’s Conditions of Sale did not mod-ify the 2006 Contract to add a forum-selection clause.
Decision.
The parties’ January 2006 contract for the sale and purchase of soy lecithin in 2006 was valid and
binding. The forum selection clause contained in Solae’s conditions of sale and incorporated in later
sales documents was not a part of this contract. The buyer did not assent to the forum selection
agreement simply by receiving and paying for the goods. The sell-er’s complaint was thus dismissed for
lack of personal jurisdiction.
Comment.
In addition to its holding on new and addi-tional terms, this case is instructive in its determination of the
minimum requirements to form a contract pursuant to the CISG and its disregard of terms apparently
incorporated into the sales documents between the parties for three years prior to this lawsuit.
Case Questions1. What was the court’s holding with respect to the inclusion of the forum selection
clause in the par-ties’ contract?
2. What are the requirements for the formation of a contract pursuant to the CISG?
3. Did the court improperly excuse Hershey’s fail-ure to object to the forum selection clause given the
parties’ extended dealings (which included conditions of sale containing a forum selection clause)? Why
or why not?

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Solae, LLC v. hershey Canada, Inc.

BACKGROUND AND FACTS

FARNAN, DISTRICT JUDGe

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