VLM Food Trading International, Inc. v. Illinois Trading Co.
2016 U.S. App. LEXIS 1013
7th Cir.2016Background
- VLM (Canadian seller) sold frozen potatoes to Illinois Trading (U.S. buyer) over multiple transactions; buyer defaulted on nine invoices after nine successful shipments.
- Each sale proceeded by: Illinois Trading purchase order (offer) → VLM e-mail confirmation (acceptance) → shipment → trailing invoice mailed after delivery that included an attorney’s-fees clause.
- VLM sued Illinois Trading, its controlling partnership, and president for unpaid invoices; district court entered an entry of default against all three defendants but later vacated default as to the president only; all defendants subsequently answered.
- On first appeal the Seventh Circuit held the United Nations Convention on Contracts for the International Sale of Goods (CISG) governed the dispute (VLM I). The case was remanded for application of the Convention.
- On remand the district court, applying the CISG, held the attorney’s-fees clause in VLM’s trailing invoices was not part of the contracts because Illinois Trading never expressly accepted that term before contract formation; the court also found VLM waived reliance on the entry of default by raising it only in a reply brief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the attorney’s-fees clause in trailing invoices became part of the parties’ CISG contracts | VLM: Parties subjectively intended fee clause to apply; subsequent conduct (accepting invoices, past practice) shows assent; Article 8/9 support extrinsic evidence and usages | Illinois Trading: Contracts formed by buyer’s purchase orders and VLM’s e-mail confirmations before invoices; under CISG mirror-image rule unaccepted post-contract invoice terms do not become part of contract | Held: Fee clause not incorporated — contracts formed at VLM’s confirmations; trailing invoices were unilateral modifications not accepted, so fee clause excluded under CISG Art.18–19 and 29 |
| Whether extrinsic evidence/party practice can incorporate the fee clause under CISG (Articles 8 and 9) | VLM: Article 8(3) and 9 permit considering negotiations, practices, and subsequent conduct to show mutual intent or established usage | Illinois Trading: No mutual intent or accepted practice regarding fee liability; bookkeeper’s knowledge insufficient; silence/non-objection cannot constitute acceptance under CISG | Held: Extrinsic evidence insufficient — no indication buyer knew and accepted fee term at formation; no established practice binding under Art.9 |
| Whether Illinois Trading’s payments or prior similar invoices can constitute acceptance of modification | VLM: Payment and history of invoices indicate acquiescence/usage | Illinois Trading: Payment consistent with original contract obligations; payment is not acceptance of new contractual term, especially where seller already performed | Held: Payment did not indicate acceptance of fee-shift term; absence of affirmative assent is dispositive under mirror-image rule |
| Whether VLM waived right to rely on entry of default so that Illinois Trading and the Partnership could contest liability | VLM: Default entry established liability and defendants should not benefit; contested only later | Illinois Trading/Partnership: VLM’s litigation conduct and failure to raise default until reply waived reliance; no formal default judgment had been entered | Held: VLM waived reliance on entry of default by failing to timely press the point; there was an entry of default but no default judgment; court did not abuse discretion in allowing defendants to benefit |
Key Cases Cited
- VLM Food Trading Int’l, Inc. v. Illinois Trading Co., 748 F.3d 780 (7th Cir. 2014) (prior panel decision holding CISG governs and discussing formation/battle-of-forms under CISG)
- Metavante Corp. v. Emigrant Sav. Bank, 619 F.3d 748 (7th Cir. 2010) (standard of review for contract interpretation)
- Square D Co. & Subsidiaries v. Comm’r, 438 F.3d 739 (7th Cir. 2006) (treaties have the force of statutes; de novo review)
- Zapata Hermanos Sucesores, S.A. v. Hearthside Baking Co., 313 F.3d 385 (7th Cir. 2002) (treating allocation of legal fees as procedural and applying domestic law when CISG is silent)
- Château des Charmes Wines Ltd. v. Sabaté USA Inc., 328 F.3d 528 (9th Cir. 2003) (forum-selection clause on trailing invoices not incorporated where prior agreement already formed under CISG)
- Solae, LLC v. Hershey Canada, Inc., 557 F. Supp. 2d 452 (D. Del. 2008) (trailing invoice clause could not modify an already-formed contract despite repeated prior invoices)
- Contempo Design, Inc. v. Chicago & Ne. Ill. Dist. Council of Carpenters, 226 F.3d 535 (7th Cir. 2000) (consideration requirement and limits on coercive contract modifications)
- MCC–Marble Ceramic Ctr., Inc. v. Ceramica Nuova d’Agostino, 144 F.3d 1384 (11th Cir. 1998) (looking to negotiations and conduct where oral agreement later memorialized in standard terms)
- O’Brien v. R.J. O’Brien & Assocs., Inc., 998 F.2d 1394 (7th Cir. 1993) (standard of review for setting aside default)
- Dundee Cement Co. v. Howard Pipe & Concrete Prods., Inc., 722 F.2d 1319 (7th Cir. 1983) (effect of entry of default: well-pleaded allegations on liability are taken as true)