## Facts

- Colfax Envelope Corporation employed 17 printing employees represented by Local No. 458-3M, a Chicago-area printing union.
- Colfax operated two 78-inch presses: a four-color press and a five-color press (often run in four colors).
- Colfax typically did not bargain directly; after the union and an employers’ association negotiated a new agreement, the union sent Colfax a summary of changes, and Colfax would sign the full agreement if satisfied or bargain separately if not.
- Under the prior agreement, Colfax generally staffed a 78-inch press with four workers when operated as a four-color press (and five workers when the five-color press printed in five colors).
- After a new agreement was negotiated, the union sent Colfax a summary containing the entry: “4C 60" Press — 3 Men.”
- Colfax read this entry to reduce staffing to three workers for any four-color press operations, including Colfax’s 78-inch presses.
- The union maintained the change applied only to presses 60 inches or smaller and did not alter staffing for presses over 60 inches.
- Colfax accepted the summary. The full agreement initially sent contained a typographical error consistent with Colfax’s reading, but a corrected version later specified three workers for four-color presses between 45 and 60 inches and four workers for four-color presses over 60 inches.
- Colfax refused to sign the corrected agreement and asserted no collective bargaining agreement existed because there was no agreement on the essential staffing term.

## Issues

1. Whether the parties formed an enforceable collective bargaining agreement despite differing interpretations of an ambiguous staffing provision.
2. Whether Colfax, having accepted the change summary and the agreement’s arbitration clause, was required to arbitrate the staffing dispute rather than litigate contract nonexistence.
3. Whether a patent ambiguity and a party’s decision to proceed without clarification can allocate the risk of interpretation to that party.

## Decision

- The Seventh Circuit affirmed summary judgment for the union compelling arbitration.
- The court held a contract existed notwithstanding the dispute over the staffing language.
- The court ruled Colfax was bound by the agreement’s arbitration clause and had to arbitrate the staffing dispute.
- The court treated the disputed language as an ambiguity for interpretation, not a failure of assent requiring rescission.

## Legal Principles

- A contract is enforceable when the parties agree to proceed despite an ambiguous term; the ambiguity is resolved by interpretation rather than by declaring no contract.
- Contract nonformation based on misunderstanding is limited to situations where the parties attach materially different meanings and neither bears the risk of the ambiguity.
- A party that recognizes (or should recognize) a patent ambiguity yet proceeds without clarification assumes the risk that its preferred interpretation will not prevail.
- Where a collective bargaining agreement includes an arbitration clause, disputes about the meaning and application of ambiguous provisions are presumptively for the arbitrator, not a basis to avoid arbitration by claiming no contract.

## Conclusion

The court required arbitration because Colfax accepted an agreement framework containing an apparently ambiguous staffing change and could not avoid the arbitration clause by recasting an interpretive dispute as a failure of contract formation.


Colfax Envelope Corp. v. Local No. 458-3M, 20 F.3d 750 (7th Cir. 1994)