## Facts

- Filanto, S.p.A. (Filanto), an Italian footwear manufacturer, agreed to supply boots to Chilewich International Corporation (Chilewich), a New York export-import firm, for shipment to Moscow.
- Chilewich had already contracted with a Russian entity to supply boots; that “Russian contract” contained a broad dispute-resolution clause requiring arbitration in Moscow and excluding ordinary court jurisdiction.
- Chilewich sent Filanto a memorandum agreement for two shipments that stated the terms of the Russian contract would govern the Filanto–Chilewich arrangement.
- Filanto did not promptly sign or object to the memorandum’s incorporation of the Russian contract, while the parties proceeded toward performance.
- Chilewich opened a letter of credit in Filanto’s favor on the deal.
- Months later, Filanto signed and returned the memorandum agreement but included a note stating it understood only three sections of the Russian contract to apply; the Moscow arbitration clause was not among them.
- A dispute later arose about the parties’ performance and obligations under the boot-supply arrangement, and Filanto sued Chilewich in federal court.
- After filing suit, Filanto sent correspondence disputing Chilewich’s complaints about defective boots and cited a Russian-contract provision not included in the three sections Filanto had said it accepted.
- Chilewich moved to stay the federal action and require arbitration in Moscow under the Russian contract’s arbitration clause; Filanto moved to block Moscow arbitration or, alternatively, to require arbitration in New York.

## Issues

1. Whether the CISG governed contract formation and interpretation of the parties’ assent to the memorandum agreement and incorporated Russian-contract terms.
2. Whether Filanto’s silence, delay, and conduct (including proceeding after the letter of credit) constituted acceptance of the memorandum agreement’s incorporation of the Russian contract, including the Moscow arbitration clause, despite Filanto’s later attempt to limit incorporated terms.
3. If an agreement to arbitrate in Moscow existed, whether the court should stay the federal case and refer the parties to arbitration, rather than enjoin or relocate the arbitration.

## Decision

- The court held that the CISG applied to the parties’ international sale-of-goods transaction and governed whether Filanto accepted Chilewich’s terms.
- The court concluded that Filanto’s failure to timely object, combined with its conduct during performance and its later inconsistent reliance on Russian-contract provisions, supported a finding that Filanto accepted the deal on the terms proposed by Chilewich, including Moscow arbitration.
- The court granted Chilewich’s request to stay the litigation pending arbitration and directed the parties to arbitrate the dispute in Moscow.
- The court denied Filanto’s request to enjoin Moscow arbitration or to require arbitration proceedings in New York.

## Legal Principles

- The CISG applies to contracts for the international sale of goods between parties with places of business in different Contracting States, and it governs contract formation questions such as offer, acceptance, and the effect of attempted modifications.
- Under CISG rules on acceptance and interpretation (including consideration of the parties’ communications, practices, and subsequent conduct), assent may be found from conduct and from an offeree’s failure to timely object when the offeree proceeds in a manner consistent with the offer.
- Under the CISG, an offeree cannot wait until after the offeror has acted in reliance on the offer (such as arranging payment through a letter of credit) and then attempt to accept only favorable parts while rejecting a material dispute-resolution term that was part of the offer as presented.
- A party’s later behavior that treats incorporated terms as operative (for example, invoking a provision of the referenced contract when defending performance) may be used to assess whether that party accepted the referenced contract as part of the parties’ agreement.
- When a valid agreement calls for arbitration in a foreign forum, federal arbitration law and the New York Convention generally require the court to stay the action and refer the parties to arbitration absent a recognized defense.

## Conclusion

Filanto–Chilewich arose from a boot-supply deal tied to a prior Russian contract containing a Moscow arbitration clause. Applying the CISG, the court found Filanto’s delayed, qualified response could not undo acceptance shown by its silence and conduct after Chilewich proceeded with payment arrangements, especially given Filanto’s later reliance on other Russian-contract provisions. The court stayed the federal lawsuit and required the parties to arbitrate in Moscow, rejecting Filanto’s effort to block or relocate the arbitration.


Filanto, S.p.A. v. Chilewich International Corp., 789 F. Supp. 1229 (1992)