A federal district court in Texas adopted magistrate judge recommendations determining that the addition of an arbitration agreement was not an unenforceable material alteration of a commercial contract in maritime commerce.

In Oceanconnect.com, Inc. v. Chemoil Corp., Civ. A. No. H-07-1053, 2008 WL 194360 (S.D. Tex. Jan. 23, 2008), Chemoil moved to compel arbitration of a dispute with Oceanconnect regarding a contract to sell fuel oil bunkers. Chemoil had altered the contract during negotiations by adding an arbitration agreement to the terms of the contract. At the contract's execution, Oceanconnect did not object to the arbitration agreement.

Upon Chemoil's motion to compel, Oceanconnect maintained that the arbitration agreement was an unenforceable material alteration of the contract. Oceanconnect also alleged that Chemoil had waived its right to arbitrate by moving to compel after the 90-day contractual deadline to invoke arbitration. A magistrate judge rejected both contentions, and recommended that Chemoil's motion to compel be granted.

In adopting the magistrate judge's recommendations, the Court observed that Oceanconnect had not borne the burden of showing the surprise required to set aside an arbitration agreement as a material alteration. While Oceanconnect had submitted an affidavit alleging that such agreements were not part of usage of trade in maritime transactions, the Court found such usage of trade in many maritime contracts.

Furthermore, the Court observed that the parties had an established course of dealing that included contracts with arbitration agreements identical to the agreement challenged in the disputed contract. To the Court, the evidence of usage of trade in maritime transactions and the parties' particular course of dealing defeated Oceanconnect's claim of surprise as to the arbitration agreement.

The Court also found no evidence of hardship suffered by Oceanconnect through the inclusion of the arbitration agreement. The hardship allegation was based in part on Oceanconnect's objection to the timing of Chemoil's motion to compel, but the Court firmly stated that the timing of arbitration was not a basis for finding hardship.

Finally, the Court adopted the magistrate's finding that Chemoil had not waived its right to arbitrate. The Court agreed that Chemoil had properly moved to compel arbitration within the agreement's 90-day time limit, finding that the time limit did not begin to run until Oceanconnect filed suit. To require otherwise, according to Court, would force a party to avoid waiver by demanding arbitration whenever a dispute might arise, rather than when a dispute actually arises.