Bayway Refining Co. v. Oxygenated Marketing and Trading A.G.

Bayway (plaintiff) verbally agreed to sell 60,000 barrels of gasoline to OMT (defendant), and after OMT faxed its own confirmation, Bayway faxed back a confirmation incorporating by reference its general terms and conditions, which required the buyer to pay any federal excise tax the seller incurred; OMT never objected to that incorporation. Because OMT was not registered for a tax exemption, Bayway ended up paying $464,000 in federal excise tax on the sale and sued OMT to recover it when OMT refused to pay. OMT argued the tax clause never became part of the contract because it materially altered the deal and its executives were genuinely surprised by it, while Bayway presented evidence that shifting such tax liability to the buyer was standard custom in the petroleum industry. The district court granted summary judgment for Bayway, and OMT appealed.