De Fontes v. Dell, Inc. - Brief PDF

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Electronic and “Layered” Contracting

DeFontes [plaintiff] v. Dell, Inc. COURT AND DATE: Supreme Court of Rhode Island (2009) PROCEDURAL HISTORY: Trial Court: Found that defendants couldn’t prove that plaintiffs knowingly consented to the terms and conditions of the agreement. Also found that plaintiffs couldn’t be compelled to enter arbitration. Denied the defendants’ motion to stay the proceeding and compel arbitration. Class action wins. Dell appeals.

ISSUE: Will a customer be bound by an arbitration clause in a “shrinkwrap” agreement? TRIGGER FACTS: Mary DeFontes brought a class action suit on behalf of purchasers (plaintiffs) of Dell computers and service contracts. The defendants moved to stay the proceedings and compel arbitration as required by the terms and conditions agreement. The agreement specifically provided that by accepting delivery, the purchaser agreed to all terms. The document did not state that the purchaser could reject the terms by returning the computer, but did provide that the customer could return the computer if not satisfied.

PLAINTIFF’S MAIN ARGUMENTS: The plaintiffs argued that Dell Computer Corporation (Dell), its subsidiaries, and service providers (defendants) improperly collected a tax on the service contracts.

DEFENDANT’S MAIN ARGUMENTS: Dell argued that the plaintiffs could have reviewed the terms on the website, the invoice, or in the packaging.

RULE (the law): Under the Uniform Commercial Code, additional terms in a shrinkwrap agreement will only become part of the contract for the sale of goods if the agreement explicitly provides that the consumer can reject the terms by returning the goods. A contract is formed when: 1. Customer decides to keep a product after being presented terms and conditions 2. Customer expressly informed of the option to reject the additional terms by returning the product.

HOLDING + REASONING: No. A purchaser of goods will only be bound by additional terms in a shrinkwrap agreement if the agreement makes clear that the purchaser can reject the terms by returning the goods. In ProCD, a software purchaser was bound by the shrinkwrap agreement included in the packaging and appearing onscreen when the purchaser used the

Electronic and “Layered” Contracting software. The court held that a seller could invite acceptance by conduct, and “[a] buyer may accept by performing the acts the vendor proposes to treat as acceptance.” Id. Subsequent cases expanded this rule to other types of products. Hill v. Gateway 2000, Inc., 105 F.3d 1147 (7th Cir.1997). Basically, when a product is delivered with a shrinkwrap agreement, additional terms become part of the contract, provided the agreement expressly gives the consumer the right to reject by returning the product for a refund in a reasonable time. It is unreasonable to expect a seller to inform a consumer of every term at the moment of a purchase. Formation is complete once the purchaser accepts the terms after a reasonable time to reject. This is the “layered contracting” theory of formation, but the seller must nevertheless prove that the buyer accepted the shrinkwrap terms. Here, neither the terms and conditions agreement nor the satisfaction policy made clear that the plaintiffs could reject the terms by returning the computers. Thus, the consumers' right to reject the terms by returning the computer was not reasonably apparent. Thus, the judgment of the trial court is affirmed....