Hill v. Gateway 2000, Inc. – Case Brief Summary
Summary of Hill v. Gateway 2000, Inc., 105 F.3d 1147 (7th Cir. 1997).
Hill (P) ordered a computer from Gateway (D) by phone. The customer service representative did not read the terms and conditions of the sale. Hill received a box containing the computer and the terms that would govern the transaction unless Hill returned the computer within thirty days, including an arbitration clause.
Hill was dissatisfied with the purchase and filed suit in federal court. The district court refused Gateway’s request that it honor the arbitration clause, holding that the record did not support a finding of a valid arbitration agreement, or that Hill had adequate notice of the arbitration clause. Gateway took an immediate appeal.
1) In order for an arbitration clause to be valid, must the purchaser receive notice of the clause apart from the terms and conditions of sale included in a box, or must the clause be otherwise prominent or stand out? 2) Does an allegation that an arbitration clause is part of a scheme to defraud render that clause unenforceable?
Holding and Rule
1) No. In order for an arbitration clause to be valid, the purchaser need not receive notice of the clause apart from the terms and conditions of sale included in a box, and the clause need not be otherwise prominent or stand out. 2) No. An allegation that an arbitration clause is part of a scheme to defraud does not render that clause unenforceable.
The court held that the enforceability of an arbitration clause is determined on the same basis as any other contract clause. A contract need not be read to be effective. The terms included in the box stand or fall together – if the terms constitute the contract between the parties then all must be enforced.
The court held that UCC 2-207(2) only applies where there is a battle of the forms, and that it did not apply in this case because there was only one form.
Vacated and remanded with instructions to compel Hill to submit to arbitration.
This case follows the same logic as the “shrinkwrap license” cases (see ProCD, Inc. v. Zeidenberg). Shrinkwrap license agreements typically involve notice of the agreement on the product packaging, inclusion of the full terms of the agreement inside the packaging, and prohibit access to the product absent an express indication of acceptance. Under such cases the contract does not form at the time of purchase; generally it forms when the purchaser makes the express indication of acceptance, for example by declining to return the product within a specified period of time.
See Klocek v. Gateway, Inc. for another contract law case brief involving a lawsuit against Gateway involving a shrinkwrap license agreement.