Klocek v. Gateway, Inc. – Case Brief

Klocek v. Gateway, Inc., 104 F. Supp. 2d 1332 (D. Kan. 2000).

Facts: Klocek (P) brought a class action suit against Gateway (D), alleging that it had made misrepresentations regarding technical support in efforts to induce him and others to purchase computers and special support packages. Klocek also brought breach of contract and breach of warranty claims, alleging that Gateway had claimed that their computers would be compatible with standard peripherals and internet services.

Each Gateway computer shipped with a document referred to as the Standard Terms in the box containing the instruction materials and cables. The Standard Terms provided that all claims would be settled through arbitration. The Standard Terms contained a notice on the first page stating that by keeping the computer for more than five days the user accepts the Terms as the binding agreement between the parties.

Gateway moved to dismiss under the Federal Arbitration Act (FAA) which ensured that written arbitration agreements in transactions involving interstate commerce are valid, irrevocable, and enforceable. Under the FAA, if any suit is brought on any issue covered by an arbitration clause the court, on motion by one of the parties, must stay the trial until the conclusion of arbitration proceedings.

Klocek in turn argued that the provisions of the Standard Terms were not binding. Klocek argued that his order of the computer constituted an offer and therefore the Standard Terms were either an expression of acceptance or written confirmation of the offer governed by Section 2-207 of the UCC.

The trial court denied Gateway’s motion to dismiss and Gateway appealed.

Issues: 1) Under UCC § 2-207, must the seller prove sufficient evidence of notice and assent to the terms at the time of purchase in order for a shrinkwrap license to be binding? 2) Can UCC 2-207 be applicable if only one form is exchanged between the parties?

Holding and Rule: 1) Yes. Under UCC § 2-207, the seller prove sufficient evidence of notice and assent to the terms at the time of purchase in order for a shrinkwrap license to be binding. 2) Yes. UCC 2-207 can be applicable if only one form is exchanged between the parties.

UCC § 2-207 may apply even if there is only one form involved in the transaction. The official comment to the section specifically provides that sections 2-207(1) and (2) apply where an agreement has been reached orally and is followed by one or both of the parties sending formal memoranda embodying the terms so far agreed and adding terms not discussed.

In typical consumer transactions the purchaser is the offeror and the seller is the offeree. Klocek offered to purchase the computer and Gateway accepted. Under UCC § 2-207, the Standard Terms constitute either an expression of acceptance or written confirmation. The Terms would constitute a counter-offer only if Gateway expressly made its acceptance conditional on Klocek’s assent to the additional or different terms.

Additional or different terms contained in the Standard Terms did not become part of the agreement because Gateway has not presented evidence that Klocek expressly agreed to the Standard Terms. That he kept the computer for more than five days is not sufficient to demonstrate that he expressly agreed to the Standard Terms.

Disposition: For Klocek. Gateway’s motion to dismiss denied.

Notes: In typical consumer contracts the offeror is the purchaser and the offeree is the seller. The court held that the contract formed at the time of the order and not five days after receipt of the computer. The terms that shipped with the computer were therefore not part of the bargain and the arbitration clause was not enforceable in light of UCC § 2-207.

See Harvey v. Facey for a contract law case brief addressing the issue of whether a mere statement of a minimum selling price constitutes an offer.


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