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Friday, March 25, 2016

Ind. Decisions - 7th Circuit decides interesting online contract case, using Illinois law

Gary Sgouros v. TransUnion Corporation (ND Ill.), a 13-page opinion today by Chief Judge Wood, has several interesting elements to it. Some quotes:

Hoping to learn about his creditworthiness, Gary Sgouros purchased a “credit score” package from the defendant, TransUnion. Armed with the number TransUnion gave him, he went to a car dealership and tried to use it to negotiate a favorable loan. It turned out, however, that the score he had bought was useless: it was 100 points higher than the score pulled by the dealership. Believing that he had been duped into paying money for a worthless number, Sgouros filed this lawsuit against TransUnion. In it, he asserts that the defendant violated various state and federal consumer protection laws.

Rather than responding on the merits, however, TransUnion countered with a motion to compel arbitration. It asserted that the website through which Sgouros purchased his product included (if one searched long enough) an agreement to arbitrate all disputes relating to the deal. The district court concluded that no such contract had been formed and denied TransUnion’s motion. TransUnion has appealed from that decision, but we agree with the district court and affirm its order. * * *

The present case, the parties agree, is governed by Illinois law. In Illinois, as in many states, the law governing the formation of contracts on the Internet is still in the early stages of development. But there is no reason to think that Illinois’s general contract principles do not apply. Formation of a con-tract requires mutual assent in virtually all jurisdictions; Illinois courts use an objective approach to that question. * * *

Generally, a party who signs a written contract is presumed to have notice of all of the contract’s terms. Janiga, 615 F.3d at 743. The trick here is to know how to apply these general principles to newer forms of contracting. In the context of cruise-ship tickets, which present problems similar to those of agreements formed on the Internet, Illinois courts have applied a “two-part ‘reasonable communicativeness’ test,” under which they ask “(1) whether the physical characteristics of the ticket reasonably communicate the existence of the terms and conditions at issue” and “(2) whether the circumstances surrounding the passenger’s purchase and subsequent retention of the tickets permitted the passenger to become meaningfully informed of its contractual terms.” Walker v. Carnival Cruise Lines, Inc. * * * Translated to the Internet, we might ask whether the web pages presented to the consumer adequately communicate all the terms and conditions of the agreement, and whether the circumstances support the assumption that the purchaser receives reasonable notice of those terms. This is a fact-intensive inquiry: we cannot presume that a person who clicks on a box that appears on a computer screen has notice of all contents not only of that page but of other content that requires further action (scrolling, fol-lowing a link, etc.) Indeed, a person using the Internet may not realize that she is agreeing to a contract at all, whereas a reasonable person signing a physical contract will rarely be unaware of that fact. We need, therefore, to look more closely at both the law and the facts to see if a reasonable person in Sgouros’s shoes would have realized that he was assenting to the Service Agreement when he clicked “I Accept & Continue to Step 3.” * * *

But what cinches the case for Sgouros is the fact that TransUnion’s site actively misleads the customer. The block of bold text below the scroll box told the user that clicking on the box constituted his authorization for TransUnion to obtain his personal information. It says nothing about contractual terms. No reasonable person would think that hidden within that disclosure was also the message that the same click constituted acceptance of the Service Agreement.

Where the terms are not displayed but must be brought up by using a hyperlink, courts outside of Illinois have looked for a clear prompt directing the user to read them. * * * No court has suggested that the presence of a scrollable window containing buried terms and conditions of purchase or use is, in it-self, sufficient for the creation of a binding contract, and we have no reason to think that Illinois would be the first.

TransUnion undid whatever notice it might have been furnishing in its bold text block by explicitly stating that a click on the button constituted assent for TransUnion to obtain access to the purchaser’s personal information. That text distracted the purchaser from the Service Agreement by in-forming him that clicking served a particular purpose unrelated to the Agreement. * * *

Illinois contract law requires that a website provide a us-er reasonable notice that his use of the site or click on a but-ton constitutes assent to an agreement. This is not hard to accomplish, as the enormous volume of commerce on the Internet attests. A website might be able to bind users to a service agreement by placing the agreement, or a scroll box containing the agreement, or a clearly labeled hyperlink to the agreement, next to an “I Accept” button that unambiguously pertains to that agreement. There are undoubtedly other ways as well to accomplish the goal. Somehow or other, however, TransUnion needed to get the message through to the site user that purchasing a consumer credit score means agreeing to the Service Agreement. It failed to do so in this case, and so we agree with the district court that no agreement that included an arbitration clause arose between TransUnion and Sgouros. We therefore AFFIRM the order of the district court denying TransUnion’s motion to send this case to arbitration and return the case to the district court for further proceedings.

Posted by Marcia Oddi on March 25, 2016 05:55 PM
Posted to Ind. (7th Cir.) Decisions