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Web Terms Are Part Of Printed Contract; Dell Customer Bound By Terms And Conditions Shipped With Computer
November 6, 2007
WEB TERMS ARE PART OF PRINTED CONTRACTA federal trial court in Alabama has ruled that contract terms posted on a Web site become an enforceable part of a printed contract where the printed contract clearly references them. This is the case even if the other party chooses not to review the online terms.
The Alabama case arose from the purchase of conference call services. Conference America Inc., provided services to Conextant Systems Inc. Conextant was a one-time "high volume preferred customer" and as such, received discounted call rates subject to a preferred customer contract. According to that contract’s terms, either party could terminate at any time.
When Conference America exercised the termination option, it gave Conextant the option of continuing services at a "premium" rate. The termination notice explicitly provided that continued services would be subject to terms and conditions available on its Web site. Those terms and conditions included a $74.95 termination fee per account.
Conextant decided to pay the premium rate for approximately 2 weeks, but then terminated all accounts. At that point, Conference America assessed the termination fee, and Conextant refused to pay.
Conextant argued that it had never visited the Web site, and had agreed only to the terms of the preferred user agreement, which did not include any termination fees.
Conextant got no sympathy from the court, however, as it found that the service extension was a new contract governed by the new terms. This new contract arose when Conextant agreed to continue services for 15 days. In doing so, the court found, the Conextant was making an offer to buy a set amount of services at a higher rate and subject to new terms.
The court also determined that the Web terms governed the contract. Conextant’s failure to review the terms didn’t work as a defense. According to the court, "As a sophisticated business, its failure to read the 'fine print' is a poor excuse, and a legally insufficient one." The court was not swayed by Conextant’s argument that it’s failure to click the "I agree" icon freed it from the online terms. According to the court, the "I agree" acknowledgement only covered new accounts. None of Conextant’s accounts were new.
While courts may be sympathetic to a "fine print" defense offered by a retail customer, that argument is much less likely to succeed in a business to business context.
DELL CUSTOMER BOUND BY TERMS AND CONDITIONS SHIPPED WITH COMPUTER
Where a computer manufacturer seller spells out terms and conditions on its Web site and includes those terms and conditions in printed form inside the computer's shipping container, those provisions bind the purchaser, according to a recent ruling from a New Mexico appellate.
The case arose when a Dell customer was unhappy with a computer he’d purchased from the Texas company. When the customer sued in state court for breach of contract, Dell moved to dismiss, arguing that the customer had agreed to submit disputes to binding arbitration.
The trial court agreed with Dell, and dismissed the case. On appeal, the customer argued that he was unaware of the arbitration clause, and had never agreed to it. He said he’d never noticed the link to the terms and conditions on Dell’s Web site, and he’d never noticed the printed agreement in his computer box.
That argument didn’t compute for the court. It identified several opportunities for the customer to have noticed the terms. In the first place, Dell had included a conspicuous link to its terms and conditions on each page of the Web site. This made the terms immediately visible before Dell delivered any product.
But while the court discussed the Web site’s terms and conditions, it focused more intently on the printed form included in the shipping box. That form sealed the deal for the court because it was clear from the terms that accepting the shipment constituted acceptance of all terms, including the arbitration agreement. The nature of the of the transaction – an online purchase played a critical role in the court’s decision. It noted "[w]hen an item, such as a computer, is purchased over the phone or on the Internet, a consumer should reasonably expect that certain terms and conditions will accompany the purchase."
The court also denied the customer’s argument that the arbitration clause was unconscionable. According to the court, the customer could have purchased the computer from another vendor if he wanted to avoid the arbitration clause. That power to choose meant that the clause was not unconscionable.
And the fact that Dell was not required to arbitrate claims against the customer did not invalidate the provision. Neither Texas law, which the contract designated as controlling law, nor New Mexico law, the location of the suit, required mutuality of obligations.
Given the state of New Mexico law on unconscionabilty, it would have been very tough for the customer to prevail on that claim. In New Mexico, unconscionability requires that the terms of the contract be such "as no man in his senses and not under delusion would make on the one hand, and ... no honest and fair man would accept on the other." Here, the customer couldn’t meet that burden.
The New Mexico Supreme Court has indicated that it will review the case. So it’s not over yet. Not all courts have been as seller friendly as the New Mexico courts. And Dell may have avoided the argument had it required the customer to acknowledge, via a mouse click, that he’d read and accepted the terms and conditions.
This Newsletter is a periodic publication of Graydon Head & Ritchey LLP and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult your own advisor concerning your situation and any specific legal question you may have.