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Obscure Online Agreements: Not Effective or Enforceable

When an online contract is obscurely hidden and referred to as a service agreement, the arbitration clause is not enforceable because the consumer did not agree to the contract and, as result, the contract does not obligate the parties to arbitrate disputes. Sgouros v.  TransUnion Corp., Case No.  15-1371 (7th Cir.  March 25, 2016) (Available Here).

In this Seventh Circuit Court of Appeals case, the consumer purchased a credit score package from defendant TransUnion.  The consumer then went to a car dealership to negotiate a favorable loan but discovered that his credit score was 100 points higher than the score pulled by the dealership.  The consumer sued TransUnion and TransUnion pointed to the online contract which required arbitration of all disputes.  The District Court held that no contract had been formed and denied the motion for arbitration.

In more detail, the consumer purchased, for approximately $40, a 3-in-1 credit report, credit score and debt analysis.  The consumer was required to take three steps.  The first page transferred the consumer to a page entitled “free credit score and one dollar credit report.” In the next step, the consumer furnished some identifying information.  In the following step, the consumer created an account with TransUnion.  Then, the consumer indicated whether the home address was the same as the billing address.  Below these yes/no bubbles, was a rectangular scroll window and inside the window contain the words “Service Agreement.” Only part of the agreement was illustrated and the rest was blurred.  There was a small hyperlink word identified as “printable version.” Below the words in bold text “you understand that by clicking on the I asked that I accept and continue step three button below, you are providing written instructions to TransUnion Interactive, Inc.  authorizing…”.

The consumer clicked on the I ACCEPT button and continued to step three button.

The court noted that there was no requirement that the consumer click on the scroll box or scroll down to view its complete content.  The arbitration clause was buried at page 8 of the full 10 page printable version of the service agreement.

The consumer sued TransUnion indicating that under Missouri law, TransUnion was misleading customers by failing to inform them that the formula used to calculate their purchase credit scores was materially different from the formula used by lenders.

TransUnion argued that courts around the country recognized this type of click-on agreement to provide enforceable contract.  However, the Court cited several cases that were contrary to TrasnUnion’s position.  Specht v.  Netscape Comm’ns Corp., 306 F.3d 17, 23 (2nd Cir.  2002)(no binding contract for click-on agreement for free software); Hancock v.  Am.  Tel. & Tel.  Co., 701 F.3d 1248, 1257 (10th Cir.  2012)(a valid agreement formed under Florida and Oklahoma law where the user was required to scroll down to the end of the online agreement and click-on an “I Accept” button); Feldman v.  Google, Inc.  513 F.  Supp.  2d 229, 236 (E.D. Pa.  2007)(a binding agreement formed when the agreement was visible and, in bold print, prompted the user to read the agreement and noted that, by clicking on the I ACCEPT button, the user was bound by the terms of service).

The Court of Appeals noted that it is a fact intensive inquiry to determine whether the parties mutually assented to the formation of the contract.  In a case involving Dell Corporation, Hubbert v.  Dell Corp., 835 N.E.2d 113 (Ill.  Ct.  App.  2005), an online purchase of a computer was agreed to based upon Dell’s terms of service which included an arbitration clause.  All five pages required to complete the purchase contained a visible hyperlink labeled “terms and conditions of sale.” Additionally, the online forms stated “all sales are subject to Dell’s terms and conditions of sale.” The court in the Dell case considered the hyperlinked pages to be the same as pages in a physical contract.  It concluded that the statement indicating that the sales were subject to the terms of service combined with the hyperlinks was sufficient to place a reasonable person on notice that there were terms and conditions attached to the purchase and that it would be wise to find out what the terms and conditions were before making a purchase.

In the present case, the Court noted that the TransUnion webpages which the consumer completed contained no clear statement that his purchase was subject to any terms and conditions of sale.  The scroll box contain the visible words “service agreement” but said nothing about what the agreement regulated.  The service agreement was not labeled “terms of use” or “purchase” or “service agreement”.

“But what clinches the case for [the consumer] is the fact that TransUnion’s site actively misleads the customer.  The block of bold text next to the scroll box told the user that clicking on the box constituted his authorization for TransUnion to obtain his personal information.  It says nothing abo contractual terms.” A similar case found no contract formed under Washington state law.  Lee v.  Intelius Inc., 737 F.3d 1254 (9th Cir.  2013).

As a result, the Court of Appeals agreed with the U.S. District Court and confirmed that no contract had been agreed to by the consumer and therefore the arbitration clause was not effective.

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