Quick Summary
Rich and Enza Hill (the plaintiffs) purchased a computer from Gateway 2000, Inc. (the defendant) with an arbitration clause in the written agreement. They kept the computer beyond the 30 days return period without rejecting the agreement and then filed a lawsuit in federal court alleging RICO violations against Gateway.
The district court denied Gateway’s request to compel arbitration due to inadequate notice of the clause. The plaintiffs moved for class certification based on all customers purchased from Gateway, but the Supreme Court held that they failed to meet the criteria for class certification.
The court also ruled that a purchaser can be bound to a U.C.C. agreement on the product packaging if they have time to review and reject it. In conclusion, the consumer is bound by terms included in product packaging if they can review and reject it.
Rule of Law
To certify a class, the representative plaintiff’s claims must be typical of the class. This includes arising from the same event and establishing the elements of each class member’s claims when proving their own. Under U.C.C., a purchaser may be bound to terms included in product packaging if they can review and reject it.
Facts of the Case
Rich and Enza Hill (the plaintiffs) ordered a computer from Gateway 2000, Inc. (the defendant). The company shipped the product with a written agreement that had an arbitration clause. However, the Hills kept the computer beyond the 30 days return period without rejecting the agreement. Later, they filed a lawsuit in federal court alleging RICO violations against Gateway.
The district court denied Gateway’s request to compel arbitration because it found no valid agreement between the parties and that the Hills had inadequate notice of the clause.
The plaintiffs then moved for class certification based on all customers purchased from Gateway. They argued that the corporation had violated various consumer laws and breached its contract with customers by inserting clauses to prevent consumers from seeking judicial redress.
The defendant opposed this motion, arguing that the customers failed to meet the requirements for class certification. The case was appealed to the Supreme Court.
Issue
Did plaintiffs meet the criteria for class certification? Can a purchaser be bound to a U.C.C. agreement on the product packaging if they have time to review and reject it?
Holding and Conclusion
No.
The plaintiffs failed to meet the criteria for class certification, and a purchaser can be bound to a U.C.C. agreement on the product packaging if they have time to review and reject it. The court held that a contract could be effective even if it is not read. Additional terms included in a box shipped by the seller become a part of the contract between the two parties, even if the buyer is unaware of the additional terms. The consumer is bound by the terms of an agreement included with a product once the consumer has had an opportunity to open the package, review the terms and reject the terms by returning the product.
Furthermore, Hills had accepted Gateway’s offer and were bound by the agreement, including the arbitration provision, as they had kept the computer for more than 30 days without returning it.
Reasoning and Analysis
The (Plaintiffs) kept the computer for over 30 days without returning it, which meant they accepted Gateway’s offer and were bound by the agreement, including the arbitration provision. This ruling was based on the Uniform Commercial Code (U.C.C.), which also applied in the ProCD Inc. v. Zeidenberg (1996) case, where the court found that a purchaser of a software program was bound by the agreement included in the software even if they did not read it.
Relevant FAQs of this case
What is an arbitration clause, and how does it affect a customer's ability to sue a company?
An arbitration clause is a contractual provision that requires disputes between the parties to be resolved through arbitration, rather than through the court system. This can affect a customer’s ability to sue a company because it limits their access to the court system and may make it more difficult for them to obtain a favorable outcome. Additionally, arbitration may be more expensive and time-consuming than a court proceeding, and may not provide the same rights and protections as a court trial.
- For Example: A customer who signed a contract with an arbitration clause after purchasing a defective product would be required to pursue their claim through arbitration, rather than through the court system.
What is the role of the Uniform Commercial Code (U.C.C.) in contract law?
The Uniform Commercial Code (U.C.C.) is a set of model laws developed to standardize commercial transactions across the United States. The U.C.C. governs a wide range of commercial transactions, including the sale of goods, leases, and negotiable instruments. In contract law, the U.C.C. provides default rules and standards for contracts involving the sale of goods, such as warranties, delivery, and payment terms. The U.C.C. also provides rules for how contracts are formed, interpreted, and enforced, and establishes requirements for written contracts and electronic communications.
- For Example: A seller who ships a product with a warranty that meets the U.C.C. requirements would be protected by the default rules of the U.C.C. in the event of a dispute over the warranty.
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