Shrink-Wrap Agreements and Browse-Wrap Terms. Mary DeFontes bought a computer and a service contract from Dell Computers Corp DeFontes was charged $950.51, of which $13.51 was identified on the invoice as "tax." This amount was paid to the state of

Question

Rhode Island. DeFontes and other Dell customers filed a suit in a Rhode Island state court against Dell, claiming that Dell was overcharging its customers by collecting a tax on service contracts and transportation costs. Dell asked the court to order DeFontes to submit the dispute to arbitration. Dell cited its "Terms and Conditions Agreement," which provides in part that by accepting delivery of Dell's products or services, a customer agrees to submit any dispute to arbitration. Customers can view this agreement through an inconspicuous link at the bottom of Dell's Web site, and Dell encloses a copy with each order when it is shipped. Dell argued that DeFontes accepted these terms by failing to return her purchase within thirty days, although the agreement did not state this. Is DeFontes bound to the "Terms and Conditions Agreement"? Should the court grant Dell's request? Why or why not?

Answer 1

Shrink-wrap agreements and browse-wrap terms
The court denied Dell's motion to compel arbitration, holding that the "Terms and Conditions Agreement" was invalid. The court reasoned, "Plaintiffs were given the opportunity to read the terms and conditions * * * in the form of a browse-wrap agreement. Specifically, Plaintiffs could have viewed the terms via a hyperlink, inconspicuously located at the bottom of the webpage. * * * [T]his was not sufficient to put Plaintiffs on notice of the terms and conditions of the sale of the computer. As a result, the browse-wrap agreement found on Dell's webpage cannot bind the parties to the arbitration agreement." As for the shrink-wrap copy of the agreement, the court emphasized that no "express disclaimer * * * indicated that if the customer was unwilling to agree to the terms and conditions as presented, the customer could reject those terms by simply returning the product." Just as "the binding effect of a shrink-wrap agreement hinge[s] on whether a reasonable person would have known of the existence of the agreement, * * * the binding effect of the Terms and Conditions Agreement also hinges on whether a reasonable person would have known that return of the product would serve as rejection of those terms. Accordingly, this Court finds that Plaintiffs did not knowingly consent to the terms and conditions of the agreement because they were not given sufficient notice of the method to reject those terms. Therefore, Plaintiffs are not bound by the arbitration clause."