DeFontes v. Dell, Inc.
984 A.2d 1061 (2009)
Rule of Law:
For a seller's post-purchase 'shrinkwrap' terms and conditions to be contractually binding on a consumer, the seller must provide clear and unambiguous notice that the consumer can reject the terms by returning the product.
Facts:
- Nicholas Long and Julianne Ricci purchased computers and optional service contracts from Dell.
- Dell collected taxes from Long and Ricci on the service contracts, which the plaintiffs later disputed as improper.
- Inside the packaging of the computers, Dell included a 'Terms and Conditions Agreement' document.
- The agreement stated that by 'accepting delivery' of the computer, the customer agrees to be bound by its terms, including a mandatory arbitration clause.
- The version of the agreement sent to Long and Ricci did not contain an explicit provision stating that they could reject the terms by returning the computer.
- The agreement referred to a separate 'Total Satisfaction Return Policy' but did not clearly link that policy to the act of rejecting the contractual terms.
Procedural Posture:
- Mary DeFontes, later substituted by Julianne Ricci, and Nicholas Long filed a putative class-action lawsuit against Dell and related entities in Rhode Island Superior Court (trial court).
- The defendants filed a motion to stay proceedings and compel arbitration, citing an arbitration clause in the 'Terms and Conditions Agreement' provided with the purchased computers.
- The Superior Court justice denied the defendants' motion, concluding that no valid agreement to arbitrate had been formed.
- The defendants (appellants) appealed the denial of their motion to the Supreme Court of Rhode Island.
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Issue:
Does a consumer's retention of a product constitute acceptance of a shrinkwrap agreement included in the packaging if the agreement fails to clearly and conspicuously state that the consumer can reject the terms by returning the product?
Opinions:
Majority - Chief Justice Williams (ret)
No, a consumer's retention of a product does not constitute acceptance of a shrinkwrap agreement if the terms do not clearly inform the consumer of their right to reject by returning the product. While the court adopts the 'layered contracting' approach where a contract can be formed after a consumer receives a product and has an opportunity to review the terms, the burden is on the seller to prove the consumer's acceptance. Here, Dell's agreement failed to make it reasonably apparent to the plaintiffs that they could reject the terms by returning the goods. The language was ambiguous, required too many 'inferential steps,' and failed to explicitly connect the 'Total Satisfaction Return Policy' with the act of rejecting the contract. Therefore, no binding agreement to arbitrate was formed.
Analysis:
This decision refines the widely accepted 'layered contracting' framework established in cases like ProCD v. Zeidenberg by placing a significant burden of clarity on the seller. It signals to companies using shrinkwrap or browsewrap agreements that enforceability depends on explicit and unambiguous notice regarding the method of acceptance and rejection. The ruling provides a crucial consumer protection limitation on post-purchase terms, requiring sellers to draft consumer-facing agreements with a high degree of precision to ensure the formation of a valid contract. This holding will likely influence how courts in other jurisdictions scrutinize the language of such agreements, particularly the connection between a product return policy and the rejection of contractual terms.
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