Gary Sgouros v. TransUnion Corporation
2016 WL 1169411, 2016 U.S. App. LEXIS 5648, 817 F.3d 1029 (2016)
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Rule of Law:
For an online contract to be enforceable, the website's layout and language must provide the user with reasonable notice of the terms and of the fact that their click will constitute assent. A website fails to provide such notice if the terms are inconspicuous and the acceptance language directs the user's attention to a different, unrelated consequence of their click.
Facts:
- Gary Sgouros visited TransUnion's website to purchase a “3-in-1 Credit Reports, Credit Scores & Debt Analysis” package.
- The purchase required a multi-step process online.
- On the second step of the process, the webpage included a small, rectangular scroll window containing a 10-page 'Service Agreement.'
- Only the first few lines of the Service Agreement were visible without scrolling, and the agreement contained an arbitration clause buried on page eight.
- Below the scroll window, a paragraph in bold text stated: 'You understand that by clicking on the ‘I Accept & Continue to Step 3’ button below, you are providing ‘written instructions’ ... authorizing TransUnion Interactive, Inc. to obtain information from your personal credit profile...'
- Sgouros clicked the 'I Accept & Continue to Step 3' button to complete his purchase.
- After the purchase, Sgouros discovered the credit score provided by TransUnion was approximately 100 points higher than the score used by a car dealership, rendering it useless for his purpose.
Procedural Posture:
- Gary Sgouros filed a putative class action lawsuit against TransUnion in the U.S. District Court.
- Sgouros's complaint alleged violations of the Fair Credit Reporting Act as well as Illinois and Missouri consumer fraud statutes.
- In response, TransUnion filed a motion to compel arbitration, citing a Service Agreement allegedly formed during Sgouros's online purchase.
- The district court denied TransUnion's motion to compel arbitration, concluding that no valid agreement had been formed.
- TransUnion, as the appellant, appealed the district court's interlocutory order to the U.S. Court of Appeals for the Seventh Circuit, with Sgouros as the appellee.
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Issue:
Does a user's click of an 'I Accept' button on a website form a binding contract to arbitrate when the arbitration clause is located in a scroll box with only a few lines visible, and the text accompanying the button states that the click serves a specific, unrelated purpose of authorizing a credit information pull?
Opinions:
Majority - Wood, Chief Judge
No. Clicking the 'I Accept' button did not form a binding contract to arbitrate because the website failed to provide reasonable notice that the click would constitute assent to the Service Agreement. Under Illinois contract law, formation requires mutual assent, which is judged by an objective 'reasonable communicativeness' test. The court found that TransUnion's website failed this test because the contractual terms were buried in an inconspicuous scroll box, and, more importantly, the bolded text immediately preceding the acceptance button actively misled the user. By stating that the click's purpose was solely to authorize a credit pull, TransUnion distracted the user from the separate and unmentioned consequence of assenting to the Service Agreement, thereby preventing a meeting of the minds.
Analysis:
This decision clarifies the 'reasonable notice' standard for the formation of 'clickwrap' agreements, emphasizing that the context and presentation of the acceptance mechanism are critical. It establishes that a website's design can actively undermine contract formation by misleading or distracting the user about the consequences of their click. The ruling places a heightened burden on online vendors to ensure their user interface makes it unambiguously clear that a user's action signifies assent to specific terms, rather than serving another, more limited function. This precedent makes it harder for companies to enforce terms that are technically available but not presented in a clear, direct, and non-deceptive manner.
