Klocek v. Gateway

United States District Court, D. Kansas
104 F. Supp. 2d 1332 (2000)

ELI5:

Rule of Law:

Under the Uniform Commercial Code § 2-207, additional terms included in a product's packaging after a contract for sale has been formed are considered proposals for addition to the contract. For a non-merchant buyer, these terms do not become part of the agreement unless the buyer expressly assents to them.

Facts:

William S. Klocek purchased a computer from Gateway, Inc.
Gateway included a copy of its Standard Terms and Conditions Agreement in the box with the computer.
The Standard Terms stated that by keeping the computer for more than five days, the customer accepts the terms.
Paragraph 10 of the Standard Terms contained a clause requiring any disputes to be settled through binding arbitration.
Klocek kept the computer for longer than five days.
A dispute later arose between Klocek and Gateway regarding the computer's performance and promised technical support.

Procedural Posture:

William S. Klocek filed an individual and class action lawsuit against Gateway, Inc. in the United States District Court for the District of Kansas.
Gateway, Inc. filed a motion to dismiss the claims.
Gateway argued that its Standard Terms and Conditions Agreement, which was included with the computer, required Klocek to resolve the dispute through binding arbitration.
The district court considered Gateway's motion to dismiss based on the enforceability of the arbitration agreement.

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Issue:

Does a vendor's inclusion of a standard terms and conditions agreement, containing a mandatory arbitration clause, inside the packaging of a product become a binding part of the sales contract if the consumer keeps the product beyond a specified review period?

Opinions:

Majority - Vratil, District Judge.

No, the vendor's standard terms do not automatically become a binding part of the contract. The court holds that additional terms included in product packaging are proposals that require the consumer's express assent to be incorporated into the contract. The court rejected the reasoning of prior cases like Hill v. Gateway, which held that the vendor is the master of the offer and can dictate that keeping the product constitutes acceptance of its terms. Instead, this court found that in a typical consumer transaction, the buyer is the offeror who offers to purchase a product, and the vendor accepts this offer by shipping the goods, thereby forming a contract. The Standard Terms included in the box are a written confirmation containing additional terms, governed by UCC § 2-207. Because Klocek is not a merchant, these additional terms are construed as proposals for addition to the contract. Gateway provided no evidence that Klocek expressly agreed to these proposals, and his mere retention of the computer does not constitute the express assent required by the UCC.

Analysis:

This decision represents a significant departure from the influential Seventh Circuit's 'terms-in-the-box' jurisprudence established in ProCD and Hill v. Gateway. By applying UCC § 2-207 and treating the consumer as the offeror, the court provides a more consumer-protective framework, requiring affirmative and express assent to post-sale terms. This ruling creates a circuit split on a key issue of contract formation in modern consumer commerce, increasing legal uncertainty for vendors who rely on 'shrinkwrap' or 'box-top' agreements. It reinforces the principle that acceptance cannot be presumed by silence or inaction when a non-merchant is presented with additional terms after a contract has already been formed.

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