105 F.3d 1147 (7th Cir. 1997)
Rich and Enza Hill ordered a computer from Gateway 2000 by telephone, providing a credit card number for payment.1 A box containing the computer along with a list of terms arrived at their residence.2 The Hills kept the computer more than thirty days before complaining about its components and performance.34
The Hills filed suit in federal court.5 They argued that the product's shortcomings make Gateway a racketeer, with mail and wire fraud as the predicate offenses, and sought treble damages under RICO for themselves and a class of all other purchasers.67 Gateway asked the district court to enforce an arbitration clause contained in the list of terms.8 The district court refused enforcement, writing that the present record is insufficient to support a finding of a valid arbitration agreement between the parties or that the plaintiffs were given adequate notice of the arbitration clause.910
Gateway took an immediate appeal.11 The Hills concede that they noticed the statement of terms but deny reading it closely enough to discover the agreement to arbitrate.1213 The box from Gateway was crammed with software, including an operating system without which the computer was useful only as a boat anchor, as well as many application programs.14 Gateway's advertisements state that their products come with limited warranties and lifetime support.15
Whether the arbitration clause and other terms enclosed in the box with the computer formed part of the contract between the Hills and Gateway?16
The Federal Arbitration Act provides that an agreement to arbitrate must be enforced save upon such grounds as exist at law or in equity for the revocation of any contract.17 A contract need not be read to be effective; people who accept take the risk that the unread terms may in retrospect prove unwelcome.18 Under the approach approved in ProCD, a vendor may invite acceptance by conduct and may propose limitations on the kind of conduct that constitutes acceptance.19 A buyer may accept by performing the acts the vendor proposes to treat as acceptance. Terms inside a box bind consumers who use the product after an opportunity to read the terms and to reject them by returning the product.20
Yes. Rich and Enza Hill ordered a computer from Gateway 2000 by telephone, providing a credit card number for payment.21 A box containing the computer along with a list of terms arrived at their residence. The Hills kept the computer more than thirty days before complaining about its components and performance.
The Hills filed suit in federal court. They argued that the product's shortcomings make Gateway a racketeer, with mail and wire fraud as the predicate offenses, and sought treble damages under RICO for themselves and a class of all other purchasers. Gateway asked the district court to enforce an arbitration clause contained in the list of terms. The district court refused enforcement, writing that the present record is insufficient to support a finding of a valid arbitration agreement between the parties or that the plaintiffs were given adequate notice of the arbitration clause.
Gateway took an immediate appeal. The Hills concede that they noticed the statement of terms but deny reading it closely enough to discover the agreement to arbitrate. The box from Gateway was crammed with software, including an operating system without which the computer was useful only as a boat anchor, as well as many application programs. Gateway's advertisements state that their products come with limited warranties and lifetime support.
The rule from the Federal Arbitration Act and from ProCD applies directly to these facts because the Hills had an opportunity to return the computer after reading the terms and chose instead to retain it beyond the thirty-day period.22 Their conduct constituted acceptance of all terms in the box, including the arbitration clause.23 The district court therefore erred when it declined to enforce the clause on grounds of insufficient notice or formation.24 Arguments seeking to confine ProCD to software transactions, to merchants, or to executory contracts fail because the formation principle is general and the Hills' retention of the computer supplied the required acceptance by conduct regardless of their status or the degree of performance already rendered by Gateway.25
The arbitration clause and other terms enclosed in the box formed part of the contract between the Hills and Gateway, so the district court's refusal to enforce arbitration must be vacated and the case remanded with instructions to compel arbitration.26