Seventh Circuit Declines to Enforce Arbitration Provision

In Sgouros v. TransUnion Corp., the Seventh Circuit recently declined to compel arbitration because the defendant’s website failed to clearly inform users that they were agreeing to arbitrate their claims.  Judge Wood, writing for the majority and interpreting Illinois contract law, framed the analysis:

we might ask whether the web pages presented to the consumer adequately communicate all the terms and conditions of the agreement, and whether the circumstances support the assumption that the purchaser receives reasonable notice of those terms.  This is a fact-intensive inquiry: we cannot presume that a person who clicks on a box that appears on a computer screen has notice of all contents not only of that page but of other content that requires further action (scrolling, following a link, etc.) Indeed, a person using the Internet may not realize that she is agreeing to a contract at all, whereas a reasonable person signing a physical contract will rarely be unaware of that fact. We need, therefore, to look more closely at both the law and the facts to see if a reasonable person … would have realized that he was assenting to the [agreement]….”

Ultimately, the court held that TransUnion had failed to ensure consumers “would see the critical language before signifying [their] agreement.”  The court noted in particular that while a block of bold text told users that clicking on the box constituted their authorization, it said nothing about contractual terms.  Judge Wood summed it up:

No court has suggested that the presence of a scrollable window containing buried terms and conditions of purchase or use is, in itself, sufficient for the creation of a binding contract, and we have no reason to think that Illinois would be the first.