It is uncontroversial to posit that most people sign far more contracts online than the time-honored method, ubiquitous during the pre-Internet era, of putting pen to paper. Given the dissimilarities between signing a contract online, with its hyperlinks, scroll boxes and assent buttons, and in person with a Bic, a veritable flood of case law as to the legality of an online contract has arisen. Since one of the earliest and most notable decisions in the Second Circuit in 2002, courts nationwide have tried to square the circle as to the problem of when and why a user has manifested objective assent to be bound to online terms and conditions. The Seventh Circuit has confronted this issue on numerous occasions, and it did yet again in a decision issued last week in Sgouros v. TransUnion Corp., No. 15-1371 (7th Cir. Mar. 25, 2016). The decision may stand out though, as the judge held that the website that used the terms and conditions were not only clumsy drafters, but may have intended to mislead the user.


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Gary Sgouros (plaintiff) purchased a "credit score" package from TransUnion (defendant). The purchase entailed a three-step process involving the use of the defendant's website. After first clicking the button under the heading "Get Your Credit Score & Report," the plaintiff was directed to a page to input personal information for identity verification purposes. Step 2 had the plaintiff creating an account with TransUnion and entering payment details. Below the questions was a scroll window which read "Service Agreement" (the Agreement) across the top.

The scroll window included language about the Agreement, and how it constituted "the terms and conditions" upon which the plaintiff would be bound when using the site. Under the scroll window and to the right was the small hyperlinked words "Printable Version." "Buried" on page 8 of the printable version of the Agreement was an arbitration clause and class action waiver. As a final gesture before proceeding to step 3, Sgouros was required to click a button labeled "I Accept & Continue to Step 3." What Sgouros accepted was delineated in a bolded paragraph immediately above the button, which stated in relevant part that, by clicking the button, he was providing "written instructions … authorizing [defendant[ to obtain from your personal credit profile from [the three main credit bureaus."

The plaintiff clicked the button. Prior to manifesting the assent, plaintiff did not have to click on the scroll window, nor "or to scroll down view the complete contents of the arbitration agreement." With the number he received from TransUnion in tow, he went to a car dealership and tried to use it to negotiate an advantageous car loan. It then emerged that the number the plaintiff had been given from the defendant was useless insofar as it was 100 points higher than the score acquired by the dealership.

The plaintiff then filed a suit against TransUnion under various state (Missouri and Illinois) and federal consumer protection laws, including the Fair Credit Reporting Act, 15 U.S.C. § 1681g(f)(7)(A). TransUnion moved to compel arbitration pursuant to the Agreement and the court took jurisdiction under the Federal Arbitration Act, 9 U.S.C. § 16(a)(1)(B).

Analysis and Legal Conclusions

In reviewing the Agreement de novo and applying Illinois law, Chief Judge Diane Wood held the arbitration clause unenforceable under "general contract principles." She first acknowledged that a click can signify assent to a contract. She then analogized the interpretation of the Agreement to that of cruise-ship tickets, the validity of such are subject to the two-part "reasonable communications" test, which inquires (1) whether the physical characteristics of the ticket reasonably communicate the existence of the terms and condition" and (2) whether the circumstances surrounding the passenger's purchase and subsequent retention of the tickets permitted the passenger to become meaningfully informed of its contractual terms. Translated to the Internet," the court posited that the dispositive, fact-intensive question was "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 inquiry does not presume that a person who clicks on a box has notice of all the contents of the page, but other content requiring further action, such as scrolling, which is applicable in the instant case.

The Agreement failed to satisfy either prong. Judge Wood devoted a considerable portion of the opinion to contrasting the instant case with Hubbert v. Dell Corp., 835 N.E.2d 113 (Ill. Ct. App. 2005). In Hubbert, the court held that an online purchaser had agreed to the seller's TOS, which included an arbitration clause, for two reasons. First, the quintet of pages required to complete the purchase included a visible hyperlink labeled "Terms and Conditions of Sale." Second, each page stated "All sales are subject to Dell's Term[s] and Conditions of Sale." In sum, the Illinois appellate court concluded that the combination of this statement and the hyperlinks would put a reasonable person of notice of the terms and conditions inextricably attached to the purchase.

Unlike in Hubbert, Judge Wood concluded that the defendant did not "ensure that the purchaser would see the critical language before signifying … assent." Specifically, TransUnion's "step 2" webpage did not notice the plaintiff that he was assenting to the terms of the Agreement by purchasing the credit score package. In fact, the webpage "contained no clear statement that his purchase was subject to any terms and conditions of sale." (emphasis in original). In addition, the hyperlink to the Agreement was labeled "Printable Version," which was insufficient to notify the plaintiff that by clicking on the link, he could read the Agreement.

Judge Wood saved her strongest language for TransUnion when discussing the pivotal reason why Sgouros prevailed. She characterized the bold text immediately below the scroll box, which informed Sgouros that by clicking the assent button he authorized TransUnion to obtain his personal information, as evidence that TransUnion's website "actively misleads the customer." She reasoned that such language, which is patently unrelated to assent to the terms of the Agreement, meant that "[n]o reasonable person would think that hidden in this disclosure was also the message that the same click constituted acceptance of the Service Agreement." Accordingly, the defendant "undid" any notice potentially communicated in this bold text block by including text that actually distracted the reader from the fact that clicking the button was tantamount to assent to the Agreement.

Judge Wood then dispatched the defendant's second argument summarily. The latter claimed that by continuing to use its site and making a purchase, Sgouros accepted the Agreement by conduct. She differentiated three cases reaching that conclusion against the specific plaintiffs, including Hubbert, on grounds that TransUnion's website did not contain any requirement that Sgouros assent to the terms of the Agreement, nor did it warn him that by completing a purchase he would be bound by its terms. Thus, "TransUnion cannot manufacture notice when there was none."

She denied the defendant's request to compel arbitration and remanded the case to the district court for further proceedings.


As Judge Wood observed in the final paragraph of her opinion, giving a user reasonable notice that use of the site or click of the button constitutes assent to an agreement, should not be "hard to accomplish." Yet, TransUnion is another example of a defendant in an online contract action that could not accomplish this task. That being said, what may be the most notable element of the opinion is that Judge Wood eschewed an attempt to analyze the admittedly granular distinction between browsewrap and clickwrap agreements, and instead evaluated the plaintiff's claims solely under first principles of contract formation.