Let the Buyer Beware: The Seventh Circuit'sApproach to Accept-or-Return Offers

I didn't read all of the shrink wrap license agreement on my new software until after I opened it. Apparently I agreed to spend the rest of my life as a towel boy in Bill Gates' new mansion.' I. Introduction In September of 1995, Rich and Enza Hill ordered a computer system from Gateway 2000, Inc. (Gateway).2 When the Hills received the computer system, a "Standard Terms and Conditions Agreement" (Agreement) and a "Three Year Limited Warranty" (Warranty) accompanied the system.3 The Agreement contained a limited liability clause and a dispute resolution clause that required the parties to settle any dispute or controversy arising out of the agreement through arbitration.4 Furthermore, the Agreement provided that its terms would govern the contract between the Hills and Gateway unless the Hills returned the computer system to Gateway within thirty days.5 The Hills, however, had not seen the Agreement or the Warranty before they ordered the computer, nor had they received any notice from Gateway that these documents would accompany the computer.6 After experiencing a series of problems with their computer system, the Hills sued Gateway.' They alleged breach of contract and sought a declaratory judgment that the arbitration, warranty, and liability clauses were unenforceable.8 In considering whether the dispute resolution clause barred the Hills from pursuing their claim against Gateway in federal court, the United States Court of Appeals for the Seventh Circuit determined that the Hills' failure to return the computer within thirty days constituted an acceptance of Gateway's offer to sell the computer.9 Therefore, because the Hills did not return the computer system, the dispute resolution clause required the Hills to settle their dispute through arbitration and not in court.lo Hill v. Gateway 2000, Inc." reveals the Seventh Circuit's liberal approach to contract formation.'2 In particular, Hill illustrates the Seventh Circuit's willingness to enforce the terms of any contract involving the sale of goods regardless of whether both parties knew the terms of the contract at the point of sale.'3 This Note analyzes the Seventh Circuit's approach to accept-orreturn offers" and considers whether the approach is consistent with the policies of the Uniform Commercial Code (UCC). Part II surveys the current UCC approach to contract formation.'5 Specifically, Part II identifies the policies underlying the UCC and outlines the traditional interpretations of its contract formation provisions. Part III discusses the development of the Seventh Circuit's approach to accept-or-return offers in ProCD, Inc. v. Zeidenberg"6 and the expansion of that analysis in Hill." Part III argues that the Seventh Circuit's approach to accept-or-return offers misapplies and misinterprets the UCC, favors the seller of goods, and enforces terms that unfairly surprise the buyer." Part IV examines the May 1998 draft of the National Conference of Commissioners on Uniform State Laws (N.C.C.U.S.L.) and the American Law Institute's (A.L.I.) proposed revisions to Article 2 of the UCC and argues that the provisions do not eliminate the bias toward sellers or the unfair surprise of accept-or-return offers.19 Part IV also analyzes the Article 2 drafting committee's tentative solution to accept-or-return offers and argues that the proposed solution would remedy the bias and the unfair surprise inherent in the Seventh Circuit's approach." Finally, Part V concludes that courts should not adopt the Seventh Circuit's approach to accept-or-return offers.zl Part V suggests instead that the N.C.C.U.S.L. and the A.L.I. should adopt proposed Sections 2-105(b) and 2-204(e) of the May 1998 draft of the proposed revisions to address the bias and the unfair surprise of accept-orreturn offers.22 Additionally, Part V recommends that state legislatures, when evaluating whether to enact revised Article 2, consider the bias and the unfair surprise of accept-or-return offers and adopt a specific statutory solution similar to proposed Sections 2-105(b) and 2-204(e) to address the problem. …