DeFontes v Dell, Inc

Dispute

Plaintiff Mary DeFontes and a class sued Dell in Rhode Island for alleged violations of the Deceptive Trade Practices Act, and Dell moved to compel arbitration under an alleged contract accepted when the parties accepted delivery of Dell products. The trial court denied, stating that the plaintiffs did not have reasonable notice of the contract and that the contract was illusory because it included the language “these terms and conditions are subject to change without prior written notice, at any time, in Dell’s sole discretion”, and Dell appealed to the Supreme Court of Rhode Island.

Rules of law

The matter was subject to the UCC. Under the UCC, a sale contract can be created when the goods are shipped, and any subsequent terms are “additional terms in acceptance or confirmation” under section 2-207. Alternately, the contract can be created at acceptance, because the buyer retains the power to accept or return the product.

Under ProCD, Inc. v. Zeidenberg, the practicality of sales is such that a consumer who receives a product and is expressly provided the right to accept or return the product for a refund subject to new terms and conditions may be bound by that contract. However, they must be temporally bound to acceptance.

Under the “layered contract” theory of formation, a seller must prove that a buyer has accepted a seller’s terms after delivery. A buyer who receives a product with additional terms is tendering acceptance by keeping it if the buyer understands that he has the option to reject it.

Conclusions

The court held that although it would have been possible for Dell to give the plaintiffs notice, Dell had failed to do so sufficiently and they could not have reasonably concluded that they had the ability to send the products back and thereby change the agreement. “Although Dell does provide a ‘total satisfaction policy’ whereby a customer may return the computer, this return policy does not mention the customer’s ability to return based on their unwillingness to comply with the terms.”

The court found that too many inferential steps were required of the plaintiffs and too many relevant provisions were left ambiguous.

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