United States District Court for the District of Kansas - 104 F.Supp.2d 1332, 104 F. Supp. 2d 1332
In Klocek v. Gateway, Inc., a significant contract law case, the U.S. District Court for the District of Kansas examined if a computer buyer was bound by an arbitration clause within a standard terms and conditions agreement sent by the seller. The case took place at the federal trial level and concerned a dispute over contract formation and enforceability.
William Klocek, the plaintiff, ordered a computer from Gateway, Inc., a company selling computers via phone and mail orders. After ordering by phone and providing his credit card information, Gateway confirmed his order and sent the computer. Inside the package was the Standard Terms and Conditions Agreement, which indicated that the buyer accepted the agreement if they kept the computer for over five days. Klocek did not read or sign the agreement.
Klocek faced issues with the computer and returned it within 30 days after being unhappy with Gateway's technical support. He filed a class action lawsuit against Gateway, who argued that Klocek was bound by the arbitration clause. The district court disagreed and applied the Uniform Commercial Code (UCC), concluding that Klocek and Gateway formed a contract without the arbitration clause.
This case is crucial in understanding how courts apply the UCC in phone or mail order contracts with standard terms and conditions. It highlights the factors determining offers, acceptances, or counteroffers and whether they bind non-merchant buyers.
The plaintiff sued Gateway and Hewlett-Packard for breach of contract and warranty related to the purchase of a computer and scanner. Gateway argued that the plaintiff must arbitrate his claims under the Standard Terms and Conditions Agreement, which includes an arbitration clause. The court overruled Gateway's motion to dismiss and sustained Hewlett-Packard's motion to dismiss. The court must determine the applicable state law for contract formation before deciding whether the parties agreed to arbitrate. The Uniform Commercial Code applies to the transaction between the parties as it governs transactions in goods. The issue is whether the Standard Terms are part of the agreement under the contract of sale, regardless of whether the plaintiff purchased the computer in person or received it through shipment. Gateway is urging the court to follow the Seventh Circuit decision in Hill, which enforced an arbitration clause in a computer shipment with terms similar to the Standard Terms in this case.
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