Sgouros v. TransUnion is a 2016 Seventh Circuit decision about whether a customer was bound by an online service agreement that he had never been shown clearly. It involved a consumer credit-score product rather than licensed software, but it is a frequently cited example of the test courts apply to click-through terms of the kind used for software and subscription services. The court held that no agreement to arbitrate had been formed.[1]
Background
On 10 June 2013 Gary Sgouros bought TransUnion’s “3-in-1 Credit Reports, Credit Scores & Debt Analysis” for $39.90 through TransUnion’s website. The purchase took three steps. On the second, he created an account and entered card details. A scroll window on that page began with the words “Service Agreement” and showed about three lines of text, and underneath it a bold paragraph stated that clicking the button labelled “I Accept & Continue to Step 3” provided “written instructions” authorizing TransUnion Interactive to obtain information from his credit profile. A small link labelled “Printable Version” led to the full agreement, whose arbitration clause was on page 8 of 10, although the first page mentioned arbitration and a class action waiver.[1]
Sgouros sued under the Fair Credit Reporting Act and state consumer protection laws, alleging that the formula behind his score differed materially from the one lenders used. TransUnion moved to compel arbitration. The district court held that no contract to arbitrate had been formed and TransUnion appealed.[1]
The dispute
TransUnion argued that clicking “I Accept” showed assent to the Service Agreement. The Seventh Circuit accepted that a click can signify acceptance and cited decisions finding a click valid where the layout and language gave reasonable notice, including the Tenth Circuit in Hancock v. AT&T and a Pennsylvania federal court in Feldman v. Google, and noted that the Second Circuit in Specht v. Netscape found no assent to a licence located below a download button.[1] Applying Illinois law, it asked whether the web pages adequately communicated the terms and whether the circumstances supported the assumption that the purchaser received reasonable notice of them.
The court contrasted an Illinois appellate decision upholding Dell’s online terms, where every purchase page carried a visible “Terms and Conditions of Sale” link and a statement that sales were subject to them. On TransUnion’s site, the pages contained no clear statement that the purchase was subject to terms and conditions; the scroll box did not say what the agreement regulated; and the link to the full text was labelled “Printable Version”. Most important for the court, the bold text beneath the box told the user that clicking meant authorizing TransUnion to obtain his credit information, which “says nothing about contractual terms”, so no reasonable person would think the same click accepted the Service Agreement.[1]
TransUnion’s fallback argument was that using the site and paying showed acceptance by conduct. The court rejected it: the site did not require the user to agree to any terms or warn that completing the purchase meant being bound, and the text saying the purchase was conditioned on the Service Agreement was below what was visible. “TransUnion cannot manufacture notice where there was none,” the court wrote.[1]
Decision or outcome
On 25 March 2016 the Seventh Circuit affirmed the denial of the motion to compel arbitration and returned the case to the district court for further proceedings. It said that a website might bind users by placing the agreement, a scroll box containing it, or a clearly labelled hyperlink next to an “I Accept” button that unambiguously pertains to that agreement, and that there are other ways to do so.[1]
Significance for software licensing and SAM practice
Online software and SaaS terms are formed in the same way: through checkout pages, account sign-up screens and download buttons. The decision shows that a court looks at what the user was actually shown at the point of acceptance. A vendor that wants limits on liability, arbitration clauses or licence restrictions to bind individual users or small buyers has to present the terms, or a clear link to them, next to a button that plainly refers to them. For organisations that buy through self-service sign-up, the same principle works in reverse: terms accepted by a click are binding where the notice was adequate, which is why the click-through terms accepted by whoever signs up should be tracked as contracts.
The case is a ruling under Illinois law on a consumer purchase. It concerns formation of the agreement, not whether the terms would have been enforceable if formed. See Specht v. Netscape for an earlier software download case and ProCD v. Zeidenberg for shrinkwrap licences.
Lessons learned
- Notice comes before assent. The court asked whether the pages communicated the terms and whether the purchaser had reasonable notice of them, not whether the terms existed somewhere on the site.[1]
- A scroll box alone is not enough. The court said no court had suggested that a scrollable window with buried terms is itself sufficient to create a binding contract.[1]
- The words beside the button matter. TransUnion’s text said the click authorized a credit data request, which undid any notice of the Service Agreement.[1]
- Clearly presented click-through terms can work. The court listed ways a website could bind users, so a well-designed acceptance step is enforceable.[1]