Gateway to Arbitration: Issues of Contract Formation under the U.C.C. and the Enforceability of Arbitration Clauses Included in Standard Form Contracts Shipped with Goods

By Mahdi, Sajida A. | Northwestern University Law Review, Fall 2001 | Go to article overview

Gateway to Arbitration: Issues of Contract Formation under the U.C.C. and the Enforceability of Arbitration Clauses Included in Standard Form Contracts Shipped with Goods


Mahdi, Sajida A., Northwestern University Law Review


Tempora mutantur, nos et mutamur in illis.1

I. INTRODUCTION

Mass production and distribution dominate today's economy.2 Consequently, the use of standard form contracts3 prevails in today's ordinary, routine commercial transactions.4 Standard form contracts are "neither good nor bad, and neither just nor unjust, for they are necessary and generally mutually beneficial."5 They permit companies to reduce the cost of negotiations and save time that each party would otherwise spend bargaining over terms.6 Courts generally enforce standard form contracts,7 and the ReIMAGE FORMULA6

statement of Contracts recognizes and approves their existence.8

A particular issue involving standard form contracts has recently presented itself. In the computer sales industry, where most transactions occur through telephone orders between the consumer and a sales representative, a standard form agreement is made available by the seller only after the consumer has paid for the purchase and the seller has shipped the goods. An increasingly common practice within the computer sales industry is to include in the standard form contract an arbitration clause that prevents the consumer from filing any claims he might have against the seller and forces him to arbitrate any disputes with a designated arbitration organization. This situation presents enforceability issues regarding such clauses, as evidenced by the debate within the legal community caused by the recent litigation9 over the arbitration clause that appears in Gateway 2000, Inc.'s Standard Terms and Conditions Agreement package and is shipped with Gateway's computers.10

Many of the courts dealing with the Gateway situation, that is, "money now, terms later," have framed the issue as one of contract formation.11 Because these transactions are conducted over the phone or mail, however, the question of contract formation is difficult.12 The issue is whether the contract is formed when the buyer hands over payment and the seller ships IMAGE FORMULA8

the goods, or whether the contract is formed later, after the customer has had time to review the product and the terms that come along with it.13 Determining the point of contract formation is crucial when analyzing the situation under the Uniform Commercial Code ("U.C.C.").14 In the U.C.C. framework, whether the arbitration provision is enforceable depends on whether it is characterized as being part of the existing contract, or merely as a proposal for addition to the contract.15 These two characterizations lead to different results.16

Courts facing the "Gateway Problem" have not been uniform in their decisions.17 Although all of these courts have looked to the U.C.C. to guide their analysis,18 some have enforced the arbitration clause provided in the Standard Terms and Conditions Agreement'9 while others have refused to enforce the provision, asserting that the clause never became part of the parties' agreement.20

While the "Gateway Problem" is generally one of "money now, terms later," since terms other than arbitration clauses are also vulnerable to a court's determination of the point of contract formation,21 this Comment argues that the recent decisions in the Gateway, Inc. cases have brought to particular attention the feasibility of arbitration clauses. Arbitration clauses are becoming a common feature of standard form commercial contracts.22 Many businesses prefer to arbitrate consumer claims because of their dissatisfaction with the civil justice system, which has "its problems of delay, expense, technicality, and judicial gridlock."23 However, arbitration clauses have come under heave attack in the legal community.24 Decisions upholdIMAGE FORMULA10

ing arbitration clauses, such as Hill v. Gateway 2000, Inc.,25 have sparked an uproar, as legal scholars lament the disappearance of consumers' constitutional right to a jury through the use of arbitration clauses in standard form contracts. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Gateway to Arbitration: Issues of Contract Formation under the U.C.C. and the Enforceability of Arbitration Clauses Included in Standard Form Contracts Shipped with Goods
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.