Hill v. Gateway: The Possibilities

Hills v. Gateway 2000 105 F.3d 1147 (1997) generates a lot of controversies, which is appropriate since the decision is pretty much wrong. (No, battle of the forms does not require forms, a single form is enough).

I want to offer a simple outline of the various logical possibilities, including my favorite one. We have three legally relevant moments (1) Phone Conversation (PC); (2) Delivery; (3) Opening and non-return (NR).

A. PC is plain vanilla common-law offer and acceptance. The easiest option, Hills win. (the form in the shrinkwrap is a later modification that requires a good faith change in light of unforeseen circumstances).

B. PC is offer, delivery is a common law acceptance. Hills win. Here, they accept the delivery by opening the door and accepting the package, terms are sent

C. PC is just a discussion, delivery is the offer, NR is acceptance. Hills lose. This is Easterbrook’s position, untenable for the reasons stated below.

D. PC is a purchase order under the UCC and the terms in the box are UCC acceptance. Hills win, being non-merchants, they are not bound by additional terms.

E. PC form the K, the terms in the box are UCC confirmation. Hills win, being non-merchants, they are not bound by additional terms.

F. No k was ever formed. Hills win. Not tenable, but if it were, Gateway could sue for quantum meruit, not getting the benefit of arbitration.

G. No clear evidence of K exists, but delivery/retention indicates the existence of a K under 2-207(3). Hills win. The knock-out rule removes the arbitration clause.

H. Delivery is the offer, retention is common law acceptance under the (mostly defunct) doctrine of exercise of dominion (ยง 69(2) R2K). Hills lose.

I. PC is a K which sets some terms and has a unilateral modification clause. Hills lose. As detailed by Becher and Benoliel, unilateral modifications are extremely common in commercial practice and are routinely enforced by courts.

The last option is my favorite interpretation. I know that a lot of people are uncomfortable about invisible terms, but so long as they are a large part of commercial Ks, singling out the case of rolling Ks strikes me as being unprincipled. The last interpretation is better than that provided by Easterbrook because (a) it doesn’t rely on a legal error & (b) it addresses one of the issues neglected by Easterbrook — what if the computer was delivered late? That would obviously be a breach of K, but under his analysis, the delivery was not legally regulated. Under this option, however, there was a K and it might be breached. (c) The right to return & consumer notice do a lot of work under Easterbrook’s analysis, but what’s the legal basis for this? I agree that notice and right-to-return should matter, but that’s not a natural fit in the standard common law offer and acceptance model. The doctrine of unilateral modifications, by contrast, emphasizes the importance of notice and opt-out might also be part of it.

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