A pair of recent decisions in federal court in Arkansas confirms that nothing about the virtual world changes a core principle of contract formation—that there can be no valid contract without objective manifestation of assent.  The decisions both deal with the efforts of one repeat pro se plaintiff, David Stebbins, to impose upon large institutions binding agreements to arbitrate via email.  These two decisions signal that courts will not relax traditional rules of contract formation merely because of the informality and relative ease of online communication.

The first decision, Stebbins v. Wal-Mart Stores Arkansas, LLC, No. 10-cv-3086, 2011 WL 1519390 (W.D. Ark. Apr. 14, 2011), relates to Stebbins’ interactions with Wal-Mart.  After applying unsuccessfully for a number of jobs at a local store, Stebbins sent an email to the company’s customer service department purporting to extend to Wal-Mart a formal offer to arbitrate any dispute between him and the company through an online arbitration service.  In the email, Stebbins explained that contact by anyone from Wal-Mart, in any form at all, would constitute agreement to be bound by the terms of the email, including submitting to arbitration.  The company responded with generic emails directing Stebbins to another department.  Meanwhile Stebbins, believing that Wal-Mart had accepted his email offer by allowing him to pay by check for a gallon of milk, registered with the online arbitration service, which emailed Wal-Mart that Stebbins intended to arbitrate an employment dispute with the company.  When Wal-Mart did not accept the invitation to arbitrate within 24 hours (a condition imposed by Stebbins under a “forfeit victory” clause in the purported contract), Stebbins claimed that he was entitled to a default arbitration award of over $600 billion, regardless of the merits of the dispute.

In another dispute before the Arkansas federal court, Stebbins v. University of Arkansas, No. 10-cv-5125 (W.D. Ark. May 19, 2011), Stebbins sought a similar agreement with the University of Arkansas relating to his unsuccessful attempts to re-enroll at the university following a suspension in 2007.  Stebbins already had a discrimination suit pending against the university for allegedly failing to accommodate his mental health disability.  While motions to dismiss were being considered, Stebbins emailed the General Counsel’s office a link to a YouTube video containing an offer to arbitrate all legal disputes and specifying that he would deem the offer accepted if the university communicated with Stebbins in any way, allowed him to communicate with university officials, or permitted him on campus.  Stebbins claimed that counsel for the university accepted his offer by fielding a follow-up telephone call and that, by failing to accept the invitation to arbitrate within 24 hours, the university lost the dispute under a “forfeit victory” clause.  Stebbins sought over $50 million and re-enrollment in the university.

Acting pro se, Stebbins moved to confirm both arbitration “awards” in separate actions in Arkansas federal court, a venue in which he had similar actions pending against his landlord and an online arbitration service.  In both cases, the court shut Stebbins down.  In the Wal-Mart case, the court explained that Stebbins could not rely on the concept of unilateral contract—in which a party accepts an offer to contract by performance instead of by express agreement—to prove the existence of a contract.  Stebbins’ emails were merely “self-serving documents that did not form the basis for any conduct or performance on Wal-Mart’s part,” and, indeed, “Wal-Mart performed no act.”

Similarly, in the University of Arkansas case, the court declined to accept Stebbins’ “novel proposition that one party can force a contract on another by sending an offer to contract, and stating therein that conduct entirely unrelated to a showing of agreement to be bound will constitute acceptance.” Distinguishing authority about the enforceability of clickwrap and browsewrap agreements, the court found that Stebbins had failed to demonstrate that the university showed any objective manifestation of assent to the formation of a contract.  The court explained that, if acceptance could be manifested in the ways Stebbins suggested, a contract might be formed if a university employee greeted Stebbins in a grocery store.  But “[t]his, of course, is not how contracts are formed, even on the Internet.”

This pair of cases posed relatively straightforward questions for the courts.  The attempts at contract formation were so one-sided, and the terms of the purported awards so outlandish, that the courts seemed to have little trouble dismissing the claims.  But the cases reinforce a basic notion that might provide comfort to institutions in closer cases—objective manifestation of assent is required no matter what method of communication is used to form a contract.