ContractsProf Blog

Editor: Jeremy Telman
Oklahoma City University
School of Law

Thursday, April 15, 2021

Digital Contracts in the Fourth Circuit

4th CircuitLast week, the Fourth Circuit upheld a district court's denial of a motion to compel arbitration in Rowland v. Sandy Morris Financial and Estate Planning Services, LLC.  Judge Wilkinson, writing for the unanimous panel, first noted the public policy, embodied in the Federal Arbitration Act, in favor of arbitration.  However, Judge Wilkinson noted, arbitration is available only if the parties agree to it.  The Supreme Court has made clear that arbiters can decide the arbitrability of particular issues, but courts can decide whether or not a contract exists.  In this case, the defendant financial planner (SMF) changed the documents at issue without notice or consent.  There was no meeting of the minds because the parties had signed different documents.

The case is so simple that the District Court warned SMF that an appeal of its decision finding that there was no agreement between the parties could be considered frivolous.  Judge Wilkinson's discussion of the merits of the case takes up two paragraphs.  The parties signed different documents.  The differences between the two documents were not minor.  SMF added a new account and changed the Rowlands' selections for risk tolerance.  Because of these material changes, no contract was formed between the parties.  

And then, beginning on page 11 of the decision, Judge Wilkinson reviews some of our favorite scholarship on the world of boilerplate contracts, citing to Kar and Radin, on pseudo-contract and shared-meaning analysis, and to Ayres and Schwartz, on the no-reading problem in consumer contracting.  He then references some of the recent cases relating to digital contracts but notes that we need to come back to first principles embodied in old chestnuts such as Lucy v. Zehmer and Holmes' The Path of the Law.  The need to adhere to the formal requirements of contract formation will not go away.  Just for good measure, he throws in a reference to Auden.  At this point, I think I am the more loving one, Judge Wilkinson! 😘

Thanks to Stanley Hammer for alerting us to this opinion!

https://lawprofessors.typepad.com/contractsprof_blog/2021/04/digital-contracts-in-the-fourth-circuit.html

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