Friday, September 02, 2011

Deceptive terms and conditions void contract in entirety

Duick v. Toyota Motor Sales, U.S.A., Inc., --- Cal.Rptr.3d ----, 2011 WL 3834740 (Cal.App. 2 Dist.)

Here’s a refusal to compel arbitration on rather unusual facts. Defendants, including Toyota’s ad agency Saatchi & Saatchi, launched an internet-based ad campaign for the Matrix car. The campaign, “Your Other You,” “consisted of sending an unwitting recipient emails from an unknown individual.” Any visitor to the Matrix website (player 1) could designate another person (player 2) for participation in the Your Other You “interactive experience.” Player 2 would then get an email purportedly from player 1, with a link “identified with Toyota.” The link went to a page titled “Personality Evaluation,” with a drawing of a door and the word “Begin” underneath. Clicking on the door sent player 2 to the terms and conditions page, which required her to scroll through text and click a box saying that she agreed to the terms and conditions.

These included: "You have been invited by someone who has indicated that he/she knows you to participate in Your Other You. Your Other You is a website provided by [Toyota] that offers you ... an interactive experience." And then: "If you review and agree to the Terms and Conditions detailed below ... you may participate in a 5 day digital experience through Your Other You.... You may receive email messages, phone calls and/or text messages during the 5-day experience." Further: "You understand that by agreeing to these Terms, you are agreeing to receive emails, phone calls and text messages from Toyota during the 5-day experience of Your Other You." There was also an arbitration provision with a class action waiver.

After that, player 2 would receive “unsettling” emails from an unknown individual who appeared to know player 2’s personal information, presumably provided by player 1.

Duick alleged that she received an unsolicited email asking her to take a personality test, that she didn’t remember clicking the box, and that for technical reasons the text was impossible to read in its entirety. She then started to receive creepy emails from “Sebastian Bowler” using her name and her previous home address, and linking to Bowler’s supposed MySpace page, which portrayed him as a drunken Englishman with a pit bull, which he indicated he was bringing to her place. Additional emails described a cross-country journey to visit her, including photos and video, along with references to efforts to evade law enforcement. After Bowler mentioned that he “ran into a little problem at the hotel,” Duick got an email from another source purporting to be the manager of a motel and billing her for the damage Bowler had done.

“The final email included a link to a video revealing that Bowler was a fictional character and that the entire sequence of emails was an elaborate prank, all part of an advertising campaign for the Toyota Matrix.” (Pro tip: if advertising can’t be distinguished from stalking, it might be a bad idea.)

Duick sued, alleging false advertising, intentional infliction of emotional distress, etc.

Defendants moved to compel arbitration. The court of appeals affirmed the trial court’s finding of fraud in the inception/execution, making the entire agreement void including the arbitration provision.

Fraud in the execution/inception is not fraud in the inducement. The former involves deception as to the nature of the act: the promisor doesn’t know what she’s signing (for example because of a misrepresentation as to the character or essential terms of the contract), or doesn’t intend to enter into a contract at all, so mutual assent is lacking. Such contracts, being void in their entirety, can’t require arbitration. Fraud in the inducement is when the promisor knows she’s signing a contract but her consent is induced by fraud.

Duick couldn’t access the terms and conditions without first clicking “Begin” on the “Personality Evaluation” page, and the terms and conditions were themselves called the “Personality Evaluation Terms and Conditions.” “Defendants thereby led Duick to believe that she was going to participate in a personality evaluation and nothing more. In particular, a reasonable reader in Duick's position would not have known that she was signing up to be the target of a prank.”

The court noted that “[i]t might have been possible to draft the terms and conditions in such a way as to correct that misimpression, but defendants did not do so. We have read the terms and conditions in their entirety, and we conclude that, as written, they could not have alerted a reasonable reader in Duick's position to the true nature of what defendants proposed to do to her.” Reasonable readers wouldn’t have known they were agreeing to be victims of a prank (and indeed that seems to have been the point); the vagueness and opacity of terms like “interactive experience” made it impossible for player 2 to understand what defendants proposed to do.

The terms and conditions did say that players might receive emails, phone calls, and text messages; at one point they said that those messages would be “from Toyota.” But that wouldn’t have informed a reasonable reader “of the true character of the proposed contract or corrected the misimpression created by the use of the phrase ‘Personality Evaluation.’ … [A] reasonable person in Duick's position would not have understood that … she was agreeing to receive frightening or disturbing messages (such as a bill for damages to a motel) that had no apparent or even traceable connection to the terms and conditions.”

The court of appeals explicitly disavowed any reliance on defendants’ subjective intent. They were the drafters of the terms and conditions, they misrepresented and concealed the true nature of the plan (whether intentionally, negligently, or innocently), and Duick wasn’t negligent in failing to understand, “because no reasonable person in her position would have understood it.” As a result, defendants “deprived Duick of a reasonable opportunity to know the character of the proposed contract.” Since this was fraud in the inception, every part was unenforceable, including the arbitration provision.

Defendants mainly argued that Duick could have read the terms and conditions. Yet “it would have availed Duick nothing to read and reread the terms and conditions, which were drafted in such a way as not to apprise her of what defendants intended to do to her.” Thus, it was irrelevant that she alleged that she was technically unable to read them.


  1. "The court of appeals affirmed the trial court’s finding of fraud in the inception/execution, making the entire agreement void ..."

    How is this different to the Borat cases? In that example, targets of the prank were told they were signing agreements to be involved in a factual documentary - the other party deliberately concealed that they were the targets of a prank.

    How did the Borat agreements stand up in court (and they were certainly challenged) yet these weren't?

  2. Mac: Interesting question. In the resulting litigation, the federal court of appeals held that the term “documentary-style film,” as used in the agreements to which plaintiffs consented, was not ambiguous. I don't think the case was cited by the California court here, but I'd say that "personality test" isn't ambiguous either, and it doesn't include sending you creepy emails.

  3. A second thought: I think the Borat scenario might fit fraud in the inducement better--they knew they were signing a movie release but were deceived as to what that meant. Here the plaintiff didn't know she was signing a contract involving an elaborate prank.