Arbitration Requires a Validly Formed Contract: Mutual Assent on Essential Terms

Introduction

This commentary examines the United States Court of Appeals for the Tenth Circuit decision in Parisi v. GreenSky, LLC and Parisi v. Oklahoma Windows and Doors, LLC (Nos. 23-6218 & 24-6043, June 6, 2025). Susan Parisi sued Oklahoma Windows and Doors, LLC (d/b/a Renewal by Andersen of Oklahoma) (“RBA”) and GreenSky, LLC (“GreenSky”) for alleged deceptive practices in connection with a home-window financing scheme offering a “Zero-Interest Loan.” Both defendants sought to compel arbitration under separate arbitration clauses embedded in two distinct documents: a “Windows Contract” and an “Installment Loan Agreement.” The district court denied both motions, concluding no valid arbitration agreements had been formed. The Tenth Circuit affirmed.

Summary of the Judgment

The Tenth Circuit held that neither RBA nor GreenSky carried their burden to prove the existence of a valid, enforceable arbitration agreement with Parisi. Applying Oklahoma contract-formation law, the court found:

No meeting of the minds on essential payment terms in the Windows Contract—Parisi sought a zero-interest loan, but the contract actually offered a high-interest financing plan.
Even if an arbitration clause appeared in the Windows Contract, it could not be severed from an agreement that never validly formed.
The “Installment Loan Agreement” likewise lacked mutual assent as Parisi never authorized the disputed transaction via the Shopping Pass and never agreed to the high-interest terms.

Accordingly, the court affirmed the district court’s orders denying the motions to compel arbitration.

Analysis

Precedents Cited

9 U.S.C. § 4, § 16(a) – Federal Arbitration Act jurisdictional and enforcement provisions.
AT&T Technologies, Inc. v. Communications Workers, 475 U.S. 643 (1986) – Arbitration as a matter of consent; delegation clauses require clear and unmistakable evidence.
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) – Gateway questions of arbitrability determined by courts absent clear delegation.
Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (2010) – Delegation clauses cannot be severed from non-existent agreements.
Hardin v. First Cash Financial Services, Inc., 465 F.3d 470 (10th Cir. 2006) – When contract formation is disputed, a jury trial is required unless no genuine issue of material fact exists.
Hancock v. AT&T Co., 701 F.3d 1248 (10th Cir. 2012) – Burden of proof on party moving to compel arbitration and deference to non-movant on factual disputes.

Legal Reasoning

The court’s reasoning unfolded in two parallel tracks:

Windows Contract with RBA:
- Essential Terms: Under Oklahoma law, a valid contract demands mutual assent to all essential terms, including price and payment method. Parisi needed a “Zero-Interest Loan.” RBA’s contract actually offered a high-interest plan.
- Offer vs. Acceptance: Kelley’s in-person presentation misled Parisi into believing she was obtaining zero-interest financing. The subsequent contract—containing fourteen signatures and an arbitration clause—was never truly assented to on the promised terms.
- Severability: A delegation clause cannot stand when the underlying agreement is void for lack of formation. The court refused to sever the arbitration clause from a contract that never validly existed.
Installment Loan Agreement with GreenSky:
- Contract Formation: GreenSky’s Loan Agreement required Parisi’s affirmative use of a “Shopping Pass” or a merchant-initiated transaction with her valid authorization. The only disputed transaction occurred without her consent.
- Mutual Assent: Parisi neither used the Shopping Pass to accept the loan nor authorized RBA to do so on her behalf. In the absence of assent, there is no contract, and hence no arbitration clause to enforce.

Impact

This decision underscores several significant developments:

Consumer Protection: Courts will scrutinize alleged “click-through” or electronic signatures to ensure genuine assent, especially where life circumstances (e.g., Parisi’s cancer treatment needs) heighten the potential for overreach.
Arbitration Clauses: Reinforces that arbitration cannot be compelled absent a validly formed contract. Delegation clauses are powerless if the underlying agreement fails.
Contract Formation in Digital Transactions: Emphasizes that electronic or mobile-device agreements must clearly present all essential terms and allow consumers a meaningful opportunity to review them.
Litigation Strategy: Defendants seeking arbitration must establish both the existence of a contract and that the contract contains an enforceable arbitration clause, or risk protracted litigation.

Complex Concepts Simplified

Arbitration Agreement: A contract provision where parties agree to resolve disputes through private arbitration rather than court.
Delegation Clause: A clause within an arbitration agreement that delegates “gateway” questions of arbitrability—such as the validity of the agreement itself—to the arbitrator instead of the court.
Mutual Assent / Meeting of the Minds: The requirement that both parties understand and agree to the same contract terms for a valid agreement to exist.
Severability: A doctrine allowing certain provisions of a contract to remain enforceable even if other parts are invalid—except when the entire contract fails for lack of formation.
Shopping Pass: An online tool functioning like a credit card number linked to a loan. “Use” triggers acceptance of accompanying loan terms.

Conclusion

Parisi v. GreenSky & RBA establishes that arbitration clauses are unenforceable absent a properly formed contract. Courts will look behind electronic signatures and boilerplate terms to ensure true mutual assent on essential elements, particularly payment terms. Delegation clauses cannot bootstrap an arbitration obligation when no valid contract exists. This decision fortifies consumer protections and clarifies the stringent requirements for compelling arbitration in the Tenth Circuit.