Online price mistakes

22 September, 2005

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22 September 2005

Q: One of my buyers ordered audiovisual equipment on a website advertised at a very low price and received messages from the seller onscreen and by e-mail that his order had been accepted. Our bank account was also debited. Then they sent us an e-mail refusing to honour the deal, saying that the low price was a mistake. Is this legal?

A: Paul Abbiati, a PMMS legal consultant, writes: Some lawyers tell business buyers and consumers that the internet is lawless and that English common law is out of touch with e-procurement, and cannot be applied. It gets worse, as some will tell you that English law lacks a definition of an e-contract.

Only the latter statement is true.

Several years ago, I was invited to speak on the BBC programme Working Lunch about electronic contracts, following City lawyers' silence over whether consumers had beaten a mighty electronics supplier over a price mistake on a website.

The problem of suppliers' price mistakes and failure to honour contracts is nothing new and will not go away. All that has changed is the environment. We have gone from ordering by letters to ordering by telephone, then to ordering by telex and fax, and now to ordering online and by e-mail.

So, who wins if the price of the goods or services anywhere - particularly on a website - is a bargain, the buyer orders according to the rules, and the supplier puts it in writing that your order has been accepted on the screen and/or in an e-mail and even debits your account?

Surprisingly, English law and other laws are clear on this. English law says that if a price offer or display anywhere is a genuine mistake, and it is clear to the reasonable person that the item's price is "too good to be true", then contract law will interpret the concluded contract - even if money is debited - as void for mistake.

All buyers might win their argument that the contract is valid just on confirmation of acceptance of the order in an e-mail if, for example, the price was "believable". This might apply, for example, if a DVD player normally priced at £20 was advertised for £1.50, or if the first five or 10 sets had been on sale at the low price as a loss leader.

However, a far greater reduction in price would not be "believable". The press reported recently that the retailers Argos and Homebase had advertised on their websites one bank holiday Monday a 28-inch television and DVD player, normally priced at £350, for 49p.

One buyer bought 80 sets at the bargain price, according to media reports. Argos and Homebase themselves said that 10,000 customers had bought the television and DVD player over the bank holiday.

However, these customers were destined to be disappointed. The retailers apologised, but were refusing to honour the website deals - even though they had debited customers' accounts - because the mistake in pricing was down to a "genuine internal error".

Need advice?

E-mail your question to adviser@supplymanagement.com

Please note that responses can only be given in the magazine and on the website, represent writers' personal views and should be regarded as general guidance only


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