Online price mistakes - e-Business...


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Is your e-business legal?

Online price mistakes - The Kodak Case

Lawyer, Paul Abbiati examines what e-tailers can learn from the Kodak consumer price mistake fiasco

e-tailers, get your website terms right

Early in 2002, Kodak refused to honour orders for a digital camera advertised on their retail website at 100, denying that an automated response to customers confirming confirmation of their orders constituted an acceptance of their 100 offer.

Kodak claimed the price was a mistake and should have been 329. Several hundred consumers were believed to be affected and had been threatening legal action against Kodak unless their contracts were honoured. Some began county court actions. After a month long-dispute well-reported in the media, Kodak bowed to pressure, saying the orders would be processed. The Financial Times reported that the fiasco had cost Kodak several million pounds.

Disputes over price mistakes on websites are nothing new and becoming more and more common as more consumers and businesses buy online and become more web-savvy.

Three years ago, the retailer Argos mistakenly offered television sets for 3 rather than 299. Since the Kodak case, the writer is being notified regularly of other price mistake disputes, one was with another famous international retailer; another was featured like the Kodak case on the BBC's 'Working Lunch'.

Why Kodak surrendered

Kodak relied on firstly, their standard terms on the site, which were the terms of sale which state that Kodak had the right to change the content of the website at any time including prices; secondly, the defence of mistake in English law which makes a contract void and thirdly, that the display of price-marked goods wherever the display is, is not an offer to sell goods but, is an invitation to a customer to make an offer to buy ( 'an invitation to treat').

Kodak's defence of mistake failed because the average, reasonable consumer may not have realised that a digital camera for 100, with 'special offer' displayed on it during a month famous for retail sales is a mistake!

Their term that they can change their terms including prices at any time would probably fall foul of EU and national consumer laws which protect consumers against unreasonable terms: the EU Directive, the UK Unfair Contract Terms Act 1977 and UK Regulations of 1999. And lastly, as to their argument that there was no binding contract because the display of the price-marked goods was an invitation to treat; the consumer's offer on a website (it's order) is accepted and becomes a binding contract when the seller communicates acceptance clearly, usually by displaying or sending a written confirmation of the order to the consumer by e-mail which happened in some cases in this instance. Kodak's automated response suggested that the orders had been accepted. It not only acknowledged the order but also talked about "this contract".

e-tailer's checklist

Under the e-commerce Directive which was meant to come into force in January 2002 but, has been delayed by further consultation, the onus on e-tailers to be more transparent with consumers increases in that they will have to explain in writing to the consumer when the contract is actually concluded online and receipt of orders must be acknowledged.

Also, all e-tailers have a duty to make their terms as clear, simple and as fair as possible. You should state in plain, simple English in your terms that the display, advertisement of price-marked goods, services is an invitation to treat and that if a mistake occurs and the mistake is easily identifiable, for example, the price is far too low for such an item, then the contract is void.

The Consumer Protection (Distance Selling) Regulations require consumers to be provided with information in a clear and easily understood manner and in good time before the conclusion of any distance contract.

Retailers selling at a distance to protect themselves must set up systems to ensure that mistakes are picked up before product details and prices are loaded on to a live website because retailers can be accused of committing the offence of giving a misleading price indication.

To defend this allegation you would have had to show that you acted diligently and took all reasonable steps to avoid misleading the consumer.

So, to avoid difficulties it is essential to ensure that you display and communicate terms and notices on website to comply with the law and reflect the way you want to do business. For example, if Kodak wants to be certain that an automated e-mail in response to an order does not amount to acceptance of the order, this should be made clear so that the customer is in no doubt about the position.

How to get Web contracts right

  • State clearly that the content of your site is an invitation to treat not an offer

  • State clearly conditions which affect the basis of accepting the order

  • State clearly in your terms and conditions when acceptance occurs

  • Set-up reliable systems to stop errors happening or at least identify them before it is too late

    Read more about online price mistakes including the price mistake

    Guest article by our legal contributors, Abbiati e-law consultancy Ltd, 2001. Specialists in international e-business law: The writer Paul Abbiati, a Business Link for Essex Adviser, is presenting UKOnline for Business workshops on e-commerce law in Essex.

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    Are you trading in Europe? Read Online Consumer Rights - Is your e-business legal?... to learn about regulations, rejections and refunds.
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