Kodak error shows need for legal protection

Out-Law Guide | 30 Mar 2005 | 3:23 pm | 2 min. read

This article originally appeared in Up, a British business magazine, in spring 2002. It has not been updated since that date.   For an up-to-date summary on protecting your site against pricing errors, please see   How to protect your site against pricing errors .

The potential cost of making a simple error on a website was highlighted early this year when Kodak.com misstated the price of its Kodak DX3700 digital camera being offered for sale on its site. The company initially refused to fulfil the orders placed, and legal action was taken by disgruntled customers in Ilford County Court. Trading Standards and the Advertising Standards Authority also investigated. Almost immediately after the court action was raised, the company capitulated, although not without a few weeks of bad publicity.

An estimated 2,000 cameras were ordered for £100 each before the error was identified – the price should have been £329. The case is reminiscent of a more significant error by Argos in 1999 when it offered Sony Nicam TVs for £2.99 each, instead of £299. Thousands of orders were placed before the company recognised its mistake and apologised to customers – but refused to honour the orders. Legal action, although threatened, did not materialise.

The Kodak.com customers received confirmation of their orders, which referred to a contract having been formed. However, Kodak then denied that any contract was in fact formed and apologised to customers for "any inconvenience and disappointment caused."

Given the language used in its acknowledgement, it seems unlikely that Kodak could have won its argument that no contract was formed, and its decision to fulfil orders was possibly based on both the risk of fighting a losing court battle and negative publicity.

When an item is offered for sale on a website at a certain price, there is a consensus that it has the same effect in UK law as an item in a shop window being offered at a certain price. This is known as an "invitation to treat." At this stage, the item is not being "offered" to the customer. Rather, the customer is expected to make an offer at the check-out, which the shop will usually accept. If a price is incorrect, the shopkeeper can legally reject the customer's offer (although, if a shop does this too often, it may run into problems with Trading Standards).

Similarly, if a website confirms an order, the consensus has long been that the contract is formed at that point, in the absence of anything to the contrary in the terms and conditions of the site.

It is difficult to make sure that a website never contains an error of the kind found on Kodak.com, but it is possible for a site to protect itself in the way it accepts orders. Instead of concluding a contract at the point of the user clicking a button or sending the user an automated acceptance, a site can make it clear to users that they are submitting an offer on the site which if accepted will result in a binding contract. The law requires immediate acknowledgement of the order; not immediate acceptance. This is how Kodak could have avoided the problems it faced.

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