Out-Law News | 02 Sep 2005 | 9:55 am | 3 min. read
The Bush 28in integrated digital TV with DVD recorder and stand appeared for £0.49 on the Homebase.co.uk and Argos.co.uk websites, both part of Argos Retail Group. Thousands of orders were placed, one person seeking as many as 80 sets. But the orders have been rejected and refunds are being given.
The company has sent emails to those who placed orders explaining that there was "an accidental error on the price shown" during the period from midnight on 27th August to 07:00 on 28th August.
According to Struan Robertson, editor of OUT-LAW.COM and a technology lawyer with Pinsent Masons, Argos got it right. "Pricing errors will happen from time to time," he said, "but companies can protect themselves against potentially huge losses with a good e-commerce process."
The key is to address pricing errors in the terms and conditions, to make sure these conditions are accepted by customers when they order and to send an order acknowledgement that doesn't undermine that protection, according to Robertson. And this is what Argos did.
Its terms and conditions (taken from Homebase.co.uk but very similar to those on Argos.co.uk) include the following provision:
"While we try and ensure that all prices on our website are accurate, errors may occur. If we discover an error in the price of goods you have ordered we will inform you as soon as possible and give you the option of reconfirming your order at the correct price or cancelling it. If we are unable to contact you we will treat the order as cancelled. If you cancel and you have already paid for the goods, you will receive a full refund."
The payment page of the Homebase website includes a checkbox and the words: "I have read and agree to the terms and conditions of this purchase."
This is sufficient for Homebase to incorporate its terms and conditions in the sale, whether or not a customer actually reads them. Many sites get this wrong: the terms and conditions exist, but if they are difficult to find, the company may be unable to rely on them.
When the payment is complete, an email goes to the customer headed "Thank you for your order". It includes an order number and, importantly, it states: "This email is only an acknowledgement of receipt of your order which has been passed to our team to be processed."
So the customer knows his order has been placed; but at this stage, no contract has been formed with the customer. This is crucial to avoiding liability for pricing errors. The terms and conditions also contain these words:
"Acceptance of your order and the completion of the contract between you and us will take place on dispatch to you of the products ordered unless we have notified you that we do not accept your order or you have cancelled it (please refer to Returns and refunds)."
Accordingly Argos has an opportunity to spot pricing errors – perhaps flagged-up by a surge in orders for a particular product – and to politely decline orders. Emails went to customers on 31st August explaining why the company "had to reject all orders placed at the incorrect price" with reference to the relevant sections of its conditions. The email included an apology.
In 1999, Argos.co.uk offered Sony Nicam TVs for £2.99 each, instead of £300. Its subsequent refusal to fulfil orders – albeit supported by its e-commerce process even then – made Argos a whipping boy for bargain hunters who thought that a contract is formed when card details are taken online. In fact the laws on e-commerce give retailers flexibility to decide when a contract is formed.
But others are less savvy than Argos. Robertson says: "Recently we learned of a large site trying to cancel orders for Sony Vaio laptops priced under £2 each. The site had done everything wrong – its conditions were awful – and customers had strong grounds for challenging the refusal to fulfil their orders."
The BBC quotes a solicitor saying that all transactions would be void because "if the deal is too good to be true, it is”. Robertson disagrees. "That is a very flaky defence for any website that has concluded a contract. It has never been tested in court and it is not a legal ground that Argos needs to rely upon."
Robertson concluded: "Retailers must not take comfort from their prices being obviously wrong. It makes much more sense and it's also much easier to get the e-commerce process right."