Kodak error shows need for legal protection
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
DX
3700 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
TV
s 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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