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Amazon's pricing error

This article first appeared in the Summer 2003 issue of the OUT-LAW magazine. It has not been updated since then. For an up-to-date summary on protecting your site against pricing errors, please see How to protect your site against pricing errors.

March 19, 2003 was a busy day for Amazon.co.uk. It probably received more orders for a rather nifty Hewlett-Packard iPaq handheld computer than at any other time. Why? Because the compact device, which normally sells for £275, was being offered for only £7.32.

We, like so many others, could not resist this sale of the century and placed our order. Unsurprisingly, the iPaq H1910 Pocket PC stayed at number one in Amazon's Hot 100 list for most of the morning. But by early afternoon, the Amazon site was down and a statement released to the effect that no orders placed would be honoured.

The following day we received a notice from Amazon cancelling our order, which the company claimed was in line with its Conditions of Web Site Use and Pricing and Availability Policy. Amazon also confirmed that no payment had been taken from our account for the product that we had ordered.

Having located the Conditions of Web Site Use on Amazon.co.uk, the provisions were certainly clear – they state that no contract will exist between the customer and Amazon until such time as Amazon confirms despatch of the ordered items.

A contract is generally formed when an offer has been made and accepted. By placing an order, we had made an offer to buy the iPaq at £7.32 but the question was whether Amazon had actually accepted that offer.

Shortly after placing the order, we received an email from Amazon confirming purchase details. The status of this automated email response is vital because if it constitutes acceptance of our offer at £7.32, Amazon can probably be held to the price. Amazon's email to us did not expressly indicate whether it merely confirmed receipt of our order, or whether it constituted acceptance of such. The confirmatory email also advised us on how to cancel "this contract". This sort of language could leave Amazon on dangerous ground. The ideal is for an e-tailer to draft its automated response to orders so that it merely acknowledges the order and does not imply in any way that a contract has been formed.

There is a second question: can Amazon rely on its Conditions at all to escape handing over the iPaq? An e-tailer may only rely on such conditions of use if it has been properly incorporated. In other words, had Amazon managed to bring its terms and conditions to our attention before we placed our order and, if so, was it done in such a way that those terms now were binding on both Amazon and us in our dealings together?

We had registered as a new user and progressed through the purchase process without being asked to scroll through the terms and conditions. Nor had we positively agreed that we had read and understood the terms and conditions before tapping in our credit card details.

Had Amazon ensured that we had been given an obvious, or even better, unavoidable, opportunity to do one or both of these things, then there could be no doubt that the terms and conditions did in fact govern the order we placed. As it is, the legal position for Amazon in terms of "incorporation" of terms is far from clear cut and the company is forced to wait and see whether any individual customer will make a legal challenge. By placing a link to the Conditions on each web site page, Amazon may well have gone far enough to bring those terms to each customer's attention. That is the company's position, anyway.

The lesson that e-tailers should take from the Amazon case is this: ensure that your automated response does nothing to indicate acceptance of the order; furthermore, make your terms and conditions water tight and bring them to your customer's attention before they place an order.

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