Graeme McKenna reckons he can spot a bargain. While surfing for blank CDs he came across an offer he couldn't refuse. PC World Business was advertising a box of 100 CDs at an astonishing price of £0.89 plus VAT. Well, Graeme thought this was Christmas (even though the temperature outside is melting the tarmac on the road) and bought 2,000 CDs for a total price of £27.75 plus VAT. Wot a bargain!
But hang on. Before you dive off this web page to buy early Christmas presents for the family on the PC World Business website, I must warn you that there's been, er, some mistake.
Even though Graeme's credit card was debited, PC World Business spotted its mistake and dispatched Graeme with just 20 CDs.
On placing the order, the company's automated computer system sent an acknowledgment: "This does not constitute acceptance of your order".
But neither the acknowledgement nor the website's terms and conditions stated when PC World Business does accept orders. A bit of a schoolboy error...
Graeme understandably asked PC World Business why it was refusing to fulfil his order. He was told that he had tried to take advantage of an obvious pricing error, that it would not fulfil the order and that it would refund his money if he preferred. The actual costs of 2,000 CDs would have been £2,080 plus VAT.
But was this an obvious error? And if it was, so what? Can PC World Business hide behind the caveat that it didn't have to accept Graeme's offer?
Legal action
The matter is due to go before the County Court later this month as Graeme pursues PC World Business for breach of contract.
According to , a specialist IT news website, lawyers for PC World Business sent an email justifying its refusal to honour the order on the ground that "there is no way a purchaser could reasonably have supposed that 2,000 CDs could be purchased for the sum of £27.75 plus VAT."
Graeme was reported as saying: "At the time I truly believed they were clearing stock or it was end-of-line stuff. I don't think a judge is going to look favourably upon a company who changes their terms to suit themselves."
He may well be right. While the obviousness of the error could be a factor, the argument that the error in the price should have been obvious is one that has not been tested by British courts in relation to websites.
And Graeme's counter-argument -- that PC World Business was the party that set the mechanism for inviting and accepting offers so has to live with its errors -- may carry the day.
Therefore it may be cheaper for PC World Business to settle out of court, let Graeme have his CDs and follow the guidance below.
Legal solution
It's possible to sell online and take payment by credit card without concluding the contract online.
The solution is to provide that the customer is making an offer on the site and that the contract will be formed only if the customer's order is accepted -- and that taking payment from the customer's credit card does not indicate acceptance.
This may, at first glance, seem unfair on the customer. In fact it's not, and it's legal, but only if the website is upfront about it to avoid misleading the customer.
Online merchant accounts provide for making refunds to a customer's credit card. Therefore, the terms should explain that, while the customer's card may be debited before the contract is formed, if the customer's order is ultimately rejected, a refund will be made immediately.
By clicking the "Accept" button the customer agrees to these terms and conditions.
By completing and submitting the following electronic order form the customer's making an offer to purchase goods which, if accepted by the brand owner, results in a binding contract.
However, the words, "if accepted by us," are very important in this context.
Practical steps
1. Make sure the user has scrolled to the bottom of the page before clicking acceptance of these terms.
2. Use a check box at the foot of the page which must be checked before the "continue" button operates.
3. By doing this, you'll improve your position in the event that a customer like Graeme claims there wasn't an opportunity to read your terms and conditions.
4. The customer should then be taken to the order form where they complete the quantity of goods and the delivery details.
5. It's best practice to offer three buttons: submit, clear and cancel. The E-commerce Regulations require a means for the customer to correct any errors; a "clear" button is a good way of doing this.
6. Next, the customer should be taken to the page on a secure server where their credit card details are taken. Secure servers use encryption and a digital ID to transfer data securely over the internet. This page should state something to the effect of: "Your card will be debited with the sum of £200 when you click the Submit button. This will be refunded if your offer is refused."
7. If the payment provider allows it, repeat the choice of submit, clear and cancel.
8. When the card details are validated, give the customer a confirmation page. This shouldn't confirm a contract -- instead it should confirm that the order has been received and that the order is being "processed".
9. It's helpful to give the customer an order number at this stage so that they can chase-up any problems.
10. It's best practice (not legally required), to ask the user to click a button on this confirmation page to indicate that they have read the confirmation -- eg a "Continue" button, linking to the homepage of the brand owner.
11. Additional information should be e-mailed to any customers who are consumers, to comply with existing rules on e-commerce known as the Distance Selling Regulations (see 'Essential Law for Marketers'). This largely repeats the information described above.
12. The final step is the dispatch of the goods. If a typo labelled the CDs at £2 and someone ordered 500 of them, then the brand owner can politely -- and legally -- refuse the order.
Ardi Kolah is author of 'Essential Law for Marketers' (Butterworth Heinemann, £25.00). Read the review of the book on Brand Republic and order your copy online
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