Legal update 2005 - pricing errors

At what stage in the purchasing process do you become legally obliged to honour an online order? And what can you do if your website has a pricing error that seemingly commits you to literally give products away?

The answer is to ensure that you have watertight Terms & Conditions on your website and that consumers need to accept them before they can place an order.

Argos were recently saved by their Terms and Conditions from an embarrassing and costly error. The retailer had to apologise after 10,000 customers placed orders for a TV/DVD combination incorrectly advertised at only 49p. The actual price should have been £350.

Argos had the right to refuse to fulfil these orders because their Terms & Conditions clearly state that completion of the contract between customer and company does not take place until goods are despatched. Furthermore, shoppers have to tick a box to say that they have accepted the Terms & Conditions, which binds them into the sale.

Argos's terms include the following paragraphs:
"Acceptance of your order and the completion of the contract between you and us will take place on despatch to you of the products ordered unless we have notified you that we do not accept your order or you have cancelled it."

"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 'Code of Practice for Traders on Price Indications' is currently being updated and now covers the Internet. The Code is not compulsory but non-compliance may be used as evidence in a prosecution under the Consumer Protection Act.

A purchaser's offer to buy does not become legally binding under Contract Law until it has been accepted by the retailer. With website sales this typically takes the form of an email from the vendor and once received by the purchaser, constitutes a legally binding contract.

Several online retailers have fallen victim to incorrect pricing on their websites, including Argos six years ago. Typos are an easy mistake to make. It's therefore important to protect against them. The website's Terms and Conditions should outline at which point in the online order process the vendor accepts the user's offer to purchase. Finally, it's important to ensure that there are built-in software checks to perform automated checks on pricing.