When Kodak.com mistakenly offered a £329 camera for £100 and sent an ‘order confirmation’ to the hundreds that clicked to purchase, was a contract formed?
When: January 2002
Kodak made a mistake in the pricing of one of its cameras as offered for sale on its website on New Year’s Eve 2001. Under the heading of a “Special Deal”, the Kodak DX 3700 was offered at £100, when in fact the quoted price should have been £329. Numerous visitors to the site eagerly keyed in their credit card details and clicked to purchase the camera. Kodak then responded with an “order confirmation”, but then discovered the incorrect pricing. On 7 January 2002 it e-mailed all the purchasers to tell them of the mistake, offered the camera again at the correct price and offered a 10% discount on their next purchase. Numbers of the buyers have not been inclined to accept Kodak’s position, and although it is understood that the case has since been resolved, it raises similar questions to the case of the Argos TV in 1999, when a TV set was offered on-line for £3 when in reality the price should have been £299.99. That case too was either not the subject of litigation at all or settled quietly on confidential terms.
One argument put forward by Argos in the various commentaries on the case published at the time was that the quoted price clearly would not be taken seriously by any reasonable purchaser and was therefore not of contractual effect. Any such argument, whatever its legal merit, could clearly not be run so forcibly by Kodak. If the matter had proceeded to litigation, the chances are that the arguments would have focused on the manner in which Kodak responded to the camera orders. The “confirmation of order” message from Kodak also stated that £100 would be taken from their credit cards as monetary consideration of the product. Given the accepted wisdom that the offering of a product for sale in a shop or on a website is no more than an invitation to treat. To give rise to a binding sale contract, this has to be followed by an offer from the buyer to purchase, which must then be accepted by the seller. Was the “confirmation of order” message “acceptance” in contractual terms so as to oblige Kodak to supply the camera at the incorrect price?
Kodak would no doubt have argued that the “confirmation of order” was nothing more than exactly that. Their position is in some way bolstered by the EU e-commerce directive, due to be part of UK law by the summer of 2002. This introduces across Europe, in an e-commerce context, a stage in the “offer/acceptance” sequence which equates to Kodak’s “confirmation of order” step. The relevant provisions appear in the section of the e-commerce directive which seeks to harmonise the rules for establishing when, in an e-commerce context, a contract of sale has been concluded. Article 11 of the directive actually obliges sellers on-line to acknowledge receipt of the recipient’s order without undue delay and by electronic means. The idea behind this is that the consumer is then given a second chance to check whether he or she might or might not have inadvertently clicked to order a product that they did not in fact want. In the Kodak case of course, this new stage in the contract making process would also help the seller by giving it an opportunity, after confirming that the order has been received, to establish that there were sufficient stocks available to enable it to satisfy the order or whether the product had been offered at the right price in the first place.
Why this matters:
In the electronic environment, both consumer and seller can fairly be said to be deserving of extra protection from “accidental contracts”. Although on the one hand it is not desirable to introduce multiple stages in the contract creation process, one can see that the “order confirmation” stage has a purpose and fairly protects both sides. The e-commerce directive also provides at article 10 that before any order is bindingly accepted, the on-line seller clearly sets out how the contract will be concluded. If it did not do this in this case, Kodak might have strengthened its position further by stating clearly and succinctly, in the same location as it was indicating that an order was confirmed, that this did not mean that the order was being accepted so as to make a contract or that they were committing themselves to supply the product at that point. The beauty of the internet is that it allows easy disclosure of information like this and e-commerce operators should even now, before the e-commerce directive is with us, be checking their on-line selling procedures to ensure that the risks of an Argos/Kodak type situation are minimised.