The Tesco Direct website crashed on Tuesday (13 March) under the weight of bargain hunters trying to take advantage of an IT glitch that led to the new Apple iPad tablet being listed for sale at just £49.99. But despite consumer campaigns, the company is under no legal obligation to honour the 'too good to be true' deal, lawyers have said.
Tesco said the advertised price was due to "an IT error" and has refused to honour any of the orders that went through for the device at the low price, which has led to customer complaints. The error has now been corrected and the black, 64GB iPad with Wi-Fi and 4G, is now listed as costing £659 – although it is also currently out of stock.
Unfortunately for the bargain hunters in this case, the law is on the side of Tesco, thanks to its carefully worded terms and conditions.
Under contract law, a contract between a buyer and seller is only binding when an offer has been made and the seller has accepted the offer. The sales process up until this acceptance is called an 'invitation to treat', which legally is not an offer, but rather an indication of the buyer's willingness to negotiate.
Tesco.com's terms and conditions state clearly that it will have only accepted an order when it has sent an order out: "At all times our acceptance of an order takes place on despatch of the order, at which point the purchase contract will be made and you will be charged for your order."
The company has also further covered itself with a specific disclaimer on its Tesco Direct product terms and conditions page: "If, by mistake, we have underpriced an item, we will not be liable to supply that item to you at the stated price, provided that we notify you before we despatch the item to you.
"In those circumstances, we will notify the correct price to you so you can decide whether or not you wish to order the item at that price. If you decide not to order the item, we will give you a full refund on any amount already paid for that item in accordance with our refund policy."
Acceptance is key
It is a straightforward contractual issue, said Danvers Baillieu, senior associate at law firm Pinsent Masons.
"Until there is an offer and acceptance, there is no contract. The way the online contract is set up, the magic moment [when the seller accepts the order] is delayed as far as possible.
"Tesco has covered itself. Legally, they are off the hook. From a PR point of view, it is a bit uncomfortable," said Baillieu.
Baillieu said that the key is when the contract is formed.
"The classic mistake is when an e-commerce seller says 'we will send you a confirmation email to confirm your order is accepted'.
"If I made the order, paid for it and received an email saying 'your order has been accepted' then I would have a strong argument to say it was a binding contract," he said.
He added: "But obviously if it says 'we have received your order and it will be processed'. It is more an acknowledgement of the order, rather than acceptance."
Mind your Ts & Cs
The lesson for any businesses selling goods and services online is to check and make sure that terms and conditions protect the business from such risks, and if possible, have them legally approved, said Baillieu.
He said: "A lot of businesses think about terms and conditions just as a page that comes up. Review the terms and conditions and say when the contract is formed, and make it clear.
"It's also important to review email communication you have with a customer after an order has been placed to make sure you can subtly, and in a customer-sensitive way, get out of it, because people do voice it quite vocally if they feel hard done by."
By reviewing their terms and conditions, not only can e-commerce businesses protect themselves if they make a similar mis-pricing error to Tesco, but also on occasions when they run out of stock and the website has not been updated in time, which Baillieu said is more likely to happen.
"The last thing you want to do is to have a legally-binding obligation to fulfil the order if you haven't got a physical stock," Baillieu said.
He recommended wording such as: "Thank you for your order, we have received it."
Meanwhile, Belinda Doshi, partner and head of the IT and privacy team at law firm Nabarro, warned: "You need to monitor very carefully what you put on your website.
"A lot of people have got quite relaxed about e-commerce and just use someone else's terms and conditions. It should be tailored to their risks [not just copy and pasted from another site]."
Although Tesco apologised to customers for the IT error in a statement, saying: "Most of our customers realised that this was an obvious mistake," some customers insisted that Tesco should still be held accountable.
James Wakefield, who owns retail website Focus Online, started a Tesco iPad campaign on Facebook to try and force the supermarket to honour the wrongly-priced deal. He had tried to purchase 10 iPads at the low price.
"My argument is that they're [Tesco] the biggest retailer in the UK and they shouldn't be able to make this kind of mistake – they should be held accountable.
"If this happened to me, I would certainly try to offer customers something, in terms of a discount, as we're a small business so it would cripple our business if we offered our luxury sunglasses for £1. In my experience in online retail, trust is everything and I feel that Tesco has failed in this," Wakefield said.
He cited the example of Marks & Spencer, which in January accidentally sold 3D televisions on its website at a fifth of the price due to an IT error.
The retailer initially refused to honour the deal, instead offering a £25 goodwill voucher, but then backed down after pressure from customers on social media sites.
Additional reporting by Mary-Ann Russon