Business Law Assignments

BB 2201 BUSINESS LAW

Siti Izzah Fadzilah Bte Haji Dolhan 12B8443 3RD November, 2014

QUESTION: The Rules Of Contract Apply Online As They Would In Ordinary Offline Transactions. Discuss This Statement In Relation To The Following Facts. Include In Your Answer, Whether Aidan Should Be Entitled To Enforce The Contract Or Otherwise.

Introduction Between these two people; trader and consumer, there will be always a contract in the form of either in writing, orally or implied from conduct. Besides that, a contract involved an offer (or more than one offer) to another party, who accepts the offer. For example, in a contract for the sale of a piano, the seller may offer the piano to the buyer for $1,000.00. The buyer's acceptance of the offer is a necessary part of creating a binding contract for the sale of the piano. Nevertheless, there is the term of ‘Invitation to treat’ and ‘offer’ are also involved between traders and consumers, whereas in this case, consumer is the one that making the offer instead of the trader. “Invitation to treat” is an action by the trader which may appear to be a contractual offer but it is actually inviting others to make an offer of their own whereas accepting an offer creates a binding contract while “accepting” and invitation to treat is actually making an offer. One of the best examples of invitation to treat and offer is an advertisement. Advertisements are usually invitations to treat, which allows sellers to refuse to sell products at prices mistakenly marked. Advertisements can also be considered offers in some specific cases. Auctions are sometimes invitations to treat which allows the seller to accept bids and choose which to accept. However, if the seller states that there is no reserve price or the reserve price has been met, the auction will be considered an offer accepted by the highest bidder. There are also online and offline transaction which use by the issuer-defined rules to authorize transactions. Online transaction is transactions which proceed as they do today in the U.S. with magnetic stripe cards. The transaction information is sent to the issuer, along with a transactionspecific cryptogram, and the issuer either authorizes or declines the transaction whereas in an offline EMV transaction, the card and terminal communicate and use issuer-defined risk parameters that are set in the card to determine whether the transaction can be authorized. Offline transactions are used when terminals do not have online connectivity (e.g., at a ticket kiosk) or in the countries where telecommunication costs are high. An example that involved offline transaction is the transaction made in a convenient store where there would not be any acceptance of cards to pay for the goods or products and services. As a contract has been made, thence a mistake could occur. A mistake usually happens when both the trader and the consumer have a mistaken belief about a fact upon entering into a

contract. If there is only one side of the party is mistaken, it is called unilateral mistake, and generally contract performance is not excused. Therefore, breaching may have consequences. As this case is about a plaintiff who sued a defendant where the case of the owner of the company as they have mistakenly put the wrong price as $69 instead of $669, it is counted as unilateral mistake as the mistake is not made intentionally by LongNet and Aidan is fully aware that it is mispricing. In this case given, there will be a defendant and a plaintiff involved. A defendant is a person or entity accused of a crime in criminal prosecution or a person or entity against whom some type of civil relief is being sought in a civil case whereas a plaintiff is a person who brings a case against another in a court of law. Thus, the defendant for this case is LongNet and Aidan and friends is the plaintiffs.

Discussion From the perspective of the plaintiff: The defendant has to agree with the transaction that has been made as it was stated in the fact that there is an automatic reply from the defendant’s website which says “Thank you for your purchase. The delivery dates of your item will vary according to the level of demand for the model purchased……” However, before the automatic reply appears, the plaintiffs need to accept the term and condition stated by the defendant for buying their products online. Besides that, only after the plaintiffs had been charged on their credit cards the plaintiffs’ received the cancellations due to the mistake. Assumptions about the plaintiffs According to Irby (2014), a person needs to be 18 years old before they can own a credit card by themselves. Not only that, the law emphasizes that when a person legally get a credit card as young as 18, the law requires the holder to have a steady source of income to qualify for a credit card. From the information mention above, the plaintiffs’ must be definitely 18 years old above

as six of them owns one or another possibilities is that each and every one of the plaintiff’s is using their parent’s credit card. Aside of the fact that the plaintiffs’ is 18 years old, the plaintiff named Aidan was at Low Frequency internet café to compare prices of 3D printer model 007 between website which proves that the plaintiff is well educated about the technologies and internets. Not only that, the fact that the plaintiffs had purchased a thousand unit of the defendant products shows that they are a group of people who is business minded and profit seeking. The plaintiffs’ must have known that the defendant have mistakenly tagged wrong price since the price was too cheap to be compare with the other websites that the plaintiff have checked. From the defendant’s perspective: The defendant is confident that they have the right to refuse and cancel orders from the plaintiffs and others that have made their purchase from the defendant’s website. As the defendant is the trader, the defendant is the one who will make the invitation to treat which gives the defendant rights to refuse the offer made by the plaintiffs. Not only that, based from the website, it was stated of how much per person can buy the product. The defendant has agreed to fully refund for the orders cancelled. Assumptions about this case LongNet might have written a rule stating that the email received is not an order confirmation or order acceptance from Argos.

Overall discussion From the facts, it was stated that, the plaintiffs decided to sue the defendant. As a result, the plaintiffs can win, lose or drop this case. There are a few points from where the plaintiffs’ can argue about this case.

By pressuring to the reply that the website have sent, the plaintiffs’ have made a point that the reply was a sign of acceptance to the offer made by the plaintiff himself. Throughout all of the plaintiffs’ purchases, the plaintiffs’ will need to click “accept” or “reject” the terms and condition that has been linked directly to them. So, from the plaintiffs’ perspective, by them clicking “accept” to the terms and condition, they have agreed to the rules stated. After accepting the terms and condition itself, the website automatically replied “thank you…..” and so, both the plaintiffs’ and defendant agreed on the deal. An example of this situation is when a deal is being made in convenient stores. Since the buyer is the one who is making the offer and the trader is the one who is giving the invitation of treat, once the buyer successfully purchased a product and right after that, the trader will say “thank you” which is similar to the fact above. The result of this transaction is that the buyer now has rights to the product as it has been paid. Aside from that, the defendant may be breaking the Fair Trading Act as the defendant have displayed and advertised their product at the wrong price (Consumer Affairs, 2013) by misleading consumers about the true price of goods. This term misleading too can be assumed as “bait and switch” tactics. Not only those, as the plaintiffs’ credit cards have been charged at a total of $69,000 (approximately) in which it concludes that the defendant have definitely accept the plaintiffs’ offer. So, by right, the plaintiffs’ could win this case. But, in the other hand, though the defendant has been accused for misleading the plaintiffs’ and other consumers about the true price of goods and applying the “bait and switch” tactics, the defendant himself can sue the plaintiffs. According to the facts, the defendant website had limited the purchase to three units per customer but the plaintiffs’ have purchased a thousand units which violates the condition made by the defendant. From this fact itself, the defendant can sue the plaintiffs’ by trying to gain more cash than what the plaintiffs’ deserved by suing LongNet. As stated by (Morran, 2011), cancelling orders over a pricing error is not the same as “bait and switch” tactics. From $699 to the price of $69 is obviously not a 90.10% discount but a pricing

error. Yet, it did not stop people from continuously purchasing from the website as to obtain the cheapest price. The defendant stated that it is a mistake and will fully refund for the orders that have been cancelled. With that statement, it proves that the defendant is not applying the “bait and switch” tactics as rather than saying “Sorry about that, but here is a $200 printer that you should buy instead,” the defendant actually stated that they will fully refund the plaintiffs’ money. Besides that, Smithers (2011) stated that “survey shows just 7% of people read the full terms when buying a product or service online, while a fifth say they have suffered from not doing so.” Which this means that there is possibility that the plaintiffs’ did not read the terms and conditions before accepting it. Referring to the case between Dell, Army and Air Force Exchange Service website and the consumers, an advert made by Dell on the Army and Air Force Exchange Service website advertised the XPS 15 laptop for an incredible $25. The computer usually retails at around $1000, a saving of 97.5%. After this case happened, Army and Air Force Exchange Service website amend its terms and condition by emphasizing that errors such as mispricing are subject to correction any time. Another example of cases which is similar to Aidan and friends v LongNet, though it was not being brought to court, there were a lot of complaints from the consumers. Besides Army and Air Force Exchange Service website, Sears too have mentioned that pricing errors may occur on the Sears Site from time to time, on items sold by Sears, or items sold by third party sellers on Sears Marketplace. Sears attempts to correct all pricing errors as soon as they are discovered, or as soon as Sears receives notice of an error. Sears reserves the right to cancel any orders containing pricing errors, with no further obligations to you, even after your receipt of an order confirmation or shipping notice from Sears. Any payments you make to Sears for orders that are cancelled due to pricing errors will be refunded. Since there were a lot of cases that involved mispricing, it is just right that every website should/will have the terms and condition mentioning about the mispricing. It is not impossible that defendant to have the same term. With that term, the plaintiffs’ would not be able to deny the fact that the term is stated and lose the case.

As the rules of contract apply as they would in ordinary offline transactions, the defendant have another point to argue. Since it is that way, it is the defendant’s rights to accept or to reject the offer regardless it has been charged to the plaintiffs’ credit cards. The terms “invitation to treat” and “offer” are applied in this case.

Evaluation In my point of view, this case can be either win by the defendant or both the parties can drop their cases or both parties can have another term of agreement. As to why the defendant can win this case is that, the defendant has a strong point. As mentioned by Consumer Affairs (2013), it is wrong for a trader to ask a consumer to pay extra amount if the trader itself sell the goods at a wrong price after the sale is completed unless the consumer knew that there was a mistake and the price was considerably less than it should have been. For example, if you bought a jumper for $30 when it was supposed to be $40, then the trader can’t ask for the extra money. But if you bought a new TV that was supposed to be $500 and the trader only charged your credit card $50 then the trader can ask you to pay the extra amount. From the example above, the price that the plaintiff had paid was $630 lesser than the price should have been. As the plaintiffs have bought a thousand units, it was supposed to total up to $669000 instead of $69000. From this transaction itself, the defendant will face a serious loss from this mistake. Not only that, it was stated in the advertisement that the limit of purchasing the product is 3 units per person. In a way, the plaintiffs is violating the terms that the defendant gave. Since the total of plaintiffs suing the defendant is six people, in which, the plaintiffs are entitled to purchase 18 units only. Even if the plaintiffs wish to sue the defendant, the plaintiffs will only have rights on those 18 units. From the perspective of terms and condition, as the assumption was that the defendant must have included a statement in the website mentioning about the mispricing and it is to be corrected

from time to time. To add to this statement, even though the plaintiffs stated that the plaintiffs as a purchaser, they were required to click an “Accept” button to the defendant’s terms and condition which they might not read the terms and condition carefully and blindly accept the “Accept” button. By doing that, it means that the plaintiffs did not fully accept the terms and condition and this will violate the contract that exists between the plaintiffs and the defendant. Aside from that, out of all the arguments, the defendant is strongly only acting as “invitation to treat” and the defendant can accept or to reject the offer.

Conclusion In conclusion of this case, Aidan is not recommended to be entitled to enforce into the contract as with the arguments that the defendant had gathered. This is because there will be a high risk of Aidan losing the case which will also lead to losing money if the defendant decides to bring the case to court and the chance for the defendant to win the case is higher than Aidan’s chance. Aidan does not have strong evidence to be argued in court as the defendant had. As a result, it is recommended that Aidan to drop the case or have another term of agreement between both parties which may also be beneficial to both parties.

References

Consumer Affairs: Prices of goods and services. (2013). Retrieved October 25, 2014, from http://www.consumeraffairs.govt.nz/for-consumers/shopping/how-you-pay/price-of-goods-andservices

Irby,L. (2014). How Old Do You Have to Be to Get a Credit Card?. Retrieved October 25, 2014, from http://credit.about.com/od/creditcardbasics/f/How-Old-Do-You-Have-To-Be-To-Get-ACredit-Card.htm

Morran, C. (2011). Canceling Orders Over A Pricing Error Is Not The Same As Bait-AndSwitch. Retrieved October 25, 2014, from http://consumerist.com/2011/12/22/canceling-ordersover-a-pricing-error-is-not-the-same-as-bait-and-switch/ Smithers, R. (2011). Terms And Conditions: Not Reading The Small Print Can Mean Big Problems. Retrieved October 25, 2014, from http://www.theguardian.com/money/2011/may/11/terms-conditions-small-print-big-problems