In August 2015, Air Canada advertised 10-pack flight passes for $800.  Many consumers thought it looked like a great deal (the passes normally retailed for $8000) and jumped onboard, purchasing the passes. However, the airline later cancelled the orders indicating that a pricing glitch had inadvertently occurred.

Earlier in 2015, a mom purchased a play set for her daughter from the Sears website for $12.99.  She thought it was a great deal, as similar sets retailed for close to $100.  However,  5 days later, her order was cancelled by Sears and upon further inspection, she found the toy was now listed for $129.99.

These are just 2 publicized cases of pricing errors, but these companies are not alone. In many cases of pricing errors, e-retailers aren’t honouring the mistaken price, but instead are turning to their website’s terms of service (or conditions of sale), which often carve out protections for such mistakes.

If you’re conducting business online, your website’s terms of service are critical to reducing the risk of selling online and protecting your business.  A properly drafted e-commerce set of terms can protect your site from a myriad of risks, including a costly pricing error posted on your webpage.

To ensure adequate protection, there are two main concepts that every e-commerce terms of service should include.

Mistake management when selling online

To avoid the pricing errors exemplified above, your website terms will need to clearly indicate when your business becomes legally bound to the customer.

In the case of the Sears pricing error, the Sears website said that it “reserves the right to refuse or cancel any order containing any error, inaccuracy or omission, whether or not the order has been submitted, confirmed, and/or your credit card has been charged.”

Some website terms state that, in the event of a pricing error, the e-retailer can cancel orders up to the time of shipping.  This allows e-retailers time to detect and correct pricing errors.

Where services are being sold online, some website terms may include a provision that the services may be decreased to an amount proportionate to the amount paid.  This allows e-service providers to remedy pricing errors that may not be detected until after services have begun to be provided.

You may also wish to consider a provision that states that once payment is accepted, the customer is making an offer to buy the goods, which is open to acceptance by the e-retailers . This provision may go on to state that neither submitting an order nor completing a checkout process constitutes the e-retailers acceptance of the order.  Additionally, if these key terms are hidden in a lengthy set of terms on the website, you should consider making a link or check box available during checkout, so that the customer must indicate their acknowledgement of these terms before continuing with the checkout process.  Furthermore, any confirmation emails that you send to customers should indicate the order was received and is being processed and avoid making any indications that the order has been accepted.

The right to amend

Your website’s terms need to be able to evolve with your business needs.  This means that you should consider the website terms to be a “living document”, recognizing that at some point you’ll inevitably need to modify or update your terms of service.  A well-drafted amendment provision can allow you to easily change your terms, while ensuring that your customers or users remain bound to the changes.

A good amendment provision should clearly state how any changes in the terms will be communicated to customers.  Typical methods include providing written notice (either by email or in billing communications) or by posting changes on the website.  Website terms should also include a place for the date, so that the date of any updates will be visible.  Ensuring that the terms contain these provisions will significantly reduce the risks associated with a customer claiming that they are not bound by the new provisions.

These provisions may work for your company, or they may not. There are many different ways that a set of properly drafted terms of service can protect your e-commerce business from the unanticipated risks of a glitch or mistake when selling online.  Your business will need to determine where the risks of mistake lie and how these risks can be managed without compromising customer service and this process should be reflected in your website terms.

The information provided above is for educational purposes only. This information is not intended to replace the advice of a lawyer or address specific situations. Your personal situation should be discussed with a lawyer. If you have any questions or concerns, contact a legal professional.

By , On , In Business Law