ContractsProf Blog

Editor: Jeremy Telman
Valparaiso University Law School

Monday, October 12, 2015

Sears Makes a Mistake

Some shoppers on Sears.com thought it was their lucky day when they saw expensive play sets and fancy toys available for the low price of $11.95.  Consumerist has the story here.  If you saw a storybook cottage that typically costs hundreds of dollars listed for sale at the low, low price of $11.95, what would you think?  That's right.  Unless it was advertised as a huge blowout sale, you would probably guess it was a mistake.  Apparently, Sears lists items sold by third parties and gets a cut - and this time, a third party had made a pricing error on its items.  Of course, some Sears sellers were upset - even though Sears refunded their money and gave them a $5 gift card.  So, for all those upset sellers, let's run through the mistake scenario to see whether the law would be on your side:

Was this a mistake of a basic assumption?  - Yes, it was a pricing error and pricing errors are generally considered basic assumption mistakes.

Was the mistake made by one or both parties (was it a mutual or unilateral mistake?) - Here, Sears mistakenly believed that the prices listed on its website were accurate (not all $11.95) while the customers saw what the prices were - $11.95 -  so it was a unilateral mistake made by Sears. 

Did it have a material effect?  Yes, there's a big difference between $11.95 and hundreds of dollars so Sears would make less money on the transaction.

Did the non-mistaken party (the Sears customers) know or should they have known of the mistake?  - Yes, because they should know that expensive playsets are typically not sold for such a low price unless it is part of a promotion or clearance sale.

Did the mistaken party bear the risk of the mistake?  You might think Sears would, since it is their website.  But based upon existing case law (i.e. Donovan v. RRL Corp), since there's no lack of good faith here and Sears presumably acted reasonably in managing its website - it does not constitute "neglect of a legal duty" and Sears likely doesn't bear the risk of the mistake.

So - there you have it.  Sorry kids - guess you'll just have to go outside and build your own play castles with branches and old bed sheets...

 

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Comments

Is there any reason here why the advertisement would not simply be treated as invitations to treat/negotiate? In Donovan v RRL, there was a statutory reason (cars had to be sold at advertised prices) why the advertisement was considered an offer. If the advertisement is just an invitation to treat here, the whole mistake analysis is unnecessary.

Posted by: Florian | Oct 13, 2015 12:34:04 AM

Hi Florian,
In this case, the "offer" by the consumer was accepted and the credit card payments were processed. (This often happens with web transactions, which is why these are typically mistake scenarios). That's why this would be a mistake analysis.

Posted by: Nancy | Oct 13, 2015 10:48:42 AM

Thanks for the reply (which I only just saw). I see your point for some of these transactions, but if the article to which you linked is anything to go by, Sears appears to have cancelled some transactions immediately, and it would be worth having a look at the Terms & Conditions to see what may be interpreted as an acceptance. Automatic order confirmations and such may not necessarily suffice.

Posted by: Florian | Oct 14, 2015 1:18:35 AM

Florian,
Sorry for the late response - I just saw this. You make a great point! I didn't want to actually go through the process of purchasing something on the Sears website, but I think we can safely assume that they have some sort of a click agreement prior to checkout. If those terms are the same as the website Terms of Service (usually the case, but not always), it does contain a clause dealing with Pricing Errors: "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."
So there you have it. Thanks for the comment!

Posted by: Nancy | Oct 22, 2015 9:16:36 AM