BestBuy’s $9.99 HDTV Contracts

Samsung TV $9.99On Wednesday morning,, the consumer products seller, advertised 52-inch Samsung HDTVs, usually sold for thousands of dollars, for sale at $9.99. Many buyers ordered at that price, with the seller processing the orders and charging respective credit cards.

Later that day, the seller called the ad a mistake, withdrew it, cancelled associated orders and reversed the credit card charges. It credibly denies any binding agreements were formed.

But is that stance air tight? Basic principles of contract law generally support the seller’s bottom line, though not exactly its reasoning, providing some basis for a buyers’ contract claim.

True, as the seller emphasizes, the advertisement probably was not an offer to enter into a binding contract at all. It did not limit the quantity available nor limit the population of persons to whom it was directed. The ad was merely an ad, an invitation to deal, not manifestation of willingness to be bound to the bargain merely by a member of the public assenting to it by placing an order.

Second, even if the ad were construed, in form, as an offer, the terms of the deal may be in the category of “too good to be true.” A purchase price of much less than 1% of a common, though high-end, consumer product should manifest to reasonable people lack of intention to be bound on those terms.

Third, the ad appeared on a Web site reserving the seller’s right to “revoke offers or correct errors,” even after receiving paid orders. So, again even if the ad were construed as an offer, in form, the Web site reservation allowing revocation of offers or error correction constitute express terms negating any manifestation to make an offer to sell the HDTVs at $9.99.

So there is little basis for saying the ad amounted to an offer those buyers accepted. But that doesn’t end the analysis. It just means the various orders buyers submitted amounted to offers. Then the issue is whether the seller, by processing those orders and related payment, accepted those orders. If so, binding contracts were formed.

This is a more difficult issue than whether the ad was an offer. The buyers are making offers, and the act of taking the order, processing and charging credit cards, would ordinarily constitute requisite manifestation of an intention to be bound.

The Web site reservation concerning the right to revoke offers does not apply because the seller made no offer it can revoke—the buyers made the offers. The Web site reservation concerning error correction may rescue the seller, but it poses an interpretive question.

The two reservations are conjoined, linking right to revoke offers with right to correct errors, which suggests reservation of rights concerning the making of offers. It does not obviously or inevitably speak to errors the company may make when accepting offers customers make.

All this may be far-fetched and somewhat technical, of course, and maybe no one cares about these buyers. After all, what’s the harm? Some excitement about a deal followed by disappointment? But those are interests the law of contract remedies does not protect.

On the other hand, it may matter a great deal. There is some speculation on the Internet that such enticing price quotes are intentionally fashioned to draw attention and shoppers to a site.  It is difficult to verify such assertions and the Federal Trade Commission, charged with policing unfair trade practices such as that, reportedly opines this one was an honest mistake, not a phony or deceptive gimmick.

Even so, the law of contracts can help police such ruses, at least as well as the FTC can.   As a matter of contract law, on these facts, the usual measure of buyer damages would be the difference between the market price of the subject HDTVs (several thousand dollars) and $9.99 (the contract price).  Maybe BestBuy should make an offer of settlement, perhaps granting buyers coupons for discounts on its products.   At minimum, that would maintain customer goodwill put at stake by such errors, and cost much less than plausible aggregate contract damages.

Hat Tip: Justin Davis

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3 Responses

  1. David McDowall says:

    What about unilateral or mutual mistake pursuant to Restatement of Contracts first and second?

  2. A.W. says:

    one thought to add to this…

    the offer was not as crazy as you might initially think. you would be stunned at the genuine offers that retail stores regularly make. for instance, when i worked at Target, i was able to get a $15 beanbag chair for less than 50 cents. ditto with a poker set normally worth around $25.

    Also despite what the company says, if you say, “if you pay us X you will get Y” that is an offer, even if they say this is not an offer. my understanding is that this wasn’t just an advertisement, but an actual order form.

    The best argument for the company is that they said that they could “correct errors” which they could try to use to stretch to say that this change in the offer is a correction of the error. but honestly if i was a judge looking at it, i wouldn’t be very sympathetic to that argument. In context it seems like it is more of a reservation of the right to change what offers are being made, but not to change the terms of the contracts being formed.

    And the fact that they said they could revoke offers, well, implies that they were offers.

    Of course all of this legal blather ignores the other real-world concern: angry customers. i would go as far as to say that the company should strongly consider honoring the deal, if only to avoid upsetting the customers.

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