There are times when you can withdraw a product from sale. This is a matter of contract law. However, businesses should be aware that ‘a mistake’ is not a defence to civil proceedings taken for misleading and deceptive conduct or misrepresentations about price.
Businesses that become aware of a mistake in their price should immediately rectify the mistake—but the impact and distribution of the rectification should be similar to those of the mistaken representation.
If you have conducted media or other advertising, rectification may include:
displaying equivalent advertising to notify the public of the amendments clearly and prominently
backing up the advertising by point of sale information and advice.
Whether or not you will be obliged to complete the transaction will depend upon the application of contract law.
An ‘invitation to treat’ is a contract law concept that means displaying an item with a marked price does not constitute a binding offer to the world at large; rather, it constitutes an 'invitation to treat', or an offer to deal with the trader concerning the item and as such the retailer has the option to withdraw the item from sale.
Whether or not a consumer can force you into completing the transaction will depend upon whether the elements of a binding contract are present:
an intention on the part of both parties to create legal relations
an offer must be made
there must be acceptance of the offer
consideration—or an exchange of something between two or more parties
legal capacity—both parties must be legally capable of entering into a contract
genuine consent between the parties
the contract must be for a legal purpose.
A contract may be verbal or written.
The important stages of contractual negotiations for retailers inadvertently mispricing goods under contract law are the ‘offer’, ‘acceptance’ and the ‘consideration’ stages.
Offer
An ‘invitation to treat’ can be considered to be part of the initial stages of negotiation between two or more parties to a contract. An invitation to treat is part of the ‘offer’ and in many circumstances, an offer may be non-binding until the successful conclusion of a contract for sale.
Acceptance
Acceptance must be an unqualified or unconditional agreement by both parties with the offer, otherwise it is a counter offer. It must be clear and certain, although acceptance can be implied.
Consideration
This means that both parties are exchanging something of value, for another thing of value. In a retailing context, the retailer exchanges goods in return for cash or some other thing of value, and the purchaser exchanges cash or some other thing of value, for the goods. In a valid contract there is both the loss and gain of something of value for both parties.
If you have inadvertently mispriced a good or service, in some circumstances you may be able to withdraw the item from sale. If you experience this problem, you must carefully consider all aspects of the offer. You must consider whether withdrawing an item from sale rather than honouring the price that you have offered it for is likely to give rise to claims that you have engaged in misleading or deceptive conduct.
Honest mistakes
If civil proceedings were instigated, the ACCC would take into account an honest mistake or reasonable reliance or assurance provided by suppliers in deciding what enforcement activity it would take against a business. However, competitors or other interested parties may be able to take action where you have misrepresented the price, albeit inadvertently.
Whether or not your business is able to withdraw the product from sale is a matter of contract law and we are not able to provide you legal advice. You must seek your own independent legal advice.
The interaction of contract law and the Trade Practices Act involves a reasonably complex set of issues. Hence, we stress that when you become aware of a mistake, you should take immediate action to rectify it—not only so that the offer of sale is withdrawn, but also to ensure that the false or misleading representation is rectified.
What should businesses remember?
You cannot mark goods at any price you like on the shelf, or in a catalogue or promotion, then tell consumers purchasing goods at the register that the goods are not available for that price. The right to withdraw an item of sale is not absolute and you should consider the facts of each matter if you receive complaints or inquiries from consumers.
You may also be party to a code of conduct, or a store policy when dealing with customers who present items at the cash register and find, for example, that the items when scanned show a higher price than the marked one.
One code of conduct relevant to this type of occurrence is ‘The Code of Practice for Computerised Checkout Systems in Supermarkets’. Some companies have a store policy that embraces similar concepts to those contained in this code.
Some provisions of the code include:
stores being required to ensure the price-accuracy of their checkout systems and shelf-pricing procedures and that where an error occurs, the customer being offered the item free in recognition of having brought that error to the attention of the store
the code applies to any bar-coded item that is scanned, even if the item is marked down for quick sale
the code does not cover items that are individually priced (that is, which carry a price sticker or tag on the item itself) and are not scanned
For more information on the code visit the website of the Australian Retailers Association (you will find their details in our Consumer & business directory on the left-hand side of this page).
It is in the interests of many businesses to include the risk of mispriced items in their risk management and mitigation strategies.
There is a wealth of information for retailers in the Retail flash series published jointly by the ACCC and Australian Retailers Association (ARA) and in Advertising, selling and the Trade Practices Act: a small business overview (see Related topics below).
To contact the ARA or visit their website (where you can download the Code of practice for computerised checkout systems in supermarkets). You will find their details in our Consumer & business directory on the left-hand side of this page.
