There seemed to be bit of hysteria this week when The Age reported on an online pricing error by Dell:

"Dell’s website inadvertently advertised 250Gb hard drives for $A8.80 – almost $A600 less
than their usual price.

News of the blunder quickly spread on Australian internet forums, with hundreds of customers attempting to order the hard drives. One claimed to have ordered 50.

By Tuesday, Dell had removed the hard drive from sale. Spokesman Paul McKeon said the $A8.80 price was a "clerical error", and affected customers could either have their money refunded in full or pay the difference.

Many customers refused the offer when contacted by Dell, believing the debiting of their credit cards constituted a contract. This was backed up by the NSW Office of Fair Trading, which said Dell had a
legal obligation to provide the hard drives at the agreed price
($A8.80)."

Whether there was a contract to sell at the advertised price depends on whether there was an offer by Dell or an invitation to treat whereby the offer is by the customer and subject to acceptance by the seller.

Dell’s website terms and conditions clearly state:

"No Contract shall come into existence until the
Customer’s order has been accepted by Dell and such acceptance has been
received by the customer. The contract shall deemed to be concluded at
the time and place where such acceptance is received by the Customer."

Whether that term has been brought to its customers’ attention is another issue however.

To protect themselves against pricing errors ecommerce providers should incorporate the following steps into their sales process:

• Make sure the terms and conditions include provisions such as:

"While we try and ensure that all prices on
our website are accurate, errors may occur. If we discover an error
in the price of goods you have ordered we will inform you as soon
as possible and give you the option of reconfirming your order at
the correct price or cancelling it. If we are unable to contact you
we will treat the order as cancelled. If you cancel and you have
already paid for the goods, you will receive a full refund."

"Acceptance of your order and the completion
of the contract between you and us will take place on dispatch to
you of the products ordered unless we have notified you that we do
not accept your order or you have cancelled it ."

• include an acknowledgement of the terms on the order page
• When the payment is complete, send an email to the customer saying "Thank you for your order". Include an order number and state: "This email is only an acknowledgement of
  receipt of your order which is being
  processed."

This gives the seller a chance to spot pricing errors and cancel the order if the buyer won’t pay the correct price.

The judgment in Universal Music Australia Pty Ltd v Sharman License Holdings Ltd [2005] FCA 1242 is available here.

Read Professor Kim Weatherall’s initial analysis.

UPDATE: Kazaa plans to appeal