Michael Eriksson's Blog

A Swede in Germany

The perversity of offers in B2C commerce

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Portions of my recent (and past) problems with eCommerce (cf. e.g. [1], [2], [3]) were worsened by a fundamental flaw in the typical* legal view of how a (B2C) purchase takes place: What should be viewed as an offer to sell a product is just an “invitation to treat”, leading up to the prospective**buyer making an offer to the seller, which the latter can then accept or reject at will.

*I have not researched the global situation, but this is the case in both Germany and the U.S. (and likely most or all other “common law” countries, because they naturally tend towards the same legal principles).

**A word that I will leave out in the remainder of the text, for brevity, irrespective of whether a purchase actually takes place.

The absurdity of this is proved by how the price and other conditions are usually unilaterally determined by the seller: Go to a grocery store, grab something priced at 9.99, go up to the cashier—and offer to buy it for 7.50. Not only will the offer be rejected out of hand almost everywhere*, but chances are that the cashier will even lack the comprehension that this type of offer should be possible. Indeed, she would likely neither be legally authorized by the store to negotiate the price, nor technically able to accept a different price**—even should it be a higher one. Effectively, “we invite you to extend an offer towards us with these exact conditions—and if you do not like said conditions, don’t waste our time”.. To consider that an invitation, not an offer, is absurd.

*One potential exception is a mom-and-pop store when the owner actually happens to be at the cash register.

**At least without causing a discrepancy between the electronic transaction logs and the contents of the cash drawer, which the cashier might be forced to cover with own funds.

Looking at e.g. eCommerce, this legal approach causes problems like a seller being able to refuse purchases even on the flimsiest grounds, no matter what efforts the buyer has gone through, and even after the buyer’s “offer” might appear to have been accepted. For instance, in my interactions with Cyberport (cf. parts of [2]), the web interface appeared to accept my “offer”, a confirmation email was sent, and my offer then rejected* some 15 (!) hours later. More generally, such transactions (at least in Germany) tend to have an attached disclaimer that “a legal contract only results with our confirmation” (or similar). Cyberport takes it to an extreme “Im Übrigen** kommt ein Vertrag mit Zusendung der Versandbestätigungs-E-Mail zustande.” (“In other cases**, a contract results with the confirmation-of-shipping email.”), which effectively implies that Cyberport can reject any “offer” until the product is actually sent on its way.***

*Cyberport still wanted my business, but refused the “offered” payment per invoice. Legally, this amounts to a rejection.

**A previous sentence specifies other rules for the special cases of prepayment and cash-on-delivery.

***Even afterwards, actually, through simply suppressing said email, but this would almost always be to Cyberport’s own disadvantage.

In other areas, problems like undue discrimination can arise, say with a (physical) store refusing customers due to a too dark skin tone, a Jewish nose, or a pro-Trump hat.

The advantages of altering this legal view include greater safety and fewer complications for the buyers, e.g. in that situations like mine will occur far more rarely, that selling items online without being certain that they can be procured will backfire,* and that bait-and-switch schemes will be harder. To boot, the situation will be more logical—cf. above or note how even the typical language of the sellers tend to place the offer on their side.**

*This practice is apparently somewhat common: A store offers a product at a certain price and a buyer places an order (makes an “offer”). If the store manages to procure the product at a price that allows it a profit, it eventually accepts; if it cannot, it rejects. This is particularly problematic when there is a non-trivial delay in time, because the buyer will have to wait that much longer before he goes to the competition. Indeed, chances are that he would never have gone through the effort to place an order, had he known in advance that delivery was not next to guaranteed. (Of course, the point of the scheme is to keep customers from going to the competition, even when it would be in their best interest.) I once read an article (likely in C’t) about a computer dealer who systematically tried to delay delivery so long, weeks or months, that it could profit from changes in the price level for its products. (Along the lines of promising a brand new Apple product for five percent below the typical retail price—but not actually delivering until the retail price had dropped by six percent. This leaves a percentage point extra profit and a number of customers who would have gone elsewhere without the misleading price claim.)

**As in “today’s offers”, “we offer”, etc. Vice versa, the word “offer” is typically not used for what the customer does—instead words like “order” and “application” dominate.

Now, making the actual offer (by the seller) an offer in the legal sense, raises a few complications, but none that cannot be handled. For instance, if the price of a product is considerably lower than normal by accident, a reservation for “obvious errors” would give the seller protection—that a car normally in the 20,000-Euro price range does not sell for 20.00 Euro or 2,000 Euro is almost a given.* Running out of product is not much of an issue in a physical store, because the offer through a sign/label/whatnot is obviously directed at the products in front of the buyer—you can buy one of these cartons of milk for 50 cent. If no cartons are present, then no offer takes place. Online, the stores would be forced to keep their listings up-to-date to reduce the risk, but that is relatively easy and increases customer friendliness.** Should later problems ensue, e.g. that the store does not receive expected deliveries, it is only fair that the store keeps the customers unharmed and settles its own problems without disadvantaging them.*** Issues like credit worthiness are largely beside the point, because if a seller has a reasonable fear that the buyer will not fulfill his part of the bargain, he cannot be obliged to stand by his offer.**** If worst comes to worst, there is always the option to make an offer conditional—with a condition that must then be explicitly stated in advance and is, correspondingly, fairer towards the buyers than the current arbitrariness.

*But with lesser errors, the store might well have to sell at the stated price—and that would be good in my eyes. (Exactly where to draw the lines is beyond the current scope, and might well depend on both product and audience.) Indeed, this is often what would happen today anyway: If the bar code is associated with the wrong price, the cashier is unlikely to even notice—and, cf. above, might not be able to do anything about it, even if she did.

**Or to implement better order management, or similar, with an improvement for both the buyers and the store.

***Note e.g. that what product sources the store uses, and what risks are associated, is a decision made by the store—not the customers of the store. Correspondingly, the store should carry the consequences of these decisions.

****However, the seller might see restrictions in the great arbitrariness that currently applies, where “unreasonable fear” is quite common. That too would be good.

Excursion on different types of deals:
Regular store sales, e.g., are by their nature offers—not invitations. However, this does not apply to all other conceivable deals. For instance, the sale of a single house or a single painting is by its nature an invitation to negotiate—all involved parties expect a negotiation and understand that only one buyer will actually get the house/painting. For instance, auctions are by their nature invitations to bid.

Excursion on advertising:
In contrast to the above, advertising might be an area where “invitation to treat” is a reasonable concept, e.g. because it is impossible to change the contents of a prospect after its been sent in the mail, even should the circumstance change or an error be detected. Explicit reservations for errors or the supply running out might be helpful substitutes (and I have seen them relatively often even as is), but might come with the danger of raising red flags to the customer, who could suspect e.g. a bait-and-switch scheme or a “lure” product that is offered at a fantastic price (but in extremely low numbers) solely to get people into the store.

Excursion on the historical situation:
In earlier days, the situation might not have been as absurd as it is today, giving some explanation to how the legal view arose. (But the more likely explanation is the convenience of the sellers.) For instance, price haggling was far more common and often outright expected in the past, amounting to a series of offers and counter-offers.* For instance, mail-order catalogs are much harder to update than websites, and there was a lot of room for misprints with older technology. (Then again, mail-order catalogs might be better viewed as advertising or otherwise be exempt, with an eye on inflation, price fluctuations, VAT changes, and similar, which can make it impossible to guarantee the same price over many months.)

*Incidentally, yet another argument why the seller’s offer should be the offer from a legal point of view: When haggling is reduced to a single statement of the seller’s price wish, this amounts to only the seller’s final offer remaining, making it absurd to interpret it as a “invitation to treat”. Negotiations did not usually go like “A: If you were to offer me ten shillings, I would sell. B: No, I couldn’t do that—but if you were to offer to sell for seven shillings, I would be on board.” (where the formulations are intended to be interpreted literally, not as round-about formulations of offers).

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Written by michaeleriksson

March 30, 2019 at 9:11 am

Posted in Uncategorized

Tagged with , , , ,

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