How to get a company to honor an incorrect price — maybe

By | December 29th, 2014

Robert Bernard just wanted to buy his wife a nice present for their anniversary. As he was paging through the Macy’s catalog, he found a deal: A diamond necklace that normally sold for $1,500 on sale for $47.

Thinking it was probably too good to be true, Bernard drove to Macy’s. Sure enough, the store was actually selling the necklace for $47.

Unfortunately for him, the person ahead of him in line bought the store’s entire stock.

The clerk was apologetic and offered to sell him two of the necklaces and have them shipped to his house. And you can probably guess what happened next. Macy’s caught the pricing error — it should have been on sale for $479 — and canceled his order despite him having a receipt for the purchase.

So what’s Bernard to do?

While I’m sure our resident lawyers will poke holes in this, in general, basic contract law requires three things for the contract to be considered complete: (1) offer of sale; (2) acceptance of the offer by the buyer; and, (3) consideration in the form of payment. So in general, after having paid for the item, and once you have left the store or the item is delivered, the item belongs to you.

Up until that point, it depends.

Consumer pricing law varies not only by country but, in the U.S., also by state. The National Institute of Standards and Technology has taken the time to consolidate the laws of all 50 states into one document.

Another great source for those of us without a law degree is Consumer Reports and its consumer rights page. The one time that courts generally agree that a retailer can void the contract is when the customer knew that it was a pricing error at the time of purchase, like the person in front of Bernard at the store. When this occurs, it’s considered a mutual mistake nullifying the contract. So, in a retail environment, in general, a store has up until it accepts your payment to discover a pricing error.

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Unfortunately for the consumer, this isn’t true online.


Most websites now include language in their Terms and Conditions that allow the cancellation of orders with pricing errors even after payment is made. Some legal sites in the UK have actually recommended that online retailers change the very nature of the online purchasing contract by essentially having the terms and conditions state that an order is conditional on the merchant accepting it. This means the buyer, not the seller, is making the offer of sale regardless of what price is listed on the website.

So what do you do if you’re caught by a pricing error?

If it’s already yours, you’re probably in the clear.
If you already have an item, the retailer has little recourse as long as you made the purchase “innocently” and not as the result of a posting on your favorite forum.

One word: Screenshot!
If you ordered an item online, read the terms and conditions on the website to make sure that they included the language allowing them to cancel your order. If the language is missing, it’s time to take a screenshot and appeal to a higher authority at the company.

For a retail purchase, know your local laws.
Some require that the retailer honor its in-store pricing.

Be nice. If you don’t have your purchase, appeal to a higher authority.
The odds are their website terms are going to allow them to cancel your order, so now is not the time to make threats. Now is the time to appeal to a company’s customer service and reputation. It’s one of those times when a loyalty program can work in your favor.

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If all else fails, appeal to your lawmakers.
Let’s face it: They are always looking for a good story to attach to a bill. You may be able to work to get legislation passed that keeps online retailers from rewriting basic contract law and changing the terms of a contract after accepting payment.

Ultimately Bernard’s wife lost out on her necklace. Macy’s wouldn’t honor the purchase for any of the customers that had ordered but not received the necklace according to local reporters who followed up with Macy’s. If nothing else, Macy’s gave merchants a lesson on how not to handle mistakes like this. The order was cancelled by voicemail and Macy’s failed to perform any sort or service recovery.

Should online retailers have to honor orders after they accept payment for them?

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  • Doesn’t seem very travel related but OK I guess.

  • austin1805

    Great overview, I feel like you were recapping my first semester of contracts. One point to clarify is that advertisements, including online shopping is usually considered an invitation to bargain; meaning that the online shopper is making the offer based on Macy’s invitation to bargain. Macy’s is usually not obligated to sell you that item at the “invitation to bargain” price (though it may be in certain circumstances). Also, in the sale of movable goods the Uniform Commercial Code is adopted by many states and can be a good, quick reference for the contract side of law in case of dispute with a retailer.

  • Joe_D_Messina

    Sorry, editing my original post for clarity. It’s nice to link to the synopsis of all 50 states’ laws but I don’t see how relevant that really is to this particular case given you say later on how basically everywhere exempts typos and the like. Either the law is going to be on his side so it is worth discussing, or it’s not on his side so that needs to be made perfectly clear to avoid confusion and getting the OP’s hopes up for no reason.

    Let’s say this was your website, Christopher, and due to a typo you ended up on the hook giving away a $479 item for $47. You’d be okay with that? Even if there were enough sales made at the erroneous price to bankrupt you?

  • sunshipballoons

    It would be fun in a jurisdiction that has favorable laws if somebody took Macy’s to small claims court. It’s a pretty simply case. If the law is favorable, it should be an easy win.

  • sunshipballoons

    From a purely contract law perspective, “invitation to bargain” is probably right. However, false advertising laws make it pretty hard in most place for that bargaining to result in a higher price than the one advertised.

  • Joe_D_Messina

    But the law isn’t favorable. Christopher even says that in the article. It’s not a well-worded article because while he seems to leave the door open for help for the OP from the law, there actually doesn’t seem to be any legal standing for the OP as the laws specifically give the retailer an exemption for mistakes of this sort.

  • austin1805

    I completely agree that consumer protection laws will apply and sometimes modify the common law approach. My take on “mistakes” in the travel industry is that if you think that their is a probability that the amount is a “mistake” then typically the merchant has the power to terminate, unless consumer protection laws apply (i.e., DOT rule for mistake airline tickets enforcement; we have no such laws for mistake hotel reservations). There are a lot of other factors, including scope/size of the mistake, reliance, and how long it took the merchant to cancel/refund/offer alternatives. Though, if you took Starwood/Hyatt/Hilton, etc to small claims over a mistake hotel rate, I’d bet that they would settle without question. They don’t want to deal with it even if they are “right”. Personally, I think we should strengthen consumer protection laws for certain mistakes (reasonable), I mean these companies screw us everyday isn’t it karma for us to get one over on them?

  • Daddydo

    I find that you need to be in the store when shopping at Macy’s or any retailer. Their web site had Cashmere sweaters at $39.00 for one of the Saturdays before Christmas. The sale was off at 1pm. I got there at 3pm. The email stated no time anywhere in the text. The store manager immediately gave us the discounted price; 1 1/2 dozen sweaters and 12 presents later, we had saved 500.00 over the non-web price. When shopping on the web, you have no person to speak to. When in the store, you have very nice people, the cashiers call the managers, and the managers make decisions. You cannot count on the web for all of your answers. They ran out of the posted price.

  • sunshipballoons

    Except, no, that’s not what he said. In fact, he says the opposite: “So in general, after having paid for the item, and once you have left the store or the item is delivered, the item belongs to you.”

    Everything he says about the company being able to get out of the deal involves web purchases.

    And I checked Texas (where Robert Bernard lives) on the document linked in the article. No laws regulating this at all. They had a deal. He paid. He gets the necklace. Or damages in the amount of the FMV of the necklace.

  • Joe_D_Messina

    Unfortunately for the OP, that isn’t the case. That document Christopher posted is incomplete. It says there are no pricing laws at all in Texas. Does it really seem possible a state would have ZERO laws pertaining to that?

    A quick google of “texas price laws” brings up the laws that Texas does in fact have on the website of the Texas attorney general. Their BUSINESS AND COMMERCE CODE, TITLE 2. COMPETITION AND TRADE PRACTICES, CHAPTER 17. DECEPTIVE TRADE PRACTICES would seem to be the applicable code and it specifically excludes all online sales, meaning the retailer is not on the hook for any price errors. Thus, the OP is out of luck at least as the law is concerned.

  • bodega3

    Macy’s website isn’t Macy’s store. They have different pricing on many of their items. Just yesterday I was on the website and the stated the local store didn’t have what I wanted. I was at the store later in the day and they had many of the items. What I was looking at is at the store all the time, not something here for the holidays, gone afterwards.

  • sunshipballoons

    Okay, I looked at that law. I don’t see anything there that would even arguably preclude a claim for breach of contract claim by this consumer.

    The statute deals with false advertising claims. This isn’t a false advertising case. Macy’s took this guy’s money in exchange for a product at a certain price, and is now refusing to provide the product. If you want to argue that he can’t make that claim, you need to provide a statute that says that you can’t sue for breach of contract when a merchant backs out of a deal because they think they didn’t charge you enough.

  • Joe Farrell

    A store, airline, hotel, etc, which insists upon a retroactive re-pricing of of inventory due to ‘their mistake’ is no different from a consumer who does not read the fine print – there was never any meeting of the minds in the transaction, according to Chris Elliott.

    That’s the argument Chris makes when he lets travel companies and retailers off on their fine print – while they can re-price for their ‘mistake’ because ‘no one would think that the price could ever be that good.’

    Often a seller has terms and conditions you must agree to – and if you read those terms and conditions, I dare say you would never click agree. Especially in cruise contracts. Many many travel contracts [airline/cruise/hotel] have all sorts of claw back provisions whereby they can charge you more if they end up losing money – don’t believe me? Go read a cruise contract – they can literally deny you boarding at the terminal if they decide that a fee increase is needed – not a cruise fare – but a fee like a baggage service fee, fuel fee, food fee, hygiene fee, boat admission fee, ID fee, and the list is as grand as your imagination. Airlines? The same. Hotels can change your rate by adding on a resort fee, profit fee, cleaning fee, etc etc etc.

    When I was in the law school the popular book was “The Death of Contract,’ whereby the ever increasing torts related to the contract mean the contract is not even worth the toilet paper value of the agreement itself.

    Asking Chris- why is a fat finger recalculation ok when a consumer cannot back out for the same ultimate reason – I made a mistake?

  • Joe_D_Messina

    I’m not following how an incorrect price could fail to fall under the deceptive trade practices law as the entire argument for the OP would hinge around how it was deceptive for them to advertise that price, take his money, yet fail to provide the goods. But it really doesn’t matter because all these laws make exceptions for online sales. That’s not surprising given that one typo on a website could bankrupt a small business and seriously hurt even a larger one.

    Rather than tell me to find another statute to support my argument I would suggest you spend some time finding one that supports yours. But do you really believe that websites would continue to offer sales in Texas if they were going to be automatically liable for any price errors? Of course they wouldn’t as the risk would be too high. Anybody knowing the law who caught an example like this would instantly order as many items as their credit card would allow because it’d be free money.

  • Joe, I didn’t write this story. John Baker did. I think he did an excellent job.

  • Joe_D_Messina

    The answer to your question is that the laws specifically allow it to be okay when it comes to price errors. The article mentions that even if it is a bit opaque on the subject. (A lot of the legal discussion in the article is rather pointless at least as the OP’s case is concerned.)

    And it’s not really a mystery as to why that is because the consumer has a very hard time arguing they made a mistake at the point of purchase. (There are certain instances, like door-to-door sales and even buying
    airline tickets, where the law will allow the consumer a period to
    change his/her mind without penalty but typically the consumer is stuck when they agree to the purchase.)

    But the laws for years made exceptions in many cases even for print advertising errors. And certainly when it comes to online sales where thousands of orders can be made before anybody with the company even realizes there’s been some sort of mistake, most legislatures have deemed it fairest to let the company have an out in those cases.

  • sunshipballoons

    If the business has an incorrect list price and is using it to deceive a consumer, the consumer probably has a remedy under these statutes.

    But that’s not the situation here. The consumer had contract with Macy’s, under which Macy’s agreed to sell the consumer a bracelet for a certain price. The consumer agreed to and did pay that price. Then, Macy’s refused to give the consumer the product. That is a breach of contract. There is no statute (or there doesn’t need to be), because this is the law “at common law.” That means: a consumer can get a remedy for a breach of contract unless there is a statute prohibiting such a remedy.

    So, again: Macy’s agreed to sell him something for a certain price. He paid the price, then Macy’s refused to deliver. In the absence of a law prohibiting it, he is entitled to recover for the breach of contract.

  • Ken

    Well, I feel sorry for the guy and hope he was able to find something else nice for his wife, but I don’t see nothing wrong in Macy’s practice except the way it handled the cancellation. Give him a coupon or something at least.
    Online stores are prone to this kind of errors and cancellation is inevitable in some cases, like when an item goes out of stock. What I don’t understand is the store cashiers. They just sold an entire stock to one person without thinking something was wrong?
    I like shopping in Amazon. They have never failed me since my first order 16 years ago. I ordered a book by mistake and couldn’t cancel it in time. Since shipping cost for return was too much, they decided to give me the book as a gift. Since then I’ve been a loyal customer. A recent incident is that I found a scientific equipment at an unreasonable price of $170. After I placed my order, Amazon revised the price to $4,600. I was kept on hold for 6 months (another anomaly), but Amazon fulfilled my order at the end.

  • AJPeabody

    Poor OP. He saw an error in pricing, and, since the prior customer bought the entire stock, he had to be aware that the price was an error. Now, if he had only bought one due the the kindness of the clerk, he would have had a plausible argument that he should be accomodated. But once he bought two, it was clear he knew the price was an error. He gets one “BooHoo” but no jewelry. It wasn’t a true sale since he knew the price was an error.

    I had an epidode similar in some repects a good long time ago. My local wine store had a huge display of bottles in open wood cases, generally ranging from cheap to average pricing. Browsing through, I found a case of Robert Mondavi cabernet 1978 (not the reserve, mind you) with price tags at $3.98 on each bottle. I suspected that the tag should have read $13.98, a reasonable price for the time. I put the remaining 6 bottles in my cart and took them to the salesman who usually served me. I pointed out the price, expecting a “Thank you” for pointing out the error and perhaps an offer that I could buy one bottle as a reward. Instead, the salesman started yelling at me. Here I was trying to help his store and he treated me like a theif! I was PO’d, but, since he did not take the bottles back or say I could not have them, I bought all 6 at the fat finger price while he continued to give me a stink eye.. I never went back to that store. It went out of business less than a year later. Wine tastes so much better with a side of karmic justice.

  • Joe Farrell

    ok – oops – it SOUNDS like one of yours!! Question is still a good one, though.

  • jet2x2

    I can’t vote because in my opinion the answer is “it depends.” It depends on the terms and conditions on the website and/or if there is any applicable law or court decisions concerning how website sales are treated. If they have the language that placing an order is an offer by the buyer, then under general contract law the customer has made an offer that the seller can reject, as long as they return the money.

    While not the situation here, I have handled many situations where consumers tried to take advantage of an obvious pricing error. They ordered in quantities far beyond even reasonable gift-giving needs, much less personal needs, and when the orders were cancelled they denied suspecting a pricing error. If a retailer makes an honest pricing error and is allowed by law to correct it by means that include cancelling an order, I don’t see why they should not be able to do that. That is of course different than a retailer deliberately or negligently posting incorrect prices to generate sales.

  • William_Leeper

    This is NOT a travel site, this is a consumer advocacy site.

  • William_Leeper

    Except this was not written by Chris.

  • jet2x2

    While a court may “do equity” and rule against Macy’s if a breach of contract suit was brought against them, there is not necessarily a contract here. Everyone pretty much knows common law contracting – offer, acceptance, consideration, etc. – but there are few commercial transactions so uncomplicated anymore because of laws, regulations and court decisions. There are many possible legal reasons why Macy’s could have been right to cancel the order, just as there are to support the customer. Had I been the legal adviser here I would have researched the law, given the advice based on the law, and then advised the client to honor the sale even if the law said otherwise. As I used to tell my clients, just because something is legal doesn’t mean it’s right. I suspect this may not have been the only sale where a Macy’s employee placed an order for a customer at the incorrect price and Macy’s decided to stop the bleeding on all orders.

  • Bill___A

    This is where I believe it is best to be fair and ethical. That was clearly not the correct price, so why beat them with a stick?
    At the end of the day, would you feel good about buying them for $47? I wouldn’t.

  • Carver Clark Farrow

    For once, I’m sitting back and not playing attorney. All I’m missing is a martini.

  • Rob Taylor

    Another one of those life events where having a legal plan would pay for itself.

  • PsyGuy

    Yeah

  • PsyGuy

    The only lesson here, is be that guy in the front, who cleared them out, he’s the one who won.

  • Fishplate

    He gets the necklace. Or damages in the amount of the FMV of the necklace.

    Which, at the time of purchase, was $47. I assume that amount was refunded to him.

  • Extramail

    And, probably turned around and made quite a healthy profit on his sales. Maybe the buyer should have asked the guy in front of him if he could buy one from him instead of Macy’s.

  • sunshipballoons

    No. $47 was not the FMV, as Macy’s actions clearly show. The FMV of the necklace was arguably $1500, but was at least the $479 Macy’s meant to sell it for.

  • sunshipballoons

    I should have followed your lead, but now I’m in too deep.

  • sunshipballoons

    First of all, I’m obviously simplifying this and making some assumptions that I’d never make if I were really advising a client.

    That said, “do equity” is not relevant here. This is not an issue of equity — it’s an issue of law: the enforcability of a contract is an issue at common law not an issue at equity.

    If the court concludes that there is a contract and that the buyer did what he was supposed to under the contract–and there is no other law relieving Macy’s of it’s obligation under the contract, which there does not appear to be in this context–then the court must either award damages or specific performance (here, probably damages makes more sense since this problem can be solved with money).

  • Fishplate

    The OP was willing to pay $47 for it, but not $479. That’s a pretty good indicator of the FMV to the M, as represented by this purchaser.

  • sunshipballoons

    You can keep saying that, but if this case went to court, there’s no way that he’d only get $47.

  • Fishplate

    His damages were $47, the amount paid for an item that was not delivered. Why does he deserve more than that?

  • sunshipballoons

    Because he is entitled to the benefit of the bargain he made, which is to obtain a $1500 or $497 item. The California model jury instruction on fair market value (which is fairly representative of the law in most or all states) is pretty clear:

    3501. “Fair Market Value” Explained

    Just compensation includes the fair market value of the property as of [insert date of valuation]. Fair market value is the highest price for the property that a willing buyer would have paid in cash to a willing seller, assuming that:

    1. There is no pressure on either one to buy or sell; and
    2. The buyer and seller know all the uses and purposes for which the property is reasonably capable of being used.

    The highest price on this item that somebody would pay, that regularly sells for $1500 and was supposed to be on sale for $500 is not $50. Get it?

    I suppose a jury or judge might conclude otherwise — perhaps nobody would have ever paid $500 or $1500 for this item. But since they WANTED to sell it for $500 and previously sold it for $1500, that seems like a huge stretch.

  • Fishplate

    They didn’t sell them for $1500, or else why drop the price so drastically? And, it’s not apparent that they sold any at $500. They did sell all they had at $50. That provides a clue to the FMV. It’s likely somewhere in between.

    But then, that’s what courts are for – to encourage endless petty bickering over trivial matters that don’t entail any actual damages.

  • sunshipballoons

    Fair point. I think I mentioned earlier I was oversimplifying for the purpose of the discussion. What is clear, though, is that FMV is not automatically $47 just because that’s what he paid. I’m fairly confident he’d do better than that if he sued.

  • jet2x2

    I was simplifying too. I don’t think there was a contract. Just my opinion based on the facts. It’s difficult to really judge these without seeing the documentation and getting all sides directly from those involved.

  • sunshipballoons

    If there was no contract, why in the world did this guy pay Macy’s money? Charity? Because he had stolen it from Macy’s previously? Just for the heck of it?

    There’s clearly a contract. That’s the easier part of this case.

  • jet2x2

    We can agree to disagree without sarcasm. Based on the facts provided, the OP says the clerk offered to place an order for him. That’s an offer from the customer to Macy’s facilitated by a low level Macy’s employee who is unlikely to have any authority to guarantee anything. The receipt is simply proof of payment for the offer. Macy’s rejected the order (the offer). Therefore the three basic elements of a contract are not present. From a consumer advocacy standpoint I believe Macy’s should have honored the order to make good on their error, particularly since another customer immediately ahead of the OP was allowed to take advantage of it – but in my opinion they had no legal obligation to do so.

  • sunshipballoons

    You don’t help yourself by getting more absurd. You’re now saying that sales made by a “low level employee” on behalf of Macy’s are not enforceable contracts. EVERYTHING you buy at Macy’s is from a low level employee. The upshot of your view is that, if you’re right, every time you buy something at Macy’s you need to be concerned about Macy’s coming back to you and demanding their product back. Or, for that matter, the Macy’s low level employee could charge your credit card, then have a manager swoop in and refuse to give you what you bought. After you’ve paid. This just isn’t how the law works. You have the right to rely on the assumption that a Macy’s sales clerk has the right to do the transactions that they do with you.

  • Mike Z

    Sorry, but your entire argument about knowing it was a pricing error doesn’t hold water. Jewelry is regularly advertised as being on sale for $x dollars with a list price of $x or originally $x dollars. In fact I don’t think I’ve ever met anyone who paid full msrp price for any jewelry item, ever. In fact, jewelry is very often advertised at well over 50% off because the “original price” was so outrageous that not one would most likely have ever ben sold at that price point.
    The other thing that holds no water is the theory that because the person in front of him purchased more than one suddenly means that he knew it was a pricing error. No, it simply meant that the person wanted to purchase more than one at the advertised price for whatever reason.
    The fact is that since the clerk made the order and not the customer, the customer could not have agreed to the fine print listed on any web page. He would have simply expected the delivery to be made as agreed to.

  • I’ve found that to be true so I assume it shouldn’t be on Boardingarea.com as a “travel” blog either? Just saying not hatin.

  • Dan, easy mistake to make. We’re still happy to have your comment here.

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