Amazon has come under fire for a software error, which on Friday 12 December led to hundreds of items being sold for just 1p. The error affected third party businesses who sell their products through Amazon. Some small businesses have lost up to £100,000 as a result. The glitch affected businesses which use a tool called Repricer Express, a software which automatically re-prices items of stock if a cheaper version becomes available elsewhere online. The Repricer Express software is provided by a third party, Lucid Interactive Limited.
On the face of it, third party sellers will be bound by the contracts selling goods for 1p, where these goods have already been dispatched to the buyer. However, one possibility for escaping these contracts is the law of mistake. A contract will be void and both parties returned to their original positions before the contract was made, if one party makes a mistake as to a term of the contract and the other knows of the mistake or must be taken to know of the other party’s mistake. For example, in one case a contract was void as the goods were offered by the seller at the wrong price. The court held that the buyer could not have thought that the seller’s offer matched their true intention and as the buyer must have realised the seller’s error the contract was void. It is arguable that the purchasers of the 1p goods on Amazon must have realised there had been a mistake in the pricing, and that therefore the contract is void for mistake and the goods can be recovered.
Alternatively, those sellers affected may well seek a remedy for the losses suffered from either Amazon or the provider of the Repricer Express software. As the error in pricing appears to have been caused by a glitch in the software, Lucid Interactive Limited is likely to be the first target for the recovery of losses. The typical Licence agreement which governs the rights and obligations between Lucid Interactive and the seller using the Repricer Express software contains the usual waivers and exclusions which attempt to exclude liability for losses caused by software glitches. For example, there is a term which states that users acknowledge the software may not be free of errors and agree that any minor errors shall not constitute a breach of the Licence and there is also a term which excludes loss of business profits.
However, it is questionable whether such exclusion clauses will be enforceable. It is possible that sellers may be able to argue that Lucid Interactive is liable as the reduction in the price of goods to 1p was a fundamental breach of contract. Alternatively, or in addition, sellers may seek to bring a claim that Lucid Interactive has failed to provide its contracted services (the provision and operation of the Repricer Express software) with reasonable skill and care.
Finally, sellers affected may also seek recompense from Amazon itself. Originally, the company had stated that sellers’ accounts would not be penalised but it seems Amazon is now ignoring calls for compensation. The agreement governing the relationship between Amazon, buyers and third party sellers, likewise contains various clauses attempting to exclude liability. The general conditions of sale on Amazon’s website state that where a mistake has been made in pricing and the correct price is higher than the price on the website, Amazon may either contact the buyer to confirm if they want to proceed with the purchase at the correct higher price or alternatively cancel the contract. It is not clear if this term applies to third party sellers, and the term is not included in the agreement which is stated to govern third party sales. Sellers may attempt to argue that Amazon should accept some liability, especially as it appears the company continued to dispatch 1p orders on Monday afternoon, almost 72 hours after the glitch was first noticed, at which stage all such orders should have been cancelled.
We therefore suggest that affected sellers pursue both the provider of the Repricer Express software and Amazon, to establish whether either party intends to provide compensation. We note that the Repricer Express website indicates that they will be making a further statement on the matter over the next few days.
If you would like any further information on this topic please contact one of the Edwin Coe Litigation & Dispute Resolution team.