1
Impact of Pricing Errors on the Validity and
Enforcement of Electronic Contracts;
A Comparative Study in English and French Law
Maria Kaniadaki
– 10846794Supervisor: Dr. Joasia Luzak
Thesis Master European Private Law 2014 – 2015
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Table of Contents
Introduction ... 3
Chapter 2. Online Offer and Acceptance... 6
2.1 English law ... 7
2.2. French law ... 8
2.3. Comparison ... 9
Chapter 3: Automation in Electronic Contracting ... 10
3.1. The establishment of parties’ “intention” in English law ... 12
3.3. Comparison ... 16
Chapter 4: Pricing Errors ... 18
4.1. English law; “communication errors” ... 19
4.1.1. Legal classification ... 19
4.1.2. Validity and enforcement of e-contracts ... 21
4.2. French law ... 24
4.2.1. Legal classification ... 24
4.2.2. Validity and enforcement of e-contracts ... 26
4.3. Comparison ... 29
Chapter 5. Evaluation of the English and French legal system ... 32
Conclusion ... 36
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Introduction
On Friday 12 December 2014, many products of "Amazon" website, among which mobile phones, games and clothes, were being sold for one penny. The obvious wrong pricing was due to a mistake caused by a software glitch. Unfortunately, it was only after thousands of orders were placed that Amazon realized the pricing errors and by then, many of these orders not only had been confirmed, but the products were
dispatched as well1. A few months earlier, in May 2014, “Lenovo Canada” was
advertising on its website a laptop for 279$ instead of the correct price of 799$. The company cancelled all the orders placed for the specific type of laptop at the wrong price2. Argos, a UK online retailer, was also exposed to a financial loss by a mistake due to which a smartphone appeared to cost 119,99£ whereas the actual price was
449,99£3. These cases are a small sample illustrating what may go wrong during an
online transaction, where some parts of preparing an offer or an invitation to make an offer are automated and an offer or an invitation to make an offer when made public instantly reach many consumers.
Undeniably, the Internet is responsible for the emergence of electronic
commerce4. However, despite the continuous evolution of computer science, it is
impossible to avoid mistakes such as the ones described above for there is always the risk of a technical glitch or an attack on the software by a virus. Besides, the involvement of the human factor can also be held accountable for such mistakes since the entry of data is effected by people.
Obviously, mistakes may occur in everyday transactions, as well. In our opinion, the situation is more ambiguous when mistakes occur during the conclusion of contracts by electronic means. The conditions under which an electronic contract is concluded differ from paper contracts and will be elaborated on in more details in the following chapters. This thesis will show that the process of e-contracting is characterized by dematerialization, depersonalization and cross-border dimension
1 See http://www.theguardian.com/money/2014/dec/14/amazon-glitch-prices-penny-repricerexpress
[last accessed on 13/4/2015].
2
See http://globalnews.ca/news/1355313/lenovo-canada-cancels-customer-orders-after-online-pricing-error/ [last accessed on 13/4/2015].
3 See
http://www.thisismoney.co.uk/money/news/article-2091129/Price-glitch-Argos-red-faced-450-Nokia-Lumia-800-smartphone-advertised-120.html [last accessed on 13/4/2015].
4
Fangfei Wang F., ‘E-confidence: Offer and acceptance in online contracting’, International Review of Law, Computers & Technology, 22:3, 2008, p. 271, http://dx.doi.org/10.1080/13600860802496483
4 which requires the reconsideration of traditional contract rules under the new electronic environment, at least with regard to the doctrine of mistake5.
The e-Commerce Directive (hereinafter ‘the Directive’) addresses the issue of
electronic contracts and provides general guidelines on a European level.6 Member
States may not preclude the validity of electronic contracts due to the mere fact that they are concluded by electronic means.7 However, the Directive remains silent as to the moment of the conclusion of the contract and it is left to the national laws of the
Member States to determine the rules governing contract formation.8 The Directive
contains provisions with regard to contracts which are designed to enhance legal certainty, consumer confidence and transparency in commercial communications as well as safeguard the validity of electronic contracts;9 the service provider has the obligation, among others, to provide technical steps enabling the conclusion of the contract and the technical means for correcting input errors prior to the placing of the
order by the consumer.10 None of the above-mentioned provisions deals with the
problematic situation that may arise due to input errors on behalf of the service provider and their influence on the validity of the contract formation. Pricing errors, in particular, need further analysis since they may affect materially the validity of a contract. Price is an essential element on which agreement has to be reached between the parties prior to the conclusion of the contract. Other types of input errors, such as wrong indications as to the qualities of a product (dimensions, colour, pictures not corresponding to the goods on sale) do not fall within the scope of this study, since they are not, as a rule, sufficiently substantial so as to constitute a ground for invalidation of the contract. Therefore, it is essential to focus on pricing errors and analyse how national laws approach this issue.
5 Hallouin J.C. and Causse H., Le contrat électronique; Au cœur du commerce électronique – Le droit
de la distribution; Droit commun ou droit spécial?, Université de Poitiers, 2005, p. 36; Mas F., La conclusion des contrats du commerce électronique, Librairie Générale de Droit et de Jurisprudence,
EJA, 2005, p. 69 et seq.
6 Section 3 “Contracts concluded by electronic means”, articles 9-11, Directive 2000/31/EC of the
European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (Directive on electronic commerce), OJ L 178/1.
7 See article 9 par. 1 of the Directive, supra note 6; Stephan Kinsella N., Simpson A. F., Online
Contract Formation, Oceana Publications, 2004, p. 289.
8 Foestraets G. de, ‘E-Commerce: a New European Framework’, International Business Lawyer, 2000,
pg. 391; S. Mercado Kierkegaard, E-Contract Formation: U.S. and EU Perspectives, 3 Shidler J. L. Com. & Tech. 12, 2007, p. 11.
9
See in particular preamble 7, 29 and 34 of the Directive, supra note 6.
5 Thus, the research question to be answered is the following:
What is the impact of pricing errors on the validity and enforcement of electronic contracts in English and French legal systems and which legal system offers the most efficient resolution of an online dispute in line with protecting interests of the party which reasonably relied on the other party’s mistaken declaration?
Our aim is to find out how traditional rules of English and French contract law with regard to mistake apply in an electronic environment of contracting. This paper has a comparative perspective due to the fact that there is neither a uniform European contract law nor uniform specific rules applicable to electronic contract formation.11 The comparison will be carried out on the basis of a functional approach. This paper focuses on English and French law, as they represent the common law and the civil
law countries respectively.12 More specifically, French law, which belongs to the
romanistic legal family, was chosen among the European civil law countries, since it varies considerably from English law as to the issues that will be addressed in this paper. Therefore, there will be a sharp contrast between approaches to the use of the doctrine of mistake online in common law and civil law. Our research will focus on the most prevalent traditional theories of contract law on the subject of offer and acceptance on the one hand and the doctrine of mistake on the other hand. Besides, we will consult case law on the scope and applicability of the doctrine of mistake, which may be relevant to electronic contracts. In order to answer our research question, we need to mostly analyse case law in English law, whereas, as for French law, we will consult both jurisprudence and legislation and the most relevant provisions of the Code Civil.
First, we will discuss how offer and acceptance is achieved online under English and French law and how the automated online process of contracting affects the validity of electronic contracts. More specifically, we will answer the question if there may be a valid consent to the contract’s formation in the absence of any human interaction, direct or indirect. The question is valid especially for the case where parties use automated confirmation messages and Electronic Data Interchange
11 Thurlow W. H., ‘Electronic Contracts in the United States and the European Union: Varying
Approaches to the Elimination of Paper and Pen’, Vol 5.3., Electronic Journal of Comparative Law,
November 2001, Introduction.
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Systems (E.D.I.) which function as electronic agents.13 The conducted analysis of
automated communication will help us answer our main research question, in the sense that in the following chapter we will analyse the legal treatment of mistakes which may occur as a result of the use of electronic means of communication. In the first section of chapter 4, we will analyse the legal characterization of input errors in English and French law. The second section will be dedicated to the impact of this type of mistakes on the validity and enforcement of electronic contracts.
Lastly, the juxtaposition of English and French law in terms of mistake will be followed by an evaluation of these legal systems. We will answer the question which of them offers the most efficient solution in case of a legal dispute that may arise during an electronic transaction, caused by a unilateral mistake, such as the wrong indication of the price. The criterion for the evaluation of efficiency will be the concept of “consumer confidence”. The latter will guide us in order to evaluate which legal system is more in compliance with the aim of the European legislation to enhance consumer confidence. A legal system which does not provide with straightforward solutions in case of pricing errors in online websites may cause legal uncertainty. Consequently, consumers may lose their trust in online shopping if the law cannot ensure that the validity of an electronic contract will depend on objective criteria and prerequisites.
Chapter 2. Online Offer and Acceptance
A contract is concluded when agreement is reached between the parties. An agreement is achieved when the offer of the one party meets the acceptance of the
other party.14 The notion of “offer and acceptance” is common among several legal
systems and it represents the basic model for the conclusion of contracts.15 However, the interpretation of what constitutes an offer and an acceptance may vary among
13 ‘E.D.I’. is the technological method which allows parties to get involved in a commercial transaction
without any human intervention. The transfer of information and electronic documents takes place between two computers which are programmed to complete automatically the whole transaction. Rawls A., ‘Contract Formation in an Internet Age’, Columbia Science and Technology Law Review, Vol. 10, 2009, p. 218; Nimmer R. T., ‘Electronic contracting: legal issues’, Journal of Computer & Information Law, Vol. XIV [1996], p. 213.
14 Beale H., Fauvarque-Cosson B., Rutgers J.,. Tallon D and Vogenauer S., Cases, Materials and Text
on Contract Law, Oxford and Portland, Oregon, 2010, chapter 6.1. p. 241 et. seq.
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national laws. 16 In this chapter we will analyse what constitutes an offer and
acceptance under English and French law in general and how this traditional model applies to online contract formation.
2.1 English law
The offer, on the one hand, expresses the intention of the offeror to enter into a legally enforceable relationship. On the other hand, acceptance is the unequivocal statement or conduct by which the offeree shows his assent to the offer.17 The simple model of offer and acceptance becomes more complicated in the case of display of goods. Under English law, this case is mostly considered as an invitation to treat.18 A customer who enters a shop is invited to make an offer for the products placed on shelves and the retailer may accept or reject the offer.19 This situation has many similarities with the display of goods in an online shop.20 The customer selects the items in which he is interested and makes an offer by clicking a “confirmation” button and the online supplier either accepts or rejects the offer.
The act of acceptance on behalf of the online retailer is occasionally problematic compared to the more straightforward process of offering. It is doubtful if the automated communication which usually follows the placement of an order constitutes an unequivocal acceptance of the offer made by the online customer or a simple confirmation of the receipt of the order.21 The e-Commerce Directive imposes an obligation on the online seller to provide the buyer with an acknowledgment that
the order has been received.22 However, it depends on the wording of the
acknowledgement, which is usually an automated e-mail, if it actually fulfils the requirements of the “acceptance” of an offer. That is to say, whether it is a manifest statement showing assent to the offer. Since the seller may also accept the offer at a later time, provided that he has previously only acknowledged the receipt of the placement of the order, the automated message may serve as a mere confirmation of
16 Study Group on a European Civil Code and the Research Group on EC Private Law (Acquis Group),
Principles, definitions and model rules of European private law: Draft Common Frame of Reference (DCFR), Outline Edition, München: Sellier European Law Publishers, 2009, Book II, p. 292 et seq.
17 Stephan Kinsella N., A. F. Simpson, supra note 7, p. 275
18 Nolan D., ‘Offer and Acceptance in the Electronic Age’ in Andrew Burrows and Edwin Peel,
Contract Formation and Parties, Oxford University Press, 2010, p. 80 et seq.
19 See English case Pharmaceutical Society v Boots [1953] 1 QB 401.
20 Bradgate R.. ‘Formation of Contracts’ in Michael Furmston, The Law of Contract, LexisNexis,
London, 2007, p. 469.
21
D. Nolan, supra note 18, p. 82 et seq.
8 the order. An e-mail of confirmation does not constitute acceptance of the offer. Thus, it is important to differentiate between these two functions of the automated messages.23
2.2. French law
Offer and acceptance have the same meaning in French law as in the above-described English law; both are indispensable elements for the conclusion of a legally binding contract.24 However, unlike English law, the display of goods in windows and shelves is deemed to be an offer rather than a mere invitation to treat.25 The analogy between a traditional shop and a virtual store with regard to offer and acceptance is evident. The online offer is distinguished from a simple advertisement or an invitation to treat in the sense that it is possible for the customer to place immediately his order without any further specifications being required. The display of goods on a website constitutes an offer as long as it is accompanied by information concerning the seller, the price, the terms and conditions and the process of concluding the contract.26
France implemented the e-Commerce Directive by modifying the Code Civil27.
It follows from the wording of article 1369-5 of the Code Civil that the seller is seen
as the offeror and the buyer as the offeree.28 Once the buyer places his order by
clicking the confirmation button, the contract is concluded and the required acknowledgement of receipt on behalf of the seller serves merely information purposes and constitutes a proof of the conclusion of the contract.29 The French Cour
de Cassation has pronounced in favour of the general principle that when acceptance
is dispatched by the offeree, the contract is concluded at that point.30
23 Fangfei Wang F., supra note 4. 24 Mas F., supra note 5, p. 137. 25
DCFR, supra note 16, p. 298.
26 J.C. Hallouin and H. Causse, supra note 5, p.40-43
27 France enacted the law No 2004-575 of 21 June 2004 (Loi n° 2004-575 du 21 juin 2004 pour la
confiance dans l'économie numérique) which introduced articles 1108-1, 1108-2 and 1369-1 to 1369-3 concerning the formation of electronic contracts.
28 See article 1369-5 of Code Civil: “For the valid conclusion of a contract, the recipient of the offer
must have had the possibility of checking the particulars of his order and its whole price, […], before confirming it in order to express his acceptance” and “The author of the offer shall acknowledge without undue delay and by electronic means the receipt of the order which has been addressed to him in this way”, translation by G. ROUHETTE, link: http://www.legifrance.gouv.fr/content/download/7754/105592/version/4/file/Code_civil_20130701_E
N.pdf
29
J.C. Hallouin and H. Causse, supra note 5, p. 66.
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2.3. Comparison
The formation of a contract depends on parties following the “offer and acceptance” scheme in both English and French legal systems. However, this scheme does not have the same application in cases of display of goods in a shop, also in an online shop. In English law, such a case constitutes an invitation to treat, whereas in French law, it is, as a rule, considered to be an offer. The explanation for the English rule, on the one hand, is that the seller may not be willing to make the goods available to the clients either because he may not have unlimited stock for an undefined number of prospective buyers or simply because he may want to take the final decision as to with whom he will conclude the contract.31 On the other hand, the French rule does not follow the “limited stock” argument, since it is believed that an offer is subject to the explicit or implicit condition that it is valid only until the exhaustion of the stock.32
These rules with regard to offer and acceptance also apply to online sales by means of analogy. However, Robert Bradgate introduces an argument which invalidates the English reliance on the “limited stock” restriction as supporting the seller’s advertisement as not amounting to more than just an invitation to make an
offer.33 He expresses the view that on websites, the vendor has the possibility to
indicate the number of available items and the indication may change automatically, depending on the amount of the orders placed. The seller will thereby not be found exposed to liability if the stock runs out and inasmuch as it is clear from the context of the website that the seller is willing to be bound by a contract with anyone who counter performs, the display of the goods in this case could constitute a direct offer.34 However, the French approach has also been challenged in the framework of online contracting by M. Stoffel-Munck. The latter has argued that an online offer may not be pure, in the sense that it may be conditional on confirmation or other
31
A less convincing argument is that if the display of goods was treated as an offer, the offeree who would pick the good from the shelf, he could not put it back, but he would be bound by the contract, as his conduct would constitute acceptance of the offer, Beale H. and others, supra note 14, chapter 6.2.A.3, p. 255-256.
32
J.C. Hallouin and H. Causse, supra note 5, p. 39.
33 R. Bradgate, supra note 20, p. 469.
34 Donal Nolan also brings the example of sales of digital products which can be purchased and
downloaded with immediate effect via the internet. He compares the website to a “digital vending machine” implying that this may be viewed as an exception to the rule that the display of goods – digital goods in this case – is a mere invitation to treat, supra note 18, p. 79.
10 reservations, and thus could not be perceived as an unequivocal offer, as required to distinguish it from an invitation to make an offer.35
The above-presented criticisms raise important questions concerning the meaning of traditional notions of an “offer” and of an “invitation to make an offer” in the electronic commerce, which are ultimately left to the national courts to be answered in future disputes. This does not imply that the general concepts of offer and acceptance both in English and French law are outdated or must be nullified. On the contrary, they can serve as the basis for further legal analysis on traditional rules
within a new online environment.36 Depending on how we consider the display of
goods in an online shop, as an invitation to treat or an offer, the automated reply following the placement of an order will have a different meaning. It may be a simple confirmation of receipt of the order or it may serve as acceptance of the offer. In English law, the automated messages may have both functions, whereas in French law, it can only be seen as a mere confirmation, since acceptance takes place when the buyer presses the “order” button. English law offers more options to the online retailers who can custom the content of the automated messages in such a way, so as to be able to review the details of the order and accept it at a later stage. In this way, both parties are protected from erroneous assumptions and mistakes that go beyond their control.
As outlined in the introduction, our main research question analyses mistakes that may occur on behalf of the seller. The above-presented “offer and acceptance” analysis may contribute to the better understanding of where the mistake is located, in the phase of the offer or that of the invitation to treat. This positioning of the mistake may have different implications for the validity and enforcement of electronic contracts.
Chapter 3: Automation in Electronic Contracting
Electronic contracting takes place either by exchange of e-mails or through a website or via electronic data interchange systems (EDI) which act as electronic
35
DCFR, supra note 16, p. 317.
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agents.37 The exchange of e-mails does not differ from the exchange of letters or
phone calls.38 A person initiates the message and sends it to the electronic box of the addressee instead of the address of his house or business. Internet trading and E.D.I. are substantially different, since no human action is involved. When someone visits a website and decides to buy a product, he only has to click on the order button. At that point, he is contracting with the retailer’s computing system. This system will send the buyer a confirmation e-mail, as required by the e-Commerce Directive, and the contract might already be concluded without the retailer actually intervening in the whole procedure.39 The conclusion of a contract via electronic agents does not either require any human action.40
The element of human behaviour does not exist in these situations. However, the conclusion of contracts reflects the freedom to contract which is traditionally a manifestation of human expression and party autonomy in all European legal
systems.41 The human factor seems therefore a prerequisite for the validity of a
contract. In order for a contract to come to existence, there must be an “intention”
from the parties to be legally bound.42 The e-Commerce Directive though introduced
a general clause of validity of contracts concluded by electronic means, leaving to the Member States to adapt their laws to the new rule.43 A theoretical background was needed for the support of the new regulation as the Directive itself does not provide any specific answer to the doctrinal question why such contracts have binding force
37 Weitzenboeck E. M., “Electronic Agents and the Formation of Contracts”, International Journal of
Law and Information Technology, Vol. 9 No. 3, Oxford University Press, 2001, p. 206; Kidd D. L. and Daughtrey W.H., “Adapting Contract Law to Accommodate Electronic Contracts: Overview and Suggestions”, Rutgers Computer & Technology Law Journal, Vol. 26, 2000, p. 227.
38 Poggi C. T., “Electronic Commerce Legislation: An Analysis of European and American Approaches
to Contract Formation”, Virginia Journal of International Law, Vol. 41:224, 2000, p. 260.
39 Nolan D., supra note 18, p. 63.
40 An electronic agent is defined as “a computer program or an electronic or other automated means
used independently to initiate an action or respond to electronic records or performances in whole or in part, without review or action by an individual”.
41 The freedom to contract is also primary European law and its sources can be found in all Member
States; see Herresthal C., “Constitunalisation of the Freedom of Contract in European Union Law” in Ziegler K. S. and Huber P.M., Current Problems in the Protection of Human Rights: Perspectives from
Germany and the UK, Hart Publishing, 2013; Perillo J. M., “The Origins of the Objective Theory of
Contract Formation and Interpretation”, Fordham Law Review, Vo. 69, 2000, p. 427.
42 DCFR, supra note 16, Book II, p. 195-196.
43 Witzenboeck E. M., supra note 38, p. 224; see also recital 34 of the Directive ; Church D., Pullen
M.and Winn J. K., “Recent Developments Regarding U.S. and EU Regulation of Electronic Commerce”, The International Lawyer – Business Transactions and Disputes, 1999, p. 351.
12 and whether there is manifestation of assent in case of automated means of contracting.44
3.1. The establishment of parties’ “intention” in English law
A contract is concluded between two or more parties when they reach a sufficient agreement and have the intention to produce a legally binding relationship.4546 “Intention” is required in English law and it is the manifestation of the parties’ proposed terms. If the parties assent to each other’s terms, there will be meeting of their minds and therefore a binding contract.47 Anything other than the expressed communication of the parties’ intentions is not deemed to be part of the agreement. Inner thoughts or desires do not outweigh the declared intention of the parties. In truth, they are not taken into consideration at all.48 Therefore, the parties’ intention must be externalised in the form of statement or conduct in order to result in a binding contract.49 The above reflect the “objective test” theory, according to which, we shall look for the external appearance of an agreement in order to ascertain the validity of a contract.50
The objective test can easily apply to paper contracts. The parties’ intention can be deducted from the words used in a written contract. Intention can also be assumed by the conduct of the parties. The criterion is the perception of a “reasonable person”. The objective intention is what a reasonable person would have understood from the
communications, should he be a contracting party.51 All the above presuppose the
existence of a communication, either written or behavioural, between two or more persons.
This is not the case for contracts concluded by electronic means. In online shopping, the retailer’s system automatically sends to the buyer a confirmation e-mail
44
Poggi C. T., supra note 38, p. 265
45 DCFR, supra note 16, p. 195 et. seq.
46 Coote B., “Reflections on Intention in the Law of Contract”, New Zealand Law Review, 2006, p. 188 47 Ibid, p. 189-190.
48
DCFR, supra note 16, p. 195 et. seq.; Cartwright J., Contract Law – An Introduction to the English Law of Contract for the Civil Lawyer, Hart Publishing, Oxford and Portland, Oregon, 2nd edition, 2013, p. 91.
49 Ibid, p. 91 et. seq. 50
See Blackburn J’s statement in “Smith v Hughes” case: “If whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that the other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms”, Beale H. and others, supra note 14, p. 45-46.
13 which may serve as acceptance to the buyer’s offer.52 In such a case, an inanimate object delivers the acceptance which, as we mentioned above, completes the process of contract formation. The question that immediately arises is, how can we establish the intention of the retailer, or an electronic agent in general, when the retailer does not participate at all in the process of contract formation?53 Intention is defined as the outward manifestation of a person’s intention and thus, the intention expressed by a computer machine may be questioned under the traditional analysis of “intention” and objective theory.
In truth, identifying the intention of the party who uses automated means of communication is only a first step to answer the real question, which is, to what extent this type of communication may bind the parties. The question how we can establish the parties’ intention in automated messages is a pseudo-question to which various theories of contract law may give the answer.
Different theories have been constructed in particular with regard to electronic agents which are more problematic. An electronic agent is not merely an example of automated contract formation, but “he” actually initiates the contract, whereas in sales via websites the retailer programs the computer to send confirmation messages to the buyers automatically. So, in the latter scenario, there is human action at an earlier stage, which determines the content of communication between the buyer and the retailer’s computing system. However, the question is, is it possible that such pre-programmed message or the action of an electronic agent binds the trader?
It has been argued particularly for electronic agents that either they should be given legal personality or they should be deemed functioning according to their controllers’ commands or the law of agency should apply.54 However, the objective theory could also be applied as such that, when interpreting a contract, only statements are important, regardless of where they derive from, humans or computers. The criterion of the “reasonable man” is crucial at this point. If a “reasonable person” understands the statement made by an electronic agent as an offer or an acceptance, then this statement evokes legal consequences. It becomes part of the procedure for
52 See above chapter 2.1. p. 7. 53
Weitzenboeck E. M., supra note 37, p. 210
14 the formation of the contract.55 Professor Kerr adds that an electronic agent has no assent to the terms of the contract, but the person who controls the agent provides his assent by using such a mechanism for the conclusion of contracts.56 This explanation is a fortiori relevant for pre-programmed messages in online shopping via websites. The online retailer programmes his computing system in a way that the latter can send messages automatically to the clients with a specific content. The system is programmed in order to respond to the orders and send relevant confirmation e-mails the content of which is determined by the retailer.
In both situations, the trader, who wants to contract via an electronic agent or a website, influences the wording of the parties’ agreement. The online retailer’s intention can be deducted from the fact that, in the case of electronic agents, he actually authorises the electronic agent to contract on behalf of him, whereas in the case of automated confirmation messages, he pre-drafts the messages and he is aware of the fact that upon reception of an order, the appropriate message will be delivered automatically to the buyer.
3.2. The establishment of “will” in French law
The French Code Civil provides that a contract is valid if there is consent and capacity of the parties, an object and causa.57 Consent is an essential prerequisite for the validity of a contract and it is understood as expressing the real will of the contracting parties. French law applies a subjective theory according to which the statement of a party is the expression of his free will. This party is bound by what he actually meant in his statement as being binding, not by what appears to be his will. The outward manifestation of consent must coincide with the psychological will of the party.58 This interpretation derives from the principle of “autonomy of will”.59 French courts though have mitigated the extreme subjective theory by introducing some diverging criteria. It is relevant for the interpretation of the contract if the one
55 Ibid at p. 219-223
56 Ibid at p. 221-222 57
See article 1108 of the French Code Civil: “Quatre conditions sont essentielles pour la validité d'une convention: Le consentement de la partie qui s'oblige; Sa capacité de contracter; Un objet certain qui forme la matière de l'engagement; Une cause licite dans l'obligation.”
58 Valcke C., “Convergence and Divergence Between the English, French and German Conceptions of
Contract”, European Review of Private Law, vol. 16, No. 1, 2008, p. 54-55.
15 party is aware of the disagreement between the other party’s declaration and its actual intention.60
The subjective theory applies to paper contracts. The parties’ actual intention determines the content of the contract.61 However, if it is not clear what the parties actually intended to, the declared intention will prevail.62 In French law, the party which agrees to the terms of the other party expresses his will to be bound by these terms. His intention is disclosed in the form of acceptance to the other party’s offer. Thus, the notion of will (“la volonté”) has a strong link to the human factor.
When it comes to contracts concluded by electronic means, the human factor seems to disappear. In fact, the person, on behalf of whom an electronic contract is concluded, is ignorant of the content of his will as it is expressed via an electronic agent or an automated e-mail.63 The result would be that contracts concluded by such means could be void, since they would lack the essential element of will. This would result in invalidating all the electronic contracts, which is contrary to the provisions of the e-Commerce Directive. However, such an outcome cannot be acceptable, since the trader cannot be ignorant of the content of a contract in which he participates as one of the contracting parties. From the moment that he decides to contract via an electronic agent or via a website, he cannot claim ignorance of the existence of a contract and its terms. For this reason, French scholars have constructed a framework within which electronic contracts are as valid as paper contracts. There are different theories that we will mention below.
Dubuisson presented the idea of a virtual person (“personne virtuelle”) which emanates from the natural person. The virtual person possesses information which is released in a network and it interacts with other members of this network. In this way, it creates an intangible extension of the natural person and thus bounds the latter in a
contractual relationship.64 Another possible solution is the agency theory
(“mandat”).65 According to this theory, actions deriving from electronic means may be justified insofar as the person who is one of the parties in a contract grants the
60 The so-called “awareness condition”, ibid at p. 56. 61
Ibid at p. 54-55.
62 Ibid at p. 56; DCFR, supra note 16, p. 195. 63 Mas F., supra note 5, p. 148-151.
64 Dubuisson E., “La personne virtuelle: propositions pour définir l’ être juridique de l’ individu dans l’
échange télématique”, R.D.I.T., Paris, 1995/3, pp. 5-27, as cited in Florence Mas, supra note 5, p. 151
16 power to someone –or something in this particular case– to act as his agent.66 This solution proposes that the computing program used in communications for the conclusion of a contract functions as an agent for the natural person.
A more comprehensive theory places the human, who uses automated messages or electronic agents, in the centre of the contractual procedure, since he is the only one who is capable of expressing his own will.67 According to this theory, the party who uses automatic communication (automated reply via e-mails or electronic agents), must declare in advance his intention to be legally bound by the automatic and autonomous process of contract formation. This would require an explicit declaration on behalf of the trader which would very much depend on his willingness to authorize in advance the use of electronic means. In fact, there is no need for an explicit declaration of the trader, since the mere fact that he uses electronic means of contracting constitutes an authorisation which implies that the content of the exchanged communication is in accordance with the trader’s will.The human factor cannot be replaced by an “electronic will” (“une volonté électronique”). The trader is present during the contractual procedure in a marginal position leaving the programmed computer to express his will. As a consequence, technological means are authorised as a contracting party not due to the existence of a distinct electronic will, but because there is human will which is reflected in the programmed computing
system. The computer is merely a means of communicating the will.68
3.3. Comparison
French and English law substantially differ in terms of identifying the parties’ “intention”. English law adopts an objective approach whereas French law follows a more subjective theory. On the one hand, what is relevant in English law is the outward manifestation of the parties’ intention. On the other hand, French law focuses on the will of the parties which must correspond to their real intention. This is a fundamental difference which requires different treatment of electronic contracts under English and French law, even if in the recent years these theories have been converging due to more flexibility as to their interpretation applied by national courts.
66 See the definition of agency in article 1984 of the Code Civil: « Un acte par lequel une personne
donne à une autre le pouvoir de faire quelque chose pour le mandat et en son nom ».
67 Mas F., supra note 5, p. 154-158 : « L’ homme, seule source de volonté ». 68
Al-Kandari F., “Internet Et La Volonté Contractuelle: Etude Comparative”, Arab Law Quarterly, Vol. 17, part 4, 2002, pp. 413-416; see also Mas F., supra note 5, p. 157-158
17 The question that arose is how “intention” or “will” can be founded in the absence of human interaction in the contractual procedure. Several theories were proposed in both legal systems. The attribution of legal personality to the computer which is involved in the contractual procedure as well as the application of the law of agency have been proposed as solutions to the doctrinal lacuna in both legal systems. The law of agency does not need any further explanation, as it functions in the same way in both legal systems. It is interesting though to notice the difference between the straightforward attribution of legal personality to the computers in English law on the one hand and the theoretical construction of a “virtual person” which is the extension of the physical person and thus is qualified in contracting with others on behalf of the physical person.
However, the above theories have been criticised. In English law, we can identify the parties’ intention by applying the objective test also to statements issued electronically and the concept of a reasonable man who interacts with an electronic agent or any kind of programmed communication. In French law, the situation is more complex, since the parties’ intention is strongly connected with their inner will. The most prevalent opinion is that the automatic system is a means of exteriorising the parties’ will. It does not produce its own “electronic” will.
The argument that requires computers to be treated as a mere means of communicating the will has a weakness; as far as autonomous technological means are concerned, they initiate the contractual phase and the person on behalf of whom the contract is introduced may even be ignorant of the existence of a contract. This may result in a huge burden for that person who might have to bear the obligations arising from a contract in which he did not want to enter, the system though initiated it autonomously and independently of his will. In our opinion, there is a lacuna in French law as for the legal basis of electronic contracts and the establishment of “will”. The introduction of a rule similar to the rules prescribed in UNCITRAL Model Law on Electronic Commerce would be a more straightforward treatment of the doctrinal gap insofar as it may diminish the questionability of automated
technological means as appropriate means of contracting.69 However, the real
69 See UNCITRAL Model Law on Electronic Commerce, 12 June 1996, article 11 on formation and
validity of contracts: “In the context of contract formation, unless otherwise agreed by the parties, an offer and the acceptance of an offer may be expressed by means of data messages. Where a data message is used in the formation of a contract, that contract shall not be denied validity or
18 question is to what extent the trader is bound by automated communications. In order to give an answer to this question, we have to examine whether English and French law protect the party who reasonably relied on a statement contained in an automated message. We will examine this question in the following chapters.
Chapter 4: Pricing Errors
In this chapter, we will come back to our main research question, i.e. the impact of pricing errors on the validity and enforcement of electronic contracts in English and French legal systems. Our research is comparative on two diametrically different legal systems belonging to the common law and civil law tradition respectively. Therefore, it is imperative to adopt a functional approach in order to analyse the legal treatment of pricing errors in the selected legal systems. From a primary standpoint, pricing errors are mistakes in broad terms. “Mistake” is an English legal term which will be used hereinafter both in its broad sense and within its strict legal meaning.
“Mistake” has an equivalent function with “erreur” in French law. In the following
sections we will, first, subsume the pricing errors under the English and French legal concepts and, then, we will examine the legal consequences of pricing errors on the validity and enforcement of electronic contracts.
Pricing errors may occur either due to a mistaken data entry on behalf of the retailer or due to a software malfunction which may affect the correctness of the information on a website, including the price of products; the equivalent term being “slips of the pen” for paper contracts. Such mistakes are also known as “communication errors”. They distort the statement of the online seller who sells his products for a wrong price. At this point, we have to distinguish pricing errors from the “mistake as to value of the subject matter” in English law and “L’ erreur sur la valeur” in French law. The latter concepts refer to mistake as to the value of the sold product in the sense that one party may ignore the real value of the thing. A typical example is the case of a person who sells a painting at a very low price because he is unaware of the fact that this particular painting is the work of a renowned painter and
enforceability on the sole ground that a data message was used for that purpose.” See also Article-by-Article Remarks and especially the remarks for article 11 which address the problem of “intent” and its establishment in a procedure lacking human interference (see in particular remark 76).
19
is worth more money.70 However, this example is completely different from the case
of an online seller who knows that his product costs, for instance, 799 euro, but while entering the price on the online shop, he mistypes 7 as 2 and as a result, the product appears to cost 299 euro. Mistakes as to the value do not fall within the scope of our research. We will focus only on pricing errors and in the following paragraphs we will illustrate how they are classified in English and French contract law.
Based on our results, we will analyse how pricing errors affect the validity of a contract. Moreover, we will answer the question if and how a contract, vitiated due to a mistake, can be enforced and under what circumstances. It is important, while going through this chapter, to keep in mind that the legal treatment of pricing errors is undifferentiated between paper contracts and electronic contracts. General contract law rules apply to both, since in fact electronic contracts are not a distinct type of contract.71 The only difference is procedural as to the formation of the contract, not substantial. This allows us to refer to old case law, especially for the English part, when there were very few or no technological means involved in the contractual process. Therefore, we will support our research with cases going back even to 1861. This anachronistic approach is intentional and imperative for a deep understanding of mistake in contract law.
4.1. English law; “communication errors”
4.1.1. Legal classification
A pricing error prima facie seems to constitute some sort of mistake. English law has developed a narrow theory of “mistake” which is often overlapped by other
concepts, such as offer and acceptance and misrepresentation.72 The doctrine of
mistake is closely linked to the validity of contracts.73 A mistake may concern
misapprehensions with regard to the terms, mistakes as to the identity of the parties or as to the subject matter of the contract.74 The first type of mistakes is the common mistake which nullifies the agreement. This is the typical case of res extincta and impossibility of performance where the subject matter of the agreement perished (or
70 See the French case “The Poussin”, Cass civ, 13 December 1983 and Cour d’ appel, Versailles, 7
January 1987, link:
http://droit.wester.ouisse.free.fr/pages/support_contrat/vices_consentement_doc1.htm
71 Kidd D. L. & Daughtrey W. H., supra note 37, p. 222 and 263. 72 DCFR, supra note 16, p. 464.
73 Kötz H. & Flessner A., European Contract Law, Vol. 1: Formation, Validity and Content of
Contracts; Contract and Third Parties, Clarendon Press, Oxford, 1997, p. 171-172.
20 never existed) or the good lacks an essential quality respectively.75
The other type consists of mutual and unilateral mistakes which negate the agreement. A mistake is mutual, on the one hand, when the parties are at cross-purposes. Their agreement is only apparent, since they are mistaken as to a fundamental term of the contract.76
On the other hand, a unilateral mistake exists when one of the parties is mistaken as to a fundamental term of the contract and the other party is aware of the mistake.77
Pricing errors belong to the second category of mistakes, those which may
negate consent and, thus, nullify the contract.78
The contracting parties enter an agreement, however, one of the parties, here the seller, is mistaken as to the terms on which he agreed. The paradox is that the seller causes the mistake by entering wrong information about the price on his website. He is mistaken by a self-induced mistake. He believes that he sells a product at x price, but due to his mistake, he sells the product at y price. If the seller intends to sell his goods at x price and the buyer intends to buy the goods at y price which is indicated incorrectly on the website, then the parties will be at cross-purposes. This is the case of a mutual mistake. Unilateral mistake differs in that the seller intends to sell his goods at x price, but he incorrectly inputs price y and the buyer is aware of the mistake. Unilateral mistake is often closely related to misrepresentation, however, this concept goes beyond the scope of our subject, since our analysis focuses on the protection of the party who reasonably relied on the mistaken declaration of the seller. This excludes by definition cases of unilateral mistake although the difficulty lies in the fact that sometimes it is unclear if the buyer realises the mistake or not and thus, the criterion of reasonable reliance, again, must be placed under scrutiny.
When the sales takes place in an offline shop, if the shopkeeper puts a wrong price for a product on the shelf, the client picks the product and heads to the cash desk asking to buy it. In fact, the client makes an offer to the seller and the latter may accept or reject it. If there is an error with regard to the price indicated on the label, the seller will not accept the offer and he may make a counteroffer to the buyer. From that point, it depends on the client if he wants to buy the product at the corrected price. In such a scenario, no obligations arise on behalf of any of the parties. There is
75 Stone R., The Modern Law of Contract, London Routledge-Cavendish, 2009, p. 385-386. 76 Ibid at p. 447-449.
77
Ibid at p. 397-398; Beale H. and others, supra note 14, p. 452-457.
21 no matching offer and acceptance and, thus, no contract is concluded between the seller and the buyer.
When the transaction happens online and automatically, it is extremely difficult for the seller to find out about the mistake before confirming the order and thereby assenting to the agreement at the stated wrong price. This is why a virtual transaction is considerably different in this respect. The buyer selects a product from a virtual shelf, he places the order and he pays the price indicated on the website with a credit card or he promises to pay the stated price upon delivery of the product. The buyer, then, receives an e-mail from the seller confirming the order. In fact, the seller never sent that e-mail on his own motion. The message is sent automatically by the online retailer’s software which is programmed for that purpose. The difference between an offline and a virtual shop is that in the latter case, the seller does not have the possibility to take a deliberate decision about accepting or not the buyer’s offer. As a result, during an online transaction, the seller does not have the possibility to correct his mistake regarding the price. As a consequence, he enters the contract in the erroneous belief that the product is sold at the correct price. However, the seller may avoid entering a contract at a wrong price if he drafts the confirmation e-mail in a way that the latter can be seen as a mere confirmation of receipt of the order and not as an acceptance to the client’s offer. Should this be the case, the seller has one more step, as in offline shops, to identify and correct his mistake before assuming any obligations from the contract.
4.1.2. Validity and enforcement of e-contracts
From the above mentioned, it becomes clear that a pricing error may lead to a contract where the parties have not reached a real agreement. Their agreement is superficial.79 This means that a pricing error may negate consent and thus render the contract void. The legal consequences may vary depending on whether the other party is aware of the mistake and does not point it out to the mistaken party, because he wants to benefit from the situation. This paper will focus though on mutual mistake where the outcome is different, since the protection of reasonable reliance is a priority.
22 .As a rule, the mistaken party cannot avoid the contract, unless the confirmation e-mail does not constitute an offer and consequently there is no contract at all.80
The reasonable reliance of the other party on the mistaken party’s declaration is taken into consideration.81
It is crucial that the mistaken party externalises his intention with a wrong statement and the other party is not aware of the mistake. So, the latter relies on the wrong statement and his reliance is reasonable, since he cannot suspect the existence of a mistake. This interpretation is consistent with the objective theory which requires that the outward manifestation of a party’s statement is relevant for the identification of his intention, not his will.82
In support of the above legal structure, the English courts in Centrovincial Estates plc v Merchant Investors Assurance Co
Ltd case held that the real intention of the mistaken party is irrelevant, when his
conduct is such that the other party has justified reasons to believe that his contracting
party assents to the proposed terms.83 Although this judgment does not concern
pricing errors, it contains important considerations about the doctrine of mistake. According to the judgment: “it is contrary to the well-established principles of
contract law to suggest that the offeror under a bilateral contract can withdraw an unambiguous offer, after it has been accepted in the manner contemplated by the offer, merely because he has made a mistake which the offeree neither knew nor could reasonably have known at the time when he accepted it”.
The above judgments summarise the main principles of English law with regard to mistake. When there is a communication error, a “slip of the pen”, the interpretation of the contract will be in favour of the party which reasonably relied on the other party’s mistaken declaration.84
Therefore, the mistaken party will be bound by his words. Exceptionally, there will be no binding contract if the other party was aware of the mistake or should have been aware of it.
These principles are complemented by the findings in other judgments-landmarks in English law as well. From Smith v. Hughes case we learn that a mistake as to the quality of the good is not material and cannot result in the annulment of the
80
Cartwright J., supra note 48, p. 154.
81 Kötz H. & Flessner A., supra note 73, p. 173.
82 Youngs R., English, French & German Comparative Law, Third Edition, Routledge, 2014, p.638. 83 Centrovincial Estates plc v Merchant Investors Assurance Co Ltd, Court of Appeal, 1983, link:
http://www.casebooks.eu/contractLaw/Chapter10/excerpt.php?excerptId=4330
23
contract, whereas a mistake as to the fundamental terms would produce this result.85
Webster v. Cecil case confirms the principle that when a contracting party is aware of
the mistake of the other party, he cannot take advantage of it to the detriment of the mistaken party.86
The claimant who was the buyer of a property, must have been aware of the mistake of the seller to offer his property for £1.250 when the latter had previously refused to sell at the price of £2.000. The outcome was the same in Scriven
Brothers & Co v. Hindley & Co case where the mistaken party was the buyer.87
This case took place at an auction where the auctioneer was selling "tow" whereas the buyer believed that he was buying “hemp”, which was more expensive. The court decided that the buyer was justified in thinking that the sold good was “hemp” instead of “tow”, since the shipping mark was the same with the mark for hemp, so every reasonable person would be misled. The court said that it was inconceivable for the seller to believe that the buyer offered such a huge price for the sold good. In Pope &
Pearson v The Buenos Ayres New Gas Co.88 case the rule of objective interpretation applied; a contract cannot be invalidated on the ground that one of the parties had an erroneous perception about the content of the contract due to a mistake. A legitimate reason for invalidating it would be if the other party induced the mistake or confirmed that there was no mistake so as to mislead his contracting party.
Assuming that there is a legally binding contract between two parties, how does enforcement take place? The answer to this question very much depends on who raises a claim. It is common practice and legally acceptable in the English legal system that the party who believes that has the right to avoid fulfilling his obligations from a contract, i.e. the seller, can actually give notice to the other party, the buyer, stating his intention to avoid the contract. In this situation, the party questioning the avoidance of the contract must bring an action before the courts and prove that the seller was not entitled to avoid the contract.89 If his claim proves to be founded, then the courts may grant specific performance. Specific performance is granted at the court’s discretion.90
English judges are often reluctant to grant specific performance, even in such disputes where it is the most appropriate remedy. Alternatively, the
85 Smith v Hughes, 1871, LR 6 QB 597 (Queen’s Bench Division), link:
http://www.leeds.ac.uk/law/hamlyn/smithv.htm
86 Webster v Cecil, 1861, 30 Beav 62.
87 Scriven Brothers & Co v. Hindley & Co, 1913, 3 KB 564.
88 Pope & Pearson v The Buenos Ayres New Gas Co, 1892, 8 TLR 516. 89
Cartwright J., supra note 48, p. 173-174.
24 courts may hold that the mistaken party is liable for damages instead of granting relief from a self-induced mistake when the other party cannot predict the existence of a mistake in the communication.91
One further aspect is whether English judges are allowed to adjust the contractual terms and especially the price. English law is not flexible with this regard, as rescission of a contract cannot be partial, for instance as to the price. The English judge will grant either rescission from the contract or damages. It cannot impose a new term or adjust a pre-existing term. Yet, there has been case law where the English judge intervened in the content of a particular type of contracts, credit agreements by reducing the interest rate. However, this is a rare deviation from the English judicial practice and the rule of the basic remedy granted by the English courts is either rescission or damages.92
4.2. French law
4.2.1. Legal classification
In French law, a pricing error is a mistake linked to defects of consent. Article 1108 of the Code Civil provides that four elements are required to form a valid contract; consent, legal capacity, a certain object and causa. Furthermore, according to articles 1109-1110, consent is not valid if it was given by error and, thus, the resulting agreement may give rise to an action for annulment when the error falls into the very substance of the object of the contract.93
The emphasis is given to the will of the parties and following the subjective theory, the relevant question is whether the parties’ declarations agree with their inner will. This approach is enshrined in article 1156 of the Code Civil which states that: “One must in agreements seek what the common intention of the contracting parties was, rather than pay attention to the literal meaning of the terms”.94
91
Beale H. and others, supra note 14, p. 441-443.
92 Hatzis A. N. & Zervogianni E., “Judge-Made Contracts; Reconstructing Unconscionable
Contracts”, SSRN Electronic Journal, December 2006, p. 8-9.
93 Article 1109: “Il n’ y a point de consentement valable si le consentement n’ a été donne que par
erreur ou s’ il a été extorque par violence ou surprise par dol”.
Article 1110 : “L’ erreur n’ est une cause de nullité de la convention que lorsqu’’ elle tombe sur la substance même de la chose qui en est l’ objet”.
94 Translation in English provided by Beale H. and others, supra note 14, p. 445. The French article is
as follows: “On doit dans les conventions rechercher quelle a été la commune intention des parties contractantes, plutôt que de s’ arrêter au sens littéral des termes”.
25 French scholars have developed the doctrine of “erreur-obstacle” (hereinafter obstacle errors). Obstacle errors refer to errors which are so substantial, that go to the nature of the contract and prevent the formation of consent. As a result, they prevent the formation of the contract.95
The error must be substantial in the sense that the mistaken party would not have entered into the contract if he was aware of the mistake, or at least he would have negotiated other terms and conditions. Therefore, when a party expresses incorrectly his intention, this statement will lead to a misunderstanding instead of a valid agreement. The wrong expression will be an obstacle to the formation of a valid contract, as it will not reflect the actual will of the party. This interpretation derives from article 1108 of the French civil code which requires a valid consent as a prerequisite for a valid contract. If the consent is vitiated by a mistake in the outward manifestation of the will of a party, there will be no valid contract. The fact that consent is interpreted subjectively and not objectively causes the vitiation in the consent. The mistaken statement does not reflect the actual intention of the party and, thus, there is no valid consent and subsequently no valid contract. There is merely a misunderstanding instead of a contract.96
If we think of a virtual shop where the seller displays the goods in an online catalogue at the wrong price, the buyer may click on the goods he is interested in and place an order. At first sight, it seems that there is already a contract since the display of goods constitutes an offer and the placement of the order serves as the acceptance of the offer. However, in truth, there may be no valid contract as there is no valid consent for such an erroneous offer. The seller mistypes the price of his goods by mistake and the wrong price appears to be correct, however this is not the case. As a result, when the buyer accepts the offer, there is no contract since he accepts an offer which does not represent the true intention of the seller. The automated reply on behalf of the seller is not a crucial element, since the automated e-mail serves merely as a confirmation to the order which nevertheless contains an invalid agreement. This simplified and imaginary example may also be transferred to a natural shop where the same would apply.
The above concern mostly pricing errors which are evident. However, when the mistake as to the price is not so evident, can the buyer still rely on the validity of the
95 Xavier H., Méga code civil, Codes Dalloz, France, 9th edition, 2011, p. 1652 et seq. 96
Planiol said: “Ce n'est pas un contrat c'est un malentendu” (“it is a misunderstanding, not a contract”), Beale H. and others, supra note 14, 450-451.
26 offer? The concept of reasonable reliance (“confiance légitime”) is unknown to French law in the first place.97 However, there is a trend towards the integration of the notion of reasonable reliance in the French case law. The contract must be deemed to be valid if the other contracting party is justified to believe that the “will” as it was expressed in the electronic platform reflected the real will of the seller.98 This is an aspect of “good faith” (“bonne foi”) according to which the contracting parties are required to act in good faith and thus recognise if the indicated price constitutes the real price of the good or if it is insufficient for its value.99
4.2.2. Validity and enforcement of e-contracts
It is apparent from the foregoing analysis that a pricing error may result in an invalid contract. We can discern two different cases: obstacle errors and consent-vitiating errors. The first kind of error means that a contract never existed. In the absence of a valid consent, no contract is formed pursuant to article 1108 of the Code
Civil. On the contrary, consent-vitiating errors are mentioned in article 1110 of the
Code Civil and they affect the validity of the consent, however they do not prevent the formation of a contract. The latter is valid until it is invalidated by the courts.
Pricing errors are considered as obstacle errors, however the courts treat them as consent-vitiating errors insofar as they recognise relative nullity rather than absolute nullity which is normally granted in obstacle-error cases.100
Relative nullity may be cured by the parties, whereas absolute nullity always renders an agreement void. Absolute nullity is granted when there is a general public interest in the annulment of an act, whereas relative nullity is granted when there are only private interests.101
French courts adopted the solution of relative nullity for mistakes such as pricing errors on the ground that a contract between individuals entails solely private interests.102
There is no public interest to justify the absolute nullity of contracts containing pricing errors. In any case, it is the courts’ competence to adjudicate on nullity.
97 Mazeaud D., “La confiance légitime et l’ estoppel”, Revue Internationale de Droit Comparé, vol. 58
issue 2, 2006, p. 363 – 367.
98 Montero E., Les contrats de l’ informatique et de l’ Internet, Larcier, 2005, p. 238. 99
Cohen M., “L’ affaire DELL: qu’ en est-il de l’ erreur sur le prix?”, Lex Electronica, vol. 12 n. 2, 2007, p. 10-12.
100 DCFR, supra note 16, p. 481-482, Beale H. and others, supra note 14, p. 458-460; Xavier H., supra note 95, p. 1653
101
R. Youngs, supra note 82, p.590
27 Pursuant to French law, a mistaken party can avoid the contract even if the other party is unaware of the mistake. This is justified on the basis of protection of the mistaken party.103
We can find two very characteristic cases in the older French jurisprudence which illustrate how pricing errors are dealt with. Both cases held that a mistake of such nature results in preventing the contract from even forming. In view of this fact, pricing errors are treated as obstacle errors. In the “Bottle-openers” case, the seller of the bottle-openers agreed to sell his products at 550 francs per thousand pieces, whereas the buyer had the impression that the price was 55 francs per thousand pieces.104
According to this judgment, there was no agreement between the parties, since they had different opinions as to the agreed price. This fundamental misunderstanding prevented the formation of a valid contract. Planiol explained the outcome of this judgment in a comprehensive manner: “There is no consent because
there is no agreement; it is a misunderstanding not a contract”.105
“Wine to Algiers” case had the same outcome.106 This case was about the sales of wine. The buyer offered 300 francs per hectolitre, but what he actually meant was 30 francs. The seller accepted the offer and delivered the agreed quantity of wine together with a bill of exchange which mentioned the total price as it was calculated according to the equation of 300 francs multiplied by the number of hectolitres of wine. The court held that there was no agreement as to the payable amount of money and, therefore, no contract. The misunderstanding as to the due amount prevented the formation of a valid agreement. Article 1108 of the Code Civil is relevant towards this interpretation. Although the previews article does not mention explicitly the notion of obstacle error, the latter is extensively used by the French courts to pronounce the invalidity of a contract when a pricing error occurs.
However, in more recent cases, the French courts refer to article 1109-1110 of the Code Civil to solve disputes arising from mistakes as to the price. Thereby they deal with pricing errors as if they were consent-vitiating errors. This shows that they gradually shift towards an interpretation in favour of relative nullity, as we have already implied above. One of the cases comes from electronic commerce. In 2002, the Tribunal of first instance of Strasbourg invalidated a sales contract of an overhead
103 DCFR, supra note 16, p. 469.
104 Cass civ Ire, 28 November 1973, link: http://www.casebooks.eu/contractLaw1/chapter3/excerpt.php?excerptId=2665 105 Beale H. and others, supra note 14, p. 450-451.
106
Cass com, 15 February 1961, link: http://www.casebooks.eu/contractLaw/Chapter10/excerpt.php?excerptId=4812
