Best Buy's Black Friday Cancellations Were "Bait-and-Switch Breach Of Contracts"

Attorney Mark D. Rasch is the former head of the U.S. Justice Department's computer crime unit and today serves as Director of Cybersecurity and Privacy Consulting at CSC in Virginia.

Twas the night before Christmas, and up in the sky, was a jolly old Santa, sans gifts from Best Buy. Consumers who had bought particularly popular items on the Best Buy Web site on Black Friday expecting a visit from Santa instead received a virtual lump of coal from the retailer in the form of an E-mail informing them that no gift was coming.

In reality, there was no cancellation of an order. Let's call it what it really is: a bait-and-switch coupled with a breach of contract (that is, assuming I am not representing Best Buy). The Best Buy contract was—by the terms of the Web site—formed under the laws of Minnesota (Best Buy's headquarters), which follow the provisions of the Uniform Commercial Code Article 2 for the sale of goods. UCC 2-204 says that if there is an offer (PlayStation for $150!), an acceptance (click here!) and consideration (here's my credit card), then voila! A contract is formed.

Apparently, the Minnesota-based retailer did not have enough of the items sold in stock at the prices quoted and, therefore, told consumers who purchased high-demand items like the Sony PlayStation 3, the Fujifilm AX-350 camera and assorted laptops that, "due to overwhelming demand of hot product offerings on during the November and December time period, we have encountered a situation that has affected redemption of some of our customers' online orders. We are very sorry for the inconvenience this has caused and we have notified the affected customers." What Best Buy really meant was, "hey guys, we can't make a profit selling these items at the price we quoted, and we don't have enough of them in stock at that price, so _!&* you, and thank you for being a loyal customer."

Much of the debate has focused on the untimeliness of the retailer's notification of the "cancellation" of the offer. With only a few days (or hours) before Christmas, customers who received the notifications from the retailer were left in the lurch. Those consumers may have either had to buy the items for a higher price elsewhere, find a substitute item, not buy a gift or have the gift sent to be received after the holidays.

Let's get back to that contract. The Best Buy contract is formed even if it is formed by an "electronic agent" of one of the parties. Electronic contracts are contracts. As far as I can tell from the Best Buy Web site, nothing gave the retailer the unilateral "right" to "cancel" the contract. Rather, Best Buy was in breach of the contract for sale and was, therefore, liable for appropriate damages—which could be the cost of acquiring the product elsewhere, additional shipping charges to get the product there on time, gas and other costs associated with finding the product, not to mention the cost of little Cindy Lou Who's tears when the AX-350 camera could not be found elsewhere.

UCC 2-301 is pretty clear.UCC 2-301 is pretty clear: "The obligation of the seller is to transfer and deliver [the goods] and that of the buyer is to accept and pay in accordance with the contract."

Here's where it gets a bit hairy. Sometimes (say, the day after Thanksgiving) a retailer is offering a product of which there are only a limited number at the advertised price. The retailer can say things like, "only 10 available at this price" or "quantities limited" or "while supplies last." Of course, there have to be at least some of the items available at the quoted price. At a brick-and-mortar store, it's pretty easy. When the item is sold out (that is, when the quantity specified or reserved is gone), the sale at that price ends. For an online retailer, the legal situation is thornier. The Best Buy Black Friday door-buster online ad said, "Limited quantities. No rainchecks."

The problem for the online consumer is that, even though there is a disclaimer saying the quantity is limited, if the retailer has not connected the marketing/purchasing system with the inventory system, the consumer is led to believe he or she has purchased the item and it is available.

It would be like a consumer in a brick-and-mortar store being handed a box, paying for it and then being told weeks later that the box is empty. If the item is truly "sold out" at the quoted price, then two things should happen: First, the online system should not let the transaction be completed. Second, the retailer should cease advertising that price unless it intends to honor it.

Look at what airlines do. They offer fares with "limited quantities." But when you go to purchase these tickets, you find out they are "sold out." Indeed, there are no longer any tickets available at the advertised price. Now, if you are taking out a newspaper ad, you have no way of knowing the items will be sold out in the future and you can get away with saying "quantities limited." But online, if you are still "offering" the product at the price (and particularly as Best Buy did, confirming the sale), you should be bound to honor your contract.

So if I had advice for Miss Cindy Lou Who, I'd say, Merry Christmas to all or else I will sue!

If you disagree with me, I'll see you in court, buddy. If you agree with me, however, I would love to hear from you.