In the digital age, pricing errors—whether due to manual input mistakes, system glitches, or algorithmic failures—have become a significant concern for Philippine retailers. While the Consumer Act of the Philippines (Republic Act No. 7394) is primarily designed to protect the "little guy," it does not leave sellers entirely defenseless when a clerical error lists a PHP 50,000 laptop for PHP 50.
Understanding the balance between consumer rights and the seller's right to rectify an honest mistake requires a deep dive into the intersection of the Consumer Act and the New Civil Code.
1. The General Rule: The "Price Tag" Requirement
Under Article 81 of the Consumer Act, the "Price Tag Requirement" mandates that all consumer products sold at retail must have an appropriate price tag, label, or marking. The law states that goods must be sold at the price stated therein and cannot be sold at a higher price.
This creates a presumption of a binding offer. When a seller displays a price, and a buyer "accepts" it by placing an order or heading to the counter, a contract of sale is generally perfected.
2. The Seller’s Defense: Vitiated Consent
The primary legal remedy for a seller facing a pricing error lies not within the Consumer Act itself, but in the New Civil Code, which supplements the Act.
For a contract of sale to be valid, there must be consent, and that consent must be intelligent, free, and—most importantly—spontaneous. Under Article 1331 of the Civil Code, if the error is so substantial that it goes to the very substance of the thing which is the object of the contract, the contract may be voidable due to mistake.
- Palpable Error: If a price is so "absurdly low" (e.g., a luxury car priced at 1 Peso), Philippine courts and the Department of Trade and Industry (DTI) generally recognize that there was no "meeting of the minds." The seller can argue that the buyer knew, or should have known, that the price was a mistake.
- Lack of Intent: A seller can argue they never intended to offer the product at that price, thereby preventing the formation of a valid contract.
3. DTI Administrative Order No. 2 (Series of 2008)
The DTI provides a crucial nuance regarding online transactions. While the law protects consumers from "Bait and Switch" tactics, it also recognizes technical errors. If a seller can prove that the error was unintentional and clerical rather than a deliberate attempt to mislead (Deceptive Sales Act), the DTI often allows for the cancellation of orders, provided the seller acts promptly.
4. Step-by-Step Remedies for Sellers
When an error is discovered, sellers should immediately employ the following strategies to mitigate legal and financial exposure:
| Action | Legal Basis / Rationale |
|---|---|
| Immediate Notification | Under the principle of Good Faith (Article 19, Civil Code), the seller must inform the buyer of the error immediately before or upon discovery to prevent further reliance. |
| Order Cancellation | If the sale was made online and the terms and conditions (T&Cs) specify that "confirmation of order" is not "acceptance of the offer," the seller may cancel the order. |
| Refund and Restitution | To avoid "Unjust Enrichment" claims, the seller must immediately return any payments made by the consumer. |
| Proof of Technical Glitch | Maintain logs or IT audits. Under the Electronic Commerce Act (R.A. 8792), electronic evidence is admissible to prove that the price displayed was a system-generated error. |
5. Limits to Seller Protection: Deceptive Sales Acts
Sellers must be cautious. If the DTI finds that the "error" was actually a form of False, Deceptive, or Misleading Sales Promotion (Article 50, Consumer Act), the seller cannot claim a remedy.
Key Distinction: A "clerical error" is a defense; a "bait-and-switch" (advertising a low price to lure customers with no intent to sell at that price) is a criminal and administrative offense.
6. The Role of Terms and Conditions (T&Cs)
A well-drafted "Terms of Service" is a seller's strongest shield. Most Philippine e-commerce platforms include "Error Correction" clauses. These clauses stipulate that:
- The display of products is an "invitation to treat," not a binding offer.
- The seller reserves the right to cancel orders in the event of a manifest pricing error.
- The contract is only perfected upon the physical shipment of the goods.
While the Consumer Act prohibits "waivers" of consumer rights, these T&C clauses are generally upheld if they are reasonable and not unconscionable.
Conclusion
While the Philippine legal landscape leans heavily toward consumer protection, it does not mandate that sellers suffer financial ruin due to a typo. By invoking the Civil Code provisions on vitiated consent due to mistake and adhering to DTI guidelines on good faith and transparency, sellers can legally rescind transactions involving manifest pricing errors. The burden of proof, however, remains with the seller to show that the error was genuine and not a deceptive marketing ploy.