A tech startup, CloudNova, advertises a new cloud storage package on its website for £10 per year. This price was a typographical error; it should have been £100. A customer places an order. What is the legal status of the website advertisement?

Answer options:

It is a binding offer that the customer has accepted.

It is an invitation to treat, and the customer's order constitutes the offer.

It is a declaration of intent with no legal consequence.

It is a counter-offer to the public at large.

How to approach this question

Apply the rules of contract formation regarding advertisements and displays of goods.

Full Answer

B.It is an invitation to treat, and the customer's order constitutes the offer.✓ Correct

In contract law, an advertisement on a website is generally treated as an 'invitation to treat' (an invitation for others to make offers). When the customer places an order, they are making the offer, which the company can choose to accept or reject. This protects sellers from pricing errors.

Common mistakes

Assuming that an advertised price is a legally binding offer.

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Practice the full ACCA LW — Corporate and Business Law Practice Exam 3

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