Could We Really Hold The Ritz Carlton Their $.01 Per Night Typo?

Regarding Ritz Carlton not honoring a 1 cent reservation, Mark dug up more contract law, ran it by his professor, tossed it off to a legal mailing list, and turned up some interesting bits.

Namely, that it’s not entirely clear his sister would lose if she decided to take Ritz Carlton and Hotels.com to court.

Check it out, good legal stuff to know about contracts, like the “peppercorn theory.” — BEN POPKEN

The Typo Hypo (Cont.) [The Mark Pike]

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  1. faust1200 says:

    This is totally lame. Consumerists don’t want to get screwed by companies nor should they want to screw companies that don’t deserve it. I don’t see where the Ritz deserves it here. All the world needs is another frivolous lawsuit.

  2. I read a comment somewhere that put this into perspective for me. Of course, I realize that one cent is obviously a blunder and this exercise could potentiouly be frivolous. However, what if the mistake was made in the opposite direction?

    Would the company fix its mistake and tell the customer “I’m sorry, we seem to have misquoted your rate. Here’s your money back.” What kind of exposure would that story have gotten? Would the company in question have stood by its quote because it was in writing and the contract was accepted?

  3. Tallanvor says:

    I wouldn’t see this as frivolous at all. Especially if she had already booked plane tickets and made other arrangements around the reservation. Somebody made a mistake, it sucks when it happens, but if a business wants to build goodwill, they should honor the rate that was quoted.

    As much as I hate the airlines, at least they’re good about honoring prices when these things happen. Ritz Carlton is pulling the same thing that you may have heard about Holland America doing back in November.

  4. shoegazer says:

    This really is a grey area for me. No one with any knowledge of the Ritz-Carlton brand and reputaton can honestly say that they believe the $0.01 rate to have been legit. To hold their (hotel.com’s) balls to the fire when they publicly admit the mistake and even offer $100 is pettiness and entirely the wrong message to send. Do we really want to be scrutinizing websites for typos to get into a 5 star hotel?

    Note this in no way absolves hotels.com for their carelessness, and I am no fan of the travel industry (am currently pursuing small claims for a botched itinerary of my own!).

  5. bluegus32 says:

    I’m fascinated that the article makes no mention of the mistake of fact doctrine.

    As for the peppercorn theory, we’re talking apples and oranges. The question of whether $.01 is sufficient consideration is not the issue. Basic contract principles provide that $.01 can be sufficient consideration to create a contract. Sufficiency of consideration is almost never an issue in contract litigation because of the peppercorn theory. Thus, sufficiency of consideration is simply not the issue here.

    Sufficiency of consideration is only one aspect of analyzing a contract. The issue here has nothing to do with consideration but has to do with whether there was a “meeting of the minds” in establishing a contract. Mutual intent is one of the key aspects of a contract. If Hotels.com can establish that the $.01 price was a mistake on their part, and can then establish that this dude’s sister knew or should have known that the price was a mistake, then the contract price will not be enforceable. As shoegazer put it, “No one with any knowledge of the Ritz-Carlton brand and reputaton can honestly say that they believe the $0.01 rate to have been legit.” This means that the sister should never have, in good faith, relied upon this quoted price which she knew or should have known was a mistake.

    This guy’s analysis is simply off the mark in that he is looking at the wrong legal aspect of this argument. I’m not surprised that his law school professor didn’t try to tell him that he is wrong because, as you can see, this is a wonderful exercise in contract interpretation for a young lawyer-to-be.

    And for all you naysayers, let me just state that I am making no claim as to morality, good business sense, or anything regarding what the Ritz should do. I am only giving you a primer on what they are legally obligated to do. The fact is that this one is not a grey area. If this were to go before a court, Ritz would win and dude’s sister would lose.

  6. gte910h says:

    What about the idea that 0.01 rates could easily be a promotional rate? Hotels and other businesses pull promotions like this sometimes.

    –Michael

  7. Metschick says:

    “No one with any knowledge of the Ritz-Carlton brand and reputaton can honestly say that they believe the $0.01 rate to have been legit.” This means that the sister should never have, in good faith, relied upon this quoted price which she knew or should have known was a mistake

    I agree with this.

    Okay, how about this change in the “hypo”? I am going to NO and I booked at the Royal Sonesta. On hotels.com, and on the hotel’s website, the cheapest rooms are $200/night. I called the hotel directly to make the reservations, and the woman who made my reservations told me that the rooms were $129/night. I even asked her to confirm that this was the Royal Sonesta (and not the Chateau Sonesta), and that was in fact the price she was quoting me.

    They wouldn’t be able to claim mistake of fact, correct?

  8. bluegus32 says:

    gte910h says:

    “What about the idea that 0.01 rates could easily be a promotional rate? Hotels and other businesses pull promotions like this sometimes.”

    Peddle that to a judge and see what happens.

    One thing the Ritz Carlton in London never, ever does is have a secret promotion. Anybody who is somehow offered a five star London hotel at a penny per night is going to have the word “promotion” or “winner” shoved down their throats.

    Sorry, the argument just doesn’t pass the bullshit test. If it sounds like bullshit, and it looks bullshit, then it’s probably bullshit. I highly doubt that a judge would buy the argument.

  9. themarkpike says:

    bluegus32-

    As you said, “this is a wonderful exercise in contract interpretation for a young lawyer-to-be.” I couldn’t agree more. I think the analysis that you wrote is fairly similar to what I posted over on my blog. Because I am still just in the 1st month of Contracts class, we really haven’t discussed the “mistake of fact doctrine”, though I did mention this a bit indirectly in my penultimate paragraph.

    Oh, and Thanks to Ben for my very own “tag!”

    Maybe I’ll weigh in with more Contracts law stuff from class… and then bluegus32 can take us ALL to school

  10. bluegus32 says:

    metschick said: “Okay, how about this change in the “hypo”? I am going to NO and I booked at the Royal Sonesta. On hotels.com, and on the hotel’s website, the cheapest rooms are $200/night. I called the hotel directly to make the reservations, and the woman who made my reservations told me that the rooms were $129/night. I even asked her to confirm that this was the Royal Sonesta (and not the Chateau Sonesta), and that was in fact the price she was quoting me.”

    You are correct that their ability to claim mistake of fact would be near impossible in such a situation. There are two important differences with your transaction: 1) the price you were quoted is much closer to that which a reasonable consumer would expect. $129 /night is definitely in the ballpark. $.01/night in London — no friggin’ way. Ever. and 2) you called to confirm.

    The second distinction is vitally important. First, you can allege that you “relied” upon their affirmative statements. This reliance triggers rights “in equity” (i.e. legal “fairness” ideas.) In such a situation, the court would consider it patently unfair to deny you a contract price that you made a point of verbally confirming to ensure that there was no mistake. Furthermore, in such a scenario where you have to called to confirm, the mistake doctrine would probably not save the hotel. This would be the type of mistake that the hotel would probably have to pay for.

    The important thing to realize about the mistake doctrine, is that the mistake must have been honest and it cannot be a mistake that you should have caught. A gross typo on a webpage? That’s not the kind of mistake you will likely get stuck with (keep in mind that this is a very broad analysis. Individual cases may differ and exceptions to this rule abound.) A mistake quoting a reasonable price after a customer calls to confirm it? Yeah, that’s probably a mistake that the court won’t save you from. In that scenario, customer wins.

  11. bluegus32 says:

    themarkpike: first month of contracts class? Are you in your first year of law school? If so, how on Earth do you have time to read the Consumerist?

    Kidding. Good for you. Law school is incredibly hard. The only thing harder is the actual practice (but in a different way.) Good luck to you.

  12. themarkpike says:

    Thanks. Yup, first year. I need all the luck I can get.

    Speaking of which, if anybody needs an intern this summer… holla at me!