Cross Country Motel 2005

My sister has been planning a European vacation with her fiancé and was perusing deals on Hotels.com last week. She was quite surprised when she found vacancy at The Ritz Hotel in London for just one penny a night. You read that correctly, $.01. Without wasting a second, because afterall, time is money, she booked three nights and a charge on her credit card showed up shortly thereafter for $.03. She received a confirmation email and number, and everything added up for a savings of about $1,991.97 from the Ritz’s regular rates.

Immediately afterwards, she emailed me to claim supreme bragging rights in the family bargain-hunter competition (though, I still think the seersucker jacket I bought at the Salvation Army Thrift Store for $3.00 is the ultimate winner).

Perhaps her taunting angered an ancient karmic god, as Hotels.com contacted her three days later to apologize for their error. They offered her a $100 voucher (good for one year) to make amends for the confusion, but they and the Ritz would not honor the rooms that had been reserved at a penny a night.

Coincidentally, I recently finished my first fortnight of Contract Law at William & Mary, and we’ve already covered some of this material in class. I figured I would use this as an excellent opportunity to review some basic concepts of Contracts law, and maybe even offer up an amicable solution for Hotels.com and my sister.

(Keep reading only if you find Contracts Law incredibly awesome)

At the very beginning of my textbook, we focus on “The Bargain Theory of Contract,” specifically the notion that “consideration” for each person’s promise is the other person’s promise. Hotels.com made an offer, my sister promised to pay in exchange for the fulfillment of that offer. Section 71 of the 2nd Restatement of Contracts defines the requirement of consideration as:

1) To constitute consideration, a performance or a return promise must be bargained for.
2) A performance or return promise is bargain for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise.
3) The performance may consist of a) an act other than a promise, or b) a forbearance, or c) the creation, modification, or destruction of a legal relation…

There appears to be consideration here as my sister followed through with payment (even if it was just $.03), and she ceased looking for other hotel reservations in London, therefore missing out on the prime opportunity to look for other bargains. Hotels.com offer for $.01 a night was accepted, for whatever reason they felt the need to provide rooms at this rate (Ryan Air sells flights for this much, so it’s not out of the realm of possibility). Maybe they were trying to generate publicity? (And, via this story, succeeding). Surely, an error like this could actually have some positive advertisement externalities, despite it not being planned out as elaborately as Mr. Wonka’s golden ticket. Wouldn’t you search Hotels.com more frequently if every now and then you could book a 5-star hotel for 5 nights for a nickel?

Perhaps there’s not a “meeting of the minds” here and thus the contract would be invalid? There was no consensus ad idem, an agreement on the same thing. It was a manifestation of the age old example of two people agreeing on shipping something on a ship called “Peerless,” but there was actually two different ships pulling into the port by that same name. My sister simply didn’t agree on the same thing as Hotels.com, even though she thought she was. And Hotels.com never intended to make the offer they made, as it was the result of computer error.

I’m also guessing that I’m missing something in the fine print. Maybe hotels have the right to cancel reservations at any point in time without giving a valid reason? One part of the Hotels.com user agreement that caught my eye concerns their admission of occasional inaccuracies and typographical errors, which they then qualify with a sentence relating it to misleading photos of dingy Vegas motels:

THE INFORMATION, SOFTWARE, PRODUCTS, AND SERVICES PUBLISHED ON THIS WEBSITE MAY INCLUDE INACCURACIES OR TYPOGRAPHICAL ERRORS. IN PARTICULAR, THE COMPANY AND ITS AFFILIATES DO NOT GUARANTEE THE ACCURACY OF, AND DISCLAIM LIABILITY FOR INACCURACIES RELATING TO, THE HOTEL PHOTOGRAPHS, HOTEL PROPERTY DESCRIPTIONS, AND LISTS OF HOTEL PROPERTY AMENITIES DISPLAYED ON THIS WEBSITE, MUCH OF WHICH INFORMATION IS PROVIDED BY THE HOTEL PROPERTIES.

As I mentioned earlier, I’m a novice with this Contracts Law stuff, so I eagerly anticipate your feedback so I can help my sister figure out the best way to move forward. She has yet to cash in on the $100 voucher, as my limited understanding suggests that if she were to do so, that would indicate she accepted their counteroffer to their alleged penny screw up.

I thought publishing this story on my blog would be a fun way to figure out one of those corporate conundrums that all customers run into eventually. It sure beats the alternative that Hotels.com provides in the user agreement:

You hereby agree that any dispute arising from or relating to the use of this website or hotel reservations made through us may, if not amicably resolved, be resolved only through binding arbitration between you and us under the commercial rules of the American Arbitration Association. This arbitration, which shall be conducted in Dallas County, Texas, USA before neutral arbitrators…

I guess the only thing guaranteed in life is death and Texas. But wouldn’t it be nice if Hotels.com lived up to their bargains?