Ebay - Peter Smyth v Vincent Thomas

I have purchased many things on ebay, and I am sure that a substantial amount of the population have done the same. But what happens when things go wrong, is there a binding contract on which to rely on? Is Ebay liable if an item doesn't turn up?

In the 2007 case of Peter Smythe v Vincent Thomas, the Defendant Thomas listed a Wirrawau Australian Warbird aircraft for sale, with a starting bid of $150,000.00, even though Thomas thought the aircraft was probably worth around $200K to $250K. With 20 seconds remaining, Smythe made a bid on the aircraft, in accordance with Ebay rules, and 'won' the aircraft (which is a peculiar way of buying something in my opinion, as you still have to pay for it at the end: I mean you don't go into Woolworths to buy a bottle of milk, and at the counter they tell you have won a bottle of milk... but you still have to pay for it....). Both parties were registered users of ebay, and both were aware of how ebay worked. Smythe then claimed that as a result, a contract for the sale of goods had been entered into, and there was now a binding contract between himself and Thomas. Thomas claimed that the ebay entry was simply an invitation to treat or in other words a request for expressions of interest. Thomas said that it was rediculous that a contract for the sale of a plane could occur, as Smythe had never inspected the plane, and he said that his intention was to advertise the plane, then discuss the terms later on. He also had another offer for the plane for $220,000.00, so this might have also been a factor as to why he was so keen to ensure this contract was not binding. Thomas also claimed that he did not know that he would be committed to sell the plane.

The New South Wales Supreme Court found it surprising that Thomas was not aware that he would be committed to sell, as he had bought vintage car parts previously, and knew how ebay worked. In the view of Rein AJ, by listing the plane for sale on ebay, with a disclosed reserve of $150,000.00, he offered to sell the plane to a bidder who bid before the end of the auction, with a bid for $150,000.00, and was the highest bidder at the end of the auction. However, it should be noted that ebay is actually not an auction site, it only provides an auction like format for users to sell their items. Therefore, the rules of a traditional auction did not apply. It was held that there was a binding contract formed between the parties, and it should therefore be specifically enforced. All the essential terms of the Contract were listed on ebay, such as the price, and that Thomas had never stated that the sale was subject to an inspection or further discussion of the terms of the sale.

One has to wonder though, what would happen if Smythe then purchases the plane, but finds it is poor repair? Would he have a further action? Could Ebay be liable? Further could Ebay be liable should an item not turn up, and the Seller had absconded with the purchase money? In Eva Gora v Ebay, a person in Victoria bought a computer from someone in the Middle East. It never turn up, and the person who sold it disappeared. They contacted the police, who refused to investigate. They then decided to take ebay to court. Ebay argued that they were not a party to the contract, only a forum for users, but that she could claim $270 insurance. However, Ebay said on its website ‘safest place to do your shopping’. Under the fair trading legislation, the question was were they inducing people to rely on their message that ebay was safe to use? It was held that they were bound to this statement. The court found that ebay had conducted itself that it was safe to use, and was for all cases automatically insured. They failed to disclose that their insurance was small. They were therefore held liable under TPA.