Negative Option Marketing Scam

Before we discuss negative option marketing, we need to cover some basic concepts in contract law.

A contract consists of mutual promises between two parties. A contract is formed when one party makes an offer, and the other party makes an acceptance.

A classic example of a contract is the sale of a used car. The salesperson touts the car's features and offers to sell the car to the buyer for a certain price. The buyer will make a counter-offer at a lower price. This process continues until the two parties agree to price. The price and other terms are committed to paper, which the two parties sign. The signatures on the contract execute the contract -- a contract is formed. Conversely, if the buyer and seller can't agree to a price, both can walk away without an obligation to the other.

A transaction in a brick-and-mortar or online retail store is no different. The prices printed on the physical or online shelf are the retailer's offer, and the buyer completing the transaction at the checkout stand is the acceptance of the offer. Conversely, leaving the store empty-handed is a clear signal the buyer does not accept the seller's offer(s).

In both of the above examples, the buyer accepts the seller's offer by taking an affirmative action that signifies the acceptance.

The basic concepts in contract law are simple -- mutual promises, offer, and acceptance -- but the implementation can be complicated because people are complicated. As a result, each jurisdiction has created its own rules for transactions between businesses and consumers, and between businesses and businesses. Some US states have adopted the Uniform Commercial Code, which is designed to make contracts law consistent across the states.

Negative option contract

Now let us turn to the negative option contract. Here, the buyer's signal of acceptance is reversed. Instead of the buyer accepting the offer by saying "We have a deal" or some other form of stating agreement, the signal of acceptance is silence.

Negative option contracts are formed like any other contract. The seller offers to deliver a product to the buyer at a certain frequency until the buyer tells the seller to stop. If the buyer accepts that offer, a contract is formed. Every week or month or whatever period the buyer and seller agree to, the seller delivers the product and an invoice, or charges the buyer's credit card. The buyer signals the seller to stop delivery, and contract is ended.

If all negative option contracts worked just as I described, there would not be much to talk about. However, sellers have discovered creative ways to make negative option contracts especially enticing to enter, and especially cumbersome for the buyer to signal their desire to stop delivery.

Negative option contracts in operation

For example, Columbia House offers to deliver 10 or 20 music CDs for a penny, which sounds like a great deal. The catch is that the buyer is obligated to buy a certain number of CDs over the next year or two. Each month, Columbia House sends a customer a postcard stating what the month's selection is. If the buyer does not in a very short period of time return the postcard with "no" checked, the monthly selection is sent and the buyer is billed. Obviously, in this situation, the buyer must go through their mail carefully and hope the postal service doesn't lose the postcard on either trip.

Buyers can be at a disadvantage if the seller refuses to accept the buyer's decision to decline the product. Scholastic, Inc. was accused of this in 2007 in a class-action lawsuit.

The latest example of a negative option contract in a bad light relates to the online sales of acai berry pills. Here, the seller promises to sell a "trial" bottle of this miracle extract for an extremely low price. However, in the fine print, the buyer agrees to buy a monthly supply of acai berry pills at inflated prices. Unfortunately, many buyers do not know they agreed to a negative option contract until the pills arrive in the mail or they look at their credit card statement. In effect, they are the victims of a scam.

Terminating a negative option contract

When one party wishes to terminate a contract before its terms are complete, that is called a breach of contract. In some contracts, the damages for breach are included in contract itself. Under the law, these damages must be fair, and cannot be punitive.

Negative option contracts are illegal in Michigan, Canada and some countries in Europe. If you are a resident in a jurisdiction where negative option contracts are illegal, either party can breach without any negative consequences.

To terminate a contract, the breaching party must give the other party clear and effective notice of the breach.

To terminate a negative option contract, send the seller a letter explaining you no longer wish to receive the product. Also, contact your credit card company and ask it to not allow additional charges on your account from that seller.

If you do not want the items you received as a result of a negative option contract, ask your credit card company to reverse the charges for those items. If the seller asks you to return the product, you should do so at their expense.

Received something I did not order

If you received unordered merchandise, you may consider those items a gift. (See the Federal Trade Commission document "Fact for consumers: Unordered merchandise"

I hope this information helps you Find. Learn & Save.

Best,

Bill

www.bills.com/

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