This is extremely deceptive. It's like offering a B1G1 sale and then when the one product turns out to be faulty, not giving you any type of consideration since you didn't "buy" it.
Given that there's no real difference if you call this "instant upgrade" or "deep discount first class," the only reason to offer it as an "instant upgrade" fare is to classify that person as a coach passenger for just this reason... limiting their own liability--which is shameful and deceptive IMO.