Previously, through the Lefkowitz case, we discussed advertisements that constituted contractual offers. Today, we're going to continue discussing the advertisements this time by examining an exceptionally entertaining case Leonard versus PepsiCo which was decided by the Southern District of New York in 1999. Hopefully, after having considered these two cases, you'll think a bit differently, or at least more critically when you see an ad, or commercial. In the 1990's, PepsiCo conducted a promotion. The company allowed consumers of its products most notably Pepsi, and Diet Pepsi to amass Pepsi points by purchasing those products. Those consumers could then use the Pepsi points to buy specified merchandise. They could then fill out, and submit an order catalog listing available products in the respective points they were worth. In furtherance of this promotion, PepsiCo aired the following television commercial. Introducing, the new Pepsi Stuff catalog. Now, the more Pepsi you drink the more great stuff you are going to get. Sure beats the bus. As you just saw, certain items appearing in the commercial were priced via subtitles with various Pepsi point values. A t-shirt at 75 points, sunglasses at 175 points, a leather jacket at 14,50 points. And of course the commercial culminates with a Harrier jet landing at the teenagers high school. The jet is shown with the subtitle seven million Pepsi points. The PepsiCo order catalog did not include the Harrier jet. Nevertheless, the plaintiff attempted to redeem the Harrier jet after submitting a check to the defendant for an amount sufficient to purchase seven million Pepsi points. The company's promotion also permitted consumers to purchase points directly at ten cents per point. After PepsiCo rejected the plaintiffs effort, the plaintiffs sued. The plaintiff argued that the advertisement displaying as it did a Pepsi point number seemingly as the price for the jet constituted a valid offer that he accepted by submitting his check. The defendant countered that the advertisement was clearly a joke, and did not constitute an offer. The Southern District of New York agreed with the defendant granting summary judgment to PepsiCo. Typically, advertisements do not constitute offers. Section 26 of the Restatement (Second) of Contracts which explains that a manifestation of one's willingness to enter bargain does not itself constitute an offer, includes an official comment that specifically addresses advertisements. That comment says, "Business enterprises commonly secure general publicity for the goods or services they supply, or purchase. Advertisements are not ordinarily intended or understood as offers to sell. The same is true of catalogs, price lists and circulars, even though the terms of suggested bargains may be stated in some detail. It is of course possible to make an offer by an advertisement directed to the general public, but there must ordinarily be some language of commitment, or some invitation to take action without further communication." As the restatement suggests, and as we saw in Lefkowitz, there're exceptions to the general rule that advertisements are not offers. Lefkowitz said that, when the advertisement is clear, definite and explicit, and leaves nothing open for negotiation, it constitutes an offer that creates a binding contract upon acceptance. But the restatement comment said that, even ads with terms stated in some detail may not constitute offers. Might an ad need to clearly state that is intended to serve as an offer in order to be effective? Well the answer is end of the restatement is possibly yes. The comment also said, that advertisements are not ordinarily intended, or understood as offers to sell, but under the objectivist conception of contract formation, we don't care a whit about whether the offer, or ordinarily intends, or not for the communication to be an offer. We care only about whether a reasonable listener would interpret the ad as an offer to sell. Is it really true that a reasonable listener would ordinarily not understand an ad to be an offer to sell, empowering the consumer to accept at least say, while reasonable supplies last? One problem with a reasonable listener inquiry is that it can be somewhat endogenous. The law is looking at what reasonable listeners think, but reasonable listeners are simultaneously looking at what the law thinks, when a case like Lefkowitz, or Leonard says that ads are not to be trusted, then reasonable listeners are less likely to think that they are offers. So, from what you've heard of the commercial, what would constitute acceptance by the plaintiff? Intuitively, we'd thing payment of the points would constitute acceptance, but how would the plaintiff pay those points, and to whom? That the commercial does not give us the answer is a primary reason why the court held that the commercial did not constitute an offer. In the court's words, "The commercial was not definite, because it reserved details of the offer to a separate writing, the catalog, and did not explain the steps necessary to accept the offer." The catalog of course which actually constituted the company's offer, did not list the jet. Recall as well, that the advertisements had issue, and Lefkowitz said, "First come first serve." The PepsiCo commercial had no similar limiting language as to quantity which meant that on the plaintiff's theory, the company would have to provide a jet to every individual who amassed, or purchased the requisite Pepsi points. The lack of such language also made the commercial too indefinite to constitute an offer, because viewers of the commercial probably wouldn't believe PepsiCo would risk the possibility that more people would accept, and the company had Harrier jets to provide. Here's a question to consider though. Imagine the leather jacket depicted in the commercial for 14,50 points was not listed in the catalog, but the plaintiff wanted it and attempted similarly to redeem Pepsi points to get that merchandise. Would the results have been the same? It's similarly indefinite, but the lack of limited language is certainly less of an issue for an article of easily produced clothing. The fact that supposed offer wouldn't seem objectively, and reasonable, or joking, and we'll talk about joking in a few minutes, would probably weigh heavily in a court's analysis. Now, Judge Cardozo might have reached a different result in this case. Remember, Justice Cardozo was the great implier in Lucy Lady Duff Gordon, and in the Allegheny College case. Would it really be so hard to imply a term that the offer was only good while reasonable supplies last to avoid the prospect of unlimited demand? Implying additional terms could resolve a lot of the indefiniteness found in this commercial. And, this implying extra terms is already a standard part of the law of offers, which teach that offers can be accepted by any reasonable means. The plaintiff also argued, and the court rejected, the theory that the commercial represented the kind of reward offer that we learned about in the Carbolic smoke Ball case. Reward advertisements like the one in Carbolic are meant to induce viewers to perform a specific action. But the PepsiCo advertisement did not do this, at most, the court found it urged viewers of PepsiCo's commercial to buy its products and accumulate points, and then look at the catalog, and figure out how to redeem them. The PepsiCo opinion also discuss joking offers that we earlier discussed with regard to Lucy versus Zehmer. The PepsiCo court indicated that an ad, or other communication is not an offer if the party who claimed an offer existed had reason to know that the offer was made in jest. In other words, whether something is an offer, or a joke is governed by an objective test. Would an objectively reasonable listener believe the commercial constituted a serious offer? The court gave reasons why it found the advertisement was clearly in jest. These included that the teenager in the commercial was a highly improbable pilot, that traveling to school in a jet is an exaggerated adolescent fantasy, and that given the Harrier jets the military uses, depiction of such a jet as a way to get to school in the morning is clearly not serious. Finally, and perhaps most compellingly, amassing the requisite Pepsi points by drinking Pepsi would require drinking about 190 Pepsis a day for 100 years. So, what have we learned? First, we reiterated the rules articulated when advertisements constitute offers. There are only going to be offers if the advertisement specifies a clear definite, and explicit means of acceptance, and has explicit terms, and maybe indicates that it intends to be an offer. Let's consider for a moment the policy argument supporting this rule of definiteness. Why don't we want all advertisements to constitute offers? Well, advertisements especially commercials are viewed by a huge number of people. Combined with the period of time between the display of the ad, and a viewer's acceptance, construing ads as offers would inspire tons of litigations which in turn might produce a chilling effect on advertisements. Then again, ads are trying to induce consumers to act. It might not be so inefficient to put the burden on the speaker to state when ads with stated prices are merely solicitations. Second, we revisited the joking offers question, and the idea of unilateral reward contracts that we first studied in Zehmer and the Carbolic Smoke Ball's case. With regard to joking offers, we learn from PepsiCo that the acceptance of an offer made in jest will not be binding if an objectively reasonable listener would not have believed that the person, or entity making this supposed offer was not being serious. Because of Leonard versus PepsiCo, federal judges are now in the business of telling us why a commercial is funny.
