Fraudulent Advertising

We're reading an interesting case for Contracts, a case with which I was actually familiar before coming here. The case is Leonard v. Pepsico, and it concerns an ad that Pepsi ran some years ago.

Pepsi's advertisement featured a kid going to school. He wakes up, puts on a shirt, and we see a caption at the bottom saying "T-shirt: 75 Pepsi Points." He puts on a jacket and a caption reads "Leather Jacket: 1450 Pepsi Points." He puts on sunglasses and a caption appears reading "Shades: 175 Pepsi Points." It then shows his school. A mighty wind starts blowing, and a Harrier jet lands. A caption then appears reading "Harrier Fighter: 7,000,000 Pepsi Points." The kid then makes a wisecrack, "Sure beats the bus," or some such.

The idea behind it was that you bought Pepsi and received Pepsi Points, which could be redeemed for stuff from a catalog. The catalog did not contain the Harrier jet from the ad. Mr. Leonard, however, decided he wanted to get the jet. So, after he tried drinking a lot of Pepsi, and decided this would never work, he studied the fine print in the ad and found that he could trade money for Pepsi Points, at the rate of ten cents per point. So he raised money from friends and family and wrote Pepsi a check for $700,000, asking to buy seven million Pepsi Points and redeem them for a Harrier Jet. Pepsi refused, and Leonard sued for breach of implied contract.

Needless to say, Leonard lost. $700,000 is a lot of money, but nowhere near the $23 million a Harrier jet costs. Moreover, given that you can't just sell military hardware to civilians, there's no way Pepsi could have delivered on their promise even if they wanted to. But of course, making a promise you can't or don't wish to keep is not an excuse to void a contract. The judge ruled that the ad was clearly a joke, and any reasonable person watching the ad would not think that Pepsi was seriously offering to give away Harrier jets for 7 million Pepsi Points. Even if Leonard thinks there was a contract, the fact that Pepsi doesn't and no reasonable person would think there was means the contract doesn't exist.

Now, this is not to say contracts which a party believes to be in jest aren't enforceable. On the contrary, in the case of Lucy v. Zehmer, Zehmer was forced to sell his family farm for $50,000 to Lucy when he got drunk and drew up a quick bill of sale on the back of a cocktail napkin and signed it with his wife, as part of a barroom bluff. He didn't offer it seriously, and was just doing it to show that Lucy didn't have $50,000 to buy the farm. He didn't expect Lucy to take it seriously. He also didn't expect Lucy and his brother to show up the next day with the money, demanding the deed. He also didn't expect to be taken to court over it, and he sure as hell didn't expect to lose in court and have to sell the farm. But there the court ruled that, while Zehmer didn't think he was making a contract, Lucy did, and the peculiar circumstances were such that Zehmer never let on that he wasn't entirely serious about it; he effectively did a cross-my-fingers-behind-my-back trick, and found out the hard way that that argument doesn't have legal merit. A reasonable person, observing their actions, would believe a contract had been made.

All of this is prefatory to one of the best lines in any decision I've read so far, from the Pepsi decision: "Plaintiff's insistence that the commercial appears to be a serious offer requires the Court to explain why the commercial is funny. Explaining why a joke is funny is a daunting task; as the essayist E.B. White has remarked, "Humor can be dissected, as a frog can, but the thing dies in the process. . . ." The commercial is the embodiment of what defendant appropriately characterizes as 'zany humor.'"

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This page contains a single entry by Zach published on September 7, 2005 8:50 PM.

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