The Objective Of This Paper Is To Answer Questions Based On The Given Case Study On A Soft Drink Company Essay Sample
What are the key legal factors present in the scenario?
In the given case, a soft drink company was sued by the Seattle man when his claim of Harrier jet was rejected by the company. The man claimed for the Harrier on the basis of the advertisement in which it is shown that company would provide Harrier jet in exchange of seven million company points. The company rejected the claim mentioning that the Harrier jet as shown in the advertisement was just for humour purpose. However, when the man took the case to the court, the judgement was also in the favour of the soft drink company.
Following are the key legal factors in this case:
First, advertisement had been wrongly considered as an offer. Merely by the offeree’s readiness to accept the offer by sending an order form will not convert the alleged offer in advertisement into a valid contract.
Second, Objective theory of contract is another key legal factor applied to this case. This theory says that the contract will be considered as valid between two parties if any reasonable person would interpret that offer has been made and accepted and the contract has been established between the two parties. However, in this case none could take the commercial seriously and would take it merely as a joke.
Third, there was no signed contract between the two parties. Which means the claim didn’t come under the criteria of statute of frauds which states that the valid contract would be established between the two parties if there is a written signed agreement between the two parties.
What are the four elements of a valid contract? How do they relate to the scenario in question?
All agreements are not contracts; it must possess four important elements to be called it as a valid contract. First is offer. There must be an offer clearly stating the terms by a party. There should be no ambiguity in whatever is stating in the offer. Second is acceptance. The offer has to be accepted by the other party in exactly the same manner in whatever has been offered by means of statement or act. Third is intention of legal consequences. A contract will exist only when both the parties in the agreement are willing to enter into a legally binding agreement. The contract doesn’t need to explicitly mention about the legal relations. However, entering into the contract itself presumes that both the parties are legally bounded. Fourth is consideration. Consideration is a value which is promised to exchange for a particular action. The value need not be money, it can be in kind or service.
The soft drink company is bound to fulfil the man’s demand only if there is a valid contract established between the two and all the four elements of valid contract is applicable to this scenario. The very first essential element of a valid contract is offer. Now here the question arises whether the advertisement by a soft drink company will be considered as an offer? As per Cohen (2000), advertisement does not consider as offer, rather it is an invitation to solicit offers. Advertisements can be considered as offer only when it is clearly stated that advertiser is committing to make an offer. The man’s official order, cheque and points could be considered as an offer, but this was not accepted by the soft drink company to make it as a valid contract.
What is the objective theory of contracts?
This theory is in effect from the late 19th century or early 20th century in place of subjective theory of contracts. As per Kadian (No Date), this theory states that the binding exists between two parties if any other reasonable person could judge objectively and interpret the agreement between the parties. The third party should be able to analyse the circumstance and judge objectively the offer has been made and accepted. Objective law of contracts works on the intention of the parties that there should be certainty in the words and action in the contract. The enforcement of this theory resulted in unbiasedness and neutrality in interpreting the contracts.
How does the objective theory of contracts apply to this case?
As discussed above, in the objective theory of contracts any third person should interpret the contract as fair and valid. Since no reasonable person can understand from the advertisement that the soft drink company can actually give Harrier Jet as a prize. Any person could assume the advertisement as merely as entertainment and can not consider this as a serious offer. The total number of points which was demanded for the Harrier Jet was seven million company points. That means to get the product, a person has to consume 190 drinks for the next hundred years. This numbers itself seems to be unrealistic and cannot be considered as actual form of reward offering by the soft drink company to anyone. Hence, the objective theory of contracts applied in this case as the reasonable person would judge this offer a merely a joke or the part of entertainment of the commercial. Thus, there is no valid contract has been occurred between both the parties.
In your own words but based on research and analysis of relevant legal concepts and cases, why do you think the court held that there was not a valid agreement in this scenario? Provide support for your position.
Plaintiff argued that the as per the offer shown in the advertisement, the soft drink company owes him the Harrier jet as he had fulfilled the requirement as per the commercial. However, as per the court decision there was not any valid agreement between the parties. Following are the three reasons which proves the court verdict.
First, to make a valid agreement there has to be an offer. However, a commercial from the soft drink company cannot be considered as an offer. Commercial is just an invitation to negotiate until and unless it is specifically mentioned in the advertisement in clear and specific words. The Restatement (Second) of Contracts explains that the advertisement by any means i.e. newspaper, TV, catalogue or internet are only to be considered as offer to sell the goods. In order to make advertisement an offer, there has to be a promise and request to act in particular circumstances in very clear, specific and concise words. Then only it will be considered as an offer and the acceptance of the other party would become a contract. Let’s take the case of Lefkowitz v. Great Minneapolis Surplus Store, 251 Minn. 188, 86 N.W.2d 689, 691 (1957) as an example (Wood, 2014). There were an advertisement printed in a newspaper mentioned that “Saturday 9 AM Sharp, 3 Brand New Fur Coats, Worth to $100.00, First Come First Served $1 Each.” However, when Mr. Morris reached the store to grab the offer, he was informed that the offer was only for female customers. The court verdict was in the favour of plaintiff in the above mentioned scenario as the advertisement was clear and definite and there were no scope for any doubt, hence the contract had been established between both the parties. However, in the given scenario there was no limitation was given such as first three people or first come first will be the winner. Hence, it makes it indefinite in nature. Thus, there could not be any contract formed.
Second, no objective reasonable person would judge this advertisement as actual offer. Court has rejected the plaintiff demand of Harrier jet by the soft drink company as per their advertisement shown in television, as no reasonable person would conclude from the commercial that the company would actually give the Harrier jet as a prize. Thus in this case, the judge would have applied the objective principles of contract law which says that if there will be no valid contract between the two parties if any other reasonable person would not identify the valid agreement between the parties. Hence, it denies the company’s subjective view of making a commercial or a person’s subjective view of understanding it. And the judge would consider it objectively, what a reasonable person would interpret and concluded from this advertisement.
Third, another reason because of which the court’s verdict that there was not a valid agreement between the two is that it was not meeting the requirements of Statute of Frauds. Statute of Frauds refers that the contract has to be in writing and signed by both the parties with specific terms to make it a valid contract. As in this case, there were no written contract had been formed between the defendant and plaintiff, court didn’t consider this as a valid agreement.
Are advertisements generally considered offers? Explain.
Advertisements reach to the common public through various sources i.e. newspaper, television, radio, internet or brochures. In which, companies provide various promotions and sale to the common public and claim their product as the best and cheapest. But then the question would arise that ‘Are all these alleged offers would be binding in a valid contract?’ The answer is ‘no’. If the advertisements would be considered as an offer, then the advertiser would be binding into indefinite number of contract and would be accountable for goods much more than existed in a marketplace. An advertisement doesn’t consider as offers rather it is an invitation to enter into a negotiation. For a legally binding offer, all the four elements of a valid contract which is discussed above must be present. Both the parties should be settled in a common terms. The consideration or a fixed value should be committed by the one party in particular circumstances by the other party. Also there should be an offer from the one party and acceptance should be confirmed from another party. Entering into a contract would make the contract legally enforceable. That means if one party doesn’t perform what is committed the other party can sue in the court of law and demand money. However, all the above criteria don’t meet in an advertisement.
For an advertisement to be considered an offer it must have the below three criteria:
First, there must be specific terms clearly written in words.
Second, the advertisement should be communicated to a particular person or a group of person.
Third, there is a clear language which shows that the advertiser has an intention to entering into a contract.
For e.g. if an advertisement by a food joint says that they will give burgers on 50% discount before 9 am on Saturdays. This can be considered as a legal offer since the conditions are clearly mentioned in the advertisements and there is no scope for further negotiation.
How does this case differ from a reward situation in which a unilateral contract is formed upon completion of the requested act?
A unilateral contract is a kind of contract which says that a valid contract can be established between the two parties if in an offer mentioned that the contract would be accepted upon the particular performance or act by the other party. In this case, there was not any specified direction given for the Harrier jet, for e.g. first three person who appeared in the head office of the company on 1st December with seven million company points would get Harrier jet as a prize. Then the advertisement would be considered as a reward situation, where there would be an invitation to perform an action in the given circumstances mentioned in the advertisement. And those who perform the action in the prescribed condition would enter into a unilateral contract. In this case, an alleged offer via advertisement was just an invitation to enter into the deal to buy company’s goods. Hence, there was no unilateral contract was formed between the two parties.
What recommendations (at least 2) would you make for a company considering an aggressive marketing campaign with giveaways of high value items? Explain the rationale behind each recommendation.
Following two recommendations would be suggested for the company considering an aggressive marketing campaign with giveaways of high value items.
First, first of all, any of the company should not enter into such circumstances where there would be confusion in any consumer’s mind for the offer shown in the commercial. Advertisement should be clear and to the point so that any layman would understand and interpret it correctly. As customers are considered as God, this will help the company not to loose its valuable customer and its honesty towards the product and the company.
Second, even if the company make such advertisement as a part of their aggressive marketing campaign and make an alleged offer to give high value items, then either the item should be within the budget of the company, so that even if anyone comes to claim the product company should be able to fulfil the promise, or the commercial should be shown in such a way that no one would take it seriously and sue the company.. This will save company time and resources and would help not to spread bad publicity in the market.
Cohen L.E. (2000). Choice of a New Generation: Can an Advertisement Create a Binding Contract? Retrieved from http://scholarship.law.missouri.edu/cgi/viewcontent.cgi?article=3454&context=mlr
Kadian K.(No Date). Mutual Assent & Objective Standard in Contract Law: Definitions & Examples. Retrieved from http://study.com/academy/lesson/mutual-assent-objective-standard-in-contract-law-definitions-examples.html
Wood (2014). Leonard v. Pepsico Inc. Retrieved from https://h2o.law.harvard.edu/cases/3508
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