Case Scenario:
In 1999, a Seattle man took a popular soft-drink company seriously when one of its commercials made an offer of a Harrier jet, the famous high-tech jump jet used by the U.S. Marines. In a TV commercial that aired in 1995, the company jokingly included the Harrier as one of the prizes that could be received with a mere 7 million company points. Although that sounds like a lot of points to get from drinking the soft drink company's products (roughly 190 drinks a day for 100 years), the company also allowed customers to purchase points for 10 cents each.
The man did the math and discovered that the cost of the 7 million points needed for the jet was $700,000. He then put together a business plan, raised the $700,000 from friends and family, and submitted 15 points, the check, and an official order form along with a demand for the Harrier jet.
The company wrote back, stating that the Harrier jet in the commercial was simply used to create a humorous and entertaining advertisement. They apologized for any misunderstanding or confusion people may have experienced and enclosed some free product coupons.
The free coupons did not satisfy the man, who then took the soft drink company to court. Finally, a federal judge for the Southern District of New York held that the company was only joking when it implied in its ad that it was giving away fighter jets. The judge noted that because the jets sell for approximately $23 million, no one could have concluded that the commercial actually offered consumers a Harrier jet. Instead, this was a classic example of a deal that was too good to be true.
Discuss the following questions:
Q1. What are the four elements of a valid contract?
Q2. What is the objective theory of contracts?
Q3. How does the objective theory of contracts apply to this case?
Q4. In your own words, why do you think the court held that there was not a valid agreement here?
Q5. Are advertisements generally considered offers? Explain.
Q6. How does this case differ from a reward situation in which a unilateral contract is formed upon completion of the requested act?
The following equation well illustrates in concise form the difference between the four elements of contract:-
Distinction between Agreements and Contracts:-
Offer + Acceptance = Agreement;
Agreement + Enforceability at law = Contract
If A and B two parties enter into an agreement intending to be bound by it, a court of law applying ether of the theories, subjective or objective, would arrive at the same conclusion indicating that the parties did enter into a binding contract.
The existence of a contract is determined by the legal significance of the external acts of a party to a purported agreement rather than by the actual intent of the parties. Here we have to consider the actual intent of the parties rather than the legal significance of the external acts of a party to a purported agreement.
The present case has been rightly summed up by the honorable Federal Judge of the Southern District of New York as "classic example of a deal that was too good to be true". Factually it was incapable of performance and anyone in his perfect state of mind can straight away view it nothing more than a joke.
The above makes amply clear that the case falls within the objective theory of contracts. Another point worth noting here is : "An agreement the performance of which is physically impossible is void ab initio that is from its very inception. If a person agrees to touch the sky is void ab initio".
The consideration should be lawful with a lawful object and the parties must be competent.
In the famous case of Carlill v. Carbolic Smoke Ball Co., it was held that there was a binding agreement between the company and Mrs.Carlill although she had not communicated her acceptance of the offer to the company but had accepted it by her conduct.
Where an offer is made to the public at large or even to the whole world, any member of the public can accept the offer in which case there will be a binding agreement between the proposer and the member of public accepting such offer.
However, if a person returns the article has not in reality has read the advertisement and is not aware of the reward, can not later on claim the reward after returning the article as he was not aware of the reward. He had not read the advertisement and had no idea that performance of such act attracts a reward also. He did not even know of its existence.
In this case there was no offer hence no acceptance.
In reward situation the act is capable of being performed, not illegal ab initio, offer is factual, amount of reward is fixed and the person undertaking to perform the duty is aware of the existence of reward which is realistic.