Leonard v. Pepsico, Inc. – Case Brief Summary

Summary of Leonard v. Pepsico, Inc., 88 F.Supp.2d 116 (S.D.N.Y. 1999), aff’d 210 F.3d 88 (2d Cir. 2000).

Facts

Pepsico (D) ran a promotional campaign in which consumers were invited to acquire “Pepsi Points” by purchasing Pepsi products, and exchange them for “Pepsi Stuff”. Leonard (P) received a catalog for use in redeeming “Pepsi Points”. Television advertisements featured merchandise available through the promotion including a Harrier Jet. Leonard saw the commercials and contended that the commercial constituted a valid offer to acquire the jet for 7,000,000 Pepsi Points.

Leonard obtained a catalog and noticed that the order form did not include the Harrier Jet. The catalog stated that merchandise could only be ordered via original order form. The form also indicated that additional points could be purchased for ten cents each. Leonard raised $700,000 in order to purchase the 7,000,000 points needed to acquire the jet.

Leonard submitted a completed order form together with a check and wrote in “1 Harrier Jet” at the bottom of the form. Leonard indicated that the check was for the express purpose of purchasing the points needed to obtain a new Harrier jet as advertised in the commercial.

Pepsico rejected the submission and returned the check, noting in its rejection that the jet was not in the catalog and thus could not acquired through the promotion. Pepsico apologized for any misunderstanding and informed Leonard that the commercial was intended to be humorous and entertaining. Leonard sued when Pepsico refused a formal demand to honor its offer. Pepsico moved for summary judgment.

Issues

  1. When is summary judgment proper in the context of contract formation?
  2. What standard is applied in determining whether some communication constitutes an offer?
  3. Is an advertisement an offer?

Holding and Rule

  1. Summary judgment is proper when the words and actions that allegedly formed a contract are so clear that reasonable people could not differ over their meaning.
  2. Whether something constitutes an offer is determined under the objective reasonable person standard.
  3. No. The general rule is that an advertisement does not constitute an offer.

The court held that in this case no objective reasonable person could have concluded that the commercial constituted an offer for a Harrier jet. Whether an offer was made depends on the objective reasonableness of the alleged offeree’s belief that the advertisement or solicitation was intended to be an offer. The court held that it was clear that no serious offer for a Harrier jet was made. As per Lucy v. Zehmer, if there is no indication that an offer is in jest, and an objective reasonable person would find that the offer is serious, there will be an offer under the law even if the person making the offer was acting subjectively in jest.

The court rejected Leonard’s argument that the jury must decide whether his belief was reasonable. The court noted that the commercial itself was highly improbable because the youth featured could barely be trusted with the keys to his parents’ car, much less the prize aircraft of the United States Marine Corps. The court stated that the notion of traveling to school in a Harrier jet was exaggerated adolescent fantasy. Furthermore the actual cost of the jet exceeded $23 million and the offer was therefore unbelievable.

Disposition

Motion for summary judgment granted.

In another seminal contract law case, Carlill v. Carbolic Smoke Ball Co., the court held that an advertisement constituted a unilateral offer, and by its terms performance alone without notice was sufficient acceptance to render the contract binding.


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