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Contracts · Offer (advertisements & jest) · Case brief

Leonard v. Pepsico, Inc.

88 F. Supp. 2d 116 · United States District Court for the Southern District of New York · 1999
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Facts

Pepsi ran a "Pepsi Stuff" promotion in which consumers collected Pepsi Points and redeemed them for catalog merchandise. A television commercial showed a teenager arriving at school in a Harrier jet, with the caption "HARRIER FIGHTER 7,000,000 PEPSI POINTS." Leonard sent Pepsi an order form, 15 original Pepsi Points, and a check for $700,008.50 to buy the remaining points, demanding the jet. Pepsi rejected the submission, explaining that the jet was not in the catalog and that the commercial was fanciful, so Leonard sued for specific performance and related relief.

Accurate?

Issue

Would a reasonable person view Pepsi’s television commercial as a definite offer to provide a Harrier jet in exchange for 7,000,000 Pepsi Points, such that Leonard’s submission created an enforceable contract?

Accurate?

Rule

Advertisements are generally not offers but invitations to negotiate unless they are clear, definite, and explicit, leaving nothing open for negotiation. Contract formation is judged by the objective reasonable-person standard, and a purported offer that is obviously in jest or hyperbolic is not enforceable as a serious promise.

Accurate?

Holding

No. The commercial did not constitute an offer, and no objective reasonable person could conclude that Pepsi seriously promised to convey a Harrier jet for 7,000,000 Pepsi Points.

Accurate?

Reasoning

The court applied the objective theory of contracts and concluded that the commercial was clearly humorous and fantastical, not a serious business proposal. The surrounding promotion materials reinforced that conclusion: the catalog and order form listed redeemable items, and the Harrier jet was absent while the listed items were ordinary branded merchandise. The supposed transaction was also implausible because a Harrier jet is an extraordinarily expensive military aircraft, making the ad’s depiction obviously exaggerated. Because no offer existed, Leonard could not establish contract formation, and summary judgment for Pepsi was proper.

Accurate?

Significance

Leonard is a leading modern contracts case on advertisements, objective assent, and jokes in commercial speech. It reinforces the traditional rule from Mesaros v. United States, 845 F.2d 1576 (Fed. Cir. 1988), that advertisements usually are not offers, and it contrasts with the rare ad treated as an offer in Lefkowitz v. Great Minneapolis Surplus Store, Inc., 251 Minn. 188, 86 N.W.2d 689 (1957), where the terms were clear, definite, and explicit. The case is also frequently taught alongside Lucy v. Zehmer, 196 Va. 493, 84 S.E.2d 516 (1954), for the objective theory of assent: what matters is how a reasonable person would understand the manifestation, not a party’s unexpressed intent.

Accurate?
Citations in this brief — every case checked
Mesaros v. United States, 845 F.2d 1576 (Fed. Cir. 1988)
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