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¶ … court ruled that the commercial was not an offer to enter into a contract. Explain the court's reasoning and holding.
In principle, a valid contract requires an offer, acceptance of that offer, sufficient specificity as to the substance of the agreement (i.e. time frame for delivery or execution, amount of payment, terms of agreement, etc.), and the payment or transfer of valuable consideration. Once an offer is proffered, the party or parties to whom that offer is extended (the "offeree") may accept that offer by communicating that acceptance to the party making the offer (or "offeror") or by performing a specific act specified by the offeror as a form of acceptance. Once an offer is accepted by the offeree, it can no longer be withdrawn by the offeror without incurring potential liability in contract to the offeree.
Generally, an advertisement (including a television commercial) is not considered an offer. According to The Restatement (Second) of Contracts (1979),
"Advertisements of goods...
The same is true of catalogues, price lists and circulars, even though the terms of suggested bargains may be stated in some detail."
Instead, under modern contract law, a typical advertisement is considered to be merely a public notice or an invitation to make an offer or to negotiate. Therefore, when a company publishes a public advertisement, unless it specifies additional terms sufficient to establish an offer, the sequence of contract actually begins when a member of the public responds to the advertisement by coming in to the store to offer to purchase the goods advertised. It is the merchant who may then accept the offer of the customer to create a binding contract.
There were also additional factors considered by the Court in determining that the advertisement was not an offer that could have been accepted to create any contractual obligation. Specifically, the Court determined…
Sources Consulted
Leonard v. Pepsico, Inc. 88 F.Supp.2d 116 (1999).
Morales, Ann C. Pepsi's Harrier Jet Commercial Was Not a Binding Offer to Contract
Academy of Marketing Science. Journal; Spring 2000; 28, 2; ProQuest Central.
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