Mrs. Carlill and the Newspaper Ad
Although the Leslie case was held under New York law in 2012, the principle that a contract could be concluded in this way was arguably decided in an English court ruling over a century ago. In that case the Carbolic Smoke Ball Company manufactured and sold an item called “The Carbolic Smoke Ball,” an inhalant which was intended to prevent people from catching influenza. So confident was the company in the effectiveness of its product that it placed adverts in various different newspapers offering a reward of £100 (a substantial amount of money at the time) to any individuals who used the smoke ball three times a day yet still caught influenza. Prints of that advert, even now, adorn the office walls of lawyers up and down the country.
Enter Mrs. Carlill, who claimed to have used the smoke ball as directed but nevertheless to have contracted influenza. Accordingly, she claimed her reward. The company refused to pay, on the grounds that their adverts were just a sales gimmick, and there was no way that it could be binding on them. The parties ended up in court.
The main question for the Court of Appeal was how a binding agreement could be formed between two parties. The law requires an offer and an acceptance to form a contract, but there are various different ways in which those things can take place – it need not necessarily be two signatures on a formal document. Taking products up to the checkout in a shop, for example, has long been seen by the law as offering a very simple contract – the customer will pay money to the shop and the shop will sell them those products. On occasion (usually due to age restrictions on the particular products) the shop will refuse that offer, but usually they will accept it by checking the items out.
In this case, the court ruled that the advert was in fact an offer of a contract that had been made to “all the world” – i.e. the contract terms could
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be accepted by anyone who fulfilled the conditions. If a person wanted to accept the contract, all they had to do was use the smoke ball as directed. If they did not contract influenza then the contract expired worthless, but those who accepted the contract and did catch influenza would be entitled under the only substantial term of that contract to the sum of £100.
Mr. Leonard and the
Non-Serious Offer One point that was key to the analysis in the Carlill case was that the company had deposited £1,000 in a bank account as a show of their “sincerity in the matter.” This made it much more difficult for them to argue in court that the offer was never intended to be serious, although they did try. The law will, however, draw a line where what might otherwise be interpreted as an offer cannot reasonably be interpreted as being serious.
An example of this is Leonard v. Pepsico, Inc., another New York case. In this case, Pepsico ran a television advertising campaign where consumers were invited to acquire “Pepsi Points” by purchasing Pepsi products, and exchange them for “Pepsi Stuff.” The television advertisements featured the wide variety of mid-90s merchandise available through the promotion, and the number of Pepsi Points required in order to obtain each item. The last item shown in the advertisement is a Harrier fighter, listed at 7,000,000 Pepsi Points – collection of which would require the consumption of around 190 Pepsis per day for one hundred years.
One Mr. Leonard, however, believed that he had found a loophole. The order form in the accompanying catalogue required at least fifteen original Pepsi Points to be submitted, but allowed applicants to purchase additional Pepsi Points in cash at a rate of ten cents per Pepsi Point. Accordingly Mr. Leonard submitted an order for one Harrier jet, duly accompanied by 15 Pepsi Points and a cheque for $700,008.50 to cover the remaining 6,999,985 Pepsi Points and postage and packaging. This was by no means a small price,
Social media should be taken as seriously by businesses as any other medium
but represented a substantial discount to the $23 million price tag usually attached to a Harrier – if, indeed, he could find someone willing to sell one to him.
Pepsico, of course, rejected the submission and returned the cheque apologising for any misunderstanding and informing Mr. Leonard that this aspect of the commercial was intended
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