Leonard v. PepsiCo Case Study (1999) PDF

Citation Leonard v. Pepsico, Inc., United States District Court, Southern District of New York, 88 F. Supp. 2d 116 (1999). Facts ​ Pepsi ran a promotional campaign, “Pepsi Stuff,” allowing customers to collect Pepsi Points to redeem merchandise. ​ A television commercial humorously su...

Citation Leonard v. Pepsico, Inc., United States District Court, Southern District of New York, 88 F. Supp. 2d 116 (1999). Facts ​ Pepsi ran a promotional campaign, “Pepsi Stuff,” allowing customers to collect Pepsi Points to redeem merchandise. ​ A television commercial humorously suggested that a Harrier Jet could be redeemed for 7,000,000 Pepsi Points. ​ John Leonard submitted an Order Form for the jet, along with 15 Pepsi Points and a check for $700,008.50 to purchase the remaining points. ​ Pepsi’s fulfillment house rejected Leonard’s submission, stating the Harrier Jet was not part of the catalog and the commercial was meant as a joke. ​ Leonard filed suit, claiming the commercial constituted a serious offer. Procedural History ​ Leonard sought specific performance, requiring Pepsi to provide the jet, or damages for breach of contract. ​ Pepsi moved for summary judgment, arguing the commercial was not a serious offer. ​ The court granted summary judgment in favor of Pepsi. Issue Did the Pepsi television commercial constitute a binding offer to provide a Harrier Jet in exchange for 7,000,000 Pepsi Points? Rule Under contract law, an advertisement does not generally constitute a binding offer unless it is clear, definite, and leaves nothing open for negotiation. Additionally, under the objective theory of contracts, the offer must appear serious to a reasonable person. Application 1.​ Advertisements as Offers: The court held that advertisements are typically invitations to negotiate, not binding offers. The Harrier Jet was not listed in the Pepsi Stuff catalog, reinforcing that it was not genuinely offered. 2.​ Objective Reasonable Person Standard: The court ruled no reasonable person would interpret the commercial as a serious offer. The fantastical nature of the commercial, including a teenager piloting a Harrier Jet to school, emphasized its humorous intent. 3.​ Humor and Jest: The commercial’s absurdity and use of exaggerated humor made it evident that the advertisement was not intended as a serious offer. 4.​ Impossibility and Context: The cost disparity between the required points and the actual value of a Harrier Jet (approximately $23 million) further demonstrated the lack of seriousness. The court also noted that such a military aircraft could not legally or practically be transferred. Holding The court held that the commercial was not a binding offer and granted summary judgment in favor of Pepsi. Conclusion Pepsi was not obligated to provide the Harrier Jet. The court’s decision emphasized the importance of interpreting contracts through the lens of reasonableness and context. Key Takeaways 1.​ Advertisements are generally not binding offers unless they explicitly state terms that allow for immediate acceptance. 2.​ Courts evaluate contracts based on how a reasonable person would interpret the outward expressions of the parties. 3.​ Exaggeration and humor in advertisements often indicate that they are not serious offers.