Leonard v. PepsiCo: The Pepsi Points Case

Case Background

• Court: United States District Court for the Southern District of New York
• Year: 1999
• Context: A case illustrating contractual offers

Advertisement Details

• Company: PepsiCo
• Promotion: Pepsi Stuff Catalog
  • Customers could collect Pepsi Points and exchange them for items
• Commercial Highlight: Showed a Harrier fighter jet available for 7 million Pepsi Points

John Leonard's Actions

• Motivation: Inspired by the commercial; sought to obtain the Harrier jet
• Initial Plan: Collect 7 million points by consuming Pepsi
• Revised Strategy:
  • Purchase Pepsi Points directly from Pepsi
  • Raised $700,000 to buy points
  • Submitted a check and order form for 7 million points

PepsiCo's Response

• Action: Refused to deliver points or jet
• Reasoning: Argued the commercial was not a serious offer
• Communication: Advertising agency claimed no reasonable person would see it as a genuine offer for a jet

Legal Proceedings

• Leonard's Claim: Filed a lawsuit demanding the jet
• Court's Task: Decide if the commercial constituted an offer

Court's Decision

• Ruling: In favor of PepsiCo
  • Reasoning:
    • Ads are typically solicitations, not offers
    • Cited the Restatement (Second) of Contracts Section 26
    • Commercial lacked specifics and commitment
    • No objective reasonable person would assume the existence of an offer
    • Commercial seen as puffery, not fact
    • Price discrepancy: $700,000 vs. $23 million
• Additional Legal Note:
  • Statute of Frauds: Contracts over $500 must be in writing
  • The alleged offer was a TV commercial, not a written contract

Outcome

• Leonard's Claim: Denied
• Pepsi's Action Post-Lawsuit: Changed the required points for the jet from 7 million to 700 million

Key Legal Takeaways

• Advertisements: Generally not offers but invitations for offers
• Exception: Clear, definite, and explicit ads may form an offer
• Objective Standard: Reasonableness judged by a reasonable person standard
• Statute of Frauds: Requires written contracts for sales over $500

This case serves as a notable example of the limitations and interpretations of advertisements as contractual offers.