Like many of you, I used some of my free time during the recent holiday break to catch-up on my binge-watching. As I was browsing through my options, I saw a docuseries on Netflix that caught my eye, Pepsi, Where’s My Jet? I was super excited to watch the series as I use the legal case on which it is based in my business law course.
The study of contract law isn’t easy!
In my business law course, one topic that students struggle with is contracts. When I introduce the topic of contracts in class, most students are confident they know what a contract is. And, to some extent they do. Pretty quickly, however, I burst their bubble.
The definition of a contract is easy. A contract is a legally enforceable agreement. But what makes an agreement legally enforceable? The answer is rather technical. For a contract to exist, five elements are needed:
- An offer
- An acceptance
- Legal capacity of the parties
- Legal purpose.
Sounds easy, right? It’s not. After suing Pepsi and losing, I think John Leonard might agree.
Each of the five elements has technical legal requirements. Figuring out whether a transaction is a contract requires a methodical legal analysis of each required element. I learned early in my teaching career that a lecture on the legal analysis of a contract was the equivalent of eating a huge Thanksgiving dinner. Students start yawning. Eyes start to glaze over. Heads start to nod. I don’t blame my students…contract analysis does not make for riveting conversation.
For example, here is one legal definition of an offer. An offer is “[a]n expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed”. Just writing the definition made me want to take a nap!
Most legal analysis can, at times, be tedious and mind-numbing, particularly when we just focus on the legal definitions. It’s only when we add facts to the legal equation that it becomes more interesting. This is especially true with contracts. Teaching contracts and keeping students’ attention requires some work. In comes case law. Cases involve disputes between people. People are interesting. Disputes are interesting. Cases makes learning law interesting.
The Pepsi Points commercial
One of the contract cases my students enjoy reading is Leonard v. PepsiCo, Inc., the subject of the docuseries, Pepsi, Where’s My Jet?. It’s a fun case to read and discuss even though it involves the technical requirements of an offer. Here’s a short rundown of the case.
In the mid-90s, Pepsi unveiled its Pepsi Points program. Under the program, customers could earn Pepsi Points by buying Pepsi products. Owners of Pepsi Points could redeem their points for apparel and other merchandise. Customers could also buy Pepsi points outright for 10 cents per point.
Pepsi rolled out its Pepsi Points campaign with an ad on national TV. Pepsi’s ad was based on a Top Gun theme. Opening with a cool teenage kid wearing a Pepsi T shirt, a leather jacket and aviators, subtitles show how many Pepsi points are needed to buy each of the items the kid is wearing.
Cut to three boys sitting in front of a high school, one holding a Pepsi Stuff catalog while the other two drink Pepsi. The boys look up in wonder. Inside the school, amid a whirlwind of papers flying around the classroom, astonished students with mouths agape, stare out the window as a Harrier Jet lands outside the school. The cool kid opens the cockpit of the jet and says, “Sure beats the bus.” With the jet still on the screen, the following words appear, “Harrier Fighter 7,000,000 Pepsi Points.” A few beats later, the following text appears: “Drink Pepsi –Get Stuff.”
You can watch the Pepsi commercial here.
I accept your offer, Pepsi!
A 21-year-old student, John Leonard, sees the commercial and instantly wants the jet. He decides to accept what he considered was Pepsi’s offer of the Harrier Jet for 7 million Pepsi Points. After realizing he could buy 7 million Pepsi Points for $700,000, Leonard found several investors, including his friend, Todd Hoffman. Leonard filled out an order form requesting the jet and sent it to Pepsi, along with 15 Pepsi Points and a check for $700,000. Pepsi returned the check along with a letter telling Leonard that “The item that you have requested is not part of the Pepsi Stuff collection. It is not included in the catalogue or on the order form, and only catalogue merchandise can be redeemed under this program.”
After receiving Pepsi’s refusal, Leonard sued Pepsi for breach of contract and fraud. Leonard’s legal argument was Pepsi made an offer for a unilateral contract to sell the Harrier Jet for 7,000,000 Pepsi Points. Under contract law, if Pepsi’s commercial amounted to a legal offer, the offer could be accepted by delivering the required number of Pepsi Points. Once an offer is accepted according to its terms, a contract is formed. Since Pepsi refused to deliver the Harrier Jet to Leonard after Leonard accepted the offer, Pepsi breached the contract. Pepsi countered that including the Harrier Jet in the commercial was “fanciful” and was intended to create a “humorous and entertaining ad.”
Sorry John Leonard, Pepsi wins
The judge in the lawsuit sided with Pepsi. In a summary judgment opinion, she held the commercial featuring the Harrier Jet did not constitute an offer. The advertisement was not sufficiently definite because it reserved the details of the offer to the Pepsi Stuff catalog. She also found that even if the commercial had been an offer, no reasonable person could have believed that Pepsi seriously intended to convey a jet worth approximately $37.4 million for $700,000. Leonard appealed the trial court’s decision. The 2nd Circuit affirmed the trial court’s decision.
After the lawsuit, Pepsi continued to air the ad on TV. However, it changed the cost of the Harrier Jet to 700 million Pepsi Points (up from 7 million) and added the disclaimer “Just Kidding”.
Learning about law and legal issues can be enjoyable with cases like Leonard v. Pepsico Inc, much more entertaining than just reading long legal definitions! And I’m sure John Leonard and Pepsi also learned important lessons from Pepsi’s jet commercial.
If you are interested in watching Pepsi, Where’s My Jet?, you can stream it on Netflix.
Dr. Robin E. Clark
Clinical Assistant Professor of Business Law