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    Truth in advertising: Pepsico's Harrier Jet Prize

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    Unit 3 Individual Project


    In 1999, a Seattle man took a popular soft-drink company seriously when one of its commercials made an offer of a Harrier jet, the famous high-tech jump jet used by the U.S. Marines. In a TV commercial that aired in 1995, the company jokingly included the Harrier as one of the prizes that could be received with a mere 7 million company points. Although that sounds like a lot of points to get from drinking the soft drink company's products (roughly 190 drinks a day for 100 years), the company also allowed customers to purchase points for 10 cents each.

    The man did the math and discovered that the cost of the 7 million points needed for the jet was $700,000. He then put together a business plan, raised the $700,000 from friends and family, and submitted 15 points, the check, and an official order form along with a demand for the Harrier jet.

    The company wrote back, stating that the Harrier jet in the commercial was simply used to create a humorous and entertaining advertisement. They apologized for any misunderstanding or confusion people may have experienced and enclosed some free product coupons.

    The free coupons did not satisfy the man, who then took the soft drink company to court. Finally, a federal judge for the Southern District of New York held that the company was only joking when it implied in its ad that it was giving away fighter jets. The judge noted that because the jets sell for approximately $23 million, no one could have concluded that the commercial actually offered consumers a Harrier jet. Instead, this was a classic example of a deal that was too good to be true.

    Write a 3â?"5-page paper that answers the following questions:

    What are the four elements of a valid contract?
    What is the objective theory of contracts?
    How does the objective theory of contracts apply to this case?
    In your own words, why do you think the court held that there was not a valid agreement here?
    Are advertisements generally considered offers? Explain.
    How does this case differ from a reward situation in which a unilateral contract is formed upon completion of the requested act?
    Your submitted assignment (125 points) must include a 1â?"2-page Word document that contains your answers to the questions listed a reference list of any sources that you used within your paper (cited properly in APA format).

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    Solution Preview

    What are the four elements of a valid contract?

    A valid contract should have four elements to it:
    At least two separate parties entering into an agreement. The agreement can be between two individuals, between an individual and a company or between a company and another company.
    The parties are qualified to agree to the terms and conditions in the contract. The parties must be of legal age and have full understanding of what the contract is and the details it outlines.
    Both parties are receiving consideration, or value, from the agreement. This is most commonly money in exchange for a good or service, but there are other methods of consideration, especially in the business arena.
    The contract is created for legal activities. Contracts are not binding or considered legally valid when they propose illegal activities or violate existing laws in any way.

    Jaceson Maughan, Life123, "What Are the Four Elements of a Valid Contract?", http://www.life123.com/career-money/business-law/contracts/what-are-the-four-elements-of-a-valid-contract.shtml

    What is the objective theory of contracts?

    Modern (late 19th century) legal concept that a binding agreement exists between two (or more) parties if a reasonable person would judge (from the outward and objective acts of the parties and the associated circumstances) that an offer has been made and accepted.

    Business Dictionary, "objective theory of contracts" http://www.businessdictionary.com/definition/objective-theory-of-contract.html

    Objective theory of contract is a doctrine which states that a ...

    Solution Summary

    This solution is a discussion on the issue that Pepsi created with its advertisement that a consumer can win a Harrier by accumulating a seven million company points. The customer sued when Pepsi was not able to redeem the customer the jet.