PepsiCo ran an ad and promotional campaign in 1996 called "Drink Pepsi Get Stuff" campaign. The enormously successful campaign allowed customers to claim prizes in exchange for points on PepsiCo beverage containers, and the points could be combined with cash payments to obtain the prizes. The campaign was so successful that the second round of ads and promotions was not run because the prizes were nearly exhausted.
In one television ad, PepsiCo pictured a Harrier jet as a satirical spoof on the prizes available under the campaign. The jet was offered in the ad for 7 million beverage points. Harrier jets are made only for the Marine Corps and are not sold in the open market. They cost $33.8 million each and can be produced at a rate of only one dozen at a time.
John Leonard, a 21-year-old business student, called PepsiCo and was told he would need to drink 16.8 million cans of Pepsi in order to obtain the required points. He was also told that he had the option of buying PepsiCo points for 10 cents each. Leonard developed a pool of investors (Pepsi drinkers) and delivered 15 PepsiCo points and a check for $700,008.50 for the remaining 6,999,985 points plus shipping and handling.
PepsiCo refused to provide a Harrier jet to Leonard because it said the ad was not an offer but a joke. Leonard filed suit on August 6, 1996, but PepsiCo had already filed a preemptive suit on July 18, asking that Leonard's suit be dismissed and declared frivolous and PepsiCo be reimbursed for its legal expenses.
What are the requirements of a valid offer? Did PepsiCo make an offer? Did Leonard accept? What is the significance of Leonard's phone call and the verfication of the PepsiCo points needed? What are the elements of a valid contract? Is there a contract between Leonard and PepsiCo? Why or why not?
If there is a misunderstanding about the ad, is there an ethical obligation on the part of PepsiCo ?
Do you think Leonard was taken advantage of, or was he taking advantage of PepsiCo? Who do you think should have won this case?