“PEPSI, WHERE’S MY JET?” A Look At the Leonard V. Pepsico Case Behind the New Netflix Limited Series

Picture it.  The year is 1995.  You’re watching MTV – maybe a grunge video is playing, or your favorite TLC music video, “Waterfalls,” just ended (you recorded it on your VCR).  On comes a Pepsi commercial – nothing surprising there, since you’re used to seeing celebrities like Michael Jackson and Cindy Crawford drinking the soda every day on TV.  But this specific commercial features a teenager showing off his shades, tee shirt, and leather jacket - all of which he purchased with Pepsi Points, a loyalty program.  Then, he pulls up to his high school in the coolest ride ever.  No, not a Cadillac or a DeLorean.  He arrives in a Harrier Jet, a fighter aircraft of the United States Marine Corps, which no civilian has ever owned or flown.  He got it for just 7 million Pepsi points, the ad states!  At this point, you are motivated to go to the fridge and grab a Pepsi, and maybe you think about getting an extra case at the grocery store.  But do you reasonably think that, if you could attain 7 million Pepsi points, you too, could get a real Harrier Jet? 

This was the question at the heart of Leonard v. Pepsico, Inc. - 210 F.3d 88 (2d Cir. 2000) that later became the go-to case in law schools to learn what constitutes an Offer in Contract Law, the Power of Acceptance, the Statute of Frauds, and the Reasonable Person Standard.  Here is how the Court described the Pepsi ad:

The teenager opens the cockpit of the fighter and can be seen, helmetless, holding a Pepsi. "Looking very pleased with himself," (Pl. Mem. at 3,) the teenager exclaims, "Sure beats the bus," and chortles. The military drumroll sounds a final time, as the following words appear: "HARRIER FIGHTER 7,000,000 PEPSI POINTS." A few seconds later, the following appears in more stylized script: "Drink Pepsi -- Get Stuff." With that message, the music and the commercial end with a triumphant flourish.  Leonard v. Pepsico, Inc., 88 F. Supp. 2d 116 at 119 (1999). 

Most recently, the case even became the subject of a documentary mini-series on Netflix, Pepsi, Where's My Jet?, that premiered on November 17, 2022.  The issue in the case was that Pepsi did not think anyone would take the ad seriously, let alone ever attain (or attempt to attain) the 7 million Pepsi points required to get the Harrier Jet.  However, 20-year-old Plaintiff John Leonard got the points – and demanded the Jet.

At that point, Pepsi realized it may need legal assistance, especially after Leonard refused their offer of over $1M to settle.  Even the Pentagon had to issue a statement that the Harrier Jet was not a civilian aircraft.  In the summer of 1999, the case finally went before the United States District Court for the Southern District of New York.  The threshold issue before the Court: was the advertisement an “offer” for a Harrier Jet? Here is what the law says.

What is an Offer?

An offer is a promise to do something, in exchange for something else of value.  Notably – an offer must be stated and delivered in a way that would lead a reasonable person to expect a binding contract to arise from its acceptance, according to the Legal Information Industry here.

Are Advertisements Offers?

Under the Uniform Commercial Code, the general rule is that an advertisement does not constitute an offer. 39 U.C.C. Rep. Serv. 2d (Callaghan) 1.  Advertisements of goods by display, sign, handbill, newspaper, radio or television are not ordinarily intended or understood as “offers to sell.” The same is true of catalogues, price lists and circulars, even though the terms of suggested bargains may be stated in some detail. It is of course possible to make an offer by an advertisement directed to the general public, but there must ordinarily be some language of commitment or some invitation to take action without further communication.  Such advertisements that DO constitute an “offer” must use plain, clear words, such as “the first person to come to the store will get this price.”  Arthur Linton Corbin & Joseph M. Perillo, Corbin on Contracts § 2.4, at 116-17 (rev. ed. 1993) (emphasis added); see also 1 E. Allan Farnsworth, Farnsworth on Contracts § 3.10, at 239 (2d ed. 1998); 1 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 4:7, at 286-87 (4th ed. 1990).

The Harrier Jet commercial, the Court held, was NOT an offer.

What Comes After an Offer is Made?

The second step in Contract formation, once an Offer is formed, is Acceptance. Generally, courts do not consider advertisements offers but rather an invitation to begin negotiations.  In conclusion, since advertisements do not create a power of acceptance in an offeree, they are not an offer

If it is clear that an offer was not serious, then no offer has been made. So, what kind of act creates a Power of Acceptance and is therefore an Offer? It must be an expression of will or intention. It must be an act that leads the offeree to reasonably conclude that a power to create a contract is conferred. This applies to the content of the power as well as to the fact of its existence. It is on this ground that the court must exclude invitations to deal or acts of mere preliminary negotiation, and acts evidently done in jest or without intent to create legal relations. An obvious joke, of course, would not give rise to a contract.

As a result, the Court in Leonard v. Pepsico, Inc. found that this advertisement was hardly a serious Offer, and therefore it created no Power of Acceptance in the Plaintiff, writing “First, the commercial cannot be regarded in itself as sufficiently definite, because it specifically reserved the details of the offer to a separate writing, the Catalog . . . The commercial itself made no mention of the steps a potential offeree would be required to take to accept the alleged offer of a Harrier Jet.”  Leonard v. Pepsico, Inc. at 124.

What is the Reasonable Person Standard?

Perhaps most importantly, the Court rejected Plaintiff's understanding of the commercial as an offer because “no objective person could reasonably have concluded that the commercial actually offered consumers a Harrier Jet.”  Id. at 127.  So, what makes someone an objective, reasonable person?  In evaluating any given case, a Court must not consider a defendant's subjective intent in making the commercial (or an offer), or plaintiff's subjective view of what was offered, but instead what an objective, reasonable person would have understood the commercial to convey.  Things that do not give rise to a contract are jokes, for example.  Think of someone saying, “sure, I will sell you my house for $5!”  If the house is a $5M home, would that be considered a joke?  You might not think so, but the Court will likely hold it was.

In the Leonard v. Pepsico case, the Court wrote:

Plaintiff argues that a reasonable, objective person would have understood the commercial to make a serious offer of a Harrier Jet because there was "absolutely no distinction in the manner" (Pl. Mem. at 13,) in which the items in the commercial were presented. Plaintiff also relies upon a press release highlighting the promotional campaign, issued by defendant, in which "no mention is made by [defendant] of humor, or anything of the sort." (Id. at 5.) These arguments suggest merely that the humor of the promotional campaign was tongue in cheek. Humor is not limited to what Justice Cardozo called "the rough and boisterous joke . . . [that] evokes its own guffaws." Murphy v. Steeplechase Amusement Co., 250 N.Y. 479, 483, 166 N.E. 173, 174 (1929). In light of the obvious absurdity of the commercial, the Court rejects plaintiff's argument that the commercial was not clearly in jest. Leonard v. Pepsico, Inc. at 130.

What is the Statute of Frauds?

A major defense to Contract formation, the Statute of Frauds is necessary to understand no matter what business one is in.  Did you know that if you are contracting to sell a good worth over $500, the Contract must have some sort of writing to memorialize it?

In the Leonard v. Pepsico case, the Court noted the lack of a writing:

The absence of any writing setting forth the alleged contract in this case provides an entirely separate reason for granting summary judgment. HN10 Under the New York 15 Statute of Frauds, a contract for the sale of goods for the price of $ 500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. N.Y.U.C.C. § 2-201(1); see also, e.g., AFP Imaging Corp. v. Philips Medizin Systeme, 1994 U.S. Dist. LEXIS 16504, 92 Civ. 6211 (LMM), 1994 WL 652510, at *4 (S.D.N.Y. Nov. 17, 1994)). Without such a writing, plaintiff's claim must fail as a matter of law. See Hilord Chem. Corp. v. Ricoh Elecs., Inc., 875 F.2d 32, 36-37 (2d Cir. 1989) ("The adequacy of a writing for Statute of Frauds purposes 'must be determined from the documents themselves, as a matter of law.'") (quoting Bazak Int'l. Corp. v. Mast Indus., Inc., 73 N.Y.2d 113, 118, 538 N.Y.S.2d 503, 535 N.E.2d 633 (1989)).

SO, WHAT DO YOU THINK?

Was the Pepsi commercial an offer?  Did it create the power of acceptance in the viewer?  Was it reasonable, objectively?  And is the Statute of Frauds a defense?

If you have any questions about the Leonard v. Pepsico case or contract formation for your business, contact Georgia D. Reid at greid@hoaglandlongo.com and Joseph V. Leone at jleone@hoaglandlongo.com or call us at 732.545.4717.

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