A tale of two rewards: Pepsi versus Joe Exotic

Note: This is the third of five blog posts devoted to Module 3 of my business law course (Tiger King edition).

We reviewed the Property Law part of my common law module in my previous post. The next part of my common law module covers Contracts. In my humble opinion, however, the Law of Contracts is one of the most complex and cumbersome areas of the common law. Therefore, since I am teaching a survey course in business law, I have decided to focus on one of the most basic yet intriguing issues of contracts rather than get bogged down in the technical minutiae of this area of law. Specifically, I have decided to focus on the following fundamental question: when is a promise legally-binding?

Simply put, not all promises are legally binding under our common law tradition, for one of the most well-established principles of the common law is that a promise, in order to be judicially enforceable, must be supported by “bargained-for consideration.” In plain English, this principle means that each party to a contract must offer the other “something of value” in exchange for the other’s promise. This “something of value” can be money, services, or anything else, as long as it is lawful and offered with a serious intent, not in jest.

Another important maxim of the common law of contracts is that courts do not inquire into the adequacy of consideration, only its existence. That is, judges are not supposed to second guess the business acumen of the parties; their role is limited to making sure that the substance of a party’s promises is lawful and serious. In the case of a promise consisting of a reward offer, one’s performance of the requested service constitutes both an acceptance of the offer and the transfer of something of value to the person making the offer.

By way of example, consider the reward offer made in Episode 4 of the Tiger King docuseries, when Joe Exotic offers $10,000 for any information leading to the arrest of his rival Carole Baskin for the disappearance of her husband Don Lewis. Is Joe Exotic’s reward offer a legally-enforceable one? My tentative answer is yes–Joe Exotic’s offer is legally enforceable–unless it was made in jest. Now, let’s contrast Joe Exotic’s reward offer in Tiger King with a different reward offer–one that was made by Pepsi Cola in a now infamous TV ad.

In brief, Pepsi once ran a TV ad that offered a Harrier jet to any customer that accumulated seven million Pepsi points. Is that a serious offer, like Joe Exotic’s? While most television viewers may have taken Pepsi’s TV ad in jest, a 21-year-old, John Leonard, took it seriously. He rounded up five investors, and together, they purchased seven million Pepsi points for $700,000 as per the rules of Pepsi’s offer. Leonard’s group then demanded the jet as offered in the Pepsi commercial or its monetary equivalent; they took the cola giant to court when Pepsi refused to perform or pay. Footnote: At the time, a Harrier jet cost $23 million. Given these facts, how would you have ruled in the Pepsi case?

Now that we have said a few words about Property and Contracts, we will proceed to the Law of Torts–and the key choice between Strict Liability and Negligence–in the next day or two.

Joe Exotic Reward Offer

About F. E. Guerra-Pujol

When I’m not blogging, I am a business law professor at the University of Central Florida.
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1 Response to A tale of two rewards: Pepsi versus Joe Exotic

  1. Pingback: The Common Law (Module 3) | prior probability

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