In the Mid 90’s, brands were built by their advertisements, It was their strongest weapon, and one company that profited from this, was PepsiCo.

However, there’s a thin line between a unilateral contract, and an advertisement, and this article talks about how the standard of the reasonable man was not so reasonable in the deciding case of Leonard v. PepsiCo.

What is a Unilateral contract?

A Unilateral contract is made by a party, which is accepted by another party through performance, no agreement exists unless the action is completed.

What is an Advertisement?

An Advertisement is a public promotion that invites offers, but is generally not a binding contract unless it is clear, definite, and leaves nothing open to negotiation.

What is the standard of the reasonable man?

Also called “The man on the Clapham Omnibus”,

this involves judging actions based on what a hypothetical, ordinary person, possessing average prudence, judgment, and intelligence, would have done in similar circumstances. This standard is objective, meaning it's not based on the defendant's individual characteristics or state of mind, but rather on how a hypothetical, ordinary person would have acted.

Pepsi, where’s my Jet?

It all started in the year 1996 during the Cola wars, Pepsi had begun a promotional loyalty program in which customers could earn Pepsi Points which could be traded for physical items.

Pepsi aired a TVC that said “the more Pepsi you drink, the more great stuff you get. Sure beats the bus” with a student, landing a Harrier Jet valued at $32 million in school, suggesting the jet could be redeemed for 7,000,000 Pepsi Points.

Importantly, the ad included no disclaimer indicating it was a joke.

John Leonard, a 21-year-old business student, saw the ad and believed Pepsi was making a legitimate offer, found few loopholes and capitalized on them. He’d have needed 16 million packs of Pepsi to get 7 million points, but then a catalog produced by Pepsi made provisions for buying points directly at $0.10 each,so he simply delivered a check for $700,008.50 attempting to purchase 7 million points/The Harrier Jet.

Pepsi Rejected the Offer, Leonard took legal action, the court ruled against Leonard, using the standard of the reasonable man, but did the court err?

Wasn’t the man on the Clapham omnibus enough?

Pepsi ran a sophisticated TVC, during a time when over-the-top marketing was designed to blur the line between parody and sales pitch. 

This wasn’t just a joke, It was a corporate advertisement backed by an existing point system and a catalog, the jet not just mentioned but shown, and consideration stated(7 million points).

Pepsi argued that the deal was absurd because no one would give away a $30 million jet for mere points, but that’s a question of adequacy not sufficiency, because “Consideration need not be adequate, but it must be sufficient.” And it was impossible to get these points without spending any money.

Now, did Pepsi intend to make the ad look like a legitimate offer? They showed a Harrier jet with a price tag. They included it as part of a point system, just like the other rewards. If it wasn’t intended to be taken seriously, why was there no caveat? Equity would not allow a party to profit from dressing a binding promise in the form of a joke because as a core principle, “Equity looks at the intent, rather than the form”. You cannot run an intentionally ambiguous ad to boost participation, and then cry “parody” when someone fulfills their end of the deal. 

Courts have upheld far more ambiguous ads as binding offers when there was a clear mechanism for acceptance and Carlill v. Carbolic Smoke Ball is a textbook example, with a structure not as concrete as that of Leonard v. PepsiCo.

So was the standard reasonable? NO. The court applied the standard in the way of a man that is too intelligent and logical, instead of an actual reasonable man, who is not too skeptical nor too timid.

Who should be categorized as a reasonable man in this situation? The ad was youth oriented, so the reasonable man should have been categorized as a youth, not too intelligent, not too daft, and how he would have reacted.

Concluding Thoughts:

The court in Leonard v. PepsiCo failed to properly apply the reasonable man standard by substituting its own skepticism for the perspective of an average consumer. Instead of assessing how a typical, young member of the public might interpret the ad, the court dismissed Leonard’s claim as absurd.

Leonard’s actions reflected what a reasonable person would do in response to a seemingly genuine offer. Gather the required resources and attempt to redeem it. By ignoring this context, it misapplied a foundational principle of contract. 

Ultimately, Pepsi simply got away with it and poor Leonard had no jet.