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Advertising in Australia

Advertising is an integral role of business. It allows a company to inform and persuade the public that their product or service is better than their competitors.

But there are many restrictions on what someone can and cannot say in advertising, and some unintended results can occur from flippant or careless advertising practices. This article will examine 2 polar opposite cases about puffery and offers in advertising.

Offer and Acceptance in Advertisements

An advertisement is not simply a tool to inform or persuade, it can also be used as a tool to offer something to consumers. Incidentally, advertisements are capable of creating a contract between the advertiser and the consumer. However, the existence of the contract is dependent upon the applicable rules of the offer and acceptance. As a general rule, once an offer has been accepted, and that acceptance has been communicated, the offeror is under obligation to comply of what has been offered.

Under the law, businesses are not allowed to make false or misleading statements about the product or service being offered. This rule applies to all forms of business advertising campaigns, product packaging, and any information provided by their sales agents, either personally or through media statements, like testimonies and the use of online shopping media pages and services.

An offer is different from mere invitation to treat, however. An invitation to treat is where there is a clear intention by the offerer to negotiate further before a contract is offered.

Mere Puff v Real Offer

An offer can sometimes be a ‘mere puff’, a highly improbable, unrealistic, or meaningless statement that is not intended to create a binding agreement. This is the case of Pepsi Cola and John D.R. Leonard in 1996 (Leonard v. Pepsico Inc., No. 96 Civ. 9069(KMW) (SD NY, Aug. 5, 1999).

Leonard filed a suit against Pepsi Company for breach of contract, fraud, deceptive and unfair trade practices, and misleading advertising after he was refused to buy the Harrier jet with 15 Pepsi Points and a check for $700,008.50 to cover the remaining Pepsi Points which could be bought for $0.10 per point as well as the $10 shipping and handling fee.

It all started with an advertisement aired by Pepsi Company on television, where Leonard took it literally. The advertisement was to promote Pepsi products and involved a system where one could acquire various items in exchange for Pepsi points.  The advertisement ended with a student landing a Harrier jet in the school with the following message appearing on screen: “Harrier Fighter: 7,000,000 Pepsi Points”. The advertisment can be viewed here

The issue was taken to the federal court in Manhattan. The Pepsi Company responded by asking the court for a declaratory judgment claiming it did not have to give Leonard a Harrier Jet as shown on the commercial. In August 1999, New York District Judge, Kimba Wood ruled in favor of Pepsi saying, “No objective person could reasonably have concluded that the commercial actually offered consumers a Harrier jet.” The Judge dismissed the case and ruled in favor of Pepsico Inc. The commercial was only a joke which should not be taken seriously, says Judge Wood.

The decision was commented on by the Pentagon when it announced that the $33.8 million worth jets are not for sale in flyable shape. Before it can be made available to the public, the Marine aircraft (Harrier Jets) would have to be “demilitarised” before being offered to the public. The jets will be stripped off of their armaments rendering them unable to fly.

Smoke and Mirrors?

On the other hand in the case of Carlill vs The Smoke Ball Company (1893), the Court of Appeal ruled in favor of Mrs. Carlill. Mrs Carlill contracted the flu after purchasing a smoke ball from the Smoke Ball Company. Their advertisement declared, “£100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts influenza after having used the ball three times daily for two weeks according to the printed directions supplied with each ball.”

The Court rejected the allegation of the company that the ad was merely a ‘sales puff’ and argued that it cannot make a contractual offer to the entire world. The Court held that there was a valid promise on which the company was contractually obliged to comply.

The Court of Appeal found the facts were sufficient and ruled that the advertisement had created a unilateral offer to anyone who compiled with the expressed conditions to claim the reward.  The offer was made to the rest of the world. In this case, it was held that advertisement is an exception to the general rule that requires notification of the party before a contract can be created. The contract is created with the implied expectation that anyone who compiles with the conditions stated in the advertisement has accepted the offer.

Seek Legal Advice

Whether it is state of the art military hardware, or a smoke ball claiming to ward away the flu, contracts and advertising can be difficult terrain to navigate. A solicitor will be able to best advise you on what your obligations are when making an advertisement, and how to best avoid some common pitfalls and mistakes when you are selling to customers.

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