What are the four elements of a valid contract?
Under common law, the four elements of a valid contract are: (1) parties capable of contracting, (2) their consent, (3) a lawful object, and (4) sufficient cause or consideration. See e.g., Cal. Civil Code §1550.
What is the objective theory of contracts?
The objective theory of contracts holds that "The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties." Powerine Oil Co., Inc. v Superior Court (2005) 37 C4th 377, 390, as evidenced by the words in their agreement. Founding Members of Newport Beach Country Club v Newport Beach Country Club, Inc. (2003) 109 CA4th 944, 956.
How does the objective theory of contracts apply to this case?
In the case of the soft-drink advertisement, there was no "mutual intent," because the company created a tongue-in-cheek advertisement that no reasonable person would have believed was seriously intended to create a contract. Thus, without an objective meeting of the minds between the company and the public, there could be no contract.
In your own words, why do you think the court held that there was not a valid agreement here?
Simply put, there was no valid agreement because: (1) the commercial did not amount to an offer of goods; (2) no objective person could reasonably have concluded that the commercial actually offered consumers a Harrier Jet; and (3) the alleged contract could not satisfy the New York statute of frauds. Leonard v. Pepsico, Inc., 210 F.3d 88 (2d Cir. 04/17/2000).
Are advertisements generally considered offers? Explain.
An advertisement of goods or services for sale is not considered a formal offer to sell, but rather as an invitation to the reader (or listener) to make an offer or to negotiate with the advertiser, unless it leaves nothing for negotiation and invites performance of a specific act without further communication. See Donovan v RRL Corp. (2001) 26 C4th 261, 271.
How does this case differ from a reward situation in which a unilateral contract is formed upon completion of the requested act?
In the case of the soft drink advertisement, even though all that was necessary to accept the offer of a reward and conclude the bargain with the advertiser was to perform the specified acts to enter the contest, it is nevertheless the case, that no reasonable person could have possibly concluded that a soft drink company was offering a state of the art military jet as part of a public promotion. The advertisement was not a legitimate offer, because it was absurd.
Edited by socrateaser on 8/2/2010 at 7:42 AM EST