CH 3 Case Briefs

Lefkowitz v. Great Minneapolis Surplus Store

Supreme Court of Minnesota [1957]

Issue

Is an advertisement a binding offer if it is clear, definite, and explicit, and leaves nothing open for
negotiation?

Facts

On April 6, 1956, Great Minneapolis Surplus Store, Inc. (defendant) published a newspaper
advertisement stating that on the upcoming Saturday at 9:00 am, it would sell three fur coats described
as “Worth to $100" for $1 each. The advertisement stated that the coats would be sold on a “first
come, first served” basis. On April 13, 1956, the store published a similar advertisement with similar
terms offering to sell a black lapin stole worth $139.50 for $1.
On each sale date, Morris Lefkowitz (plaintiff) was the first person to present himself at the store and
offer to buy the advertised items. However, the store refused to sell him the items on the basis of a
“house rule” that the offers were intended for women only. Lefkowitz brought suit against the store.
The trial court held that the value of the fur coats in the first advertisement was too speculative to
determine with any certainty and denied damages to Lefkowitz for these items. However, the trial
court held that the value of $139.50 for the stole could be determined with sufficient certainty and
awarded Lefkowitz the full value of the stole minus the $1 advertised purchase price. The store
appealed.

Rule

An advertisement constitutes a binding offer if it is clear, definite, and explicit, and leaves nothing
open for negotiation.

Holding (Murphy, J.)

Yes. The store’s advertisement is a clear, definite, and explicit offer, and acceptance by Lefkowitz
formed a valid and enforceable contract. An advertisement constitutes a binding offer if it is clear,
definite, and explicit, and leaves nothing open for negotiation. Whether an individual newspaper
advertisement constitutes an offer, as opposed to merely an invitation to make an offer, depends on the
parties' intentions and the surrounding circumstances.
Additionally, once an offer is made, the offeror can unilaterally modify the terms of the offer before
acceptance. However, after acceptance, the offeror may not impose additional or arbitrary conditions
on the offer. In this case, the advertisement by the store for the lapin stole was clear, definite, and
explicit, and it left no terms open to negotiation. It stated that the stole would be sold on a given date at
a given time to the first person who arrived and agreed to pay the $1 purchase price. Lefkowitz
fulfilled this condition, and he thus accepted the store’s offer. This formed a valid and enforceable
contract, and the store could not then impose additional and arbitrary conditions on the offer such as
requiring the purchaser to be female.
Accordingly, the trial court correctly awarded damages to Lefkowitz in the amount of the value of the
stole minus the $1 purchase price. The trial court's judgment is affirmed.
 Leonard v. Pepsico

United States District Court for the Southern District of New York [1999]

Issue

Is a valid and enforceable contract created when a consumer agrees to the terms of an advertisement
that was intended to be humorous?

Facts

Pepsico (defendant) began a promotional campaign that encouraged its customers to collect “Pepsi
points” and trade them in for merchandise. As a part of this campaign, Pepsico created a commercial
that showed some of the available merchandise along with the number of points it would take to
acquire it. One item in the commercial was a Harrier Jet, which was said to require seven million
points. Pepsico also released a catalog containing the promotional merchandise. Pepsico provided an
order form with the catalog, which listed items that could be redeemed with Pepsi points. The jet was
not listed in the catalog or on the order form.

Leonard (plaintiff) wanted to redeem the jet, which he was aware at the time cost approximately 23
million dollars. He saw to the catalog, which contained directions for claiming merchandise. These
directions included that, in the event someone does not have enough Pepsi points for an item, the
additional points could be purchased for ten cents as long as at least 15 Pepsi points are sent in with
the order. Leonard was not able to collect seven million points through purchasing Pepsico products.

He raised enough money to purchase the requisite number of points for the jet (i.e., $700,000) and
submitted his order, which included 15 points and the money. Leonard sent a letter with his
submission explaining that the money was for the purpose of buying additional Pepsi points to be used
to redeem the jet shown in the commercial. Pepsico rejected the submission, stating that only items in
the catalog or on the order form could be redeemed. Leonard exchanged demand letters with both
Pepsico and the advertising company responsible for the commercial.

Pepsico filed suit in the United States District Court for the Southern District of New York seeking a
declaratory judgment that it was not required to provide the jet under the campaign. Leonard filed suit
in Florida state court seeking specific performance of Pepsico's alleged offer for the jet. That action
was eventually transferred to the Southern District of New York, and the court considered both actions
together. Pepsico moved for summary judgment.

Rule

A consumer's agreement to the terms of an advertisement that was intended to be humorous does not
create a valid and enforceable contract.
No commitment with an ad that is clear, definite, and explicit constituting an offer
Holding  (Wood, J.)

No. Generally, an advertisement presumably does not constitute an offer, even when a price for an
item is provided therein. The advertisement must contain a commitment or an invitation to take further
action. Simply including an order form is not sufficient to transform an advertisement into an offer.
However, when an advertisement is “clear, definite, and explicit, and leaves nothing open for
negotiation,” it is an offer for which acceptance will create a contract. An advertisement that is
detailed suggests that an offer is being made. However, the lack of limiting words, such as “first come,
first served,” suggests that the advertisement is too indefinite to be considered an offer.
Whether an advertisement is to be considered an offer must be determined by considering whether an
objective, reasonable person would deem the advertisement as an offer. If the advertisement was
clearly meant as a joke then it is not an offer.
In the current matter, Leonard’s completion of the order form and submitting it constituted the first
offer in this matter, rather than acceptance, because Pepsico had not made an offer through its
commercial. The commercial was not sufficiently detailed to be deemed an offer. Additionally, even if
the jet had been included in the catalog, there existed limiting language that would suggest that it was
merely an advertisement. Additionally, the commercial was clearly intended as a joke for many
reasons, including that no reasonable person could believe that he could pay $700,000 for an
approximately $23 million aircraft. The jet was included in the commercial as a tongue-in-cheek joke,
even though there was no distinction in the commercial between it and the other merchandise and no
Pepsico promotional material explicitly stated the jet was a joke.

Pepsico’s motion for summary judgment is granted.

Supreme Court of Rhode Island [1976]

Issue

Does conditional acceptance of an offer create a valid contract?

Rule

A valid acceptance that is capable of forming a valid contract must be definite and must not include
additional conditions or limitations on the offer, unless such conditional language is clearly
independent of the actual acceptance

Facts

In August 1975, William and Katherine Horan (defendants) offered to sell residential property in the
city of Newport. Ernst Ardente (plaintiff) bid $250,000 for the property. The Horans’ attorney
communicated that the bid was acceptable and prepared a purchase and sale agreement which he
forwarded to Ardente. Ardente executed the agreement, and his attorney forwarded it back to the
Horans. Ardente also included with the agreement a check for $20,000 and a letter asking if certain
furniture and fixtures were a part of the transaction and requesting that they remain with the property.
The Horans refused to sell the items listed by Ardente and returned the unsigned purchase and sale
agreement and the $20,000 deposit to Ardente. The Horans refused to sell the property to Ardente, and
Ardente brought suit seeking specific performance. The trial court ruled that Ardente’s letter
constituted a conditional acceptance of the Horans’ offer to sell their property and thus must be
construed as a counteroffer. The Horans never accepted the counteroffer and thus no contract was
formed, so the trial judge granted the Horans’ motion for summary judgment on the grounds that no
facts were in dispute and no contract had been formed as a matter of law. Ardente appealed.

Holding

No. Ardente’s letter of acceptance is conditional, and thus operates as a rejection of the Horans’ offer
that is incapable of creating a valid contract. A valid acceptance that is capable of forming a valid
contract must be definite and unequivocal and must not impose additional conditions or limitations on
the offer. An acceptance that contains such conditional language may still be valid, however, if the
actual acceptance is clearly independent of the conditional language. Without more, the delivery of the
purchase and sale agreement by Ardente would have operated as a valid acceptance of the Horans’
offer to sell their property and would have created contractual obligations. However, Ardente’s
accompanying letter imposes additional conditions that cannot be construed as independent of his
underlying acceptance. The language of Ardente’s letter actually inquires as to whether the additional
furniture and fixtures are a part of the underlying transaction. Ardente in no way communicates that he
is willing to move forward with the purchase and sale agreement even without the additional
conditions. Thus, his letter operates as a conditional acceptance properly construed as a rejection of
the Horans’ offer to sell their property; a counteroffer with additional terms. No contractual
obligations are created, and the decision of the trial court is affirmed.