Mutual Consideration : It Means the Mutual Exchange of Something of Value

Mutual Consideration : It Means the Mutual Exchange of Something of Value

a Seattle man took a popular soft-drink company seriously when one of its commercials made an offer of a Harrier jet, the famous high-tech jump jet used by the U.S. Marines. In a TV commercial that aired in 1995, the company jokingly included the Harrier as one of the prizes that could be received with a mere 7 million company points. Although that sounds like a lot of points to get from drinking the soft drink company's products (roughly 190 drinks a day for 100 years), the company also allowed customers to purchase points for 10 cents each. The man did the math and discovered that the cost of the 7 million points needed for the jet was $700,000. He then put together a business plan, raised the $700,000 from friends and family, and submitted 15 points, the check, and an official order form along with a demand for the Harrier jet. The company wrote back, stating that the Harrier jet in the commercial was simply used to create a humorous and entertaining advertisement. They apologized for any misunderstanding or confusion people may have experienced and enclosed some free product coupons. The free coupons did not satisfy the man, who then took the soft drink company to court. Finally, a federal judge for the Southern District of New York held that the company was only joking when it implied in its ad that it was giving away fighter jets. The judge noted that because the jets sell for approximately $23 million, no one could have concluded that the commercial actually offered consumers a Harrier jet. Instead, this was a classic example of a deal that was too good to be true. Write a 1–2-page paper that answers the following questions:* What are the four elements of a valid contract?* What is the objective theory of contracts?* How does the objective theory of contracts apply to this case?* In your own words, why do you think the court held that there was not a valid agreement here?* Are advertisements generally considered offers? Explain.* How does this case differ from a reward situation in which a unilateral contract is formed upon completion of the requested act?

Solution

There are four elements of contract: Mutual consent, Offer and Acceptance, Mutual consideration, and Performance or deliver.

Mutual Consent: This means that the parties have a mutual understanding of whatever the contract is going to cover. There must be a meeting of minds or an apparent, common understanding between the parties as to the subject matter of their agreement, the terms of that agreement, and a manifestation by each party of an intent to do or to refrain from doing some specific act or acts required by those terms.

Offer and Acceptance: the contract has offer to another party. The counter offer is not an acceptance. The offer and Acceptance would be valid if the parties to a contract exchange something valuable.

Mutual consideration: it means the mutual exchange of something of value.

Performance or Delivery:In order to be enforceable, the action contemplated by the contract must be completed.

This simply means that a contract must legally bind all parties to perform under the terms of the contract. A “contract” which requires one party to perform, but requires nothing of the other party, is not a contract.

Objective theory of contracts

Because neither contracting parties nor courts are mind readers, it is important that the existence and terms of contracts be determined from the manifestations made by each of the parties, rather than by each party’s subjective intention. Thus a party’s intentions are to be gauged objectively, rather than subjectively (….).

In this scenario, the objective theory of contracts is applicable and no one conclude that the company actually made an offer of Harrier Jet. For instance, the judge noted that Harrier jets sell for millions of dollars. Entering intentions are judged by the court. The party real intentions are not important but it is important that how the reasonable person view this situation. I think the court did not find any valid contract because a key element was missing in the company’s advertisement.

Generally, an advertisement to the public does not count as an offer in the legal sense. “The condition of an offer includes four conditions: Delivery date, price, terms of payment that includes the date of payment and detail description of the item on offer including a fair description of the condition or type of service” (…). If any one of the condition is missing then it is not a legal offer but seen as an advertisement.

Unilateral contract means that only one party to the contract makes a promise, for instance reward contract. One party makes an offer to pay another party for performance of an act.“A reward offered for providing certain information is an example of a unilateral contract.” (…..) For unilateral contracts, there must still be an offer, and in the case at hand, the soft drink company did not make an offer for the jet, it was merely an advertisement.

References

Pakroo, Perri, H., & Pakroo, Peri, (2010), The small business start up kit. Retrieved from Google books.

Emanuel, S. L. (2006), Contracts. Retrieved from online database.