Business Law Problems

Topics: Contract, Law, International Court of Justice Pages: 8 (2690 words) Published: October 13, 2007
1.What are the four elements of a valid contract?
A contract is an "agreement between parties, with terms and conditions that describe the agreement that constitutes a legal obligation" (All Business). A valid contract requires four elements and these are:

a.Mutual agreement – there must be a meeting of the minds between parties. There should be an offer and an acceptance. There should be an agreement to enter into the contract
b.Consideration - meaning that "every party is conferring a benefit on the other party or himself sustaining a recognizable detriment, such as a reduction of the party's alternative courses of action where the party would otherwise be free to act with respect to the subject matter without any limitation" (Wikipedia). This simply means that there should be something given and something received.

c.Legality - The good or service being exchanged must be legal
d.Capacity – both parties should be legally competent to enter into the agreement. 2.Describe the objective theory of contracts. How does that theory apply to this case?
In layman's term, the objective theory of contracts simply means that "we look at whether a reasonable person to whom the statement was address would believe it to be an offer" (Lloyd). In the case of PepsiCo's advertisement and Leonard suit, it is obvious that there is no contract on the basis of the objective theory. As the judge ruled "an objective reasonable person would not have considered the commercial an offer" (John D.R. Leonard vs. PepsiCo). The commercial was supposed to be humorous and an objective person would look at it that way and not really an offer just like Leonard assumed it was. 3.Why do you think the court held that there was not a valid agreement here?

The court held that that there is no valid agreement here because the commercial was evidently was made in jest. Also if we look at one of the four elements of a valid contract, there is no mutual agreement between PepsiCo and the plaintiff. Also, is it a "deal too good to be true" since a fighter jet plane cost $23 million while the 7,000,000 points would only cost $700,000. Clearly 4.Are advertisements generally considered offers? Why or Why not?

According to the case, advertisements are not offers because the Restatement of Contracts state that "Advertisement of goods display, sign, handbill, newspaper, radio, or television are not ordinarily intended or understood as offers to sell….but there must ordinarily be some language of commitment or some invitation to take action without further communication". Advertisements are usually regarded as requests to reflect on them whether the viewer will be enticed to buy the product. 5.How does this case differ from a reward situation, where a unilateral contract is formed upon completion of the requested act?

A reward offer is usually a unilateral contract. "The offeror (the party offering the reward) cannot impel anyone to fulfill the reward offer. An offeree can sue for breach of contract, however, if the offeror does not provide the reward after the offeree has fulfilled the contract's requirements." (Wikipedia). In advertisements offering rewards, a person would have to perform the conditions named in the advertisement, and anybody who does perform the condition accepts the offer.

Selling Bigtown on EBay might have the same repercussion as the case of the PepsiCo and Leonard. There might really be someone like Leonard who will take the auction seriously and a legal fight might arise from the suit. The effort of the Mayor to boost Bigtown's tourism would backfire when Bigtown becomes embroiled in litigation such as the case of PepsiCo versus Leonard. Bad publicity will definitely result in the tails of the legal proceedings which would negatively impact Bigtown. Is this what the mayor wants? For Bigtown to become an object of ridicule? Tourists will probably go to Bigtown, not because of what Bigtown can offer for them but for the...

Bibliography: All Business. Legal Requirements for A Contract. Retrieved 25 October 2006 from
ARL Website (1999)
Legal Information Institute. United States Constitution. Retrieved 25 October 2006 from
Lloyd, R.M (2003)
Petrova. R. (2002). The Impact of E-Commerce on the Global Economy. London: International Association for Official Statistics
Reid T., Priest L.L.P
Pearson Education, publishing as Fact Monster. Retrieved 25 Oct. 2006 from .
Trakman, L.E. (2003) From the Medieval Law Merchant to the E-Merchant Law. Toronto: University of Toronto Law Journal.
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