Videos: Part 1: Forming Contracts: Video 2: Giving away a billion dollars

Introduction

In 2003 and 2004, Pepsi ran a promotion called ‘Play for a Billion’.  People purchasing Pepsi received a code which they could redeem online or by post.  Some of these codes won small prizes.  One thousand, however, appeared on a special game show, where people were eliminated until just one person was left.  That person won US$ 1 million, and had a chance to win a final prize of US$ 1 billion. The contest was set up to make winning the final prize difficult (involving, among other things, selection by a chimpanzee), but it was theoretically possible to win.  A summary of the rules of the contest is available online.

The promotion ran twice.  Each time, one person won the US$ 1 million prize.  The US$ 1 billion prize was never won.  The question you are asked to consider, however, is whether the ad campaign run by Pepsico would have placed them under a contractual obligation to pay out US$ 1 billion if an individual had won the contest.

Watch the ad carefully, and analyze its legal effect in terms of the law of formation.  Consider, in particular, what distinguishes this ad campaign from the campaign in Video 1, especially in relation to the intention to create legal relations.  As with Video 1, much of your analysis will have to be fact-specific, and will require you to relate the legal tests to the specific facts of the case.

Commentary

1. As with Video 1, to consider whether a contract was formed in this situation, you need to work through the elements of formation: namely, offer and acceptance, consideration, and the intention to create legal relations. 

2. As far as offer and acceptance go, the issue here once again relates to the fact that although advertisements are usually not offers but only invitations to treat, advertisements announcing rewards are often offers of a unilateral contract (Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256).  In relation to the Harrier Fighter in video 1, the fact that there was a separate Pepsi Stuff Catalog meant that the ad was not an offer.  No such catalog is referenced in this ad.  Does that make it an offer?

3. On the issue of consideration, you should once again consider these facts in the light of Chappel v Nestle [1960] AC 87 (HL). 

4. On the issue of intention to create legal relations, the key question is once again whether the ad would objectively be seen as evidencing an intention to take on binding legal obligations.  Does the ‘callowness’ of the youth in this ad, and the fact that the deal also seems ‘too good to be true’ mean that there is no intention to create legal relations here as well?  Or is there something distinguishing this ad from the ad in video 1, which gives it a binding character?