Objective Theory of Contracts

598 Words2 Pages
The four elements of a valid contract are offer and acceptance, meeting of the minds, consideration and competent parties. The contract must cover a legal purpose or objective as well (Binder, 2012). The objective theory of contracts holds that contract formation is dependent on what is communicated, rather than what is thought by one of the parties (Barnes, 2008). The Pepsi Harrier case (Leonard v. PepsiCo) is an example of a situation where the four elements of a contract are simply not met. Advertisements in general constitute an invitation to treat, rather than an offer. Therefore, Leonard was not able to accept the offer, because the offer never existed. As such, the basic elements of a contract were not present in their entirety, meaning that no contract existed between Pepsi and the Seattle man. The objective theory of contracts is relevant to this case, because there was a clear difference between what Pepsi was thinking and what Leonard was thinking. Each had their own view of what the advertisement constituted, and it is from these differing views that the contract dispute arose. The judge in this situation must use the objective theory to decide the case. This means that the case can only rest on what has actually been communicated between the two parties. In this case, Pepsi has an advertisement that discusses its promotion. The promotion describes a bargain in which a customer presents Pepsi with "points" and Pepsi allows the customer to redeem those points
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