Hoover’s Marketing Promotion
I have previously written about what is known as the Hoover flights fiasco. To briefly explain what happened: In 1992, Hoover ran a promotion that promised two free seats on flights to Europe or America to any customer who bought a Hoover product costing £100 or more.
The promotion was enormously successful in encouraging people to buy Hoover products, but it failed wildly in terms of how much Hoover had to pay for the flights. One estimate put Hoover’s sales at £30 million and the cost of the flights at £50 million.
In my previous article, I raised the question of why Hoover didn’t just pull the plug when they knew the promotion wasn’t doing exactly what they wanted.
One answer, the PR answer, is that Hoover had already suffered serial PR disasters because of the promotion and how it was being handled. Pulling the plug would only have made things worse; however, exactly how much worse she could have gotten is debatable.
I suggested that there might also be a second answer worth exploring, the unilateral contract answer. This answer has to do with the nature of unilateral contracts, a type of contract in which one person promises something in exchange for another to perform an act.
It may have been the case that even if Hoover had canceled the promotion earlier, there would be customers who would have been entitled to claim airline tickets because they had entered into a contract with Hoover to that effect, even though they had not yet purchased a Hoover Product.
english contract law
English contract law has historically recognized that only negotiations create legal obligations between two parties. A deal implies an exchange: I give you something and you give me something in return. What we exchange may consist of an exchange of promises; This type of contract is often known as a bilateral contract.
Less frequent, but still important, is the unilateral contract. With this type of contract what is exchanged is the promise of one person in exchange for the act of another. Rewards are good examples. If you see my ad offering £100 for the return of my lost dog (a promise), your return of the dog (an act) creates a contract.
In most cases, contracts consist of an offer and an acceptance. One person offers something that another person accepts. In a unilateral contract, the promise is the offer and the act is the acceptance. For example, I offer a reward for the return of my lost dog, and you accept my offer for the act of returning it.
Usually, the person making the offer (often referred to as the offeror) can change their mind and cancel the offer. In technical contract language, the offeror is said to revoke her offer. However, to revoke an offer, the law establishes two stipulations: the offeror must communicate his revocation to the other party (known as the recipient) before he accepts it. This all seems to make a lot of sense.
Unilateral Offers and Revocations
Let me give you an example of what a one-sided contract could potentially comprise. I promise you £1000 if you run and complete the London marathon. You don’t promise to run the marathon; however, on the scheduled day you are there in the starting lineup. If you complete the marathon; a one-sided contract is formed and I owe you £1000.
Just remember what I said about bid revocation: the bidder (I’m the bidder in the marathon case) can revoke an offer at any time before it’s accepted by the recipient (you’re the bidder in the marathon case) as long as that she communicates said revocation to the addressee. Therefore, I can revoke my offer of £1000 by notifying you of my revocation at any time before you accept it. If you think about it, this presents a problem when it comes to one-sided offers.
With a unilateral contract, the question arises, at what point does the acceptance take place? Acceptance is an act, and an act is something that has a beginning and an end. An act is not instantaneous. In the case of the marathon, your act will last several hours.
Although there are arguments to the contrary, in the case of the marathon it is likely that acceptance is when you cross the finish line because this is what I asked: I asked you to run and complete the race.
Therefore, if the acceptance of my promise occurs only when it crosses the line, according to the revocation rule, I can revoke my offer at any time before I accept it, that is, before it crosses the line, as long as notify you of this revocation. . So we could have a situation where I’ve covered 26 miles and about 350 yards when I jump out of the crowd and tell you my offer has been revoked.
If I am allowed to successfully revoke my offer at this late stage, it seems unfair, but that seems to be where the principles of contract law have led us. Does English contract law really allow me to do this?
A way out of injustice
I suppose most people would say that allowing me to revoke my offer in the above circumstances would be very unfair. It may seem that contractual principles allow this, but surely, many would say, he should be given the chance to finish his act once he has started it. The key points here are that you have acted in good faith trusting what I promised you.
It seems that English contract law would agree with this view. The position would appear to be one where there is a one-sided offer; the revocation will not be accepted once the addressee has undertaken the act. In most cases, this seems pretty sensible. The position in English law was explained by Goff LJ in the case Daulia Limited v Four Milbank Nominees Limited 1978.
The judge begins by saying that “… the true opinion of a unilateral contract must be, in general, that the offeror has the right to demand full compliance with the condition he has imposed and, other than that, he is not obliged…” . Therefore, in the case of the marathon, this means that you are entitled to your money only when you cross the line.
The judge continued by saying that “… there must be an implicit obligation on the part of the offeror not to prevent the condition from being met, an obligation that seems to me to arise as soon as the offeror begins to comply.” Once you start performing your act, therefore, I cannot revoke my offer. Certainly, then, at the moment the starting gun is fired, I cannot revoke my offer.
The question then is: what does all this have to do with the Hoover case?
The Hoover case and unilateral contracts
One-sided contracts are sometimes called “if” contracts or “if-then” contracts because their form is always the same: if you do this, I’ll do that. If you run and complete the London marathon, I’ll give you £1000; or if you buy one of our Hoover products, we’ll give you two plane tickets from the UK to Europe or the US.
Hoover had originally made his offer in August 1992 and it was scheduled to last until the end of January 1993. There is nothing to stop you from revoking an offer even if you have said you will keep it open for a certain period of time. Thus, Hoover could have withdrawn his offer at any time before it ended naturally in January 1993.
What would the position have been if Hoover had tried to cancel his promotion, that is, revoke his offer, say in December 1992? The question is whether such a revocation would be effective. From the above, a unilateral offer cannot be revoked once the recipient has initiated the act requested in the offer.
The revocation will be effective with respect to anyone who has not initiated the act of purchasing a Hoover prior to the point of revocation. Let’s say the revocation point was December 12, 1992. That all sounds pretty straightforward, doesn’t it? If you initiated the act of purchasing a Hoover product prior to that date; you would be entitled to your plane tickets. But what would constitute the act of purchasing a Hoover Product?
The requested act
If the act of shopping is handing over your money at a store, most of what follows is redundant. The act of shopping, however, can be something more complex than that and can start even before entering the store. Let’s go back to the marathon.
I ask you to run and complete the marathon. It is highly unlikely, not impossible but certainly highly unlikely, that you would simply go out and run a marathon without at least a few weeks of training; maybe 3 to 6 months of training wouldn’t be unreasonable. The raison d’être of the rule against revocation once the act has begun is that it is unfair to the recipient. It is unfair to the recipient because he trusts what is promised and adjusts his position accordingly.
If I promise you £1000 to run and complete the London marathon, your preparation for this may take a considerable amount of time and be considerably expensive; you may have to buy sportswear and who knows what else. Therefore, there may come a point where your preparation is detrimental enough to you, in terms of cost, that I cannot revoke my offer and deny you the opportunity to complete the act requested.
You can apply similar reasoning to the Hoover case. Let’s stay with a fairly simple situation that could have happened. It’s quite conceivable that a potential buyer decided that he wouldn’t buy a Hoover until the New Year. There could be several reasons why he might decide. He may want to save some money each week, for example. One can think of multiple variations on a theme like this that, if Hoover had canceled his promotion, the fertile minds of customers denied their free flights could build.
Conclution
I’m not sure Hoover’s people would sit down to discuss the jurisprudential niceties of unilateral contracts. I guess the reasons the promotion was allowed to run its course were that Hoover thought the PR damage was bad enough and that a cancellation could only make things worse.
I’m pretty sure someone did a calculation and came up with a worst-case scenario in terms of the likely number of people who might accept the flight offer. However, I cannot believe that the figure of £50 million has been reached and accepted.
However, I wonder if someone with an astute legal mind could have thrown a warning about the problem of unilateral contracts. She might have reasoned that an early cancellation could cause bigger problems. Hundreds, perhaps thousands, of frustrated customers could argue that they had started the act of buying a Hoover. This would bring more bad PR, hefty legal bills, and potentially defeat in court, if things had gone that far, in many cases.
It’s interesting to speculate what might have happened if Hoover had canceled his promotion. What is almost certain is that any judgment that a court would issue – had litigation occurred – would have been restricted to a very narrow point of law, which would have shed light on other contentious issues of unilateral contracts: Issues to which I will return in future articles.
