Unit 1: Four Principles

Unit 1: Four Principles

“Intro … Intent to Create Legal Relations? … Both Sides Serious? … Legal and Moral? … Gift or Bargain? … Participation Ladder of Trust … Participation … The Ladder of Trust”
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  • Unit 1: Four Principles > Intro > Intro
  • Unit 1: Four Principles > Intent to Create Legal Relations? > Invitation to Dinner
  • Unit 1: Four Principles > Both Sides Serious? > Pepsi Case Part 1
  • Unit 1: Four Principles > Both Sides Serious? > Pepsi Case Part 2
  • Unit 1: Four Principles > Legal and Moral? > Mr. Big
  • Unit 1: Four Principles > Gift or Bargain? > Promises to Make a Gift

Unit 1: Four Principles > Intro > Intro

  • What we have seen is that contracts are promises- promises, which government will stand behind.
  • Promises are commitments, ways for people to make sure that the trust they put in each other will justify the sacrifices they make, so that all together we all make progress.
  • Trust is engendered, among other things, by promises.
  • Promises, with the government standing behind them, are a way to make promises firmer, to make people more confident in trusting them, so that we can build with them.
  • Not every promise is, or should lead, to a contract.

Unit 1: Four Principles > Both Sides Serious? > Pepsi Case Part 1

  • At the time this took place, back in the 1980s, Pepsi had a promotional campaign.
  • What you could do is with each bottle of Pepsi, I think it was in the bottle top cap, you get a Pepsi Point.
  • With Pepsi Points you could buy stuff, a key chain.
  • For a lot of Pepsi Points, several hundred, could even get a leather jacket with a Pepsi logo on the back.
  • What you would do is you collect your Pepsi Points, maybe get some from your friends, you go to a catalog, you pick out the stuff you want, you send in an order form, and there you go.
  • Now, the more Pepsi you drink, the more great stuff you’re going to get.
  • ” You can top up your Pepsi Points the commercial said like frequent flyer miles at $0.10 a point.
  • A Harrier Jet, according to the ad, only was worth 7 million Pepsi Points.
  • “Well, I had a couple of Pepsi Points from drinking Pepsi and I could top it off,” he thought “with $700,000.
  • They go to a bank and get a certified check for $700,000 made out to Pepsi Points.
  • On the order form they add, they write in, because there’s no space for a Harrier jet, “one Harrier Jet, 7 million Pepsi Points.
  • Pepsi says, “I’m sorry, but you didn’t understand.
  • The next step they take is they get a lawyer, also a wise guy, and they sue Pepsi.
  • They sue Pepsi, I suppose, to either force Pepsi to deliver a Harrier Jet, which they can’t possibly do, or for the difference between $700,000 and the value of the Harrier Jet, which is real money.
  • “Plaintiff’s insistence,” that’s Leonard and his wise guy friends, “that the commercial appears to be a serious offer requires the court to explain why the commercial is funny.

Unit 1: Four Principles > Both Sides Serious? > Pepsi Case Part 2

  • The lawsuit is thrown out, and the whole thing cost Pepsi, in today’s money, about a quarter of a million dollars in lawyer’s fees.
  • There are order forms and checks and things like that.
  • So is it somewhat similar to the silver watch case? Remember, in the silver watch case, both the buyer and seller knew that the whole thing was a joke.
  • He decided to take it seriously because he thought it was a nifty way to get some real money from Pepsi.
  • So what do we have here? We have some promises which are real promises, but people don’t expect that these promises can be taken to court.
  • It’s the kind of promise that friends make to each other for friendly relations.
  • That lovers make to each other, and they don’t expect to be able to take them to court, and the law will not stand behind them.
  • Not because this was not the kind of promise that people don’t take to court, buying and selling things come to court all the time.
  • These are things that look like promises, but that one or both of them don’t think are promises.
  • They are not real promises, they just look that way.
  • The Harrier Jet is another more complicated case, because that’s a case where Pepsi didn’t intend even to make a real promise.
  • What he thought is, look, the law says that contracts are promises.
  • This is a promise, it looks like a promise, it quacks like a promise, let’s make a promise out of it.
  • So we’ve got three examples, two of which look like promises or exchange, but really aren’t.
  • One of them, the dinner, is a real promise, a real exchange, with real harm when it was broken.
  • As you and I might say, it’s not the kind of promise which anybody expects to take to court.

Unit 1: Four Principles > Gift or Bargain? > Promises to Make a Gift

  • The invitation to dinner, showing the informal or no intent to create legal relations example; the silver watch, promises which are jokes and are not contracts, even though they have the form of a contract; and then the immoral contract.
  • Promises which are jokes, promises which are part of relations between friends, promises to make gifts, these, the law said, and the law says, are not important enough for us to get involved in.
  • It turns out that though it’s said often by courts and textbooks that the law will only enforce bargains, exchanges, that we’ll see a number of quite important situations where we can’t find a bargain.
  • No enforcement of purely informal relations not intended to create legal relations, no enforcement of things that look like contracts, that look like bargains, but which the parties really meant as a joke, or one of the parties meant as a joke and the other one should certainly have known that.
  • Then there are bargains where bargains where the exchange is thought to be somehow immoral.
  • Finally, bargains which are not bargains at all but are promises to make gifts.
  • Second, if it’s a bargain, the law doesn’t care if it’s a good bargain or a fair bargain, but just, is it a bargain at all? And the reason for that, of course, is that people ought to be able to make whatever bargains they want, and the law doesn’t want to look over their shoulders.

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