Hoover Marketing Promotion
I have previously written about what is known as the Hoover flight 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 hugely successful in encouraging people to buy Hoover products, but it failed hugely in terms of how much Hoover had to pay for flights. One estimate put Hoover’s sales at £ 30 million and the cost of flights at £ 50 million.
In my previous post I raised the question why Hoover didn’t just tune things out when they knew the promo wasn’t doing exactly what they wanted.
One answer, the public relations answer, is that Hoover had already suffered serial public relations disasters because of the promotion and how they were handling it. Disconnecting it would only have made things worse; however, exactly how much it could have gotten worse is debatable.
I suggested that there might also be a second answer worth exploring, the one-sided 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 someone else to perform an act.
It may have been the case that even if Hoover had canceled the promotion earlier, there would have been customers who would have been entitled to claim airline tickets because they had entered into a contract with Hoover for this purpose, even though they had not yet purchased a ticket. airplane. Hoover product.
English contract law
English contract law has historically recognized that only negotiations create legal obligations between two parties. A deal involves 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 generally known as a bilateral contract.
The one-sided contract is found less frequently, but is still important. 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 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 by returning my lost dog.
Generally, the person making an offer (often called a bidder) can change their mind and cancel the offer. In the technical language of the contract, the offeror is said to revoke his offer. However, to revoke an offer, the law establishes two stipulations: the offeror must communicate his revocation to the other party (who is known as the recipient of the offer) before accepting it. All of this seems to make a lot of sense.
Unilateral offers and revocations
Let me give you an example of what a one-sided contract might form. I promise you £ 1000 if you run and complete the London marathon. You don’t promise to run the marathon; however, on the expiration day you will be in the starting lineup. If you complete the marathon; a one-sided contract is formed and I owe him £ 1000.
Just remember what I said about revocation of offers: the bidder (I am the bidder in the case of marathon) can revoke an offer at any time before it is accepted by the recipient (you are the bidder in the case of marathon) always that she communicates that 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 for several hours.
Although there are arguments to the contrary, in the case of the marathon acceptance is likely to be when you cross the finish line because this is what I asked you, 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 have completed 26 miles and about 350 yards when I jump out of the crowd and tell them that my offer has been revoked.
If I am allowed to successfully revoke my offer at this late stage, it seems unfair, but it 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 it, but surely, many would say, you should be given the opportunity to finish your act once you have started it. The key points here are that you have acted in good faith by relying on what I promised you.
It appears that English contract law would agree with this view. The position would appear to be one in which there is a one-sided offer; Revocation will not be allowed once the recipient has embarked on the act. In most cases, this seems quite delicate. The position in English law was explained by Goff LJ in 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 bidder has the right to demand full compliance with the condition he has imposed and, unless he is not obliged …”. So, in the case of the marathon, this means that you are entitled to your money only when you cross the line.
The judge went on to say that “… there must be an implicit obligation on the part of the bidder not to prevent the condition from being met, an obligation that I think should arise as soon as the bidder begins to comply.” Once he begins to perform his act, therefore, I will not be able to revoke my offer. Certainly, then, the moment the starter 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
Unilateral contracts are sometimes called “if” contracts or “if then” contracts because their form is always the same: if you do this, I will 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 give you two free airline tickets from the UK to Europe or the USA.
Hoover had originally made its offer in August 1992 and it was scheduled to run until the end of January 1993. There is nothing to stop you from revoking an offer even though you have said that you will keep it open for a certain period of time. Therefore, Hoover could have revoked his offer at any time before it naturally ended in January 1993.
What would have been the position 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. Due to the aforementioned, a unilateral offer cannot be revoked once the recipient has initiated the act that was requested in the offer.
The revocation would be effective with respect to any person who did not begin the act of purchasing a vacuum cleaner prior to the time of revocation. Let’s say the time of revocation was December 12, 1992. It all seems pretty straightforward, doesn’t it? If you started the act of purchasing a Hoover product before 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 buying is handing over your money to a store, most of what follows is redundant. The act of shopping, however, can be a bit more complex than that and can begin 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 just go out and run a marathon without at least a few weeks of training; maybe 3-6 months of training would not be unreasonable. The rationale for the rule against revocation once the act has started is that it is unfair to the addressee. It is unfair to the recipient of the offer 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 can take a considerable amount of time and be considerably expensive; you may need 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 that was requested.
You can apply similar reasoning to the Hoover case. Let’s stay with a fairly simple situation that could have occurred. It is quite possible that a potential buyer has decided that they would not buy a vacuum cleaner until the new year. There could be a number of reasons why you might decide. You may want to save some money each week, for example. It’s possible to think of multiple variations on a theme like this that, if Hoover had canceled its promotion, the fertile minds of customers who are denied their free flights could build.
conclusion
I’m not sure the people at Hoover sat down to discuss the jurisprudential niceties of one-sided contracts. I suppose the reasons the promotion was allowed to run its course was that Hoover thought the PR damage was bad enough and a cancellation could only make things worse.
I’m pretty sure someone did a calculation and came away with a worst-case position in terms of the likely number of people who would be able to accept the flight offer. However, I cannot believe that the £ 50 million figure was reached and accepted.
However, I wonder if someone with a shrewd legal mind could have given a warning about the problem of one-sided contracts. You could have reasoned that an early cancellation could cause bigger problems. Hundreds, perhaps thousands, of frustrated customers could argue that they had started buying a vacuum cleaner. This would bring more bad PR, costly legal bills, and potentially court losses, 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 ruling rendered by a court, if litigation had occurred, would have been restricted to a very narrow point of law, which would have focused the light on other contentious issues of unilateral contracts: questions I will return to in future articles.