Dispute

Defendant RJR launched and then canceled a merchandise reward program connected to its sale of Camel cigarettes. A group of plaintiffs who had collected reward certificates sued for breach of contract, promissory estoppel, and consumer protection laws.

The trial court dismissed for failure to state a claim.

Rules of law

• “The determination of whether a particular communication constitutes an operative offer, rather than an inoperative step in the preliminary negotiation of a contract…is whether the person to whom the communication was made had reason to believe that it was intended as an offer.”
• “If the statement…calls for the performance…of specific acts, action in accordance with such an interpretation will close a contract or make the offer irrevocable. There are many cases of an offer…for the redemption of coupons.”
• “Advertisements have been held to constitute offers where they invite the performance of a specific act without further communication and leave nothing for negotiation.”

Arguments

RJR argued that their advertisement was merely an invitation to offer, rather than an offer itself. They argued that they had reserved the right to cancel the program without notice, avoiding any mutuality of obligation, and they argued that any contract arising from any purported offer was too indefinite to be enforceable. They also challenged it on the question of untimeliness under the statute of limitations.

The plaintiffs argued that RJR’s incentive program constituted an offer for a unilateral contract because it guaranteed the opportunity to purchase merchandise for any person who collected the certificates. They argued that the contract thus created was definite in its guarantee of the opportunity to purchase, even if no specific merchandise was contemplated. They further argued that mutuality of obligation was no object, as this was a unilateral contract with no mutual obligation on both sides. They also pointed out that the reservation of right to cancel was not present in all advertisements, and that RJR had waived that right by noticing its customers with a definite end date.

Conclusion

The court found for the plaintiffs, determining that they had shown the prima facie claim and thus dismissal as to breach and promisory estoppel was improper. The court did not discuss whether the notice to customers was a waiver to reservation of right to cancel, but looked more closely to the inapplicability of mutuality of obligation. They found that because the advertisements were specific enough (and the steps taken by RJR over the course of the promotion were consistent enough) to be interpreted as an offer, it was in fact an offer for a unilateral contract and could be binding.