CHARLES FRIED: Now that I've given you these first two

principles let me challenge you for a moment

and give you a more contemporary example, which is a bit more difficult.
At the time this took place, back in the 1980s,
Pepsi had a promotional campaign.
You've seen these kinds of things.
And what you could do is with each bottle of Pepsi,
I think it was in the bottle top cap, you get a Pepsi Point.
And with Pepsi Points you could buy stuff, a key chain.
And for a lot of Pepsi Points, several hundred,
could even get a leather jacket with a Pepsi logo on the back.
And 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.
So this all played out over TV.
Let me show you the clip.
[AD PLAYING] Introducing the new Pepsi Stuff catalog.
Now, the more Pepsi you drink, the more great stuff you're going to get.
"It sure beats the bus!"
At the time this ad was very well known.
And what happened was that this guy Leonard, a real wise guy, figured
"you know, a Harrier Jet, that's pretty cool."
You can top up your Pepsi Points the commercial said like frequent flyer
miles at $0.10 a point.
And a Harrier Jet, according to the ad, only was worth 7 million Pepsi Points.
That's $700,000.
"Well, I had a couple of Pepsi Points from drinking Pepsi
and I could top it off," he thought "with $700,000.
And there I am and I get a jet fighter."
Now of course, a jet fighter like that, even in those days
went for about $21 million and now it's probably more
like a quarter of a billion, but whatever.
So Leonard gets together with a bunch of friends, also wise guys,
and they put together $700,000.
They go to a bank and get a certified check
for $700,000 made out to Pepsi Points.
And a certified check is as good as money.
And they send that in to Pepsi.
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."
Well, what do you think Pepsi does?
Pepsi says, "I'm sorry, but you didn't understand.
That wasn't meant as a serious offer.
That wasn't meant as a serious promise.
So here is your check back.
Thanks very much."
Leonard and his friends more or less expected
that this is what would happen.
And 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.
They go from one court to another.
They start out in courts in Florida, where none of them live.
The Florida courts buck it up to New York, and in New York
this is what the judge says.
"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.
Explaining why a joke is funny is a daunting task.
As the essayist E.B. White has remarked humor can be dissected as a frog can,
but the thing dies in the process.
The commercial is the embodiment of what defendant appropriately characterizes
as zany humor.
In light of the obvious absurdity of the commercial,
the court rejects Leonard's argument that the commercial was not
clearly in jest."

CHARLES FRIED: So it's a little bit like the silver watch from 1863,
except it's much more money involved.
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.
So how does this follow from the two principles we've discussed so far?
Is the Pepsi case similar to the invitation to dinner?
Maybe not.
Because in the invitation to dinner, everybody took that seriously.
Much more seriously than in either of these two.
It was just an informal situation.
Here it seems more formal.
There are order forms and checks and things like that.
But we have to see if both sides took it seriously.
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.
It was not to be taken seriously.
In this case, certainly Pepsi was not serious, but what about the buyer?
He seemed to be taking it seriously.
He got his friends together, they bought a cashier's check for $700,000.
So that looks like serious business.
However, what is complicated here is that the hopeful buyer of the Harrier
Jet, Leonard, pretty well knew it was not meant to be taken seriously.
But he decided to take it seriously anyway.
He decided to take it seriously because he thought it was a nifty way
to get some real money from Pepsi.
But when you get to the root of it, what you
see that this was something that neither side should have taken seriously.
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 just got the wrong feel to it.
They are informal relations.
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.
Similarly, in the silver watch case, the law won't 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.
But only if they intend them to be real promises.
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.
And the Harrier Jet is another more complicated case,
because that's a case where Pepsi didn't intend even to make a real promise.
They intended to be a sort of joke.
Leonard probably knew that, certainly knew that.
But 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.
And it's not just a social interchange.
$700,000 is real money.
So let's see what we can get.
And the court said, we're not going to get involved in this kind of thing,
either.
So we've got three examples, two of which look like promises or exchange,
but really aren't.
And one of them, the dinner, is a real promise, a real exchange,
with real harm when it was broken.
The invitation to dinner was not no harm, no foul.
But it was because it was not the kind of thing
that the law says is intended to create legal relations.
And as you and I might say, it's not the kind of promise
which anybody expects to take to court.
You can tell your friends what a stinker I am.
You can ruin my reputation, but judges, jurors, lawyers,
don't want to have anything to do with stuff like that.
It's just playing in the wrong arena.
So not every promise is a contract.