Hoover's Marketing Promotion
Earlier, I wrote about what became known as the Hoover flight debacle. To briefly explain what happened: In 1992, Hoover launched a promotion that promised two free seats on flights to Europe or America to all customers who purchase a Hoover product worth £ 100 or more.
The promotion was extremely successful in encouraging people to buy Hoover products, but extremely unsuccessful in how much Hoover had to pay for flights. According to one estimate, Hoover's sales amount to £ 30m and flights cost to £ 50m.
In my previous article, I raised the question why Hoover didn't just pull the plug on things when they knew the promotion wasn't doing exactly what they wanted.
One answer, PR's response, is that Hoover has already suffered a series of PR disasters because of the promotion and how they handle it. Pulling a plug would just make things worse – however, how much worse it can turn out is debatable, however.
I suggested that there might be a second answer that is worth exploring, the one-sided answer to the contract. This answer is related to the nature of unilateral treaties, a type of contract that involves one person promising something in exchange for another who takes action.
It may be that even if Hoover had canceled the promotion earlier, there would have been customers who would have been entitled to request airline tickets, since they had signed a contract with Hoover even though they had not yet purchased the Product of Hoover.
English contract law
English contract law has historically recognized only transactions as creating legal obligations between two parties. A good deal involves an exchange: I give you something and you give me something in return. What we exchange can be an exchange of promises – such a treaty is commonly known as a bilateral treaty.
Less common, but still important, is a unilateral treaty. In this kind of contract, what is exchanged is a promise made by one person in exchange for another act. Prizes are good examples. If you see my ad that offers £ 100 for the return of my lost dog (promise), the return of the dog (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 with the act of returning my lost dog.
Usually, the person who makes the offer (often called the bidder) can change their mind and cancel the offer. The language of the technical contract states that the offeror shall cancel his tender. However, in order to withdraw the offer, the law sets two stipulations: the offeror must notify its cancellation to the other party (known as the offeror) before accepting it. All of this seems to make perfect sense.
Unilateral offers and cancellations
Let me give you an example of what could potentially form a unilateral treaty. I promise you £ 1000 if you run and finish the London Marathon. You don't promise to run a marathon; however, on the day you are in the starting line-up. If you complete the marathon; a one-sided contract and I owe you £ 1000.
Just remember what I said about the withdrawal of offers: the bidder (I am the participant in the marathon case) may cancel the offer at any time before being accepted by the bidder (you are the bidder in the case of the marathon) so long as it announces this withdrawal of the offender. That is why I can withdraw my offer of £ 1000 by announcing your withdrawal at any time before accepting it. If you think about it, this is a problem when it comes to unilateral offers.
The unilateral treaty raises the question of when is the adoption taking place? Acceptance is an act and an act is something that has a beginning and an end. The act is not instant. In the case of a marathon, your act will last several hours.
Although there are arguments to the contrary, in the case of a marathon the acceptance will probably be when you cross the finish line, because that's what I wanted – I asked you to run and finish the race.
That way, if acceptance of my promise only happens when the line is crossed, according to the cancellation policy, I can withdraw my offer at any time before accepting it – that is, before terminating the line – as long as I announce this withdrawal, we might have a situation where you have traveled 26 miles and about 350 yards when I jump out of the crowd and tell you that my offer has been canceled.
If I am allowed to successfully withdraw my proposal at this late stage, it seems unfair, but the principles of contract law seem to have taken us away. Does English contract law really allow me to do that?
A way out of wickedness
I guess most people would say that allowing me to withdraw my offer in the above circumstances would be very unfair. There may be contractual principles that allow this, but surely many would say you should be given the opportunity to complete your activity once you have started it. The key points here are that you acted in good faith, relying on what I promised you.
It would seem that English contract law would agree with this view. The point seems to be that where there is a unilateral proposal; withdrawal will not be allowed after the offender has committed the act. In most cases, this seems pretty reasonable. 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 view of the unilateral contract as a whole must be that the offeror has the right to demand full fulfillment of the condition he has imposed, and in short that he is not bound …". This means that in the case of a marathon, this means that you are entitled to money only when crossing the line.
The judge continued, stating that "… there must be an implied obligation on the part of the proposer not to prevent the fulfillment of the condition which obligation, in my view, should arise as soon as the offender commences." Once you start doing your job, therefore, I cannot withdraw my proposal. Surely, at the moment when the firing of the starters shoots, I cannot withdraw my proposal.
The question is this: what does this have to do with the Hoover case?
The Hoover case and unilateral treaties
Unilateral contracts are sometimes called "if" or "if then" contracts, since their form is always the same: if you do, I'll do it. If you run and finish a marathon in London, then I'll give you 1000 pounds; or if you purchase one of our Hoover products, we will give you two airline tickets from the UK to Europe or the US.
Hoover originally made the offer in August 1992 and had to start by the end of January 1993. There is nothing stopping you from withdrawing the offer, even though you said you would open it for a period of time. Hoover could therefore withdraw its offer at any time before it would naturally end in January 1993.
What would be the position if Hoover tried to cancel his promotion – that is, to cancel his offer – say, in December 1992? The question is, would such a withdrawal be effective? From the above, a unilateral proposal cannot be canceled once the bidder has started the request in the bid.
The cancellation would be effective for anyone who did not initiate the act of purchasing Hoover before the time of the cancellation. Let's say the point of cancellation was on December 12, 1992. That all seems clear enough, isn't it? If you started buying a Hoover product before that date; you are entitled to your flights. But what would be the act of buying a Hoover product?
The requested act
If the act of buying is the transfer of your money to a store, then most of the following is superfluous. However, the purchase may be more complicated than that and may begin even before you enter the store. Let's go back to the marathon.
Please run and finish the marathon. Extremely unbelievable, not impossible, but it is certainly very unbelievable that you just go out and run a marathon without at least a few weeks of training – maybe training for 3 to 6 months would not be unreasonable. The rationale for an anti-revocation rule, once the act has commenced, is that it is unfair to the offender. It is unfair to the offender as he relies on what he has been promised and adjusts his position accordingly.
If you are promised £ 1000 for running and completing the London Marathon, preparing for it can take considerable time and be significantly costly – you may need to buy sportswear and more. This may come at a time when your preparation is detrimental enough to you – in terms of costs – that I will not be able to withdraw my offer and deny you the opportunity to complete the act requested.
You can apply similar reasoning to the Hoover case. Let's just stay with a pretty simple situation that could happen. It is possible that the potential buyer has decided not to buy Hoover by New Year. There may be a number of reasons why he may decide to do so. You may want to save some money each week, for example. Many variations on a similar theme may be thought of, such as this – if Hoover cancels its promotion – the fertile minds of customers who refuse free flights could create.
I'm not sure the people of Hoover were sitting around discussing the legal merits of unilateral treaties. I expect that the reasons why the promotion was allowed to go their own way were that Hoover thinks the damage from PR is already pretty bad and cancellation can only make things worse.
I'm pretty sure someone did the calculation and came out worse with the likely number of people who could accept the flight offer. However, I cannot believe that the figure of £ 50 million would have been arrived and accepted.
I wonder, however, if someone with a shrewd legal mind could simply raise a warning about the problem of unilateral treaties. He may think that early cancellation can cause bigger problems. Hundreds, perhaps thousands, of frustrated customers can claim to have begun the act of purchasing Hoover. This would lead to even worse PR, heavy legal bills and potential court defeat if things went so far in many cases.
It is interesting to speculate what might happen if Hoover cancels his promotion. What is almost certain is that any decision given by a court – in the event of litigation – would be limited to a very narrow legal framework that would focus light on other contentious issues of unilateral treaties: to which I will return in future articles.