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Introduction
Advertisements are everywhere. We see them through billboards, print ads, television, radio, and the Internet. They entice us with almost anything and everything. They also claim to offer the best brands and products or services at the most cost effective prices. However, these offers are sometimes unintentional and are only made for promotions purposes. In business law, advertisements do not constitute an offer and hence, it is not a binding contract. Hence, any attraction to a certain ads which offer a product or package in exchange for a purchase or patronage does not literally mean there is a binding contract between the two parties, the manufacturer and/or advertiser and the consumer.
Generally, courts do not consider advertisements as offers (Pearson, p. 1). Instead, they are just an open invitation to begin negotiations. This makes common sense because not all advertisements cannot be easily accepted or conformed with. For instance, it one claims to be the perfect get away package and the customer did not feel it was, then, he/she will have a valid reason to sue the travel agency. This will hinder the promotions of various products and services and this makes no practical purpose in business. Inherently, companies advertise because they want their products and services to be more accessible to more people. They do not intend advertisements as a basic ground for them to be sued and not be able to conduct their business more effectively.
Advertising and Laws Governing It
The Federal Trade Commission (FTC) is the main federal agency which implements advertising laws and regulations (US Small Business Administration Website, p. 1). Under the Federal Trade Commission Act, advertising must: 1.) be truthful and non-deceptive; 2.) have evidence to substantiate their claims; and 3.) be fair. There are extra laws applying to advertisements for specialized products like consumer leases, credit, ads with a 900 telephone number, and products sold by mail order or telephone sales. State and local governments also regulate advertisements and it is usually the state attorney general or a local district attorney or a consumer protection agency which enforces these laws.
Usually, the FTC depends on the reports of consumers and competitors for unlawful advertising. If FTC investigators are convinced that a cretain advertisement has violated the law, it often tries to enforce voluntary compliance from the violator through informal ways (“Seven Rules for Legal Advertising, p. 1). If this does not prove to be effcetive, the FTC can issue a cease-and-desist order and bring a civil lawsuit on behalf of people who have been affected in a negative way by the said advertisement. The FTC can also request a court order (injunction) to cease a questionable ad while an investigation is being made (p. 1). The agency can also require an advertiser to admit that an earlier ad was false and he/she must state the correct data.
Most states have laws, particularly through consumer fraud or deceptive practices statutes, which regulate advertising (Small Business Development Corporation, p. 1). Under these laws, state or local officers can file for injunctions against unlawful ads and take legal action to get customer restitution (p. 1). Some laws even have cluases for criminal penalties such as fines and imprinsonment. However, criminal proceedings for false advertising are rare unless there is fraud (p. 1).
Advertising laws are against false advertisements, which are any type of promotion which deceives consumers (The New York City Department of Consumer Affairs, p. 1). Even those ads which have the possibility to be mistaken by consumers may be qualified as deceptive (p. 1). In most cases, false advertising induces a consumer to believe that he is especially benefitting from an advertising offer or a purchase. He may believe that he is obtaining a good deal, making savings or buying something which will perform in a certain manner, but in truth, the benefit is generally on the side of the advertiser (p. 1). Any prospective advantage to the consumer is often non-existent.
There are various types of false advertisement which consumers see on a regular basis. One common false advertisement is the inflated price comparison (p. 1). By this form, retailers raise the item prices and then offer them for lower “sale” prices. This implies a great bargain for the ocnusmers when in fact, the price of the merchandises were just its normal prices and not on sale (p. 1). Inflated price comparison could be used when customers have loyalty cards to grocery stores or retail stores of a particular size (p. 1). Cardholders are able to buy products at the presumed discounted prices. While some loyalty cards can save some money, they do not really mean savings since prices are inflated (p. 1).
A second type of false advertisement is selling products with rebate (p. 1). The rebate is not issued at the point of purchase. Instead, it is claimed by the buyer and sadly, some companies do not give these rebates on time. When the advertisement does not state that the price is “after rebate,” buyers can assume to pay the full price (p. 1).
Another thing is the sellin gof products or services under “introductory prices” (p. 1). This may be potentially deceptive when the ads do not totally state that the price will hike up after the expiration of the introductory period (p. 1). Other forms of false advertisements include making false claims about products (i.e. "Georgia" peaches grown in California) (p. 2). Using fillers in packaging is also another example of false advertising because it can increase weight, making the consumer feel like he is getting the most out of the purchase. Because of these qualifications, most companies are now trying to state their conditions of offers so as to avoid violations (p. 1).
Consumers have the right to sue advertisers under state consumer protection laws. For instance, if a consumer purchases a product or service because of a false or deceptive ad might sue the advertiser for a refund through a small claims. He/she may join others in suing the company for a large sum of money. A competitor harmed by unlawful advertising or faced with the likelihood of such harm also has the right to seek an injunction and possibly win an award of money (payment for damages). However, these damages are sometimes very hard to prove (p. 1). These cases are often based on one of two legal theories - unfair competition or commercial disparagement (p. 1).
In business, advertisements and contracts are vitally required in any operations. Business owner must know how both contracts and advertisements impact the business and its customers. Advertisements are the same with unilateral contracts because they do not press the liability to perform on one party alone (Clarkson, et. al., p. 12). A unilateral contract is a legal agreement in which one party to the contract pledges to take a specific action if the other party proactively takes or ceases from taking a certain action. In some cases, an advertisement may be considered as a unilateral contract. If a company specifies a particular number of items available and includes words of promise in an advertisement, it may have the legal force of a unilateral contract. For instance, if a company's advertisement says that it will sell 10 televisions sets and specifies that these units will be sold on a "first come, first served" basis, the first 10 people to act upon this offer may sue the company if the said televisions were not sold or if there were some anomalies and foul play in relation to the sale of the said television sets (p. 13).
Other than that, a valid and enforceable contract law, on the contrary, should be agreed upon by two parties on its specific terms. There is also an exchange of consideration or something of value involved (p. 13). The parties can evidence that they have agreed on the contract terms by showing that there was an offer and an acceptance (p. 14). There is no standard formula for this offer and acceptance as a contract law lets individua parties use whatever format they want to use (p. 14). Once the elements of "consideration" are put in place, the contract is taken as legally enforceable. Hence, if one party does not fulfill as what is stipulated in the contract, the other party can sue for money damages. The court could also enforce the breaching to perform as set (p. 14).
Offer and acceptance are indeed very crucial to any contract (Cross & Miller, p. 21). There must be a “meeting of minds” between the parties invovled (p. 21). However, in reality, sometimes, there is not a total meeting of minds, as one party may not fully understood a part of the stipulations yet he has consented the agreement. In any real proposition, an offer results a contract, whereby there are certain obligations and responsibilities which must be met. These are either directly stated or implied. Hence, parties must carefully study the contract terms because ignorance of any of its direct or implies obligations, resulting to a breach, is not excusable by law (p. 22).
The general rule in every contract is that one party should make a certain offer, intended as such when judged by common standards of interpretation, whole and definite enough to be enforceable against the party once accepted, and the party to whom the offer is made must accept the offer as stipulated, without qualifications (p. 22). There is no contract when the offer is not communicated to the offeree.
Summary
Advertisements in the form of announcements made in an initial manner, in the course of advertisement, meant to attract trade are not offers and cannot be accepted. People may response to the offer from the original announcer as either accepting or rejecting the said offer (Cross & Miller, p. 11). There are frequent cases wherein a person claims that a contract is fulfilled because he has ordered the products or has made an action in response to a proposition which is for advertisement purpose alone. Whether such a proposition is an offer or not relies on the way that the alleged acceptor would be entitled to place on it, based on the reasonable rules of interpretation (p. 15).
Just the same, an advertiser cannot make exaggerated claims about its products or services. All advertisements must be true or at least have a reasonable basis in fact (p. 1). There are advertising laws which protect consumers and these laws require advertisers to be truthful about their products or services. They must also be able to substantiate their claims. Businesses should follow these advertising and marketing laws because their failures may result in expensive lawsuits and civil penalties.
Works Cited:
Clarkson, K., et. al. Business Law: Text and Cases: Legal, Ethical, Global, and Corporate Environment. London: Cencage Learning.
Pearson, Owen. (2013). Differences Between an Advertisement and a Unilateral Contract. Houston Chronicle. Accessed on 26 April 2013 < http://smallbusiness.chron.com/differences-between-advertisement-unilateral-contract-26362.html>.
Seven Rules for Legal Advertising. Inc. Magazine Online. 2013. Accessed on April 26, 2013 < http://www.inc.com/articles/2000/05/20153.html>.
Small Business Development Corporation. “Four Essential Elemtns of a Contract.” 2013. Accessed on 26 April 2013 < http://www.smallbusiness.wa.gov.au/four-essential-elements-of-a-contract/>.
The New York City Department of Consumer Affairs. False Advertising. N.d. Accessed on 26 April 2013 < http://www.nyc.gov/html/dca/downloads/pdf/Advertising.pdf>.
US Small Business Administration Website. How to Comply with Advertising Laws. Accessed on 26 April 2013 < http://www.sba.gov/content/how-comply-with-advertising-laws>.
