Shell Oil Company made an offer for a unilateral contract with its “Buy 10 gallons of fuel, get a voucher for a free lift ticket!” promotion, according to a new decision from an Oregon federal court.
John Martin Kearney alleged that he purchased 10 gallons of gas at a Shell location, but instead of a free lift ticket, he was given a voucher for a “two for one” coupon that required he purchase a lift ticket at full price at a participating ski resort in order to receive the free lift ticket.
Kearney sought to represent a nationwide class claiming breach of contract and multiple subclasses claiming unlawful trade practice as defined in the statutes of California, Colorado, Michigan, Oregon, and Washington.
Shell moved to dismiss the suit in its entirety.
The defendant argued that the “Ski Free” promotion lacked the necessary specificity to constitute a binding contract and the state claims failed to meet the higher pleading standards of Federal Rule of Civil Procedure 9(b) because they sounded in fraud.
While the court agreed that the state law-based claims did not meet the necessary Federal Rule pleadings standards, U.S. District Court Judge Marco A. Hernandez found that the ads fell within an exception to the general rule that advertisements offering a reward do not constitute a binding contract, if the allegations contained in the amended complaint are true. Applying a totality-of-the-circumstances test, the court determined that the advertiser made an offer for a unilateral contract that was accepted by the plaintiff, who provided adequate consideration for the deal.
Shell “in clear and positive terms, promised to render performance in exchange for the purchase of ten gallons of fuel,” the court said. “Namely, if one purchases ten gallons of fuel at a Shell Station participating in the ‘Ski Free’ promotion, then the purchaser is rewarded with a voucher for a free lift ticket. Additionally, plaintiff, as the recipient of the advertisement, ‘reasonably might have concluded that by acting in accordance with the request a contract would be formed.’ The clear offer in the advertisement established a unilateral contract, and plaintiffs accepted the offer through performance by purchasing ten gallons of fuel at a Shell station participating in the ‘Ski Free’ promotion.”
The state law claims fared differently. Judge Hernandez determined that FRCP 9(b) applied because the claims for relief sounded in fraud and Kearney failed to meet the higher pleading standards. The plaintiff “failed to plead with particularity the who, when, and where of [the] state statutory claims,” the court said, by not indicating which of the franchised locations displayed the advertising at issue, where he purchased his gas, and a specific date on which he made his purchase.
The court dismissed the state law claims with leave to amend, but denied Shell’s motion to dismiss the nationwide breach of contract claim.
To read the opinion in Kearney v. Equilon Enterprises, LLC, click here.
Why it matters: The mixed decision for Shell serves as notice to advertisers that an ad can constitute an offer to enter into a unilateral contract under a totality-of-the-circumstances analysis. In the Shell case, the court found that a sign stating “Buy 10 gallons of fuel, get a voucher for a free lift ticket!” was sufficient to survive a motion to dismiss on the breach of contract claim.