Puffery, advertisement or a legally-binding contract?

It is important for entrepreneurs to familiarize themselves with some basic concepts of business law, which may affect their commercial activities. Entrepreneurs are always conducting negotiations, reviewing and executing documents, placing orders, making offers, actively marketing their business and more. Contract law may be applied to most of these activities. It is clear that we are governed by a contract law when we actually make a deal. It may not be a common knowledge that contract law covers advertisements among other things.


Usually the advertisements are considered to be unenforceable offers to enter further negotiations. The exaggeration of the advertised product’s or service’s qualities is a "mere puffery," a term that is used to describe what a business often does to attract attention. In some cases, though, the courts will hold an advertisement to be an enforceable contract. It is crucial to understand the difference between these two approaches.


The Basics of Contract Law: Offer, Acceptance, and Consideration.


For a contract to be enforceable, a number of elements have to be present. The offer must be made and the other party must accept the offer, either in writing, orally, or by his/her subsequent conduct. Also, there must be a consideration, e.g. some exchange of value, which does not necessarily have to be the money.


With regard to the advertisements, the courts generally hold that those are not the actual offers, but the invitations to start further negotiations. There are a number of reasons for this. First, the average advertisement lacks the specificity required for an offer. Second, often these advertisements are made without any intention of creating an enforceable contract, and they are directed at the general population. In spite of this common approach there are cases when business owners can get themselves in trouble if they do not closely monitor their marketing campaigns.


When Advertisements Rise to the Level of Enforceability


Advertisements can become legal offers in certain circumstances. If the advertisement contains enough details that it satisfies the requirement of the offer under the contract law, it becomes a unilateral contract. Unilateral contract is an offer made by one party who is willing to enter a contract if it is accepted by the other party. To make the unilateral contract enforceable the other party must simply accept this offer. For example, if a store advertises that it will be selling goods at a certain price on a particular day and time, then the customers are legally entitled to buy those products at the advertised price on the pronounced day and time. The customers make an enforceable contract out of this offer by taking an action in response – coming to the store to buy the advertised products. 


What is "Mere Puffery?"


Mere puffery is a legal term of art that describes what businesses do when they market their products. It is expected that businesses would promote their products with the best language possible. For this reason, businesses are given some leeway in their descriptions of the offered products and services, and their statements are generally held out as puffery that does not constitute an enforceable contract. However, it is important for business operators to remember that even puffery must have some basis in fact. Otherwise, entrepreneurs might open themselves up to the claims of misrepresentation and fraudulent inducement in their dealings with clients.

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