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Wednesday, April 18, 2012

There's No Such Thing As a Free Drink (Anymore)

CouponsSouthwest Airlines, of "your bags fly free" fame, likely is toasting a recent decision involving its free drink coupons and breach of contract.  The plaintiff in the case, Charles S. Grimsley, alleged that Southwest breached a contract with him when it refused to honor a "1 free drink" coupon he earned as a member of the airline's Rapid Rewards program (Southwest's version of a frequent flier program).  Southwest reportedly had terminated the original coupon program, despite no expiration date appearing on the coupons themselves, in an effort to reduce costs (see picture on right for new vs. old coupon format). In an April 17, 2012 opinion, Judge L. Scott Coogler granted Southwest's motion to dismiss, based on the basic yet critical elements of offer, acceptance and consideration. In dismissing the case, the court noted as follows: "Nothing in the [complaint] alleges that the Coupons promise a [drink] in exchange for the performance of some action on the part of the coupon-holder (emphasis in original)."  The opinion continues:

"Although Plaintiff claims that he was induced to remain a member of the Southwest Airlines Rapid Rewards Program and fly with Defendant in order to enjoy a free beverage (Doc. 9 ¶ 12), he never alleges that the Coupons, on their face, requested such actions in exchange for the promised drink. “A proposal of a gift is not an offer . . . ; there must be an element of exchange. Whether or not a proposal is a promise, it is not an offer unless it specifies a promise or performance by the offeree as the price or consideration to be given by him. It is not enough that there is a promise performable on a certain contingency.”  Restatement (Second) of Contracts § 24(b). Plaintiff has not alleged facts sufficient to establish that the Coupons made a contractual “offer.” Plaintiff also does not allege sufficient facts establishing that he accepted an offer by performing an action that constitutes sufficient consideration to make that offer legally binding. See Smith v. Wachovia Bank, N.A., 33 So. 3d 1191, 1197-98 (Ala. 2009). Accordingly, Plaintiff fails to state a claim for breach of contract."

No offer, no acceptance, no exchange = no contract.  Interested readers also may wish to read about a similar case brought by a different plaintiff summarized by our very own Meredith Miller here.

[Heidi R. Anderson]

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