Mrkt Law & Ethics (Topic 1)

Topic 1 Full

What is Sales Puffery ? (with example)

Harmless, exaggerated ad claims that can’t be measured, that shoppers don’t usually rely on .

(e.g. Red Bull gives you wings)

Why is sales puffery generally allowed ?

Consumers aren’t expected to take exaggerated claims literally

What is a “mere puff” ?

A statement courts see as harmless exaggeration rather than a legally binding promise.

Which famous case recognised the concept of “mere puff”?

Carlill v Carbolic Smoke Ball Co (1893)

Explain “Carlill v Carbolic Smoke Ball Co (1893)” case → (3)

• Ad promised £100 to anyone that uses its product and still catches a flu

• Mrs Carlill used it correctly but caught the flue, company refuse to pay her.

• Court ruled in favour of Mrs Carlill.

Difference between Sales Puffery & False Statement (2)

• Puffery → Harmless exaggeration

• False Statement → Inaccurate claim that may create legal liability

Why was Red Bull sued ?

Plaintiff claimed false advertising because he drank it for years yet never grew wings.

What was the real issue in the Red Bull case?

Red Bull was accused of misleading advertising because its slogan and marketing suggested the drink provided superior performance, and energy benefits that were not scientifically proven.

How did the Red Bull case end?

Red Bull settled out of court with $13M - not just to the plaintiff, no winner or loser was legally declared.

What is a contract?

Legally binding agreement enforceable by law.

Where do Irish contract rules originate?

Based on English law, & developed through case law dating back to the 17th century

What is meant by a "meeting of minds"?

The court sees that both parties genuinely agreed to the contract

Can marketing promotions create contracts?

Yes, marketing promotions can create binding contracts, sometimes unexpectedly

Essential elements of a contract? (3) - In order

1. Agreement (Offer + Acceptance)

2. Consideration

3. Intention to Contract

What happens when a contract is breached ?

The injured party may seeks legal action for breach of contract.

Are advertisements generally considered contractual offers?

No.

They are usually invitations to treat rather than offers.

What is an invitation to treat?

An invitation to negotiate rather than a legally binding offer.

When can an advertisement become a contractual offer? (4)

When its

• definite,

• precise,

• clear, and

• capable of acceptance.

What type of marketing statement is most legally dangerous?

A clear, unconditional and precise statement capable of acceptance by customers.

What product was involved in Carlill v Carbolic Smoke Ball?

The Carbolic Smoke Ball.

What did the company promise?

£100 to anyone who used the product and still contracted influenza

What defence did “Carbolic Smoke Ball” use?

The ad was "mere puff" and not a contractual offer.

Why is the Carlill case important? (3)

It established that advertisements can create binding contracts when they are sufficiently, clear and definite.

What was the “AAirpass” and how much did the customer pay for it? (2)

• A lifetime unlimited first-class travel pass sold by American Airlines.

• $250,000

Why did American Airlines cancel his pass?

They alleged fraudulent use, including fake companion names and excessive unused reservations.

Who won the case?

American Airlines.

What legal lesson comes from the case?

Contractual rights can be lost if contractual terms are breached.

Why is the Hoover promotion famous?

It is often described as the worst sales promotion in history.

What was Hoover's original promotion?

Buy a Hoover product costing over £100 and receive two free flights in Europe.

Why did the first Hoover promotion succeed?

The claim process was difficult, so few customers redeemed the flights.

What change was made on Hoover’s promotion in 1992?

The promotion expanded to include free transatlantic flights to Orlando or New York.

What happened after Hoover tried to avoid honouring the offer?

Customers formed a pressure group and legal proceedings followed.

What was the eventual cost?

Hoover's parent company was ordered to pay approximately £50 million.

What happened to Hoover's reputation? (3)

• Market share collapsed,

• executives were fired, and

• the brand suffered severe reputational damage.

What marketing lesson comes from Carlill and Hoover?

Avoid making clear offers capable of acceptance by large numbers of consumers.

How can marketers reduce legal risk during advertising?

Use puffery and terms like "subject to availability" to limit offers and avoid misleading consumers.

What are damages?

Monetary compensation to put the injured party back where they would have been if the contract was carried out

What is specific performance?

A court order requiring a party to carry out contractual obligations

What is rescission?

Returning both parties to their original positions.

What does "costs follow the event" mean?

The loser pays legal costs.

Difference between “Contract” & “Tort” ?

• Contract → Agreement between parties

• Tort → Duties imposed by law

What is a representation?

A statement that persuades someone to make a contract, but it’s not part of the contract itself

What is fraudulent misrepresentation?

A knowingly false statement or one made recklessly (didn’t care if it was true or not) that causes another person loss.

Elements of fraudulent misrepresentation? (4)

1. False statement of fact

2. Made knowingly false/recklessly

3. Relied upon (Believed)

4. Loss suffered

What case established the test for fraudulent misrepresentation?

Derry v Peek (1889)

Explain the “Derry v Peek (1889)” case (6)

• A tramway company (Derry) wanted to replace horse-drawn trams with steam-powered trams.

• The company directors stated they had the right to use steam-powered trams, but government approval was still pending.

• An investor (Henry Peek) bought shares based on this claim.

• The government later denied permission to use steam-trams - project didn’t go through despite prior investment

• Peek lost money, sues directors for misrepresentation.

• Court ruled in favour of the directors because they genuinely believed the government would grant permission. They didn’t deliberately lied or acted recklessly.

What remedies are available for misrepresentation? (2)

• Damages

• Rescission

What is negligent misrepresentation?

A false statement a speaker thought was true, but without good reason

Case example of negligent misrepresentation?

Hedley Byrne v Heller (1964).

Explain the ‘Hedley Byrne v Heller (1964)’ case. (6)

• An advertising agency (Hedley Byrne) wanted to a company’s financial reliance, before deciding to work with them.

• Hedley Byrne asked its own bank to obtain the company’s financial reference.

• Their bank contacted Heller - a bank with prior relationship with the company Hedley wants to work with.

• Heller provided a positive reference, but added a disclaimer saying it accepted no legal responsibility for the reference.

• Hedley relied on the reference, worked with said company, lost money, then sued Heller for negligent misrepresentation.

• Court ruled in favour of Heller.

What relationship usually exists in negligent misrepresentation?

One party relies on the skill or knowledge of another.

Another case example of misrepresentation

Spice Girls v Aprilia (2000)

Explain the "‘Spice Girls v Aprilia (2000)’ case (7)

• Spice Girls agreed to promote a motor scooters company (Aprilia)

• Aprilia signed the contract assuming all 5 members will be together for the entirety of the campaign

• Prior to contract, one member told both the girls and their management that she was considering to leave the group, none of which informed Aprilia.

• All 5 girls participated in promo activities, creating the impression they would all remain together throughout.

• Later, the girl leaves the group leaving only 4, thereby affecting Aprilia’s promotional plans.

• Aprilia sues the Spice Girls’ company for misrepresentation.

• Court rules in favour of Aprilia.

Defamation

A false statement that damages another person's reputation.

How can defamation arise in marketing? (4)

By speaking negatively about competitors, products, services or individuals.

What legislation governs defamation in Ireland? (2)

• Defamation Act 2009

• Defamation (Amendment) Act 2026

Who can sue for defamation? (2)

• Living persons, and

• Companies

Publication

Communication of the statement to at least one third party.

What forms can defamatory statements take? (5)

• Written,

• Spoken,

• Digital,

• Pictures or

• Gestures.

What is the name of the act that prohibits the posting of fake reviews or paying others to post fake reviews?

Consumer Rights Act 2022

What must a defamatory statement do?

Injures a person’s reputation in most reasonable people’s eyes

What is identification

People can tell the statement is about the plaintiff.

What are the main defences? (5)

• Truth

• Honest opinion

• Privilege

• Fair and reasonable publication on a public-interest matter

• Innocent publication

How can a defamation dispute be resolved? (2)

• Apology

• Offer of amends

What remedies exist for defamation? (3)

• Damages

• Injunction

• Complaint to regulator / Ombudsman

When is an online review NOT defamation? (2)

• Genuine honest opinion,

• Factual claim

When might an online review become defamatory? (3)

What it’s

• Malicious

• Fake

• Not genuinely believed by the writer

What does the Consumer Rights Act 2022 prohibit? (2)

• Posting fake reviews

• Paying others to post fake reviews

What must businesses do before publishing reviews?

Check if the reviewer actually bought or used the product.

Explain "mere conduit" defences

An online middle-man is usually not liable for other people’s harmful content, unless they’re informed and fail to remove it quickly.

What damages level is "moderate defamation"?

€0 → €50,000.

What damages level is "very serious defamation"?

€200,000 → €300,000

What is an AI hallucination?

When AI makes up totally false facts and presents them as reliable or true.

What is the key legal question concerning AI defamation?

Who is responsible for false statements made by AI ?

Name a case that highlights AI hallucination

Walters v OpenAI

Explain the ‘Walters v OpenAI’ case (4)

• A journalist asked ChatGPT to summarise a legal complaint about fire-arm organisation

• ChatGPT wrongfully accused Walters (a radio presenter / gun-rights activist) for embezzling money from the organisation, when he wasn’t even involved in the case.

• Walters sued OpenAI for defamation

• Court ruled in favour of OpenAI because a reasonable user wouldn’t treat chatbot responses as definitive fact given the fact AI is known for hallucination risks.

What change did the ‘Defamation (Amendement) Act 2026’ bring?

Got rid of juries for new defamation cases in the high court

For defamation cases involving companies, what is the “serious harm” test?

Businesses must prove it suffered major reputational harm before suing.

What is malicious falsehood?

Deliberately published false statement about a person’s business, trade, profession or property.

What do plaintiffs need to show to sue for malicious falsehood?

Must prove real, measurable financial losses (special damages)

Does malicious falsehood apply to opinions?

No

What is comparative advertising

Advertising that points out a competitor (or their products / services) either directly or indirectly.

What is “Knocking copy"

Comparative advertising that criticises competitors and may amount to sales puffery

What law governs comparative advertising? (2)

• Directive 2006/114/EC

• European Communities (Misleading and Comparative Marketing Communications) Regulations 2007.

When is comparative advertising prohibited? (5)

• If misleading

• Doesn’t compare like-for-like products / services (e.g. cheap basic phone vs. high-end laptop)

• Can’t be verified

• Denigrates (bad-mouths) competitors

• Creates confusion between the advertiser’s and competitor’s goods or services.

when may a competitor's logo be used for comparative advertising?

Only when necessary, provided it doesn’t offer an unfair advantage of, or denigrate the competitor.

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NOTE

Unfair advantage → in this context means, piggy backing on the competitors good brand rep.

What remedy is available against unlawful comparative advertising?

An injunction.

What does “An injunction” mean ?

An authoritative warning or order

Case example of comparative advertising (3)

• Dunnes used Aldi's name and pricing with slogans like "Aldi Match".

• Aldi argued Dunnes was misleading customers because some products were genuine equivalents.

• Court ruled in favour of Aldi but only for some of the comparisons, as they were found to be misleading.

When are ‘price-only’ comparisons allowed

When they’re factually verifiable

What does the Supreme Court look for when given a case on comparative advertising

It checks whether consumers are comparing products fairly or are being deceived

What was the problem identified in Tesco's Aldi price-match campaign?

Some Tesco products had less of the main key ingredients than Aldi’s products, therefore the comparison wasn’t like-for-like.