Lottery Approach to Promotional Schemes

Plaintiff, assignee of a conditional sales contract for the purchase of a home fire alarm system, sued defendant-purchaser upon default. The assignor-seller had obtained the contract using a referral sales scheme as an inducement, and plaintiff knew of the scheme at the time of assignment. The scheme included a Representative\u27s Commission Agreement in which seller promised to pay purchaser one hundred dollars for each sale made to purchaser\u27s sixty referrals. In addition, seller promised five Bonus Presentation Guarantees of 200 dollars, each payable when seller had contacted fifteen of purchaser\u27s referrals. Seller represented that the referral plan would pay for the fire alarm system priced at 898 dollars, but valued at 225 dollars. The trial court, holding the referral sales scheme a lottery, refused to enforce the conditional sales contract. On appeal, the Washington Supreme Court affirmed. Held: A referral sales scheme which awards prizes by chance while exacting consideration is void as a lottery. Sherwood & Roberts-Yakima, Inc. v. Leach, 67 Wash. Dec. 2d 618, 409 P.2d 160 (1965)