Carlill v Carbolic Smoke Ball Co

Carlill v Carbolic Smoke Ball Co [1894] The Carbolic Smoke Ball Co produced the 'Carbolic Smoke Ball' designed to prevent users contracting influenza or similar illnesses. The company's advertised a 100 pound reward to any person who contracts influenza after having used the ball three times. Carbolic deposited $1000 with a bank. Ms Carlill purchased the balls, used them as directed and caught the flu. She then attempted to claim the reward, but Carbolic Smoke Ball Co refused to pay. Defendant’s arguments are: There was no binding contract – the words of the advertisement did not amount to a promise because: • The ad was too vague to make a contract – there was no limit as to time & no means of checking use of the ball by consumers; • The terms are too vague to make a contract- no limit as to time – a person might claim they contracted flu 10 yrs after using the remedy • No contract because a contract requires communication of intention to accept the offer or performance of some overt act Plaintiff’s arguments are: ad was an offer; it was under an obligation to be fulfilled because it was published so it would be read and acted upon. The promise was not vague and there was consideration.

At what time was a contract made between Mrs Carlill and the company? In order to be valid and enforceable by the law, a contract must contain key elements which are as follows;

(1) Agreement The first essential feature of the contract that the party has made an agreement; this is determined by the rules of the offer and the acceptance Carbolic argued that the 'promise' was not made to any particular person, and therefore was not an offer. The Court of Appeal held that this was not a 'contract with the world' but was simply an offer to the world capable of becoming a contract with anyone performing the stipulated conditions.

As a general proposition, when an offer is made, it is necessary in order to make a binding contract, not only that it should be accepted, but that the acceptance should be notified. In this case, however, it was not necessary to notify of acceptance prior to performing the requisite acts - the language of the offer showed the Company had waived the need for notification. The offeror (in this case the Company) impliedly indicates that it will be sufficient to perform the acts requested in the offer without communicating that to him, therefore the performance of the condition is a sufficient acceptance without notification. In other words, in unilateral contracts there is no requirement that the offeree communicates an intention to accept, since acceptance is through full performance

(2)

Consideration

The second essential element is that the agreement or the obligation assume by each party must be supported by consideration from the other party. In this case, using the smoke balls in the way directed was an inconvenience suffered by Mrs. Carlill, at the request of the company, sufficient to constitute consideration. Although not required, her use of the smoke balls was also a benefit to the Company in that it could promote further sales. Catching the cold, on the other hand, was a condition precedent to entitlement – not consideration.

(3)

Intention to create legal relations

The last essential element is that the parties to the agreement intent that their promises to be legally binded. The company's claim that £1000 was deposited at the Alliance Bank showed the serious intention to be legally bound

To conclude the case Carlill v Carbolic Smoke Ball includes all the essential elements of a contract. The parties, the offeror i.e. Carbolic Smoke Ball Company and the offeree i.e. Mrs.Carlill entered into a contract when Mrs. Carlill caught the influenza. The Court of Appeal unanimously rejected the company's arguments and held that there was a fully binding contract for £100 with Mrs. Carlill. Among the reasons given by the three judges were;  That the advert was not a unilateral offer to the world but an offer restricted to those who acted upon the terms contained in the advertisement.  That satisfying conditions for using the smoke ball constituted acceptance of the offer.  That purchasing or merely using the smoke ball constituted good consideration, because it was a distinct detriment incurred at the behest of the company and, furthermore, more people buying smoke balls by relying on the advert was a clear benefit to Carbolic.  That the company's claim that £1000 was deposited at the Alliance Bank showed the serious intention to be legally bound. The judgments of the court were as follows.