Case Analysis

Carlill v Carbolic Smoke Ball Co.

June 24, 2021

By:- Sanchit Patharde

Name of Case	Louisa Carlill v Carbolic Smoke Ball Co
Citation	[1893] 1 QB 256 (CA)
Decided On Date	7^th December 1893
Judges/Bench	Lindley, Bowen & AL Smith
Plaintiff	Lilli Carlill
Defendant	Carbolic Smoke Ball Company of London

Concept Highlighted is Unilateral Contract

Abstract

The Contract Law has evolved in different dimensions leading to various landmark cases that have shaped its concepts by placing scenarios that put the judicial minds under thought. The Carbolic Smoke Ball case sets the basis for much of our modern understanding of contract law. It is one of the first cases ever taught to law students and its significance remains in much of the world around us. It is an early sign of the importance of protecting consumers from misleading advertisements. Its decision was given by the English Court of Appeals.

Introduction and Facts of Case

In 1891, the Carbolic Smoke Ball Company manufactured a product which they called a ‘smoke ball’ and claimed it was a cure for the flu and other diseases that were widespread at the end of the 19th century. The company ran an advertisement for this product in various newspapers. In its advertisement, the company made the bold claim to pay £100 to any person who, despite using the smoke ball according to the instructions provided with it, still got sick with the flu. The advertisement went so far as to declare that £100 was deposited to a specific bank account for the sole purpose of paying any of the smoke ball’s users who got the flu. It went on to state that none of the smoke ball’s users suffered from the flu during the last flu period.

Louisa Carlill saw the smoke ball advertisement and bought one. She used it as per its instructions for almost two months before contracting the flu. She went on to claim the £100 sum from the Carbolic Smoke Ball Company, arguing that the advertisement and her compliance with its terms amounted to a contract between her and the company. The company, on the other hand, argued that the advertisement was not a contract and that its statements were merely marketing puff.

Issue Raised

There were 4 main issues raised:

Whether there was any binding effect of the contract between the parties?
Whether Mrs. Carlill was required to communicate her acceptance of the offer to the Carbolic Smoke Ball Company?
Whether Mrs. Carlill provided any consideration in exchange for the reward of 100 pounds offered by the company?

Arguments

Defendant’s Arguments

The Carbolic Smoke Ball Company argued that their offer didn’t have a binding impact to form a valid contract. The words used in their advertisement were too vague and ambiguous to form a necessary contract.

Secondly, the defendant argued that there was no specified limit as to time and there was no means of checking as to how the smoke ball (product) was being utilized by the consumers.

Thirdly there was no contract because to form a valid contract requires communication of intention to accept. In this case, Carlill didn’t send any acceptance concerning the offer either expressly or impliedly or through any performance of an overt act.

Plaintiff’s Argument

The plaintiff argued that the promise was not vague and also the construction of the offer was such that it was clear that in case the product wasn’t effective the company would reward a certain amount.

Secondly, for the order to facilitate the same, the company had deposited a large amount in the Alliance bank account. Thus, their act of depositing the amount is proof of their intention to form an agreement from one side. The plaintiffs also proved that there was a consideration in the form of the money paid to buy the carbolic smoke ball.

Thus, the plaintiff contended that the advertisement was not an empty boast. It characterized most of the essentials that attribute to a contract and more precisely a Unilateral Contract. Thus, the company has to fulfill its part of the agreement.

Judgment

The Court of Appeal held that the plaintiff is entitled to claim 100 pounds from the defendant as it was a binding contract with valid consideration. The reasoning given by the court is as follows:

The advertisement is a promise

Justice Lindley said the statement in the advertisement “1000 pounds is deposited with the Alliance Bank, showing our sincerity in the matter” clearly proves the sincerity of the defendant to pay the amount and cannot be construed in any other manner. Hence, it’s apparent that the advertisement is not puffery but promise.

The promise made by the company is binding enough even though there was no specific at the receiving end of this conditional benefit. This is a unilateral offer that doesn’t require acceptance as it is made to the world at large. It shall be treated as an offer to anyone who performs the conditions and anyone who performs the specific condition.

Justice Lindley also concluded that the advertisement is not vague. The words used to construct the language of the advertisement can be construed as a promise. The words are reasonably constructed to lead any potential consumer to believe that if they contracted the flu even after using the smoke ball, they are entitled to 100 pounds.

Justice Bowen also offered his reasoning. Bowen also agreed with Justice Lindley. An offer made to the public at large can also ripen into a contract if anyone fulfills the conditions of the contract. Their performance implies their acceptance and also establishes consideration.

The reasoning of Justice Bowen for the notification of acceptance differed. For a contract to be valid it is essential that when an offer is made, not only that it should be accepted, but that the acceptance should be notified. But in cases of this kind that rule is an exception, here the notification of acceptance need not precede the performance so specific notification of acceptance is not required in such situations.

Impact of Carlill v. Carbolic Smoke Ball & concept of Unilateral Contract Highlighted

The concept of a Unilateral contract as now companies and advertising agencies are more careful with what they release to the world at large. This judgment impacted English contract law. E.g. If a person/ pet goes missing and the missing person’s family/ owner puts up a poster with their picture and name on it, offering a reward for any relevant information of the missing person/ pet or even the safe return of the same; this can be treated as a unilateral contract. It is an offer to the world at large. Once the person or pet is found then it shall be implied that the offer was accepted. Thus, the offeror is now under the obligation to perform his part of the agreement that is to reward the person who found them.

Conclusion

The case laid the foundation for the Unilateral Contract and is often cited by the courts of England and Wales. It held that unilateral contracts are an exception with regards to notification of acceptance of offer and consideration. It also points out the problems associated with unilateral contracts. This case also helps in understanding the essentials of normal contracts as this is a case of exception to these principles owing to lack of need for acceptance of offer and consideration. The commercial uncertainty created due to such a vacuum in unilateral contracts also affects the concept of privity of contracts.