Louisa Carlill v. Carbolic Smoke Ball Co.

In this 5-minute read, you will learn how the Court of Appeal gave a landmark decision regarding a general offer and the notification of its acceptance. The judgement holds its place in contract law even after almost 100 years of its pronouncement.
CITATION[1892] EWCA Civ 1
COURTCourt of Appeal
JUDGES/CORAMLindley LJ, Bowen LJ and AL Smith LJ
DATE OF JUDGEMENT07.12.1892

Introduction

The Carlill vs Carbolic Smoke Ball Co. is a famous English Contract Law case, which was decided by the Court of Appeal. The case settled a principle of contract law by establishing that an advertisement is a unilateral offer but only limited to those who had fulfilled the condition. Statements made in an advertisement may be a mere “puff” and not intended to be legally binding but if the advertisement shows a clear promissory intention to be legally bound, it may constitute a unilateral offer open for acceptance to anyone who acts in direction.

Facts

The facts of the case are as follows: The Defendant advertised their product ‘Carbolic Smoke Ball’ a drug, and offered to pay a total sum of £100 to anyone who contracted influenza, cold or any other disease related to cold, after having the Smoke Ball three times a day for two weeks. It was further mentioned that the Company had deposited £1000 with Alliance Bank to show their sincerity in the matter. The Plaintiff named Mrs. Louisa Carlill, relying on the advertisement made by the company, purchased their product and used it with the directions, despite which she got infected with influenza. On claiming her reward, the company ignored her letters at first. Then the company said that in order to protect itself against fraud she would have to come to their office to use the product each day and be checked by an officer of the company.

Issues

The primary issues before the Court were to ascertain as to whether the advertisement by the Defendant was an offer and the act of Plaintiff in direction to the advertisement constituted its acceptance thereby, forming a contract between the two.

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Contentions of the Plaintiff

  1. The advertisement was clearly an offer; it was designed to be read and acted upon and the company was under an obligation to fulfill their promise;
  2. The advertisement was made to the public and as soon as a person does the specified act there is a contract; and,
  3. The promise was not vague and there was a consideration.

Contentions of the Defendant

The defendant took recourse to following arguments in order to escape from his liability arising out of his promise made via advertisement:

  1. The advertisement was a sales puff and lacked intent to be constituted as an offer;
  2. It is not possible to make an offer to the world;
  3. There was no notification of acceptance by the Plaintiff;
  4. The wording was too vague to constitute an offer since there was no stated time limit as to catching the flu; and,
  5. There was no consideration provided since the ‘offer’ did not specify that the user of the balls must have purchased them. 

Summary of court decision and judgment

At the trial stage, Justice Hawkins held that Mrs. Carlill was entitled to recover the reward. In an appeal, L.J. Lindley and L.J. Bowen held that the offer being a general offer addressed to the world had ripened into a contract by the Plaintiff’s act of performance of the required condition and thus accepting the offer. She was, therefore, entitled to claim the reward.

Following were the observations made by the judges with regard to the matter:

  1. The advertisement was an express promise to pay £100 to anyone who contracts flu after using the ball three times daily for a period of two weeks;
  2. Lindley LJ was of opinion that the acceptance is legally valid when the occurrence of performance of the specified conditions is communicated to the offeror. However, Bowen LJ differed from Lindley LJ on this point as he opined that there is no need for notification of acceptance of the offer;
  3. An offer can be made to the whole world and will ripen into a contract with anybody who comes forward and performs the condition; and,
  4. There was a consideration as the performance of the specified conditions constitutes consideration for the promise.
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Analysis

The decision of the Court has been considered to be appropriate and till date acts as a precedent to contractual laws, not only in the United Kingdom but also in India. It has served to provide a better understanding of the essentials, which are involved in a valid contract. The Company said it was not an offer, but only a statement with a mere puff. However, the Judges rejected that point and decided it was not a mere puff since the Smoke Ball Company Deposited £1000 in the Alliance Bank, Regent Street. Judges also said depositing money in the bank was a way to show their sincerity in paying £100 to whoever contracted influenza after using the Smoke Ball according to the right directions.

Acceptance of the offer is very important in the subject of Contracts. Usually acceptance is notified in front of the parties of the contract or the agreement. To accept an offer, a person need only follow the indicated method of acceptance. If the offeror either expressly or impliedly intimates in his offer that it will be sufficient to act without giving notice of acceptance, performance is sufficient acceptance without notification. In the Court of Appeal the defence council brought this point that there was no notified acceptance by Mrs. Carlill. However, the Judges’ answer was that there was no need of notified acceptance to the offer because the Smoke Ball Company published their advertisement in the newspapers not telling any notified acceptance in this contract is required.

The completing factor of contract law, consideration is also highly spoken according to this case. The Court held that an advertisement is considered to be an offer when it specifies the quantity of persons who are eligible to accept its terms. If such an advertisement requires performance, the offeree is not required to give notice of his performance. Although the defense council argued that there was no consideration in the advertisement, the Judges refused that point of contention.

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Conclusion

The judgement sets a precedent in contract law that continue in both Britain and India. The case emphasised the significance of offer and acceptance in contract law. Smoke Ball Company case was a landmark case in protecting the rights of consumers and defining the responsibilities of companies. It continues to be cited in contractual and consumer disputes today.