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This article is written by Ms Sankalpita Pal, who is currently pursuing BBA.LL.B (Hons) from Symbiosis Law School, Pune. This article will attempt a detailed overview of the famous Carlill v. Carbolic Smoke Ball Case and the concepts intertwined within it.

Introduction

The English Contract Law has evolved in different dimensions leading to various landmark cases have shaped its concepts by placing scenarios that put the judicial minds under thought. Carlill v. Carbolic Smoke Ball Company is one such landmark case that has earned a name and a necessary reference for law students. Its decision was given by the English Court of Appeals. Most importantly it became a landmark judgment due to its notable and curious subject matter. The presiding Coram was also very influential and well-founded when the bench interpreted the legal concepts involved in the case. The concept of unilateral contracts will be briefly dealt with in order to facilitate a wholesome understanding of this case. 

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Facts of the case

The Carbolic Smoke Ball Company came up with a new advertising strategy that would require the company to advertise that their Carbolic Smoke Ball was a definite panacea for influenza, hay-fever, coughs and colds, headaches, bronchitis, laryngitis, whooping cough and any other sore throat related troubles. 

The company was, in fact, very confident of the usefulness of their product. They also claimed that the carbolic smoke ball not only possesses the ability to cure influenza but also prevent users from getting any type of common flu. However, the main crux of their advertisement was that the company stated that any person who catches a cold or gets affected by influenza even after using their product (carbolic smoke ball); such a person will be entitled to claim £100 from the company provided that the product has been used for a certain specified period of time. 

The company also stated that it had also gone as far as to deposit £1000 in a certain Alliance Bank. This deposit was made by the company in the event of any claims that could be made in lieu of their advertisement. The plaintiff Carllil followed all the procedures of using the carbolic smoke ball. Even after following the procedure she still caught the flu. Consequently, she filed a suit against the Carbolic Smoke Ball Company.  Her claim was £100 from the company as the company advertised their product as such. The Court ruled in her favour. The defendants, however, appealed.

Coram: 3 Judge-Bench consisting of Justice Lindley, Justice Bowen, Justice Smith

Citation: [1893] 1 QB 256; [1892] EWCA Civ 1

Decided on: 7th of December 1892

Issues raised

There were 4 main issues raised:

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

Concept of Unilateral Contracts

A simple way of describing Unilateral Contracts or Single-sided Contracts is that they consist of an offer to the world at large and formal communication of its acceptance is not required. 

There are a few implications of the way these types of contracts function. After a thorough analysis of this concept of Single-sided Contracts, a common conclusion is that its implementation is problematic due to the doctrine of consideration.  

Most contracts have consideration as an essential part without which an agreement is not considered as a valid contract under law. Anything of value is a consideration. For example, a benefit or a detriment. When such a benefit or detriment is promised in return for the promisor’s promise then only an agreement becomes a valid contract. The consideration also needs to be valid and lawful. Unlawful consideration renders a contract void.

Only promises (from both sides) which are backed by a valid consideration are enforceable. The problem with Unilateral contracts is that both sides don’t hold a definite obligation towards each other. If the offer made is beneficial then also under such contracts there is no seeming obligation for the other party (at the receiving end of the benefit) to provide any consideration in return. According to the essentials of a valid contract, a unilateral contract should be invalid due to the lack of consideration, however, in daily scenarios, it very well exists and thrives in market places.

Analysis

Defendant’s arguments

The Carbolic Smoke Ball Company argued that their offer didn’t have a binding impact in order to form a valid contract. Their reasoning was that words used in the advertisement did not really amount to a proper promise because the advertisement was too vague in its terms to form a contract.

Secondly, they 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 utilised by the consumers. For example, an unscrupulous consumer may have not used the product properly at all and then alleges the company into depositing the money according to the offer. 

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

Thus, it is clear that the advertisement was just a marketing strategy and the company didn’t have any intention to form any form of a contract while making an offer to the world at large. 

Plaintiff’s arguments

The plaintiff, on the other hand, 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. Also in 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 actually 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.

The advertisement was not an empty boast. In fact, it characterised most of the essentials that attribute a contract and more precisely a Unilateral Contract. Thus, the company has to fulfil its part of the bargain.

Court’s stance

The English Court of Appeals held that the contract was a binding one. Carlill was successful. The reasoning provided by the judges are as follows:

In a nutshell, Justice Lindley stated that the advertisement shall be treated as an express promise. According to this promise, anyone who contracts the flu despite the preventive capacity of the smoke ball as claimed by the company will be paid 100 pounds provided that the ball is utilised as per the directions (three times daily for 2 weeks). Elaborating his reasoning as follows:

  1. Justice Lindley said that the advertisement was not an empty boast or a mere puff because of the use of a particular statement that is “1000 is deposited with the Alliance Bank, showing our sincerity in the matter”. This statement makes it evident that the company was sincere enough while offering the reward in the first place. 
  2. 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 which 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 (in this case using the smoke ball 3 times for 2 weeks) accepts the offer. 
  3. 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.
  4. With regard to the notification of acceptance Lindley observed that the notification of the acceptance need not precede the performance. It was a continuing offer. For example, if an express acceptance was required, then the person making the offer gets the notice of acceptance along with a promise of performance of the condition laid down in the advertisement”. In other words, if the specific conditions are performed then it implies the communication of acceptance of the offer.
  5. Lastly, Justice Lindley concluded that consideration did exist in this case mainly for 2 reasons. Firstly, the company received a benefit in the form of sales. Secondly, there is a detriment involved that is the direct inconvenience caused to the consumer who uses the smoke ball as per the conditions laid down in the advertisement. Thus, the performance of the specified conditions constitutes consideration for the promise.

Justice Bowen also offered his reasoning. Bowen also agreed with Justice Lindley. His reasoning can be summed up into 3 points.

  1. An offer made to the public at large can also ripen into a contract if anyone fulfils the conditions of the contract. Their performance implies their acceptance and also establishes the consideration.
  2. A specific Notification of acceptance is not required in such situations. 
  3. There exists a valid consideration. Firstly, the company will profit from the sale of the product. Secondly, the fact that the company deposited 1000 pounds in the bank for the purpose of the offer made by them implies their sincerity to fulfil their part of the bargain in case their product fails to prevent the flu. 

Finally, Justice Smith went with the reasoning of Justice Bowen and Lindley and dismissed the appeal unanimously. The plaintiff received compensation of £100.  

Impact of Carlill v. Carbolic Smoke Ball case on English Contract Law in the present day

This judgment impacted English contract law. Especially the concept of Unilateral contract as now companies and advertising agencies are more careful with what they release to the world at large. A thoughtless marketing strategy can incur grave losses for the company as they may be pulled into an unnecessary litigatory matter. 

Now, there are other scenarios of unilateral contracts. For example,  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. 

Similarly, if the police offer rewards to the public at large if anyone provides information that will assist the police in a criminal investigation; then also such a scenario shall be treated as a unilateral contract. Thus, making the reward money payable.

                   

Commercial Uncertainty due to the concept of Unilateral contracts 

Due to the flawed implementation of the doctrine of consideration in unilateral contracts create commercial uncertainties which could have been otherwise ruled out. For example, the implied terms that specify the variations in remuneration in commercial contracts causes commercial uncertainty. In other words, the face of the document may put up one price however, it would vary. Thus, the deal on the contract papers isn’t as straightforward as it seems but it’s still considered as a valid contract. Same is the case with the unilateral contracts where there are no specific parties to the contract. This also means that such contracts also cannot be certain about its privity until the conditions are performed by someone (which again can be anyone). 

At this point, the only question that arises is that how would commercial parties be certain about what all conditions would be adhered to? 

The confines of the implied terms and conditions are narrow in its scope. Therefore, there are limited to situations in which commercial certainty would be violated due to failure of performance.

Conclusion

This is one of the most frequently cited cases in the English common contract law. It is a perfect example of unilateral contracts. It also points out the problems associated with unilateral contracts. This case also helps in understanding the basic 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 uncertainties created due to such a vacuum in unilateral contracts it also affects the concept of privity of contracts. Thus, this case has become a foundation case for Contract law. Altogether, the judgement was well put together, however, the underlying implications of the judgment have become an evergreen subject of debate in commercial circles.   

References

 

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