Carlill V Carbolic Smoke Ball Co Case Study

Carlill v Carbolic Smoke Ball Co
[1893] 1 QB 256
Chapter 5 (pp 206, 209, 216, 218)

Relevant facts

On 13 November 1891, Carbolic Smoke Ball Co (CSBC) placed an advertisement
in the Pall Mall Gazette which included the following:

100 pounds reward will be paid by the Carbolic Smoke Ball Co. to any person who
contracts the increasing epidemic influenza, colds, or any diseases caused by taking
cold, after having used the ball three times daily for two weeks according to the
printed directions supplied with each ball. 1,000 pounds is deposited with the
Alliance Bank, Regent Street, showing our sincerity in the matter..

Based on the advertisement, Mrs Carlill purchased a smoke ball and used it as
instructed from mid November 1891 until 17 J anuary 1892, at which time she caught
influenza. Mrs Carlills husband then contacted CSBC on his wifes behalf claiming
the 100 pound reward. CSBC refused to pay the reward. Mrs Carlill sued for
damages for breach of contract.

At first instance, the trial judge decided that CSBC was liable to pay the reward to
Mrs Carlill. CSBC appealed to the Court of Appeal.

Legal issue

The main issue for the Court of Appeal to determine was whether a binding contract
existed between Mrs Carlill and CSBC in relation to the reward. This was a separate
contract to the contract for the purchase of the smoke ball and required
consideration of the following questions:

1. Was the advertisement of the reward an offer or an invitation to treat?
2. If the advertisement was an offer, had Mrs Carllil communicated her acceptance
of the offer?
3. Did the parties intend to be legally bound?
4. Had Mrs Carllil provided consideration for CSBCs promise to pay a reward?

Decision

On 7 December 1892, the Court of Appeal (in separate reasons) unanimously
decided as follows:

1. The advertisement was a conditional offer made to all the world, and not merely
an invitation to treat.
2. CSBC had waived the requirement that acceptance of its offer be communicated
to it. Instead, through its advertisement, CSBC had implied that the performance
of certain conditions would constitute acceptance. These conditions were
purchasing and using the smoke ball as instructed but still catching one of the
ailments the smoke ball was said to prevent. Mrs Carlill had met these conditions
and a contract was created on fulfilment of the conditions. CSBC received notice
of the acceptance at the same time as being told about notice of the performance
of the conditions, which was, in any event, before the offer was retracted.
3. In the circumstances, CSBC had not successfully rebutted the presumption that
the parties to commercial or business agreements intend to be legally bound.
CSBCs argument that the advertisement was an advertising gimmick such that
no reasonable person would take seriously was rejected. The Court considered
how the general public would view the advertisement, including the fact that the
advertisement had said CSBC had deposited 1000 pounds with a bank in
demonstration of their sincerity.

According to Lord J ustice Bowen:

It seems to me that in order to arrive at this contract we must read it in its plain
meaning as the public would understand it. It was intended to be issued to the public
and to be read by the public. How would an ordinary person reading this document
construe it upon the points which the defendants counsel has brought to our
attention?

4. There was consideration for the contract in the form of Mrs Carlills inconvenience
in performing the conditions set by CSBC as well as the advantage CSBC
received by acceptance of their offer, namely, the use of the smoke ball would
promote the sale of the smoke ball.

According to Lord J ustice Bowen:

What is the definition of consideration? It is any act of the plaintiff from which the
defendant derives a benefit or advantage, or any labour, detriment or inconvenience
sustained by the plaintiff, provided such act is performed or such inconvenience is
suffered by the plaintiff with the consent, either express or implied, of the defendant.
Can it be said here that if the person who reads this advertisement applies thrice
daily, or such time as may seem to him to be bearable, the carbolic smoke ball to his
nostrils for a whole fortnight, he is doing nothing at all - that it is a mere act which is
not to count towards consideration to support a promise? The law does not require
us to measure the adequacy of the consideration. Sufficient if there is an
inconvenience sustained by the one party with the consent of the other.

Significance

This decision presents an example of an advertisement that amounts to a conditional
offer rather than just an invitation to treat. It is also authority for the proposition that
an offeror can waive the requirement that acceptance of an offer be communicated
by implying that performance of particular conditions will constitute acceptance,
whether or not the offeror is aware of that performance. It is authority for the
proposition that an inconvenience sustained by the offeree with the consent of the
offeror may be sufficient consideration. Finally, it demonstrates that it is difficult to
rebut the presumption that the parties intend to be legally bound by commercial or
business agreements.

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