Carlill vs Carbolic Smoke Ball

This article is written by Khushnuma Rahman, Amity Law School, Amity University Patna, 3rd Year BBALL.B(Hons) student during an internship at LeDroit India.

Keywords:

1. Carlill v. Carbolic Smoke Ball Co.
2. Unilateral Contract
3. Offer and Acceptance
4. Consideration in Contracts
5. Advertisement as Offer
6. Invitation to Treat
7. Revocation of Unilateral Contracts
8. Acceptance by Conduct

Introduction

The Carlill v. Carbolic Smoke Ball Co. (1893) case stands as a cornerstone in contract law, particularly for clarifying principles around unilateral contracts and offer and acceptance. This landmark decision dealt with an unusual advertisement promising £100 to any user of the Carbolic Smoke Ball who contracted influenza, despite using the product as directed. Mrs Carlill’s claim to this reward after contracting the flu became a legal battle that would define concepts in contract law, including the enforceability of certain types of advertisements and the criteria needed for a legally binding offer.

In this article, we’ll explore the background, central issues, legal arguments, judgment, and the broader implications of this case. We’ll also discuss relevant illustrations and similar cases that have since applied these principles, affirming the legacy of Carlill v. Carbolic Smoke Ball Co.

Case Background

Company and Product Description In the late 19th century, Carbolic Smoke Ball Co. manufactured a product called the “Smoke Ball,” which was advertised as a preventative measure against influenza and other illnesses. The product consisted of a ball filled with powdered carbolic acid, which users were instructed to inhale through the nose. The company’s advertisement in the Pall Mall Gazette stated that anyone who contracted influenza after using the Smoke Ball as directed would be entitled to a £100 reward. This advertisement was even accompanied by a claim that £1,000 had been deposited in the bank as proof of the company’s sincerity.

Claim by Mrs. Carlill Mrs. Louisa Carlill purchased the Smoke Ball and followed the instructions diligently. Despite this, she contracted influenza, leading her to claim the £100 reward as stipulated in the advertisement. Carbolic Smoke Ball Co., however, refused to pay, asserting that the advertisement was merely a “puff” – a marketing strategy that could not reasonably be expected to constitute a binding contract. This refusal led Mrs Carlill to file a lawsuit, resulting in a case that would be tried in the English Court of Appeal and ultimately set binding legal precedents.

Legal Issues and Arguments

The central issues in Carlill v. Carbolic Smoke Ball Co. revolved around contract formation, specifically regarding whether the advertisement constituted a binding offer, if there was acceptance of the offer, and whether consideration existed. Here’s a breakdown of the main issues:

1. Offer vs. Invitation to Treat
   Carbolic Smoke Ball Co. contended that the advertisement was not a genuine offer but rather an invitation to treat – a mere encouragement for the public to buy their product. An invitation to treat does not constitute an offer, meaning it cannot result in a contract by simple acceptance.
2. Unilateral Contracts
   The case required an analysis of unilateral contracts, where one party makes a promise in exchange for the other party’s performance (e.g., offering a reward). The company argued that their ad did not create a contract because there was no mutual agreement or requirement for Mrs Carlill to communicate her acceptance of the offer.
3. Consideration
   For a contract to be binding, there must be consideration – something of value exchanged between the parties. The company argued that Mrs Carlill provided no consideration for the offer, as she neither directly contacted the company nor did anything that specifically benefited them beyond purchasing the product.
4. Intent to Create Legal Relations
   Carbolic Smoke Ball Co. further argued that there was no intent to create legal relations, asserting that the advertisement was not a legally enforceable promise but rather a marketing tactic.

The Court of Appeal, therefore, upheld Mrs Carlill’s claim and ordered Carbolic Smoke Ball Co. to pay her the £100 reward.

Key Takeaways and Illustrations

1. Unilateral Contracts
   Carlill v. Carbolic Smoke Ball Co. serves as a classic example of a unilateral contract, where an offer is made to the public, and acceptance is completed by performing the required action. This principle is seen in reward cases today, such as lost dog posters offering a reward upon the dog’s safe return.
2. Advertisements and Offers
   The judgment clarified that certain advertisements with explicit promises and conditions can be legally binding offers, not just invitations to treat. For instance, limited-time offers that promise discounts or rewards upon purchase under specific conditions may also constitute unilateral contracts.
3. Case of Errington v. Errington (1952)
   In this case, a father promised his son and daughter-in-law that if they paid the mortgage instalments, they would own the house. The Court held that the father’s promise constituted a unilateral offer, and by performing the act of paying the instalments, the son and daughter-in-law had a binding claim to the house. This case further reinforced the concept of unilateral contracts outlined in Carlill.
4. Bowerman v. Association of British Travel Agents Ltd (1996)
   This case involved a travel agency’s unilateral promise to reimburse clients in case of company bankruptcy. The court found that this statement constituted an enforceable unilateral offer, influenced by the reasoning in Carlill, establishing that certain public guarantees are legally binding if they meet specific criteria.

Unilateral Contract

A unilateral contract is a type of agreement where one party, the offeror, makes a promise in exchange for a specific action performed by another party, the offeree. Unlike bilateral contracts, where there is a mutual exchange of promises, a unilateral contract does not require the offeree to communicate their acceptance. Instead, acceptance is completed through the performance of the specified action. In Carlill v. Carbolic Smoke Ball Co., the court found that the advertisement constituted a unilateral contract because it promised a reward for a specific act (using the Smoke Ball as directed).

Revocation of Unilateral Contract

In the context of unilateral contracts, revocation refers to the withdrawal of an offer before the offeree completes the specified action. The general rule is that an offeror can revoke an offer at any time before acceptance. However, with unilateral contracts, where acceptance occurs only upon complete performance, revocation can be complex. Courts have generally held that an offeror cannot revoke a unilateral offer if the offeree has already begun performing the required action, as seen in cases like Errington v. Errington (1952). This rule was implied in Carlill v. Carbolic Smoke Ball Co., where the performance of the stipulated conditions by Mrs. Carlill bound the company to pay the reward.

Impact and Legacy

Carlill v. Carbolic Smoke Ball Co. established principles still widely applied in contract law today. The case confirmed that advertisements could be legally binding when framed as specific offers with actionable terms. It also provided clarity on unilateral contracts, offering guidance on how actions, rather than words, can constitute acceptance of a contractual offer.

The case has influenced legal interpretations in several jurisdictions, including the United States, Australia, and Canada. Modern e-commerce and promotional activities frequently refer to the Carlill precedent, particularly in cases where companies issue promotions or warranties with  similar language of offer and performance

Similar Cases

1. Errington v. Errington & Woods (1952)

• Facts: In this case, a father promised his son and daughter-in-law that they would own the house if they paid off the mortgage. After the father’s death, his widow sought possession of the house.
• Legal Principle: The Court of Appeal held that the father’s promise constituted a unilateral contract that could not be revoked once the couple had begun performing the required act (i.e., paying mortgage instalments). This case extends the Carlill principle by affirming that once performance has started in a unilateral contract, the offeror cannot revoke the offer.

2. Lefkowitz v. Great Minneapolis Surplus Store (1957, U.S.)

• Facts: A department store placed an advertisement offering “three fur coats, worth $100 each, first come, first served, for $1 each.” Mr. Lefkowitz arrived to purchase the coat but was denied because the store claimed the offer was only for women.
• Legal Principle: The Minnesota Supreme Court ruled in favour of Lefkowitz, holding that the advertisement constituted a binding offer due to its clear terms and the specific action required (being “first come, first served”). Like Carlill, this case demonstrates that advertisements with clear terms and promises can create legally enforceable offers.

3. Bowerman v. Association of British Travel Agents Ltd (1996)

• Facts: A travel agency had a notice stating that travellers would be reimbursed in case of the agency’s bankruptcy. Customers sought compensation when the agency went bankrupt, citing the notice as a binding offer.
• Legal Principle: The Court of Appeal held that the statement was a unilateral contract because it constituted an offer accepted by performance when customers booked through the agency. The case confirmed the Carlill principle that unilateral offers can arise from public statements, especially in consumer settings where an offer induces reliance.

4. Williams v. Carwardine (1833)

• Facts: A reward was offered for information about a murder. Williams provided information, not primarily to claim the reward, but out of a desire to ease her conscience.
• Legal Principle: The court ruled in favour of Williams, finding that she had completed the conditions of the unilateral offer, which entitled her to the reward. This case reinforced that in unilateral contracts, acceptance occurs upon performance, and motivation for performing the act is irrelevant to claiming the reward.

5. Daulia Ltd v. Four Millbank Nominees Ltd (1978)

• Facts: Daulia Ltd. sought to purchase property from Four Millbank Nominees. The latter made a promise conditional on a particular action by Daulia but then tried to withdraw the offer after Daulia began performing.
• Legal Principle: The Court of Appeal upheld that in a unilateral contract, once the performance has started, the offeror is bound and cannot revoke the offer. This case echoes the Carlill principle on performance-based acceptance and establishes that the offeror’s attempt to revoke after the performance begins may not be legally permissible.

6. Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd (1953)

• Facts: This case involved whether goods displayed in a self-service shop were an offer or an invitation to treat.
• Legal Principle: While not a unilateral contract case, this decision clarified that a display or advertisement of goods is typically an invitation to treat, not an offer. Carlill is distinguished here because the Carbolic Smoke Ball advertisement was unusually specific and included a reward, making it a binding offer rather than an invitation to treat.

7. Partridge v. Crittenden (1968)

• Facts: Partridge advertised birds for sale, which was against the law without a license. He was charged, but he argued that the advertisement was an invitation to treat, not an offer.
• Legal Principle: The court held that the advertisement was indeed an invitation to treat, not a binding offer. However, this case helped distinguish general advertisements from Carlill-type offers by confirming that advertisements usually are not offers unless they clearly and specifically promise performance in exchange for a specific action.

8. Dickinson v. Dodds (1876)

• Facts: Dodds made an offer to sell a property to Dickinson, which he later attempted to withdraw before Dickinson accepted.
• Legal Principle: This case confirmed that an offer could be revoked before acceptance but in the context of a bilateral contract. This case helps differentiate bilateral contracts, where both parties make promises, from unilateral contracts like in Carlill, where revocation is limited once the offeree begins the required performance.

Conclusion

The Carlill v. Carbolic Smoke Ball Co. case transformed contract law, clarifying the legal status of unilateral contracts and the circumstances under which advertisements can be binding offers. This decision underscored the importance of clear and specific promises in advertisements, reaffirming the judiciary’s role in upholding contractual rights and ensuring fairness. Through its interpretations, the Court reinforced the need for companies to honor their commitments when using inducements to drive public participation, setting a standard for transparency and accountability.

While the judgment addressed issues unique to its historical context, its principles remain relevant today, particularly in consumer protection and contract law. The lasting impact of Carlill v. Carbolic Smoke Ball Co. is a testament to the case’s role as a guiding precedent in the law of contracts.

References

1. Carlill v. Carbolic Smoke Ball Co. [1893] 1 QB 256.
2. Errington v. Errington [1952] 1 KB 290.
3. Bowerman v. Association of British Travel Agents Ltd [1996] CLC 451.
4. Treitel, Guenter, The Law of Contract.