CARLILL V CARBOLIC SMOKE BALL COMPANY

Carlill v Carbolic Smoke Ball Company [1892] EWCA CIV 1 is an English contract law case and is a decision of the Court of Appeal that determined that an advertising including specific conditions for receiving a prize constituted a binding unilateral offer that may be accepted by anybody who met its conditions. It is famous for its peculiar subject matter and the innovative method the important judges (especially Lindley and Bowen) constructed the law. Carlill is commonly cited in all law books as an example of an introductory contract case, and it is typically the first case a law student reads in contract law.

CARLILL V CARBOLIC SMOKE BALL COMPANY

THE ADVERTISMENT

The case emerged from a dispute for non-payment of prize money and a treatment for influenza known as the "carbolic smoke ball." The Smoke Ball Company advertised that purchasers who used their cure would not get the flu. And if they did get flu they would get £100, a substantial sum at the time. It was determined that the company was obligated by its advertising, which was seen as an offer that the customer accepted by employing the smoke ball, so forming a contract. The Court of Appeal determined that the necessary components of a contract, including offer and acceptance, consideration, and purpose to form legal relations, were all present.

FACTS

The defendants promoted the sale of a product known as a "smoke ball" during a flu pandemic. They published an advertisement in the newspapers promising to pay £100 to anybody who had the flu, a cold, or any other illness that resulted from acquiring a cold after using the "smoke ball" as directed for fourteen days. The advertising for the Carbolic Smoke Ball Company also said that the company has set up £1000 in a bank account for such such expenses. After purchasing a smoke ball and carefully following the directions, Mrs. Carlill became ill with the flu and later requested a refund of £100 from the manufacturer. The corporation replied that there was no offer since the advertisement was just "sales puff," or sales talk (e.g., Red Bull gives you wings), and that it would also be ridiculous and impractical to extend the contract to the entire world.

THE DECISION

The Court of Appeal determined that the offer was essentially a unilateral one; one that had the intention to create legal relations to anybody who satisfied the requirements of the offer to claim £100. The Court of Appeal came to this conclusion after examining the offer in question. The court also came to the conclusion that because it was a one-sided offer (called unilateral offer), there was no need for either party to communicate their acceptance of the offer. The court has now addressed the issue of whether or not an offer may be extended to the whole globe if there was a possibility that it might be accepted, provided that the requirements that were indicated were met. As a result, Mrs. Carlill was able to make a claim for one hundred pounds.

BOWEN LJ

“we have to ask “how would an ordinary person, reading this document, construe it?” His answer is to take it at face value. He says that the offer was limited either to the duration of the “epidemic” or to the period of usage of the product. The advertisement was not a mere “puff” or “proclamation” because it was intended to be perceived by the public as an offer to be relied on (i.e. more people would buy the product having seen the advert). This demonstrates the need of having a legal relation intention. Due of the advertisement's unique characteristics, it should be seen as an offer (to everyone) rather than only an invitation to treat, as most advertisements are. It is legal for an offeror to waive the need for notice of acceptance (even if such communication is often needed), as in the case of incentives for recovering missing pets. In this instance, the advertisement indicated that notice was unnecessary. Because the company received a sale in exchange for the offer, there was consideration. Is this accurate? What if Carlill had chosen to purchase the ball over the offer?

THE COURT OF APPEAL

In the case of Carlill v. Carbolic Smoke Ball, the reason why the Court of Appeal rejected the defendant's argument that the advertising was nothing more than a puff was because the defendant claimed to have deposited one thousand pounds with Alliance Bank as proof that it was genuine. Because of this assertion, a reasonable person reading the advertising would consider the promise to pay one hundred pounds to be one that needed to be taken seriously and one that had the potential to generate a legally enforceable obligation in light of the scenario that had really come about. Because of this, the advertising served as an offer.

The court did not find an issue with the defendant's argument that the advertising had not been directed to any particular individuals since it had been published. In this case, the offer was extended to everybody, including Mrs. Carlill, who satisfied the requirement that was outlined in the advertising. The court made the comparison to an offer of prize, which may be taken by everyone who satisfies the requirement.

When it came to the defendant's argument that Mrs. Carlill ought to have informed them of her acceptance, the court once more drew an analogy with the reward cases and ruled that based on the wording of the advertisement, the Carbolic Smoke Ball Company could be construed as having waived the requirement to communicate acceptance. This was in response to the defendant's argument that Mrs. Carlill ought to have informed them of her acceptance. The company could not have reasonably anticipated that every customer who purchased a smoke ball would get in touch with them; rather, they could have only anticipated hearing from customers who had used the smoke ball (in the manner advised) and subsequently had influenza.

Carlill is the authority for the proposition that an advertisement can constitute an offer to "the world" (that is, anyone who learns of it), and that it may, by the way in which it is stated, waive the need for communication of acceptance prior to a claim being made under it. As a result, the proposition that an advertisement can constitute an offer to "the world" is supported by Carlill. An offer of a "unilateral" contract (as opposed to a "bilateral" contract) is what the court in Carlill considered to be an "offer of a special sort," which is recognised in English law as an offer of a "unilateral" contract.

SUBSEQUENT CASES

This case is referenced as precedent in Leonard v. Pepsico, a case in which a Pepsi advertising implied that a Harrier Jet could be purchased for seven million Pepsi Points. If you were unable to consume seven million points' worth of Pepsi, you may buy more Pepsi Points for cash. In its ruling, the U.S. District Court for the Southern District of New York determined that there was no writing between the parties that would have satisfied the Statute of Frauds in that case because the advertisement was not a legally binding offer, it was tongue-in-cheek, and no reasonable person could have been led to believe that Pepsi was giving away a Harrier Jet worth millions.

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