case summary of landmark judgement of carlill v carbolic smoke ball company, Study notes of Contract Law

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TABLE OF CONTENTS

INTRODUCTION..................................................................................................................................... 2

INTRODUCTION

A ‘contract’ is a bilateral transaction between two or more than two persons. Anson^1 has defined the word ‘contract’ in the following words: “A contract consists in an actionable promise or promises. Every such promise involves two parties, a promisor and promise, and an expression of a common intention and of expectation as to the act or forbearance promised.” Section 2(h) of the Indian Contract Act^2 defines contract as “An agreement enforceable by law is a contract.” Therefore, a contract means an agreement which is enforceable by law. An agreement consists of reciprocal promises between the two parties. Each party is legally bound by the promise made by him. An agreement arises by an “offer” (used in English Law) or “proposal” (used in Indian Contract Act) by one of the parties and the “acceptance” of such offer by the other. “When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.” An offer need not always be made to an ascertained person but it is necessary that an ascertained person should accept it. The case “Louisa Carlill v. Carbolic Smoke Ball Company^3 ” took place in the year 1983 in the court of Appeal in UK which is considered as one of the landmark judgements in English law of contracts. It deals with an advertisement in the newspaper and with general offer. The judges in this case were Justice Lindley, Justice Bowen, and Justice Smith. (^1) Anson’s Law of Contract 23rd (^) Edition, Edited by A.G. Guest (1971) p. 23 (^2) Indian Contract Act, 1872. (^3) Louisa Carlill v. Carbolic Smoke Ball Company [1892] EWCA Civ 1 / (1893) 1 Q.B. 256.

THE DEFENDANTS ARGUED:

1. That there was no binding contract between the parties because notification of acceptance had not been communicated, i.e. no communication of acceptance was done by her(the offeree) to the company (the offeror).
2. That – the present case is similar to Harris v. Nickerson^4 (law Rep. 8 Q.B. 286 Vol. I. 1893). The advertisement is too vague to be the basis of a contract; there is no limit as to time, and no means of checking the use of the ball. Anyone who had influenza might come forward and depose that he had used the ball for a fortnight, and it would be impossible to disprove it.
3. It was further argued by the company that the offer of the reward of £100 was a casual offer, a mere advertisement and it was thought that no reasonable man took any serious note of it.
4. That their offer didn’t have a binding effect on them to form a legal contract. They reasoned that the word used in the advertisement didn’t amount to promise because the advertisement was not clear in terms to form a contract. Thus, it is clear that the advertisement was just a marketing strategy and the company has no intention of creating any kind of contract while offering a worldwide offer.

THE PLAINTIFF ARGUED:

1. That the promise was not vague and also the formulation of the offer was such that it was clear that in case the product doesn’t work and wasn’t effective the company would reward a certain amount. And also to imply the same, the Company had deposited in their Alliance bank account. Thus, their act of depositing the amount is proof of their intention to make a contract.

2. That there was a consideration in form of money paid to buy the Carbolic smoke ball. Thus, the Company has to fulfil its part of the bargain. (^4) Harris v. Nickerson (1873) LR 8 QB 286

THE ISSUES WHICH COULD BE RAISED IN THIS CASE ARE –  What is the test of determining as to whether the parties intended to create legal relations while giving the proposal. ( “intention to create legal relations is an essential in creating valid agreement or proposal )  Whether the advertisement made by the company a valid general offer or not?  Was any sort of communication of acceptance done by mrs. Carlill to the company or not? Or whether mrs. Carlill was required to communicate her acceptance of the offer to the company?  Whether a consideration was made or not.  Is there a binding effect of the agreement between the parties?  Does the performance of the conditions advertised constitute as “acceptance of offer”? COURT’S OPINION The court of appeal unanimously rejected the company’s argument and held that there was a fully binding contract for £100 with Mrs. Carlill and finally Mrs. Carlill received compensation of £100. The court further held that: (i) This advertisement was a unilateral offer to the entire world. (ii) Bowen, L.J., observed : As notification of acceptance is required for the benefit of the person who makes the offer, he may dispense with notice to himself if he thinks it desirable to do so......... In the advertisement cases it seems to follow as an inference to be drawn from the transaction itself that a person is not to notify his acceptance of the offer before he performs the conditions. It is well settled that an offer may be accepted by conduct. But conduct would only amount to acceptance if it is clear that the offeree did the act with the intention (actual or apparent) of accepting the offer. (iii) This is one of those cases in which a performance of the condition by using these smoke balls for two weeks three times a day is an acceptance of offer. (iv) A person becomes a persona designata and able to sue, when he performs the conditions mentioned in the advertisement.

CONCLUSION

This benchmark judgment of Carlill v. Carbolic Smoke Ball Company was given in 1892 and still remains an important case for law students. It established several key principles in Contract Law:

- It clarified that advertisements can be considered offers that can be accepted by performance. - It demonstrated how the principle of offer and acceptance works in practice. - It confirmed the importance of consideration in contract formation and showed how reliance on an offer can be sufficient consideration.