Court: Court of Appeal (Civil Division)
Citation:  EWCA CIVIL 1,  1 QB 256
Bench : Lindley LJ, Bowmen LJ And Al Smith LJ
Theme- Can a general offer amount to a contract?
Subject: English Contract Law
BRIEF FACTS AND PROCEDURAL HISTORY
- The Carbolic Smoke Ball Company made a product called the ‘smoke ball’. It professed to be a cure for Influenza and a number of other diseases, in the backdrop of the 1889-1890 flu pandemic (estimated to have killed one million people).The smoke ball was a rubber ball – containing Carbolic Acid (Phenol) – with a tube attached. The tube was thrusted in the user’s nose, and the ball is squeezed. The purpose was to make the nose run. In this manner, the influenza was supposably, flushed out.
- The Company publicized advertisements in the Pall Mall Gazette and other newspapers and articles on November 13, 1891, proclaiming that it would furnish £100 to anyone who got sick with influenza after following its product according to the instructions and directions set forth in the publication. £100 reward will be paid by the Carbolic Smoke Ball Company to any individual who developed the surging epidemic influenza colds, or any disease caused by taking cold, after having used the ball three times daily for two weeks, according to the printed directions supplied with each ball. £1000 is deposited with the Alliance Bank, Regent Street, showing their sincerity in the matter.
- Mrs. Louisa Elizabeth Carlill, a resident of London, believing in the accuracy of the statement made in the advertisement with respect to efficacy of the smoke ball in cases of influenza, purchased one packet and used it thrice everyday from mid November, 1891 until 17th Jan, 1892, at which latter date, nevertheless, she had an seizure of influenza. Consequently, her husband, a solicitor, wrote a letters for her to the defendants, explaining what had happened, and asking for £100 as promised in the advertisement.
- On the third request, the company responded anonymously in a letter that if the medicine is used accordingly, the company had complete faith in the smoke ball’s effectiveness, but to safeguard themselves from any kind of swindling claims, they proposed her to visit their office and consume the smoke ball following the prescribed instructions under the purview of their secretary. Mrs. Carlill did not accept this proposal and brought an appeal in the court before Hawkins J. and a special jury.
ISSUES BEFORE THE COURT
Whether the dialect in Defendant’s advertisement, regarding the 100£ reward was meant to be an expressed promise or, rather, a sales puff, which had no denotation?
ARGUMENT’S FROM PLAINTIFF’S SIDE
Mrs Carlill charged, challenging that there was a contractual relationship between the parties, based on the company’s advertisement and her dependence on it in acquiring and using the Smoke Ball. The advertisement was distinctly an offer; it was intended to be read and performed upon and was not a vacant exaggeration. The advertisement was made to the public and as soon as a person does the specified act there is a contract.
Simply performing the act composes acceptance, as defined in Section 2(b) under the Indian Contract Act, 1872; further communication is not necessary: in particular, it never was necessary that a person initiating to use the smoke ball should go to the office and obtain a reiteration of the statements in the advertisement. Where an offer is made to all the world general nothing can be indicated beyond the fulfillment of the conditions and instructions. It should be noticed before the event cannot be required; the advertisement is an offer made to any person who completes the condition.
The terms are not too vague and uncertain. It would not matter if the plaintiff had not bought the balls directly from the defendant, as an increased sale would be a benefit to the defendants even if via a middleman or other market intermediaries. In the matter of the absence of a time limitation, it was stated that there were various feasible constructions; it may be that ‘a fortnight’s use will make a person safe for a reasonable time’ as mentioned by the company in the advertisement.
ARGUMENTS FROM THE DEFENDANT’S SIDE
- Carbolic Smoke Ball Co argued there was no binding contract. They argued that, while the words in the advertisement conveyed an intent, they did not amount to a promise. The advertisement was too vague to compose a contract (in particular, it is not time limited and it would not be possible to check whether the ball had been used or used correctly).
- In this case, there was no consideration from the plaintiff – the terms of the claimed contract would authorize someone who stole and used the balls to claim the reward.To make a contract by performing a condition there needs to be either communication of purpose to accept the offer or performance of some unconcealed act; in particular, merely performing an act in private is not sufficient.
- Even if there was a contract it was a ‘wagering’ contract (void under statute at the time).
RATIO OF THE COURT
1. Lord Justice Lindley observed that there was a conveyed promise to pay £100. It was not a ‘mere puff’ ; this conclusion was based on the passage in the advertisement stating that £1,000 was deposited with the bank to show sincerity. This could have no other intention than to nullify any proposition that this was a mere puff. His Lordship noted that the advertisement clearly constituted a plea for those who read it to perform an act (use the smokeball) and sincerity was demonstrated by lodging money at the bank. This was not a ‘mere expression of confidence in the wares’ of the defendant, but was ‘an offer intended to be acted upon’. The advertisement was an offer to the world. It was contended that it is not binding. It is said that it is not made with anybody in particular. In point of law this advertisement is an offer to pay to anybody who will perform these conditions, and the performance of the conditions is the acceptance of the offer.
2. It is to be noted that this advertisement was an offer to pay £100 to anyone who performed and fulfilled the stated conditions and instructions, ‘and the performance of the conditions is the acceptance of the offer’. On the issue of whether notification of acceptance was required. Undoubtedly, as a universal hypothesis, when an offer is made, it is necessary in order to make a binding contract, not only that it should be accepted, but that the acceptance should be notified. But in cases of this kind, it is perceived that they are an exception to the rule that the notification of the acceptance need not precurse the performance. This offer is a continuing offer. It was never repealed, and if notice of acceptance is required, then the person who makes the offer gets the notice of acceptance simultaneously with his notice of the performance of the condition before his offer is revoked.
3. His Lordship observed that the language is vague and uncertain in some respects. There is no time limit fixed for catching influenza, and it cannot seriously be meant to promise to pay money to a person who catches influenza at any time after the intaking of the smoke ball. There is also great vagueness in the limitation of the persons with whom the contract was intended to be made. But this document was intended to be issued to the public and to be read by public. So it is very important to understand how would an ordinary person interpret this advertisement? And the effect of this advertisement was to attract people and make them use it, which would amount to more sales, thus more profit. Based on this intention to promote the distribution of the smoke balls and to increase its usage, the advertisement was accepted as a contract addressing public at large but limited to those people who are using it either for prevention or treatment of influenza and other mentioned diseases.
4. His Lordship noted the argument that this was a ‘nudum pactum’ and there was no merit to the defendants in the use of the ball. His Lordship rejected this argument, stating: ‘It is quite obvious that in the view of the advertisers a use by the public of their remedy, if they can only get the public to have confidence enough to use it, will react and produce a sale which is directly beneficial to them. Therefore, the advertisers get out of the use an advantage which is enough to constitute a consideration.’ His Lordship also observed that a person who acted upon this advertisement and accepted the offer, put himself to disruption at the request of the defendants. This alone was sufficient to constitute consideration. Lordship wind up by using the smokeball as directed, Mrs Carlill had provided consideration. Furthermore, (although this was not necessary), the defendants received a benefit because ‘the use of the smoke balls would promote their sale.’One is the consideration of the inconvenience of having to use this carbolic smoke ball for two weeks three times a day; and the other more important consideration is the money gain likely to accrue to the defendants by the enhanced sale of the smoke balls, by reason of the plaintiff’s user of them. There is adequate consideration to support this promise.’
5. In Unilateral Contracts, communication of acceptance is not expected or necessary. If there is an offer to the world at large, and that offer does not expressly or impliedly require notification of performance, performance of the specified condition in the offer will constitute acceptance of the offer and consideration for the promise.
DECISION OF THE COURT
The defendant’s appeal before the court was dismissed unanimously by all the three judges and Mrs. Carlill finally received compensation of £100. The court concluded that :
- There was a valid offer – An offer can be made to the world. This was not a meagre sales puff (as evidenced, in part, by the statement that the company had banked £1,000 to demonstrate sincerity).The language was not too vague to be enforced.
- Despite of being a general rule, communication of acceptance is required, the offeror may bestow with the need for notification and had done so in this case. Here, it was implied that the offeree (Mrs Carlill) did not need to communicate a purpose to accept; rather acceptance occurred through performance of the requested and instructed acts (usingthe smoke ball)
Ø There was consideration; the disruption suffered by Mrs Carlill in consuming the smokeball as instructed was adequate consideration. Moreover, the Carbolic Smoke Ball received a benefit in having people use the smoke ball.
Yes, the advertisement made by the Carbolic Smoke Ball company was an offer, to be more precise, a General Offer. General Offer is an offer to the world at large. The offer had been made to the whole world and will ripen into a contract, with anybody who comes ahead and performs the conditions and instructions mentioned in the advertisement. The nature of Mrs. Carlill’s consideration was good, because there both advantageous; in additional sales in reaction to the advertisement and a distinct disruption that people go to when consuming a smoke ball.
This case is very important in the Indian Contract Act, 1872 because offer can be unilateral; the judges finished it by stating the elements of offer and acceptance, intention to create a legal relation(money deposited in the bank) and consideration (the inconvenience of using the product and the benefits of the company).
This case is seldom cited as an important case in the common law of contract, particularly where unilateral contracts are involved. It provides an excellent and extensive study about the basic principles of contract law and how they relate to everyday life.
Misleading advertisements is a criminal offence. Under the Consumer Protection from Unfair Trade Regulations( secondary regulations, passed under the European Communities Act, 1972) regulation 5 states that a commercial practice is misleading “if it contains false information and is therefore untruthful or if it or its overall presentation in any way deceives or is likely to deceive the average consumer, even if the information is factually correct.”
Contributed by: Vasundhara Dhar (Student, Birla School of Law, Birla Global University)
The views of the author are personal only. (if any)