Article By: Bhanupriya Sharma

Introduction:

It is a landmark case law in english contract law that established the important principle regarding the formation of contracts.This case is renowned for its unique subject matter and significant legal implications

Facts of the case

• In 1891, Carbolic smoke ball company placed an advertisement stating that their product “carbon smoke ball”, would prevent colds and influenza if it is used as directed

• They offered hundred euro reward to those who contracted influenza despite using the product as instructed to ensure this, they deposited thousand euro in the bank for the purpose of providing reward.

Background 

Mrs., Lilli Carlilll bought the product, used it as instructed, and caught the flu.

Therefore, she then sought to claim the 100 Euro, the reward from the company as advertised, but the company denied to pay, as there was no notification or communication of acceptance and mutual consideration, which renders it to form a valid contract. 

Hence, Mrs Carlill sued the company for the same.

ISSUES

The main issue rises here is, whether the company’s advertisement promising €100 Reward for anyone who used their product as directed and still contracted influenza constituted a legally binding promise or mere sales puffery.

The issues raised here, includes:

• Whether there was a binding contract?
• Whether formal acceptance notification was necessary?
• Whether Mrs Carlill provided considerations for the reward?

Judgement 

The court of appeal ruled in favour of Mrs carlill.

The English Court of Appeals unanimously dismissed the defendant’s appeal, affirming that Mrs.Carlill entitled to claim the reward of €100 as this was considered as a valid contract, not a puffery or market gimmick, as the company’s specific performance backed by depositing thousand euro in a bank demonstrated sincerity and their intention to createlegal relations, which transformed the advertisement into a binding unilateral contract.

Here, in the given case, Court ordered that buying and using the product smoke ball, constitutes sufficient consideration from Mrs Carlill’s part and purchasing the product is considered as acceptance to the offer.

Justice Bowen and Smith concurred highlighting the public nature of the offer and the company’s deposited funds as indication of their commitment to fulfilling the promise.

Breakdown of the judgement 

Offer:²

       In unilateral contracts like advertisements the offer is to the public l, called general offer.

Acceptance

Mrs. Carlill used the product as prescribed constituted acceptance of the offer. Acceptance is complete when she performed the conditions as set out in the offer.

Intention to create legal relations

    Depositing a amount of €1000 in bank considers their intention to pay the reward who were caught flu after performing the contract.

Considerations³

      Mrs Carlill Provided consideration by going through the inconvenience and potential harm of using this smoke ball as directed.

Notification of Acceptance 

     The court held that, in a unilateral contract notification is not required. Acceptance is completed by performing the conditions of the offer.

Conclusion

The case remains a foundational case in contracts, establishing the concept of unilateral contract, principles and their enforceability arising from advertisements.

The case highlights the importance of clarity and intention in contractual communications , ensuring that even unconventional forms of offers can lead to binding agreements when the essential elements of offer, acceptance and consideration are present.

Concept of Unilateral contracts

A unilateral contract, as exemplified in Carlill v. Carbolic, involves an offer made to the public at large where acceptance is demonstrated through performance rather than formal communication.

This type of contract poses challenges under traditional contract law principles, particularly concerning consideration. Typically, consideration, or something of value exchanged between parties, is essential for a contract’s validity. In unilateral contracts, however, only one party (the promisor) makes a promise, usually offering a reward or benefit upon fulfillment of specified conditions by the other party (the offeree).

The offeree’s performance, such as using a product or providing information, constitutes acceptance. Despite concerns that unilateral contracts lack mutual obligations and therefore consideration, courts recognize them when the promisor’s promise is clear, the conditions for acceptance are specified, and performance constitutes acceptance.

Carlill v. Carbolic Smokeball case underscores how courts interpret and enforce such contracts based on the clarity of the offer and the promisor’s intent to be bound by specific terms advertised to the public.

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https://thelegalschool.in/blog/types-of-contract