CARLILL V CARBOLIC SMOKE BALL CO. (1893) CASE ANALYSIS:
Author :PRACHI DIXIT, a student of UNITY P.G AND LAW COLLEGE, LUCKNOW
DATE OF TRIAL: December 7, 1893
PLAINTIFF: Mrs. Louisa Carlill
DEFENDANT: Carbolic Smoke Ball Company
BENCH/JUDGES: Lord Justice Lindley, Lord Justice Bowen, Lord Justice A.L. Smith
APPLIED: [1893] 1 QB 256
COURT: Court of Appeal
INTRODUCTION
Carlill vs. Carbolic Smoke Ball Company (1893) is a significant case in English contract law that set standards for one-sided contracts created through advertisements. The situation revolved around a promotion made by the Carbolic Smoke Ball Company, where they offered a £100 reward to customers who caught the flu after using their product as instructed. The court decided that advertisements could be considered binding contracts if the terms were clear and specific, and that acceptance could be shown through action rather than a promise. This ruling established that an offer is considered legally enforceable if it demonstrates a clear intention to enter into a legal agreement and outlines the specific terms.
FACTS OF THE CASE
The Carbolic Smoke Ball Company was the manufacturer of a device known as a smoke ball that was marketed as a preventative measure against influenza and other respiratory illnesses. To promote its product, the company developed a bold advertising campaign that later turned into a major lawsuit.
In late 1891, the Carbolic Smoke Ball Company placed an advertisement in several well-known newspapers, including the Pall Mall Gazette and the Clerkenwell News. The advertisement read:
“The Carbolic Smoke Ball Company will pay a reward of £100 to a person suffering from an increasing epidemic of flu, colds or any flu-related illness after using the ball three times a day for two weeks according to the printed instructions supplied with each ball.
“The advertisement also stated that the company had deposited £1,000 with Alliance Bank to prove their sincerity in the matter and to ensure that they had the means to pay the promised fee.
Lady Londoner Louisa Elizabeth Carlill found this ad and was intrigued by the bold claim of the Carbolic Smoke Ball Company. Believing in the power of the product and the company’s promise, he bought one smoke ball and proceeded to use it as directed, following exactly the printed instructions.
Mrs. Carlill diligently used the smoke ball three times a day for the prescribed two weeks. Despite following the instructions, he ended up contracting the flu, a disease that the smoke ball is said to prevent.
After falling ill, Mrs. Carlill immediately notified the Carbolic Smoke Ball Company and demanded a £100 fee as promised in their advertisement. To his surprise, the company refused to pay, claiming that the announcement was not a serious contract offer, but simply a publicity stunt or “exclamation” and was not intended to be taken literally or create legal relations.
The company’s refusal to honor its announced promise prompted Ms. Carlill to seek legal remedies. He brought suit against the Carbolic Smoke Ball Company, alleging that the advertisement was a legally binding unilateral offer which he accepted by performing the required act, viz. using the smoke ball as directed.
ISSUES RAISED
On behalf of the plaintiff (Mrs. Carlill):
- The advertisement was a unilateral offer open to anyone who took the desired action (using the smoke ball as directed).
- Ms. Carlill accepted the offer by purchasing and using the smoker as stated, creating a legally binding contract.
- The company breached the contract by refusing to pay the promised fee when Ms. Carlill caught the flu.
From the Defendant (Carbolic Smoke Ball Company):
- The advertisement was only a “sting” or publicity stunt and was not a serious offer to be accepted.
- Although it was an offer, it was too vague and uncertain to be legally binding.
- No legal relationships were intended and the advertisement was not intended to be taken literally.
Plaintiff argument (Mrs. Carlill):
The plaintiff in the case, Louisa Elizabeth Carlill, made the following arguments in support of her claim for £100
1. The advertisement constituted a unilateral offer: – Mrs. Carlill argued that the advertisement published by the Carbolic Smoke Ball Company was a unilateral offer that could be accepted by anyone who performed the required action and used the smoke ball as directed. The ad clearly stated the terms, including the required procedure (use of a smoke ball three times a day for two weeks), the promised fee (£100) and a £1,000 deposit from the company to show its sincerity.
2. Acceptance by Action: – Ms. Carlill asserted that she accepted the unilateral offer by purchasing the smoke balloon and using it in detail according to the printed instructions.A unilateral contract accepts an action, not a promise, and Ms. Carlill’s action amounted to an acceptance of the offer.
3. Formation of a Legally Binding Contract: – By accepting the unilateral offer by execution, Ms. Carlill asserted that a legally binding contract was formed between her and the Carbolic Smoke Ball Company. – The company’s deposit of £1,000 indicated an intention to establish legal relations and commit to the terms of the advertisement.
4. Breach of Contract: Despite fulfilling her contractual obligations by using the smoke balloon as stated, Ms. Carlill contracted the flu, the disease the product was supposed to prevent. – The company’s refusal to pay the promised £100 fee breached the legally binding contract between the parties.
5. Certainty of Terms: – Ms. Carlill argued that the terms of the offer were clear and certain enough to be legally binding because they specified the action required, the period of use and the promised fee. The announcement was not vague or ambiguous and its terms could be enforced. MS Carlill’s arguments focused on establishing that the advertisement was a valid unilateral offer, that she had accepted the offer and that the company was bound by law to fulfill the promised fee if it met the advertised conditions.
Defender’s Argument (Carbolic Smoke Ball Company):
Carbolic Smoke Ball Company, as defendant in the action, made the following arguments to reject Mrs. Carlill’s claim for the £100 fee:
1 Ad for “Puff” or publicity stunt: – The company claimed that this ad was only a “puff” or publicity stunt and not a serious contract offer that could be accepted. Advertisements are often exaggerated or hyperbolic and should not be taken literally or considered as legally binding offers.
2. Lack of Intent to Create Legal Relations: – Defendant claimed that it did not intend to create legal relations through the advertisement. -The ad was intended as a marketing ploy to promote their product and should not be construed as a legally enforceable offer.
3. Vagueness and Uncertainty of Terms: – The company argued that even if the ad is considered an offer, its terms are too vague and uncertain to be legally binding. The criteria for determining whether someone had the flu or a cold was not clearly defined, making the offer difficult to fulfill.
4. Impossibility: – A defendant could argue that the promise to prevent influenza or other respiratory diseases was inherently unenforceable, rendering the offer void or unenforceable
5. No Serious Expectations of Acceptance: – The Carbolic Smoke Ball Company could argue that they did not reasonably expect a significant number of people to take up the offer using the smoke ball because it was intended as a bold marketing claim rather than as a genuine offer.
6. Lack of consideration: – The company could argue that Ms. Carlill did not consider because she did not provide anything of value for the promised fee, other than the use of the product at her disposal. purchased in advance.
They try to present the advertisement as a mere marketing gimmick, with no intention of creating any legal relationship or being bound by its terms.
JUDGEMENT
Carlill Vs. The Carbolic Smoke Ball Company was heard by the Court of Appeal, presided over by Lord Justice Lindley. The court made an important decision that established several important principles of contract law, especially in relation to the conclusion of unilateral contracts with claims.
1. Validity of the Offer: The Court held that the advertisement issued by the Carbolic Smoke Ball Company was a valid unilateral offer that could be accepted by anyone who performed the required action of using the smoke in accordance with the instructions of the ball.
2. Intention to create legal relations: The court found that the company’s deposit of £1,000 in Alliance Bank showed their intention to create legal relations and to be bound by the terms of the advertisement. This deposit was the deciding factor in determining the seriousness of the offer.
3. Certainty of terms: The court found that the terms of the offer were clear and certain enough to be legally binding. The ad stated the procedure required (using a smoke ball three times a day for two weeks), the duration (two weeks) and the promised fee (£100).
4. Executive acceptance: The court decided that Ms. Carlill accepted a unilateral offer by performing the required act of using the smokebox as directed. In a unilateral contract, acceptance is by performance, not by promise.
5. Formation of a Legally Binding Agreement: Based on a valid offer, intent to create legal relations, certainty of terms and acceptance of Ms. Carlill’s actions, the court decided that a legally binding agreement was formed between Mrs. Carlill and Carbolic Smoke Ball Company.
6. Breach of Contract: Because Mrs. Carlill contracted the flu, despite using the smoke ball as directed, the court found that the company was in breach of contract by refusing to pay the promised £100 fee.
The court’s decision was unanimous in favor of Ms. Carlill. In making the ruling, Lord Justice Lindley said: “If the advertisement was merely puffery, it would be a fraud on those who bought the smoke ball and the company cannot say that it was merely puffery and meant nothing.” The court rejected the company’s arguments that the ad was mere “hype” or a sales gimmick, and emphasized that an ad can create legally binding obligations if the purpose is clear and the terms are specific enough. The decision in Carlill v. Carbolic Smoke Ball Company has established important principles regarding unilateral contract through advertising, intention to create legal relations, certainty of terms and acceptance of offers. It set a precedent for determining when claims and promises could create legally enforceable obligations, shaping the development of principles of contract law.
LEGAL PRINCIPLES INVOLVED IN THE CASE
Here are the main legal principles and points involved in the case:
1. Unilateral Contracts: – The principles laid down in the case regarding the formation of unilateral contracts where one party makes a promise in return for another party. Clarified that advertisements can be legally binding unilateral offers if the purpose is clear and the terms are specific enough.
2. Intention to Create Legal Relations: – The case emphasized the importance of creating legal relations for a valid and enforceable contract. The company’s deposit of £1,000 was taken as proof of their intention to be legally bound by the terms of the advertisement.
3. Certainty of Terms: – The case emphasized the requirement of certainty of terms in a valid and enforceable contract. The court ruled that the terms of the ad, which specified the action required, the duration and the promised fee, were specific enough to be legally binding.
4. Acceptance by performance: – The case confirmed the principle of acceptance of performance in relation to unilateral contracts. Ms. Carlill’s actions in following the smoke globe’s instructions constituted an acceptance of a unilateral offer and constituted a legally binding contract.
5. Offer and Acceptance: – The case dealt with the basic principles of offer and acceptance in concluding a contract. This clarified that an advertisement can be a valid offer that can be accepted by taking action.
6. Evaluation: – Although not central to the case, the concept of consideration was involved. MSA. Carlill’s actions in accordance with smokeball’s instructions were considered sufficient payment for the promised fee.
7. Breach of Contract: – The case involved a breach of contract issue where the company failed to fulfill its promised obligation (to pay a fee) after Ms. Carlill fulfilled her part of the breach of contract. a contract to an agreement
8.Promissory Estoppel: – Although not specifically discussed, the case involved principles of promissory estoppel where a party (Ms. Carlill) relied on a promise made by another party (the company). unfortunately for them. Carlill vs. The Carbolic Smoke Ball Company has established principles and precedents in several areas of contract law, including unilateral contracts, intent to create legal relations, certainty of terms, acceptance of performance, offer and acceptance, payment, breach of contract, contract and obligation. These principles significantly influenced the interpretation and application of contract law in subsequent cases. of.
INFERENCE
Carlill v Carbolic Smoke Ball Company had a significant impact on the development of contract law principles, particularly in relation to unilateral contracts and notices.
Here are key takeaways from the case: The case held that advertisements can be legally binding unilateral offers if the intent to create a legal relationship is clear and the terms are specific enough. It clarified that acceptance of such offers is based on performance and not on promise. This principle opened the door to better compliance with advertising requirements and promotional offers and increased consumer protection. The judgment also emphasized the importance of the goal of establishing legal relations and the certainty of deadlines at the conclusion of contracts. Overall, the case strengthened the legal status of advertising and promotion, providing a framework for assessing their enforceability and holding companies accountable for their claims and promises to consumers.
Frequently Asked Questions
What type of contract was formed in Carlill v Carbolic Smoke Ball Co. (1893)?
A. Bilateral contract
B. Unilateral contract
C. Voidable contract
D. Valid contract
What is the essential element to create a legally binding contract, as established in Carlill v Carbolic Smoke Ball Co. (1893)?
A. Intention to create legal relations
B. Certainty of terms
C. Offer and acceptance
D. Payment
3.How did Mrs. Carlill accept the offer made by the Carbolic Smoke Ball Co. in Carlill v Carbolic Smoke Ball Co. (1893)?
A. By sending a letter of acceptance
B. By performing the required act (using the smoke ball)
C. By making a counteroffer
D. By seeking clarification on the terms
4. What is the principle that prevents a party from going back on their promise, as seen in Carlill v Carbolic Smoke Ball Co. (1893)?
A. Promissory estoppel
B. Breach of contract
C. Intention to create legal relations
D. Certainty of terms
5. What was the outcome of the case Carlill v Carbolic Smoke Ball Co. (1893) in terms of payment?
A. The company was not liable to pay Mrs. Carlill
B. Mrs. Carlill was not entitled to payment
C. The company was liable to pay Mrs. Carlill £100
D. The payment was deemed invalid
Answer – 1.B, 2.A, 3.B, 4.A, 5.C
