This article is written by Vamakshi Pareek of BA.LL.B. 2nd Year of RNB Global University, Bikaner.
Facts of the Case
- A London based company, named, Carbolic Smoke Ball Co.(Appellant-Defendant) introduced a new product in the market, called the ‘Smoke Ball’, and claimed that the product was a total panacea for the influenza and certain other kinds of diseases like cold, coughs, hay-fever, headaches, bronchitis, laryngitis, whooping, and sore throat.
- The Smoke ball product was basically a rubber ball with a tube attached to it and contained carbolic acid or phenol. The ball when squeezed, released the vapors into the nose of the user through the tube.
- The Co. published an advertisement in the Pall Mall Gazette, on November 13, 1891, stating that it would pay £100 to whoever catches influenza even after using the product, as per the instructions given with it. To support their assertion, they even deposited £1000 with the Alliance bank.
- After seeing the advertisement, Louisa Carlill (Respondent-Plaintiff), bought the product and used it three times daily, for nearly two months. But she contracted influenza on January 17, 1892. So, she claimed £100 from the company. Mrs. Carlill’s husband, who was a solicitor, wrote two letters to the company, claiming the reward, but the co. ignored those letters. On a third request the co. replied with a letter, stating that if the product would have used properly, Mrs. Carlill wouldn’t have caught influenza again and they called her to their office for further checking.
- Mrs. Carlill filed a case against the co., claiming her reward before the lower court (Queen’s Bench). The court passed the judgement in favor of Mrs. Carlill (Plaintiff), but the defendant being dissatisfied with the judgement, filed an appeal.
Issues raised before the court
- Whether there was any binding contract between both the parties?
- Whether there was any offer made by the Company?
- Whether there was a requirement to communicate the acceptance of the offer made by the company?
- Whether there was any requirement to provide the consideration in exchange of the reward of £100 offered by the company?
Contentions at the part of:
Appellant-Defendant’s arguments (Carbolic Smoke Ball Co.)
- At first, the company argued that the co. did not make any kind of offer having binding impact as their advertisement was a ‘Nudum Pactum’ (a naked agreement) and the motive was to increase the sales of the product. The advertisement was too vague to be considered as an offer.
- Secondly, as there was no proper means to check whether the ball was correctly utilized by the consumers or not, it might be possible that the respondent has used it inappropriately.
- Further they argued that there was no contract between the parties because there was no communication of acceptance by Mrs. Carlill, which is an essential element for a contract to be declared as valid. And also, no consideration was given by her in exchange for the reward of £100 offered by the company.
Thus, the advertisement was an empty boast and the aim was merely to shoot up the marketing of the product, the company did not have any intention to enter into contract.
Respondent-Plaintiff’s arguments (Mrs. Carlill)
- They argued that the offer made by the company was not vague as it clearly stated that in any case if the product becomes ineffective, they would reward the amount of £100.
- Secondly, the company even deposited £1000 in the Alliance Bank, which was evidence that the company had the intention to enter into a legal relationship with anyone who accepted the offer.
- Thirdly, they argued that there was a consideration in the form of the price paid for purchasing the product. a
- Thus, the advertisement made was not a boast but an offer made to the general public and it contained all the required essentials of a valid contract. So, the company would be liable to pay the reward money to Mrs. Carlill.
Judgement
The Court of Appeal, dismissed the appeal of the company and held the decision in favor of Mrs. Carlill, stating that there existed a binding contract and she would be entitled to get the reward money.
The bench of the judges gave their reasonings, which are as follows:
Justice Lindley:
- According to him, the advertisement was not a mere puff because they made a statement of depositing £1000 with the Alliance Bank, which showed their sincerity in the matter of offering the reward money.
- The offer made by the company was a binding one as it was a unilateral offer, which is made to the world at large and doesn’t require any acceptance. It shall be treated as an offer to anyone who performs the specific condition (as in this case was to use the smoke ball 3 times for 2 weeks) and it is said to be the acceptance of the offer.
- He even concluded that the advertisement was not at all vague, reason being that it carried such words which led the potential consumers believe that if they catch the flu again after using the smoke ball, they would be entitled to get the reward money.
- Lastly, Justice Lindley observed that the consideration did exist in two forms. Firstly, the company got huge benefit as a result of increase in the sales and secondly, there was a direct inconvenience to those who used the product as per the conditions laid down in the advertisement.
Justice Bowen:
- He agreed with Lord Justice Lindley, that the advertisement was not a mere puff and vague because it constituted such words which induced the public into buying the product.
- He noted that, however, the communication of the acceptance is essential for constituting a valid offer, but if the offeror himself, expressly or impliedly, notify in the offer that the performance of condition would be a sufficient acceptance, then it is not necessary to communicate the acceptance.
- And in relation to the argument of the defendant that it was a Nudum Pactum, he observed that simply by using the product as per the directed conditions, Mrs. Carlill had given her consideration.
Justice AL Smith also agreed with both the judges. He stated that there was adequate consideration to support the promise.
Ratio Decidendi
The bench hearing the case, unanimously rejected the arguments of the Appellant, giving the following reasons:
- An offer can be made to the public at large i.e. a General Offer and it is valid. The advertisement of the company was a general offer.
- The acceptance to such offer is not required to be communicated, simply performing the specified condition would amount to acceptance.
- The purchasing and using the product would also be considered as a consideration.
- The action of depositing £1000 in the bank clearly showed the intention of the company to enter into a legal relationship.
Conclusion
This case is an excellent understructure for all the contracts concerning the unilateral contracts and general offer. It is equally significant in understanding the essential elements of the contracts like acceptance, consideration, intention to enter into legal relationship, etc. This judgement had also helped to nip in the bud all the kinds of illegal and unfraudulent advertising practices. Thus, in a nutshell this case has become the foundation of the contract law.
