Carlill v Carbolic Smoke Ball Co

Introduction

The difference between a valid offer and a mere invitation to treat, especially in the world of advertisements but also beyond, can be difficult to establish. The intention of the parties must be ascertained whether subjectively or objectively, together with whether or not the accepting party has provided either notice of acceptance – if required – or any consideration to allow the (unilateral) contract to form.

Issues raised by Carlill v Carbolic Smoke Ball Co

Advertisements may be generally intended only as invitations to treat, i.e. inviting further negotiation before a contract is concluded, but their form, wording and factual context are all important. Carlill dealt with (a) how and when an advertisement will amount to a unilateral offer, (b) what amounts to performance of the conditions contained in an advertisement, and (c) notification or otherwise of the acceptance of the offer.

Facts

In 1891 – a time when there was no statutory consumer protection and there was an influenza epidemic – the Carbolic Smoke Ball Company issued an florid advertisement in the Pall Mall Gazette and other newspapers offering to pay £100 to anyone who contracted influenza having used one of their devices three times daily for two weeks as specified in the printed instructions supplied. The company’s advertisement further stated that £1000 was deposited at the bank to confirm their sincerity.

On the strength of the advertisement, Louisa Carlill bought a smoke ball and used it as directed for over 7 weeks before she contracted influenza.  She sued for breach of contract.

Decision

As a result of the range of defences submitted by the defendants, the Court of Appeal was able to comprehensively review the law around unilateral contracts.

This form of contract arises when party A commits itself to a contingent obligation in certain circumstances, (these contracts are sometimes called ‘if’ contracts), but potential accepters – e.g. party B – make no commitment unless and until they accept the offer when a contract is formed.

The claimant succeeded on a number of grounds.  All three judges found the inclusion of the statement about the £1000 deposit compelling, meaning that an ordinary person would treat the offer to pay £100 as ‘an offer intended to be acted upon, [which], when acted upon and the conditions performed, constituted a promise to pay’.  Some view this case as crystallising the doctrine of ‘intent to create legal relations’ – contractual intention is essential for a binding contract.

Further, the width of the advertisement was not problematic. The offer was made to all the world, not with all the world. The contract is then made with the limited number of people who perform the condition on the faith of the advert.  Advertisements for reward were often similarly worded, and regarded as offers which could be accepted by anyone who satisfied the condition(s).

That the claimant had not given notice of her acceptance was irrelevant. The company had impliedly waived the need for this, the acceptee acting in response to, and as stipulated by, the offer dispensing with the need for notice.

Consideration was supplied by the inconvenience suffered by the claimant in using the device as instructed and/or the advantage the company received each time an individual purchase of their product was made, each purchase boosting trade.

Subsequent Impact of Carlill on unilateral contracts

Advertisement amounting to an offer

Whilst the intention of the person making the statement may be relevant, the courts have always dealt with this issue pragmatically, looking at the context and clarity of the advertisement and the practical consequences of deciding one way or the other. Generally, an advertisement in a newspaper, on a hoarding or a television commercial is only an invitation to treat Advertising an auction is not a promise to hold it.  However, if the advertisement contains a clear expression of willingness to be bound, perhaps by including the reference to ‘first come, first served’ or ‘while stocks last’, then that can amount to an offer.  Such ‘promisor objectivity’ amounts to common sense.

Consideration arises in a unilateral contract in the form of ‘induced reliance’ This was clearly set out in Bowerman v ABTA>, echoing the court’s reference in Carlill to the advantage to the defendant company whenever an individual purchase was made.

Subsequently, the legal basis as set out in Carlill has remained undisputed, but difficulties have arisen in applying the law to each case’s individual facts.  In Bowerman v ABTA the majority of the Court of Appeal found in favour of the claimant, but Hirst LJ dissented, finding that the wording of the defendant’s Notice was ‘grammatically descriptive’ only and without any specific words of promise. Waite LJ agreed that the document was confusingly drafted, but his construction found that in its overall factual context there was such intention. Similarly, an ‘if’ contract involving casting votes was not disputed on that aspect of the claim.

What amounts to performance

Once the promisee acts on the promise by undertaking the action, the promisor cannot revoke or withdraw his offer.  There is no answering obligation on the promisee to continue the action to completion, but if it is left incomplete, there is no entitlement to claim the promised reward.

Where Carlill has not assisted later generations is in the area of acceptance by part performance.  At what point can acceptance of such an offer be said to have occurred? This has proved a vexed question, but generally, once the promisee’s conduct amounts to actual part performance, the offer can no longer be withdrawn.

Notification or otherwise of acceptance of the offer

The courts have continued to find that acceptance can provided by performing the conditions attached to the offer.  As in Carlill, it is the expectation of the ordinary person if presented with the offer/invitation wording that has been applied.  In Attrill v Dresdner Kleinwort Ltd, the court found that ‘nobody hearing the promise made in (the) announcement would for one moment expect … to be able to benefit from it only if he … positively accepted the offer’.

Conclusion

Carlill remains a foundation stone of the modern law of contract in the areas of contractual intention and the overall form and construction of unilateral contracts.  Singular facts and clear, succinct judgments from an era when consumer protection was only provided by the courts’ development of the common law have combined to create an outstanding example of the power of one case to shape the future.

Bibliography

Primary sources – caselaw

Attrill v Dresdner Kleinwort Ltd [2013] EWCA Civ 394

Azevedo v IMCOPA [2013] EWCA Civ 364

Bowerman v ABTA [1996] CLC 451

Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256

Harris v Nickerson (1873) LR & QB 286

Partridge v Crittenden [1968] 1 WLR 1204

Soulsbury v Soulsbury [2008] Fam 1

Williams v Carwardine (1833) 110 ER 590

Secondary sources

Stone R The Modern Law of Contract 10th edition

Chitty on Contracts 31st edition

Andrews N Contract Law 2nd edition

McMeel G ‘Contractual Intention: the smoke ball strikes back’ 1997 113 LQR 47

Footnotes

[1893] 1 QB 256

e.g Claimant could not by any act of her own establish a claim as she had no control over contracting flu; the advertisement too vague to amount to an offer; no consideration from the claimant; any contract was only a wagering contract and so void (under then current law).

per AL Smith LJ at 274

Andrews N Contract Law  2nd edition p158 at para 6.02

per Bowen LJ at 268; author’s italics for emphasis

Williams v Carwardine (1833) 110 ER 590 – reward for information leading to the conviction of criminal

Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 at 262-263 per Bowen LJ

Ibid p 264-265

See eg Partridge v Crittenden [1968] 1 WLR 1204 – classified advert in a periodical

Harris v Nickerson (1873) LR & QB 286

See Stone R the modern Law of Contract 10th edition p42 para 2.7.7

McMeel G Contractual Intention: the smoke ball strikes back’ (1997) 113 LQR 47

[1996] CLC 451

[1996] CLC 451

Ibid at p354-455

Ibid at p457

Azevedo v IMCOPA [2013] EWCA Civ 364

See e.g Soulsbury v Soulsbury [2008] Fam 1 citing Carlill with approval

See Chitty on Contracts para 2-079

[2013] EWCA Civ 394

Ibid at para 98 per Elias LJ