Carlill v Carbolic Smoke Ball Company

Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 is arguably the most important foundational case in English contract law which establishes offer and acceptance.

Issue

The central legal issue was whether the advertisement placed by the Carbolic Smoke Ball Company constituted a legally binding offer capable of acceptance, thereby forming a valid contract with Mrs. Carlill.

Specifically, the court addressed four sub-issues:

1. Was the advertisement a mere puff (sales talk) or a promise/offer?

2. Was there an acceptance of the offer?

3. Was there sufficient consideration provided by Mrs. Carlill?

4. Was there an intention to create legal relations?

Rule

The Court of Appeal established several key rules regarding contract formation, particularly in the context of unilateral contracts:

1. Unilateral Offer: An offer can be made to the whole world, and the performance of the stipulated condition (e.g., using the product) constitutes the acceptance of that offer.

2. Dispensing with Notification of Acceptance: In a unilateral contract, the offeror (the company) implicitly waives the need for formal communication of acceptance before performance begins. Acceptance occurs through the act of performance.

3. Intention to Create Legal Relations: The deposit of money (£1,000) by the company into a bank demonstrated their sincerity and intention to be legally bound by their promise, moving the advertisement beyond a mere commercial puff.

4. Consideration: The inconvenience suffered by the buyer (Mrs. Carlill) in using the product, or the benefit gained by the company (increased sales), provided sufficient consideration to support the promise.

Application

The court applied the rules of contract formation to the company’s advertisement:

• Offer vs. Puff: The court viewed the advertisement, especially the statement about depositing £1,000 in a bank to show "sincerity in the matter," not as vague sales talk, but as a definite promise and a serious offer intended to be acted upon.

• Acceptance: The company argued that Mrs. Carlill never communicated her acceptance. The court rejected this, stating that the very nature of the advertisement meant that the act of purchasing and using the smoke ball as directed was the mode of acceptance.

• Consideration: Mrs. Carlill suffered a "detriment" (the time and effort of using the product as prescribed, and buying the product), while the company gained a "benefit" (increased product sales). This was held to be good consideration in the eyes of the law.

  
  

Conclusion

The Court of Appeal found in favour of Mrs. Carlill, ruling that a binding contract existed. The Carbolic Smoke Ball Company was ordered to pay the promised £1,000.

The case confirmed that promises made in commercial advertisements, if sufficiently clear and supported by evidence of serious intent, are enforceable contracts under English law.