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Carlill v/s Carbolic Smoke Ball Company

Facts
The Carbolic Smoke Ball Company (defendant) advertised in the Pall Mall Gazette about their product, smoke ball. In the advertisement, they promised to pay 100 pounds as compensation to anyone who contracts influenza after using their ball three times daily for two weeks as per the instructions printed.

The advertisement also stated that they have deposited 1000 pounds with the Alliance bank as an assurance. Mrs. Carlill (plaintiff) after going through the advertisement purchased the smoke balls and used it as per the directions but subsequently caught influenza. The plaintiff’s claim was refused by the defendant and therefore, she brought a suit against them for the recovery of the amount.

Procedural History
The lower court passed the order in favour of the plaintiff and thusbeing aggrieved by it the defendantfiled an appeal.
Issues:
  1. Whether the advertisement was a promise or a mere puff
  2. Was it a binding contract?
  3. Was Mrs. Carlill required to communicate her acceptance of the offer to the Company?
  4. Did Mrs. Carlill provide any consideration in return for the 100 pounds offered by the defendant Company?

Defendant’s Contentions
The defendant argued that the advertisement was a mere puff and not a promise. They contested that the advertisement was too vague and without any time limit. In addition to this, they said that there was no way to ascertain whether the ball had been used by the consumer.

It was also submitted by them that it was not a valid contract as the essential element of a contract is the communication of acceptance of the offer expressly or impliedly or through a performance of some overt act, which the plaintiff didn’t comply with. Further, the defendant stated that it was a bare promise without consideration.

Plaintiff’s Contentions
The plaintiff argued that the advertisement was not vague. The construction of the offer made it clear that if the balls were not effective, the company would give 100 pounds to the consumers and in order to facilitate the same, they had deposited the money in Alliance Bank. Hence, the act of depositing the money proves their intention to enter into the contract and constitutes a promise.

Held
The Court of Appeal held that the plaintiff is entitled to claim 100 pounds from the defendant as it was a binding contract with valid consideration. The reasoning given by the court are as follows:
  1. The advertisement is a promise
    The statement in the advertisement “1000 pounds is deposited with the Alliance Bank, showing our sincerity in the matter” clearly proves the sincerity of the defendant to pay the amount and cannot be construed in any other manner. Hence, it’s apparent that the advertisement is not a pufferybut promise.
     
  2. The contract is binding:
    1. Because in a unilateral offer, the offer is made to the world at large and anybody who performs the specific conditions, accepts the offer. Here, the advertisement is in the form of a unilateral offer.
    2. The structure of words in the advertisement is not too vague and can be construed as a promise. Its formation is made in a way that leads the consumer to believe that if you use the smoke ball, you will not contract the flu for a reasonable time after that.
       
  3. Notification of acceptance not necessary:
    1. For a contract to be valid it is essential that when an offer is made, not only that it should be accepted, but that the acceptance should be notified. But in cases of this kind, there is no need to communicate the acceptance of an offer.
    2. The performance of the condition i.e. using the smoke ball itself amounts to an acceptance of the offer.
       
  4. Existence of Consideration:
    1. Consideration does exist as the defendant would benefit from the advertisement as it would attract more people leading to an increase in the sale of the smoke ball and thus their profit.
    2. Direct inconvenience would also be caused to the person who uses the smoke ball three times daily for two weeks, as per the directions of the defendant. In other words, the performance of the specified directions constitutes consideration for the promise.

Concurring opinion
Justice Lindley concurred with the decision of Justice Bowen and Smith, but the reasoning of Justice Bowen for the notification of acceptance differed. For a contract to be valid it is essential that when an offer is made, not only that it should be accepted, but that the acceptance should be notified. But in cases of this kind that rule is an exception, here the notification of acceptance need not precede the performance.

This is a continuing offer and was never repealed, so if notice of acceptance is required, the person who makes the offer gets the notice of acceptance contemporaneously with the notice of the performance of the condition”. To justify this, he used the rationale applied by Lord Blackburn in the case of Brogden v. Metropolitian Ry. Co. 2 App Cas 666, 691.

Rule of Law:
  1. Unilateral offer for the sale of goods via advertisement waves of the rule of notification of acceptance.
  2. An advertising scheme with a reward for the performance of any act can be considered an express contractual promise to pay.

Conclusion
The case laid the foundation for the Unilateral Contract and is often cited by the courts of England and Wales. It held that unilateral contracts are an exception with regards to notification of acceptance of offer and consideration. The case not only provided a remedy in contractual disputes but also in other statutes such as Consumer Protection. The Consumer Protection from Unfair Trading Regulations 2008 of the United Kingdom plays a pivotal role in outlawing misleading advertisements. [1]

Wherein the manufacturers cannot make false promises without intention to fulfill it, misleading advertisements are considered a criminal offence. Regulation 5 states that a commercial practice is misleading "if it contains false information and is therefore untruthful ... or if it or its overall presentation in any way deceives or is likely to deceive the average consumer ... even if the information is factually correct."[2] Thus, restricting the manufacturer from misleading the customers about the products/services.
 
End-Notes:
  1. Carlill v Carbolic Smoke Ball Co, Wikipedia
  2. 2008/1277, The Consumer Protection from Unfair Trading Regulations 2008, Regulation 5

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