Carlill v. Carbolic Smoke Ball Company
1 QB 256 (1893)
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Rule of Law:
An advertisement constitutes a binding unilateral offer that can be accepted by anyone who performs its conditions, without the need for prior notification of acceptance. The inclusion of a promise, such as depositing money in a bank, indicates a serious intent to be bound and is not mere puffery.
Facts:
- The Carbolic Smoke Ball Company placed an advertisement in several newspapers for its product, the 'Carbolic Smoke Ball'.
- The advertisement promised a £100 reward to any person who used the smoke ball three times daily for two weeks according to the directions and still contracted influenza, colds, or any related disease.
- To demonstrate its sincerity, the advertisement stated that the company had deposited £1000 with the Alliance Bank.
- Based on the advertisement, Louisa Carlill purchased a Carbolic Smoke Ball.
- Carlill used the product as directed, three times a day, from November 20, 1891, to January 17, 1892.
- On January 17, 1892, while still using the smoke ball, Carlill contracted influenza.
Procedural Posture:
- Louisa Carlill sued the Carbolic Smoke Ball Company in the High Court of Justice, Queen's Bench Division (a trial court).
- The trial judge, Justice Hawkins, found in favor of Carlill, holding she was entitled to the promised £100.
- The Carbolic Smoke Ball Company, as the appellant, appealed the trial court's judgment to the Court of Appeal.
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Issue:
Does an advertisement that promises a reward to any person for performing specific conditions constitute a binding unilateral contract with any individual who performs those conditions?
Opinions:
Majority - Lindley, L.J.
Yes, an advertisement that promises a reward for performing specific conditions constitutes a binding unilateral contract. The advertisement in this case was an express promise, not mere puffery, as evidenced by the statement that £1000 was deposited with a bank to show sincerity. This was an offer made to the public, which could be accepted by anyone who performed the specified conditions. While acceptance of an offer generally requires notification, the nature of a unilateral offer like this one implies that the offeror dispenses with the need for notification of acceptance; the performance of the condition is a sufficient acceptance. Furthermore, there was valid consideration, both in the advantage the company gained from increased product use and sales, and in the inconvenience Carlill sustained by using the smoke ball as directed.
Majority - Bowen, L.J.
Yes, the advertisement was a definite offer intended to be acted upon, which ripened into a contract upon performance. An offer can be made to all the world and becomes a contract with the limited portion of the public who come forward and perform the condition on the faith of the advertisement. The requirement for notification of acceptance is for the benefit of the offeror, who may dispense with it. Here, the nature of the transaction implies that performance of the condition, without prior notification, is sufficient acceptance. The inconvenience sustained by the plaintiff in using the smoke ball at the company's request is ample consideration, as is the commercial benefit the company receives from the public's confidence and increased sales.
Majority - A. L. Smith, L.J.
Yes, the advertisement was an offer intended to be acted upon, which constituted a binding promise when its conditions were performed. The deposit of £1000 at the bank confirms that this was not a mere puff but a serious offer. The offer was accepted by the plaintiff's performance of the conditions. The contract is not made with 'all the world' but with the specific person who performs the conditions and becomes a 'persona designata' able to sue. There is ample consideration for the promise, including the inconvenience to the plaintiff of using the ball and the money gain likely to accrue to the defendants from enhanced sales.
Analysis:
This is a foundational case in contract law that establishes and clarifies the principles of a unilateral contract. It affirms that advertisements can be considered offers, rather than mere invitations to treat, if they are specific, definite, and demonstrate an intent to be legally bound. The decision solidifies the concept that acceptance in a unilateral contract is achieved through performance of the stipulated conditions, and the offeror can waive the requirement for notification of acceptance. This precedent is critical for analyzing public offers, rewards, and promotions, holding advertisers accountable for serious promises made to consumers.
