DR.

RAM MANOHAR LOHIYA NATIONAL

LAW UNIVERSITY
LAW OF CONTRACT – 1

FINAL DRAFT
TOPIC - CARLILL VS CARBOLIC SMOKE BALL
COMPANY

SUBMITTED TO SUBMITTED BY

MS. PRIYA ANURAGNI ANTRIKSH YADAV

Associate professor (law) Enrollment No. -200101029

(BALLB 2ND SEM)

 Acknowledgement
I am highly privileged to take this opportunity in expressing my deep sense of gratitude to
Professor Ms Priya Anuragni for having spared her valuable time and guidance which helped me
throughout the project work. She is a constant source of inspiration during the study.

We are also thankful to the staff of the library section of Dr. Ram Manohar Lohiya National Law
University without whose support and help, this project would not have been possible.

We are sincerely thank all my friends and classmates who have always given their encouraging
support and being a great help all the time at various stages of development of this project.

Thanking you
Contents
1. Introduction .........................................................................................................
2. Case Facts ............................................................................................................
3. Issues involved.....................................................................................................
4. Relevant legal principles ......................................................................................
Offer .....................................................................................................................
Acceptance ...........................................................................................................
Consideration ........................................................................................................
Intention to a contract ...........................................................................................
5. Significance .........................................................................................................
6. Usage Today ........................................................................................................
7. Conclusion………………………………………………………………………
8. Bibliography………………………………………………………………………
1. Introduction
Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1 is an English contract law decision
by the Court of Appeal, which held an advertisement containing certain terms to get a reward
constituted a binding unilateral offer that could be accepted by anyone who performed its terms.
It is notable for its curious subject matter and how the influential judges (particularly Lindley LJ
and Bowen LJ) developed the law in inventive ways. Carlill is frequently discussed as an
introductory contract case, and may often be the first legal case a law student studies in the law of
contract. The case concerned a flu remedy called the "carbolic smoke ball". The manufacturer
advertised that buyers who found it did not work would be awarded £100, a considerable amount
of money at the time. The company was found to have been bound by its advertisement, which
was construed as an offer which the buyer, by using the smoke ball, accepted, creating a contract.
The Court of Appeal held the essential elements of a contract were all present, including offer and
acceptance, consideration and an intention to create legal relations.
2. Case Facts
Defendant:

Carbolic Smoke Ball Company

The company made a product called “Smoke Ball". It claimed to be a cure to influenza and many
other diseases, in the context 1889-1890: Flu pandemic which is estimated to have killed 1 million
people. The smoke ball was a rubber ball with a tube fixed to its opening. The ball is filled with
Carbolic acid (Phenol). The tube is supposed to be inserted in one of your nostrils and the bottom
part of the rubber ball is to be pressed. The gas enters your respiratory tract and flushes out all the
viruses.

Advertisement:

The Company published advertisements in the Pall Mall Gazette and other newspapers on
November 13, 1891, claiming that it would pay £100 to anyone who got sick with influenza after
using its product according to the instructions set out in the advertisement.

“£100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the
increasing epidemic influenza colds, or any disease caused by taking cold, after having used the
ball three times daily for two weeks, according to the printed directions supplied with each ball.
£1000 is deposited with the Alliance Bank, Regent Street, showing our sincerity in the matter.
During the last epidemic of influenza many thousand carbolic smoke balls were sold as preventives
against this disease, and in no ascertained case was the disease contracted by those using the
carbolic smoke ball. One carbolic smoke ball will last a family several months, making it the
cheapest remedy in the world at the price, 10s post free. The ball can be refilled at a cost of 5s.
Address: “Carbolic Smoke Ball Company, “27, Princes Street, Hanover Square, London."

Plaintiff:

Louisa Carlill
She, believing in the accuracy of the statement made in the advertisement with respect to efficacy
of the smoke ball in cases of influenza, purchased one packet and used it thrice everyday from mid
November, 1891 until 17th Jan, 1892, at which latter date she had an attack of influenza.

Thereupon, her husband wrote a letter for her to the defendants, stating what had happened, and
asking for £100 as promised in the advertisement. They refused and this action was brought in
court before Hawkins J. and a special jury. Arguments were heard on both the sides and finally
the verdict was given in favour of Mrs. Carlill.

3. Issues involved
 Whether the advertisement made in newspaper was an offer to the world or not?
 Whether communication of acceptance is necessary for a contract made to the world?
 The main issue at hand is whether the language in Defendant’s advertisement, regarding
the 100£ reward was meant to be an express promise or, rather, a sales puff, which had no
meaning whatsoever.
 Whether there is a relevancy to create a legal relationship in the following case or not?

4. Relevant legal principles

According to Sir Frederick Pollock a Contract is “A promise or set of promises which
the law will enforce” as reported on lawteacher.net (2012).

The agreement which binds the parties together for the contract takes a very important
place with its every word.

The law of contract is a set of rules governing the relationship, content and validity of an agreement
between two or more persons (individuals, companies or other institution) regarding the sale of
goods, provision of services or exchange of interests or ownership. While this is a wide definition
it does not cover the full ambit of situations in which contract law will apply. The reason for this
is due to the vast number of examples in which contracts can arise in everyday life.

The Law of Contract is defined with four essentials.

 Offer
  Acceptance
 Intention to create legal relations
 Consideration

Offer
An offer is an expression of willingness to contract on certain terms, made with the intention that
it shall become binding as soon as it is accepted by the person to whom it is addressed, the "offeree"
[G.H. Tretel, The Law of Contract, 10th edn, p.8].

In the case of Carlill V Carbolic Smoke Ball Company the Offer was the Promise of paying £100 if
the Smoke Ball does not results properly. The Company said it was not an offer, but only a
statement with a mere puff. But the Judges rejected that point and decided it was not a mere puff
since the Smoke Ball Company Deposited £1000 in the Alliance Bank, Regent Street. Judges also
said depositing money in the bank is a way to show their sincerity in paying £100 for whom got
attack by influenza after using the Smoke Ball according to the right directions.

Acceptance
“Acceptance Acceptance of an offer means unconditional agreement to all the terms of that offer.
Acceptance will often be oral or in writing, but in some cases an offeree may accept an offer by
doing something, such as delivering goods in response to an offer to buy. The Courts will only
interpret conduct as indicating acceptance if it seems reasonable to infer that the offeree acted
with the intention of accepting the offer.” (Groves, 2004)

Acceptance of the offer is very important in the subject of Contracts. Usually Acceptance is being
notified in front of the parties of the contract or the agreement. To accept an offer, a person need
only follow the indicated method of acceptance. If the offeror either expressly or impliedly
intimates in his offer that it will be sufficient to act without giving notice of acceptance,
performance is sufficient acceptance without notification. In the Court of Appeal the defense
council brought this point that there is no notified acceptance with Mrs.Carlill. But the judges’
answer was there is no need of notified acceptance to the offer because the Smoke Ball Company
published their advertisement in the news papers not telling any notified acceptance in this contract
is required.
Consideration
Consideration is an essential element for the formation of a contract and may consist of a
promise to perform a desired act or a promise to refrain from doing an act that one is legally
entitled to do. (Groves, 2004)

The third Essential of contract law, Consideration is also highly spoken according to this case of
Carlill V Carbolic Smoke Ball Company. The court held that an advertisement is considered to be
an offer when it specifies the quantity of persons who are eligible to accept its terms. If such an
advertisement requires performance, the offeree is not required to give notice of his performance.
Although the defence council argued that there was no consideration in the advertisement, the
judges refused it.

Intention to a contract
“Intention to create legal relations also means an intention to be serious about agreement
significance.”

As we all know, intention to create legal relations is part of elements in contract. Intention to create
legal relations is defined as an intention to enter a legally binding agreement or contract. Intention
to create legal relations is one of the necessary elements in formation of a contract. It is because;
intention to create legal relations consists of readiness of a party to accept the legal sequences of
having entered into an agreement. Intention to create legal relations is a motion of every
contracting party must have the necessary intention to enter into a legally binding contract.

In the smoke ball case, the smoke ball company pleaded the defence that there is no intention to
enter into contract it is only a puffery and is done to increase the sale smoke balls, but the
advertisement also claimed that ₤1000 was being deposited into the bank. Here BOWEN LJ
pointed that merely saying that the small ball company don’t want to intent to enter into a contract
or its mere a puffery don’t result to show their intention but it’s there the act of depositing₤1000
in the bank shows there sincerity to enter into a contract.

There is no provision in the Indian Contract Act requiring that an offer or its
acceptance should be made with the intention of creating a legal relationship. But in English law
it is a settled principle that “to create a contract there must be a common intention of the parties to
enter into legal obligation” and the Indian Contract Act mostly comes from the common English
law so rather there is not specifically mention in any section of Indian contract act about intention
but it is a dominating part of a contract to be entered into. Some cases defining intention.

5. Significance
Carlill is frequently cited as a leading case in the common law of contract, it provides an excellent
study of the basic principles of contract and how they relate to everyday life. The case remains
good law. It still binds the lower courts of England and Wales and is cited by judges with approval.
However, in addition to the contractual remedy afforded to users, the same facts would give rise
to a number of additional statutory remedies and punishments were an individual to place an advert
in the same terms today.

Firstly, misleading advertising is a criminal offence. Under the Consumer Protection from Unfair
Trading Regulations (secondary legislation, passed under the European Communities Act 1972),
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”

...in relation to a long list of actions and omissions by sellers. Misleading practices are unfair and
unfair practices are prohibited. They are also criminal offences and overseen by stringent
enforcement mechanisms. Sellers still have a defence of legitimate "puffery", or that their
representations could not be taken seriously (e.g. "this washing powder makes your clothes whiter
than white!").

In a much more recent American case from the Southern District of New York, Leonard v Pepsico,
Inc, Judge Kimba Wood wrote,

"Long a staple of law school curricula, Carbolic Smoke Ball owes its fame not merely to "the
comic and slightly mysterious object involved"... but also to its role in developing the law of
unilateral offers."
Mr Leonard had sued Pepsi to get a fighter jet which had featured in a TV ad. Supposedly one
might get the jet if one had acquired loads of "Pepsi Points" from buying the soft drink. It was held
that Mr Leonard could not get the fighter jet, because the advertisement was not serious. Cashing
in "Pepsi Points" could certainly mean various prizes, but the fighter jet thing was really a
joke. Kimba Wood J distinguished the case on a number of different grounds from Carlill, but it is
clear that not all advertisements are always to be taken seriously.

6. Usage Today
The effects of this judgment are still felt today. If you lose a family pet and put up a poster offering
a reward for its safe return, you are providing an ‘offer’ which someone may accept, if they find
your pet safe and well. Similarly, the police offer rewards to ‘anyone’ who can provide information
leading to the arrest and/or conviction of a suspect in a criminal investigation. If a member of the
public provides that information, and the police are as a result able to arrest/secure a conviction
against the wanted person, the reward money will become payable. Since 1893, law students have
been introduced to the mysteries of the unilateral contract through the vehicle of Carlill v Carbolic
Smoke Ball Co. and taught to repeat, as a sort of magical incantation of contract law, that in the
case of unilateral contracts performance of the act specified in the offer constitutes acceptance,
and need not be communicated to the offeror."
7. Conclusion
This Case, Carlill V Carbolic Smoke Ball Company is a most frequently cited case where
unilateral contracts are concerned .Studying this case helps law students to get a basic knowledge
how the Law of Contracts is used and how it has to be used in daily life and what are the principles
of Contract Laws. According to the points and arguments brought out from the council of defense
were turned as benefits to Mr. and Mrs.Carlill. Studying this case on surface or looking at this
matter in a human angle we can see that its good Mrs.Carlill, the plaintiff of this case got justice
for this matter. Two further features of offers to be noted are that the terms of an offer must be
clear and that the offer is made with the intention that it should be binding. In connection with the
latter requirement, a further defense propounded in the Carlill case was that the advertisement was
a ‘mere puff’ and not intended to form the basis of a binding agreement. Such ‘puffs’ are very
much part of commercial life today, particularly in the advertising industry. Clearly statements
that allude to certain soap powders ‘washing whiter than white’ or certain types of beers working
untold miracles are not intended to be taken seriously but to ‘puff up’ the propensities of the
product to induce the all suffering public to buy. In the Carlill case the allegation that the offer
was a ‘mere puff’ was rejected on the basis that the advertisement also stated that the
defendants had deposited £1,000 with the Alliance Bank ‘to show their sincerity’. It was clear in
this case that this fact indicated that they intended the promise to form the basis of a legal
relationship. So far everything presented is fairly straight forward, but unfortunately the situation
is not so simple. There are many types of statement which, on the face of things, appear to be offers
but in fact do not so comprise.
8. Bibliography

Singh, Avtar. Law of Contract and Specific Relief, 12th ed. EBC International, 2017.

Bangia, R. K. Contract – I, 7th ed. Allahabad Law Agency, 2017.

Vardhan, R Yashod. Pollock & Mulla - The Indian Contract Act, 1872. 14th ed. LexiNexis, 2017.

http://www.scconline.com/Members/SearchResult2014.aspx

http://www.manupatrafast.in/pers/Personalized.aspx