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Carlill v Carbolic Smoke Ball Co (HPH 37)

We have already briefly looked at this case and discovered that it is the classic authority on the concept of unilateral
contract. Remember that most commercial contracts are bilateral, that is, formation occurs on the exchange of executory
promises. Unilateral contract, by contrast, involves an obligation on one side only, namely, the promisor is obliged to keep
his or her promise (or pay damages) once the other party has accepted the offer by doing what is required. So, in the
case of Mrs Carlill, she bought and used the smoke ball as specified in the advertisement.

The case raised a number of fundamental points about formation of contract. They are dealt with in logical order in the
judgments of Lindley and Bowen LLJ.

Was a promise made?

Only Lindley LJ deals with this issue on p 37. For a contract to be made there must be a promise or a set of promises. It
was argued that no promise was made here. The argument that was used was that what was said in the advertisement
was a "mere puff", an appropriate expression in the circumstances. In modern day language, it was argued that this was
mere sales talk and not to be taken seriously. Lindley LJ dismissed this argument in short order. The wording of the
advertisement was in very definite language which, objectively, meant only one thing. The company was guaranteeing to
pay the money and it had deposited some money at the Alliance bank to show that it was being serious.

To whom was the offer made?

It was then argued that you cannot make an offer to the world. Alternatively, the alleged contract was not made with
anyone in particular. Both Lindley and Bowen did not accept this argument, saying that this type of offer could be made to
the world but then only a limited number of people would accept such an offer by doing what was required in the
advertisement, namely, using the smoke ball 3 times a day for 2 weeks. Bowen on p 40 made the point that this was not
like other advertisement cases which do not amount to offers but instead amount to invitations to treat. See "It is not
like..." Reward type offers ripen into contract when someone responds and does what is requested in the reward
advertisement.

Acceptance was not communicated

It was then argued that an acceptance of an offer must be communicated. This is the general rule but the judges were
able to overcome this difficulty by saying that the person who makes the offer may expressly or impliedly dispense with
the need for notification of acceptance. It is obvious that in the case of a reward-type offer it is not necessary for all those
people who intend to respond to notify that they are responding. Bowen makes this point when he talks about a reward for
finding a lost dog (p 41 middle). It is obviously not necessary to send a letter saying "I am looking for your dog." Instead
performance of the requested act amounts both to acceptance and to notification of acceptance, that is, the person who
offered the reward finds out about acceptance when the claimant arrives with the dog or whatever.

Uncertainty

Another argument that was tried was that the advertisement was too vague. This is an area of the law which we will deal
with. It was said that there were so many possible interpretations of the advertisement that it was too uncertain to
constitute a contract. The approach of courts to this problem is to apply the objective test: how would a reasonable person
have construed the advertisement? Although there were a number of different meanings which could be placed on the
advertisement (see Lindley on p 38) and although the judges did not entirely agree as to what was the correct meaning
(see Bowen on 40 middle para), Mrs Carlill had made out her case whichever meaning was chosen. She had contracted
influenza whilst using the smoke ball. That was sufficient.

Consideration

Finally, both judges discussed whether or not Mrs C had provided consideration for the company's promise. The
advertisement specified that the promisee should use the smoke ball 3 times a day for 2 weeks. It was argued that using
the smoke ball was no benefit to the company because it was only interested in selling its product and that had occurred
already. Both judges rejected this argument and said that there were two ways of finding a consideration. Firstly, Mrs C's
using the smoke ball was a benefit to the company because it had an interest in people not just buying its product but
using it as well. The more use, the more sales. Secondly, it was argued by the judges that using the smoke ball was a
detriment to Mrs C in the sense that she put herself out by sticking to the regime specified in the advertisement. Either a
benefit to the defendant or a detriment to the plaintiff is sufficient. Look at the quotation from Selwyn's Nisi Prius cited by
Tindal CJ in Laythoarp v Bryant (p 41 "Any act of the plaintiff...")

So, what role did contracting influenza play in this contract? Clearly Mrs C could not have got her money if she had not
contracted influenza. Was this part of the consideration? It seems odd that consideration could be something which is
beyond anyone's control. The answer is that getting influenza was an essential condition which had to be fulfilled but it
was not a consideration.

Contractual intention negatived

What we turn to now is a further exploration of what constitutes an offer. In particular, we examine the ways in which the
courts may come to the conclusion that no offer was intended which, of course, means that there is no contract. We have
seen examples of this already. The Gibson case is one such example. The letter that was sent was expressed in such a
way that it was clear, at least to the House of Lords, that there was no offer. Remember the italicised words in the letter.

Barwick's judgment in MacRobertson Miller is another example. Remember that the exclusion clause in the ticket had the
effect of rendering what might otherwise have been an offer not an offer. A contract cannot be based on an optional
"obligation". It is a contradiction in terms.

It is possible to make sure that an offer cannot be converted into a contract by the act of acceptance. Suppose for
example you are negotiating by letter and you want to make absolutely sure that a letter sent by you will not be construed
as an offer. The usual circumstance where this occurs is when the parties contemplate that their agreement will be
embodied in a fully written contract. The way to do this is to include the words "subject to contract" in the letter. The High
Court had occasion to analyse the effect of thesewords in