A Classic Case Reviewed (Contract Law)

Any law student, past or present will remember Carlill v Carbolic Smoke Ball. The first step in any contract is to identify an offer, and law students will start with the general principle that adverts are usually seen as invitations to treat (Partridge v Crittenden). There is a logical reason to this as explained by Lord Herschell in Grainger & Son v Gough. To see the advertisement as an offer would mean ‘a merchant may find himself involved in any number of contractual obligations to supply [goods] of a particular description which he would be quite unable to carry out’. So there is a logical and practical reason to apply the general rule: The focus being on the bi-lateral agreements. So what was different in Carlill?

Many students will tell me that there can be unilateral offers, ones made to the whole world and the reason Carlill  was different was that the Company had paid £1000 into a bank. But this is too simplistic. At the time of the advert it was not unusual for companies to make exaggerated claims, one tablet was claimed to prevent divorce! So such claims may just be seen by the Company as another such ‘puff’.  Lindley LJ focussed on the wording of the advertisement, pointing out the requirement of an offer is the clarity of the words (see Scammel v Ousten on this point). The test for making an offer is an objective one ( see Smith v Hughes) and Lindley LJ asked not what the Company meant by the words of the advertisement but what the reasonable person would believe from the advertisement. He referred to the words ‘…£1000 is deposited with the Alliance Bank, Regent St, shewing [SIC] our sincerity in the matter.’ So the deposit of the money was to show, objectively that they intended the words to be taken seriously. Not to be confused with a general intention to enter into legal relations but an intention to make an offer.

The Company argued that as the offer was not made to anyone in particular it was too vague and
imprecise to amount to an offer and was ‘mere puff’. Bowen LJ rejected this as being ‘mere puff’ but that the words were sufficiently clear to maintain an offer. He felt that if a person chose to make an extravagant offer that was their choice. This reflects one of the main principles of contract law, the freedom of contract and to contract on the terms which you choose.  The advert stated that any person had to buy the smoke ball, use it as prescribed and catch the flu. If they did so then they would get £100. Lindley LJ pointed out that full acceptance was in satisfying all three elements. The problems of considering an advertisement as an offer identified by Lord Herschell in Grainger & Son v Gough were overcome, as full acceptance required an offeree to obtain a ball first. If the stock had run out they could not accept. So the policy against adverts being offers was overcome, therefore the basic requirements of clarity prevailed.

The Company’s next argument was that if this was an offer the rule was that acceptance must be communicated (see Felthouse v Bindley). It was in Carlill that it was suggested (obiter) that if the offeree suggested that silence could amount to acceptance then there was no injustice in allowing the requirement for actual communication to reach the offeree. This is a point we see in more recent decisions such as Re Selectmove. The judges are pointing out that the principle of requiring communication is not an absolute. Here the general rule argument of requiring communication was rejected because it was established that the performance of the required act was acceptance. Lindley LJ pointed out there was no need to communicate to the Company that performance had begun. If communication was needed (which he doubted) then this was communicated to the Company when Mrs Carlill applied for the £100 after catching the flu. If this was done before the Company had
revoked the offer then there is a binding contract.

The next argument of the Company was that there was no consideration. Smith LJ pointed out that the argument that there was no consideration between the Company and Mrs Carlill could not run. The purchase of the ball, and use correctly, then catching the flu was the consideration by one and the increased sales were consideration constituted the necessary benefit to create a promise to pay.

Reading the original judgments in this case again, after many years since I first read them, has
reminded me of the fundamental in contract and how a good legal argument can be presented.
Remember that a judgment is effectively the judge answering a problem question. It also illustrates how an argument can be presented and developed on many levels. The Company had several strands to their argument. First that there was no offer, which the court rejected. Then that there was no
acceptance, which was also rejected. Then that there was no consideration, again rejected.

Sometimes students are too busy to read cases in original but it may enhance their ability to formulate a legal argument, present authority and argue to a conclusion if they try to read at least two or three. It can be seen from reading this case, for example, that in the cases referred to as authority, such as Grainger & Son v Gough, very little of the facts of that case are given, but the principle of the case is applied to the facts before the Court. This is what a student is required to do when answering an exam question. So reading cases has two benefits; students learn a legal principle and learn how to present a legal argument logically and with authority.

This blog post was written by Anne Street, Law Lecturer at SOAS, University of London. Anne regularly teaches on the Laws Programme’s Regional Revision courses.