Carlil vs. Carbolic Smoke Ball Co., 1893

• The Carbolic Smoke Ball Company made a product called the "smoke ball" which claimed to be a cure for influenza and a number of other diseases. The Company published advertisements 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.
• Mrs. Louisa Carlill saw the advertisement, bought one of the balls and used it three times daily for nearly two months until she contracted the flu on 17 January 1892. 
• She claimed £100 from the Carbolic Smoke Ball Company. They ignored two letters from her husband, a solicitor. 
• On a third request for her reward, they replied with an anonymous letter that if it is used properly, the company had complete confidence in the smoke ball's efficacy, but "to protect themselves against all fraudulent claims" they would need her to come to their office to use the ball each day and be checked by the secretary. 
• John Carlill (Louisa Carlill's husband) brought a claim to court. The barristers representing Carlill argued that the advertisement and her reliance on it was a contract between her and the company, and so they ought to pay. 
• The company argued it was not a serious contract.

Lindley, L.J., on behalf of the Court of Appeals, notes that 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.

1. How does one interpret vague terms?
2. Was the ad a "mere puff"?
3. Does performance of the conditions advertised in the paper constitute acceptance of an offer?
4. Was there any consideration made?
5. Can one make a contract with the entire world?

In the Carlill vs. Carbolic smoke ball case the main point which arises is:

• Is the advertisement made by the smoke ball company regarding 100 pounds is a valid general offer?
• Did any sort of communication of acceptance was done by Mrs. Carlil to the company or not?

According to the Contract Act, 1872, When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise. It is questionable if the promise has been made by the company has been made and the validity of the advertisement.

• Does the performance of the conditions advertised in the paper constitute acceptance of an offer.

Plaintiff arguments:

• The arguments in favor of Mrs. Carlill were that advertisement as issued by the company was not an invitation to an offer but offer in itself, as the company itself mentioned they will compensate if used by the prescribed in the paper. 
• The whole aim of publishing that paper is to let people know about the validity of the offer and to assure that they have even paid a deposit in that bank.

Defendant argument:

The smoke ball company argued for three points:

• The defendant argued that there is no particular binding offer on Mrs. Carlill, as the offer was made to the word as whole and there exists no particular contract to make Mrs. carlill to take up the offer and act upon it.
• They further more stated that it was the fault on the plaintiff's part, that she may not have followed the written course properly or else she might be lying on the pretext to get compensation.
• They stated there was no particular consideration to constitute it as a contract.
• They conclude saying: 
  1. In a contract there must be communication of acceptance from the offeree to the offeror. But it is not the case with the plaintiff, she could not communicate her acceptance to the company even though she was willing to.
  2. It can also be seen that the contract is too vague saying any person may claim that they were affected with influenza 10 years later. Giving it a too unreasonable time period.

Lord Justice Lindley:

The first point in this case is, whether the defendants' advertisement which appeared in the Pall Mall Gazette was an offer which, when accepted and its conditions performed, constituted a promise to pay, assuming there was good consideration to uphold that promise, or whether it was only a puff from which no promise could be implied, or, as put by Mr. Finlay, a mere statement by the defendants of the confidence they entertained in the efficacy of their remedy. Or as I might put it in the words of Lord Campbell in Denton v Great Northern Ry. Co[3]., whether this advertisement was mere waste paper. That is the first matter to be determined. It seems to me that this advertisement reads as follows:

100 Dollor reward will be paid by the Carbolic Smoke Ball Company to any person who after having used the ball three times daily for two weeks according to the printed directions supplied with such ball contracts the increasing epidemic influenza, colds, or any diseases caused by taking cold. The ball will last a family several months, and can be refilled at a cost of 5s.

Lord Justice Bowen:

I am of the same opinion. We were asked by the council for the defendants to say that this document was a contract too vague to be enforced. 100l. will be paid to any person who shall contract the increasing epidemic after having used the carbolic smoke ball three times daily for two weeks.

Lord Justice AL Smith:

100 Dollor reward will be paid by the Carbolic Smoke Ball Company to any person who after having used the ball three times daily for two weeks according to the printed directions supplied with such ball contracts the increasing epidemic influenza, colds, or any diseases caused by taking cold. The ball will last a family several months, and can be refilled at a cost of 5s.

Judgement:

The Carbolic Smoke Ball Company, represented by H. H. Asquith, lost its argument at the Queen's Bench. It appealed straight away. The Court of Appeal unanimously rejected the company's arguments and held that there was a fully binding contract for 100 Dollor with Mrs. Carlill. 
Among the reasons given by the three judges were:

1. That the advertisement was not a unilateral offer to all the world but an offer restricted to those who acted upon the terms contained in the advertisement.
2. That satisfying conditions for using the smoke ball constituted acceptance of the offer.
3. That purchasing or merely using the smoke ball constituted good consideration, because it was a distinct detriment incurred at the behest of the company and, furthermore, more people buying smoke balls by relying on the advertisement was a clear benefit to Carbolic.
4. That the company's claim that 1000 dollars were deposited at the Alliance Bank showed the serious intention to be legally bound.

Mrs. Carlill was entitled to reward. There was a contract between the company and Mrs. Carlill as the offer comes under a general offer, under which the offer was accepted by Mrs. Carlill by performing the prescribed use written on the package.

• There was a valid general offer made to the public. The smoke ball was not merely sale of puff as the company has deposited certain pounds as an evidence in the bank. The language was not too vague to be enforced.
• Although the rule of communication of acceptance is required, the offeror may dispense with the need for notification. It is implicit that the offeree did not need to communicate an intention to accept. Rather has performed the act showing the willingness as asked in contract.
• The inconvenience suffered by Mrs. Carlill was itself a sort of consideration and to an added advantage the company has got beneficial increase in sales.