This is a well known common law case in Contract Law.
Facts of the case
The Defendant, Carbolic Smoke Ball Company is a company which produce a medicine which prevents a person from contracting the influenza after taking the smoke balls according to the company’s instructions. The defendant had advertised in the newspapers as follows:
"100 pounds 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. 1,000 pounds is deposited with the Alliance Bank, Regent Street, showing our sincerity in the matter”.
The Plaintiff is a lady which saw the advertisement and bought the smoke balls at a chemist’s believing that it will work as advertised. Even though she used the smoke balls as instructed by the company, she was still attacked by the influenza.
Issues of the case
Whether there is a binding contract between the parties?
Whether the Plaintiff entitled to the 100 pounds reward?
First issue: Whether there is a binding contract between the parties?
Defendant argued that there was no binding contract because:
The terms in the advertisement was vague as no time limit
Contracts requires a communication of an intention to accept an offer or through performance of an act
There was no element of consideration.
Judgment of the Court:
The defendant’s advertisement is an express promise to pay 100 pounds to anyone who contracts the influenza after using the smoke balls three times daily for two weeks. The Defendant’s act of depositing 1000 pounds to the Bank shows their sincerity to pay and not just a sales puff. The unilateral offer is binding even though it is not made to a specific person. The defendant’s offer is a continuing offer to the public. Therefore, acceptance can be made by anyone of the public.
As a general rule, a communication of acceptance to an offer is required. However, the court is in the view that they had dispense the need of notification. The Plaintiff had indirectly accepted the offer through performance of the requested act by using the smoke balls as instructed. There was also consideration. Firstly, the defendant had benefited in sales through advertising their product in this manner. Secondly, the Plaintiff’s act of taking the smoke balls as advertised constitutes the consideration for the offer.
Second issue: Whether the Plaintiff entitled to the 100 pounds reward?
Judgment of the Court:
Plaintiff had accepted the offer through performance. Thus, there is a binding contract between both parties. Plaintiff is entitled to the 100 pounds reward.
Principles of the Case
Offer can be made to the world at large and communication of that offer is not necessary. Performance of the specified terms of the offer will be sufficient.
Statements made in an advertisement can be legally binding if it shows a clear promissory intention to be legally bound.