Contract Law: Validity of Contract and Refund Claim in Gaia v SuperNatural Case

This article discusses the validity of the contract and refund claim in Gaia v SuperNatural case based on the principles of invitation to treat and unilateral contract in contract law.

Running head: CONTRACT LAW 0
Business Law Assignment

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I: Issue
The key issue is whether there is a valid contract between Gaia and SuperNatural and
whether Gaia can ask for a refund from Alexander and Roxanne because they guaranteed that
taking their medicine can immune people from catching viral strain ‘NeuroToxicia and even
after taking their medicine, as per instruction, Gaia gets a strain of NeuroToxicia.
L: Law
A contract is referred to an agreement that legally binds its parties to the terms of the
contract. In order to create a valid legal contract, parties are required to fulfil its essential
elements which include offer and acceptance, valid consideration, mutual intention, free and
voluntary consent, capacity of parties, certainty of terms, and legality of the subject matter. A
contract cannot be formed without fulfilment of these elements. A basic contract required
agreement, intention and consideration. An agreement is referred to meeting of minds
between two or more parties which include an offer and acceptance. An agreement can be
written or spoken. An ‘invitation to treat’ is an initial approach in which a person invites
others to deal with him on certain specified terms. Most advertisements are treated as an
invitation to treat for potential customers to consider something. The doctrine of invitation to
treat was explained by the court in Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256
case. An acceptance can be given by spoken words, written words, performance or an act or
conduct.
An offer which constructs by performance creates a unilateral contract. It is formed by an
express offer that can be accepted by a party only through performance. A bilateral contract is
open for one person to accept whereas a unilateral contract is open for the world. In Carlill v
Carbolic Smoke Ball Co case, the court held that an offer can be open for the world and it can
be accepted by the performance of an act. The parties to a contract must have intention to
create legal relations. Generally, the presence of a valid consideration is the evidence of an
intention however it is not always the case. In commercial agreements, it is presumed that the
parties have an intention to enter into a legal contract. Although puffery or puff is a promise
made during a commercial which clearly intended not to be taken seriously. It is necessary
that a valid contract must be available in each contract which can include money, provision of
goods or services, onerous obligation, refraining from doing something or promise to do

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something. Although these are essential elements of a contract which are necessary to be
fulfilled by the contracting parties, however, the court can enforce a contract even when its
essential elements are not fulfilled based on the doctrine of promissory estoppel.
Lord Denning provided in Moorgate Mercantile Co Ltd v Twitchings [1976] QB 225 case
that consideration is not required if promissory estoppel is proved. This case is relevant
because in this case, the court provided that if a person led another to believe in specific act
by his/her conduct or words, he/she will not be allowed to go back to his/her words. In this
case, it was held that presence of consideration is not mandatory in when promissory estoppel
is proved. It is necessary that contracting parties are capable of entering into a contract.
Incapable parties include minor, intoxicated person, bankrupts, and person lacking
intellectual capacity. It is necessary that parties to a contract must have intention to create a
legal relationship which means an intention must be free from any external forces. There are
a number of vitiating factors that affect the genuine consent of contracting parties which
include unconscionable conduct, misrepresentation, undue influence, duress and mistake.
Lack of genuine or free consent due to these factors can set aside a contract, and the court can
declare it void. The party can also sue for damages if the consent is not free or involuntary.
A: Application
In this case, the facts are similar to Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256
case. In this case, an advertisement was given by a business called ‘SuperNatural’ for a tablet
called ‘Flu-Defeat’ which is advertised as a guaranteed cure for a serious viral strain called
‘NeuroToxicia’. The company further provided that a person has to take their medicine for
two months based on given instructions and it will cure the viral strain of NeuroToxicia. The
corporation claimed that if a person catches the viral strain of NeuroToxicia after using their
medicine, then they will refund his/her money and also fund an all-expense paid trip to
Sunshine coast Resort town of Noosa. In order to show their sincerity, the owners make a
reservation with the resort. In Carlill v Carbolic Smoke Ball case, Carbolic Smoke Ball Co
published an advertisement promising that their product would positively cure different
diseases such as asthma, influenza, coughs, colds, whooping cough, headache and others. The
company further provided that they will pay a reward of 100 pounds to any person who gets
influenza after using the ball for three times daily for two weeks. In order to show their
sincerity, the company deposited 1000 pounds in the bank.

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In this case, Gaia who is a 79-year-old retiree sees the advertisement and purchase 100 tablets
pack of Flu-Defeat. She continuously takes those tablets for new two months as per the
instruction gave by the SuperNatural. After some time, she was diagnosed with a very serious
strain of NeuroToxicia. Gaia contacted Alexander and Roxanne, owners of SuperNatural, for
refunding her money, but they denied her by saying that they did not have any intention to
enter into a contract. In Carlill case, Mrs Carlill purchased the smoke balls offed by the
company and used them as per the directions. After some time, she caught the flu. She
claimed her reward of 100 pounds, but the company rejected her by saying that it did not
have an intention to enter into a valid contract with her. In Carlill v Carbolic Smoke Ball
case, the defendant argued that the advertisement was a sales puff which cannot be taken
seriously and it is not possible to make an offer to the world. There is lack of notification of
acceptance of the party. The wording of the advertisement was too vague in order to
constitute an offer. Finally, the defendant stated that there is no consideration between parties
which cannot form a valid contract.
The Court of Appeal held in the judgement that Mrs Carlill was entitled to a reward because a
contract has constructed between her and the company. The advertisement formed a
unilateral contract between the parties which was accepted by Mrs Carlill by performing the
conditions provided in the offer. Further, the court stated that the advertisement is not puffery
because the company deposited 1000 pounds in the bank for showing their sincerity. The
court stated that it is possible to make an offer to the world and a notification of acceptance is
not required in a unilateral contract. The wording of the advertisement is capable of being
resolved by the parties. The consideration is not required in a unilateral contract. The
judgement of Carlill v Carbolic Smoke Ball Co case applied to the case of Gaia as well.
According to the principle of invitation to treat, SuperNatural invited people to enter into a
contract with it by issuing a public advertisement. The company had an intention to create a
legal contract because its owner book reservation with the resort to show their sincerity. The
offer for contract made by the company was open for the world and any person can accept it
by performing the instructions of advertisement.
Gaia has given her consent through the conduct by complying with instructions of the
advertisement. Notification of acceptance is not required in the case of a unilateral contract.
Other essential elements of a contract are also fulfilled in the case as well. For example, both
the parties are capable of entering into a valid contract. They have an intention to create a
legal relationship, and they have given free consent. Gaia has accepted the offer by

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performing the instructions given by the SuperNatural in the advertisement. Based on the
judgement of Carlill v Carbolic Smoke Ball Co case, a valid contract has established between
Gaia and SuperNatural because of the principle of unilateral contract and invitation to treat.
Gaia can ask for the refund from SuperNatural, and the company also have to give her all-
expenses-paid weekend to Sunshine Coast Resort.
C: Conclusion
In conclusion, Gaia and SuperNatural have entered into a valid contract based on the
principle of invitation to treat and unilateral contract. SuperNatural has made an invitation to
treat which as accepted by Gaia by complying with the terms. Gaia can sue SuperNatural
because a unilateral contract has formed between the parties and SuperNatural has to refund
Gaia her money and provide her all-expenses including a weekend holiday in Sunshine Coast
Resort.